Equinor (EQNR) Takes 100% Ownership in Empire Wind Swap With BP
Equinor ASA, EQNR the Norwegian state-owned energy giant, announced a swap transaction with BP plc BP, leading to Equinor's full ownership of the Empire Wind lease and projects in the United States.
Per the terms of the agreement, Equinor will gain 100% ownership of Empire Offshore Wind Holdings LLC and BP's 50% share of the South Brooklyn Marine Terminal lease. In return, BP will take over Beacon Wind Holdings LLC and become the operator of the Beacon Wind projects. The transaction is designed to be cash-neutral, accounting for standard settlements of cash and working capital items.
This move provides both Equinor and BP with the flexibility to pursue their respective priorities aligned with their corporate strategies. Equinor's extensive experience in offshore wind, spanning more than 20 years, positions it as a key player in the rapidly evolving U.S. offshore wind market. Pål Eitrheim, executive vice president of Renewables in Equinor, expressed the company's commitment to being a leader in the energy transition.
Following the agreement, Equinor submitted a bid for the Empire Wind 1 project in New York's fourth offshore wind solicitation round, closing on Jan 25, 2024. Additionally, Equinor has agreed with the New York State Energy Research and Development Authority to terminate the Offshore Wind Renewable Energy Certificate Purchase and Sale Agreement for the Beacon Wind 1 project.
Upon the transaction’s closing, Equinor will advance the Empire Wind projects on a 100% ownership basis, further solidifying its presence in the U.S. offshore wind market. Meanwhile, BP will take charge of the Beacon projects with full ownership.
According to Molly Morris, senior vice president for Renewables in the Americas at Equinor, Empire Wind 1 is poised to make a significant contribution to New York's climate and energy objectives. She highlighted the project's preparedness, citing the acquisition of permits and supplier contracts.
However, both Empire Wind 1 and 2 faced industry-wide macroeconomic challenges. While Empire Wind 1 bids in the NY4 solicitation, Empire Wind 2 will be matured for future rounds. The assets will be fully consolidated into Equinor's balance sheet upon closing, with a near-term reported capital expenditure increase of approximately $1.2 billion for 2024 and $1.5 billion for 2025.
A positive outcome in the NY4 solicitation is crucial for the development of Empire Wind 1, with a final investment decision expected in mid-2024. Equinor plans to use project financing and introduce a partner at the right time to enhance value and reduce ownership share and exposure.
The transaction, subject to regulatory approval, has an agreed effective date of Jan 1, 2024. It is expected to close in the second or third quarter of 2024. Equinor estimates a combined reported loss of $200 million, assuming a positive NY4 solicitation outcome, with no cash impact and effect on adjusted earnings.
Zacks Rank & Key Picks
Equinor currently carries a Zack Rank #3 (Hold).
Some better-ranked stocks in the energy sector are Oceaneering International, Inc. OII and Enbridge Inc. ENB. While Oceaneering International sport a Zacks Rank #1 (Strong Buy), Enbridge carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Oceaneering International is a leading provider of integrated technology solutions, active at all phases of the offshore oilfield lifecycle. Its strong relationship with high-quality customers provides revenue visibility and business certainty. OII is well-positioned to supply equipment for deep-water projects.
Enbridge has an extensive oil and liquid pipeline system that spreads across 17,809 miles. A significant portion of the midstream operator’s earnings is generated from transportation operations, driven by a string of long-term contracts. ENB anticipates substantial cash flows from the recently completed midstream projects.
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