Bud's Offshore Energy (BOE)

RWE has agreed to relinquish their Atlantic, Pacific, and Gulf of America wind leases.

“After careful consideration, it was determined there is no path forward to permit these projects in the U.S. for the foreseeable future.”

Comment: The poor prospects for these leases had more to do with bad investment decisions than permitting challenges. The company is fortunate to be able to rollover their lease bonuses into LNG infrastructure and gas turbine purchases.

The relinquished leases:

OCS-A 0539: RWE paid the highest bonus ever, $1.1 billion, for this lease at the irrational exuberance Atlantic wind sale in Feb. 2022. The amount was $305 million higher than the next highest bonus for any offshore lease.

OCS-G 37334: RWE was the only bidder at the 2023 Gulf wind lease sale. A second Gulf wind sale received no bids.

OCS-P 0561: RWE underestimated the technical and economic challenges associated with deepwater floating wind development offshore California and elsewhere. Only one wind lease remains in the Northern California wind lease area. Two of the three wind leases in the Central California area have also been relinquished.

The wind adverse U.S. Administration offered RWE a lifeline that allows them to reinvest in more prospective projects:

• LNG infrastructure: a financial investment of $900 million to acquire an indirect 16% stake in the Louisiana LNG Project. RWE proceeds will be used to fund the construction of the terminal.
• Natural gas turbine reservations: To support the expansion of its growing flexible power generation work in the U.S., RWE Americas has signed a $300 million turbine reservation agreement securing future generating capacity to meet growing U.S. electricity demand. The company is developing a pipeline of 15 natural gas peaking projects across target markets in the U.S.

Apparently, the attached letter from 50 U.S. environmental groups asking RWE not to keep their wind leases was not persuasive (and perhaps RWE didn’t appreciate the implied threat of litigation against a deal that was in the company’s best interest).