Bankinter | The US Department of the Interior has announced the immediate suspension of lease agreements for all large-scale offshore wind projects under construction in the United States due to ‘national security risks identified by the Department of Defence’. Among others, Iberdrola’s Vineyard Wind 1 wind farm, which was already under construction, will be halted. This farm is being developed off the coast of Massachusetts and has an installed capacity of 806 MW and an investment of more than €2.7 billion already underway. Iberdrola has a 50% stake in Vineyard Wind 1 through its subsidiary Avangrid, with the remaining 50% held by the Danish investment group Copenhagen Infrastructure Partners (CIP).
Construction of the project began in 2021 and it started supplying electricity in early 2024. Of the 62 wind turbines that make up the Vineyard Wind 1 farm, 44 have already been built and are generating electricity, and another six are currently under construction. It remains to be confirmed whether the suspension ordered by the US executive would affect the entire project or only the 12 wind turbines that remain to be built. In total, five wind farms are affected this time by this order from the Trump administration.
In addition to Iberdrola’s project, wind farms owned by Dominion Energy, Empire Wind, Equinor and, once again, Ørsted would also be halted.
Bankinter’s analysis: Bad news for Iberdrola, although of limited scope. Until now, Trump’s threats against Iberdrola’s offshore wind power focused on projects where the group had not yet begun construction. This is the case with the New England Wind 1 and 2 farms, for which Trump withdrew construction authorisation last September. Iberdrola’s investment in these farms was minimal and it had not made any provisions for the threat of a halt to construction. However, the case of Vineyard Wind 1 is different, as a large part of the investment (€2.7 billion) has already been committed. It remains to be confirmed whether the blockage affects all 62 generators in the project or only the 12 generators that have yet to be built.
In the worst-case scenario, the impact on Iberdrola would be limited. On the one hand, 50% of the investment in Vineyard Wind 1 amounts to €1.35 billion, which represents 1.1% of its current market capitalisation. Furthermore, offshore wind power in the US is not a priority in the group’s future investments. The priority is growth in networks, as reflected in its Strategic Plan. Iberdrola expects the regulated asset base in networks to increase from €49 billion in 2024 to €70 billion in 2028 with very attractive returns (average ROE of 9.5%).
