DBRS Morningstar published a commentary titled “Unfavourable Gusts: Cost Inflation Distressing Offshore Wind Projects, Earnings, and Credit Quality.”

Key points include:
— The strong growth realized in recent years by the offshore wind power industry is being challenged by significant cost inflation.
— The increase in industry costs would meaningfully reduce project returns and result in lower-than-anticipated future cash flows.
— The industry is likely to receive some form of support from the governments promoting these projects because of the importance of offshore wind power in enabling policymakers to achieve their decarbonization plans.

“Unless offshore wind developers can renegotiate electricity prices for projects currently under development or receive additional tax credits to compensate them for these significant project cost increases, the credit quality of these project owners is likely to weaken,” says Kevin Beicke, Vice President, Project Finance and Infrastructure.