Wind farm developer Orsted shares plunge after €2.1bn hit in US
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Shares in Denmark's Orsted plunged 23% after the renewable energy company warned of impairments of as much as 16bn Danish kroner (€2.1bn) to its US portfolio because of supply chain issues and soaring interest rates.
Orsted is best known in Ireland as the owner of almost 20 wind and solar farms across all of Ireland. Separately, it had announced earlier this year a partnership with ESB to develop offshore projects.
In the US, the company’s Ocean Wind 1, Sunrise Wind, and Revolution Wind projects are being hurt by supplier delays, which could lead to writedowns of up to 5bn kroner, it said. High interest rates could also add another 5bn.
Orsted’s troubles are the latest in a series of struggles for the wind power industry, just as countries around the world demand more of the clean energy technology. Rising supply chain costs have clouded the outlook for some developers’ revenue, with others facing turmoil from critical mechanical issues.
Orsted said in June that its link-up with the ESB here would include working on offshore wind farms as part of the 2030 climate change goals, and on renewable hydrogen projects. Earlier this summer, it also announced a contract to supply Meta in Ireland, which owns Facebook, from one of its wind farms.
“While the bulls could argue many of these issues related to the [US] impairment are already known, the announcement is unlikely to bode well for an already weakened Orsted share price,” said Citigroup analyst Jenny Ping.
“We continue to see a number of challenges to offshore wind”, including affordability and fierce competition.
“Further signs of supply chain headwinds on the offshore segment may spur a bigger focus on onshore wind and solar development,” said Bloomberg Intelligence analyst Patricio Alvarez.
Orsted shares are down about 30% this year, trading at their lowest since January 2019.
Orsted earlier this month reported a decline in earnings for the second quarter, pressured by weak wind speeds and lower margins in some divisions. Still, it expects its return on capital employed target for the 2023-2030 period at about 14%.
In another sign of the stressed industry, Swedish developer Vattenfall halted a UK project last month as surging costs made it no longer viable. Meanwhile, Siemens Energy has tried to delay the delivery of new wind turbines from its 5.X platform amid flaws in its machines.
Orsted said it will continue to press on with US near-term offshore wind projects and work to mitigate supply delays.
Still, Danske Bank said the impairments “will have no bearing” on earnings before interest, taxes, depreciation, and amortisation, and it could also reduce the company’s development capital expenditure budget.
“Our overall impression from this is that it is only slightly credit negative,” said the bank.
- Bloomberg and Irish Examiner