Orsted took a $4 billion hit last year when it canceled wind farm projects in the United States.
By AFP - Agence France Presse
Drifting off course, turbine giant Orsted seeks a second wind
Camille BAS-WOHLERT
Long dependent on fossil fuels before becoming a champion of offshore wind energy, Danish company Orsted is now struggling to restore its business after abandoning several major projects.
Orsted suffered a $4 billion blow last year when it canceled wind farm projects in the United States, a crucial market for the group.
The return of Donald Trump, who dislikes wind energy, to the White House in January could be another challenge for the company.
Orsted recently announced that it was withdrawing from the Danish government's “Green Fuels for Denmark” project and has asked shareholders to share the burden and suspended dividends until the 2026 financial year.
“A few years ago, they had the ambition to be a major green player, but now we no longer hear that they want to change the world,” climate editor Jakob Martini of the business newspaper Finans told AFP.
Orsted is trying to refocus on offshore wind energy and “make money from this core business,” said Martini, who has been following the sector for several years.
Supply chain disruptions, high interest rates, rising material costs, falling electricity prices, and political uncertainties have shaken Orsted.
- US headwinds
Orsted was once considered a success story.
In less than a decade - from 2010 to 2019 - it went from being a traditional energy company that relied on fossil fuels for energy production to 86% renewables.
“They won projects that created a lot of value,” Tancrede Fulop, an analyst at Morningstar, told AFP.
It was the first company to invest massively in offshore wind energy in the United States, securing fixed-price projects in a low-rate environment. in a low-rate environment.
“With Covid, the acceleration of the energy transition, interest rates kept at zero, and the election of (US President Joe) Biden, they benefited from a favorable bubble,” Fulop said.
But “in the United States, which is a new and therefore riskier market, they may have bitten off more than they can chew,” he added.
The central banks of the United States and Europe began raising interest rates in 2022, seeking to control inflation and only started reducing them this year.
Martini said that Orsted had “failed to anticipate” by bidding for large offshore projects in the United States “without protecting itself against high interest rates.”
By abandoning the Ocean Wind 1 and 2 projects, two wind farms that were due to be installed off the coast of New Jersey, the group was also forced to reimburse its suppliers.
“It was a colossal cancellation. It completely devastated them,” said Fulop.
Now, the group faces more uncertainty with Trump's return.
“What Trump hates most is offshore wind energy, but the two projects Orsted is involved in, Revolution Wind and Sunrise Wind, have received federal approval, so Trump can't block them,” said Fulop.
In any case, the day after his re-election, Orsted shares, which have lost 70% of their value since the end of 2021, fell by more than 12%.
“There are many concerns linked to this election when Orsted has not yet recovered from the wounds of 2023,” said Jacob Petersen, an analyst at Sydbank.
“Things will be better when Trump is in charge, and we know what he wants to do,” Petersen added.
- Sign of confidence
According to the analysts, one ray of hope is Norwegian energy giant Equinor's acquisition of almost 10% of Orsted's shares, making it the second largest shareholder after the Danish state.
“It's a blessing, a sign of confidence,” said Petersen.
Fulop noted that the acquisition was made “before the US elections, so they don't think it's a problem, which is quite positive.”
Orsted is also gradually replenishing its coffers and recently sold half of the Changhua 4 offshore wind farm to Taiwan's Cathay Life Insurance for around $1.6 billion.
Despite the current headwinds, wind energy is predicted to have a bright future.
The rate of expansion of global wind capacity is expected to double between 2024 and 2030 compared to the previous six years, according to the International Energy Agency.
“Cleantech continued to grow during Trump's last presidency, and we are confident that it will continue to grow during this one. Because it is cheaper and local and boosts energy security,” said Kingsmill Bond, energy strategist at the Rocky Mountain Institute, a US think tank.
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