(Jan 21): Orsted A/S shares slumped after it recorded a US$1.7 billion (RM7.6 billion) hit on its earnings as the cost of building offshore wind farms in the US keeps rising, complicating the company’s efforts to expand the green technology from Europe.
It’s the latest in a long series of setbacks for Denmark’s Orsted, one of the world’s biggest developers of wind farms at sea. The news comes as President Donald Trump moved to stop federal permitting and leasing areas for new offshore wind projects in the US, putting the future of the industry in jeopardy.
Orsted fell as much as 18% in early trading in Copenhagen, the most since November 2023.
Supply chain issues and rising interest rates in recent years upended the business of offshore wind, particularly in the nascent US market. As costs soared, Orsted became emblematic of the challenges of building wind farms off the US coast, as the company cancelled two flagship projects and recorded billions of writedowns. With Trump now in office, the industry’s growth appears to be on an indefinite pause.
The impairments reported by Orsted late on Monday cost some 12.1 billion Danish kroner (RM7.51 billion).
“The impairments announced today, and especially the continued construction challenges, are very disappointing,” CEO Mads Nipper said in a statement. “We remain committed to the US market in the long term with its potential for renewables to meet the growing electricity demand and create thousands of industrial jobs across the US.”
The financial hit stems from a variety of issues including rising interest rates and higher costs to deliver its Sunrise Wind project off the east coast of New York’s Long Island, Orsted said.
Just under US$500 million was due to an expected hit in the market value of Orsted’s seabed leases off the coast of the US. Such early-stage projects require federal approvals, which the Trump administration has already moved to stop.
Despite the impairments, Orsted reported preliminary 2024 earnings before interest, tax, depreciation and amortisation of 24.8 billion kroner, excluding new partnerships and cancellation fees. That’s in line with the 24 billion kroner to 26 billion kroner it had previously guided.
Orsted has become symbolic of the promise and risks of offshore wind. The company constructed the world’s first offshore wind farm in Denmark in the early 1990s and has since built up a portfolio of projects around the world.
The technology had benefited for years from decreasing costs from its supply chain and rock-bottom interest rates. But disruptions caused by the Covid-19 pandemic and rising interest rates hit offshore wind developers with soaring project costs.
Some of Orsted’s flagship projects in the US were no longer financially viable, forcing the company to take billions in writedowns, cancel two major projects and dismiss two top executives. Nipper unveiled a turnaround plan early last year, cutting the firm’s dividend and reducing its expansion plans.
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