The financial hit stems from a variety of issues. — Bloomberg
COPENHAGEN: Orsted A/S recorded a 12.1 billion-krone hit on its earnings as the costs of offshore wind farms, particularly in the United States, keep rising.
The setback is the latest in a long series of issues for Denmark’s Orsted, one of the world’s biggest developers of wind farms at sea.
The news comes as the offshore wind industry in the US faces President Donald Trump who vowed in the first hours of his second term that he will stop leasing areas for new projects.
“The impairments announced today, and especially the continued construction challenges, are very disappointing,” Orsted chief executive officer Mads Nipper said in a statement on Monday.
“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 United States.”
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$500mil was due to an expected hit in the market value of Orsted’s seabed leases off the coast of the United States.
Such early-stage projects require federal approvals that the Trump administration will have broad power to block.
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, in line with the 24 billion kroner to 26 billion kroner it had previously guided.
Orsted has become emblematic 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 after the pandemic disrupted global supply chains and central banks increased rates to quell inflation, offshore wind developers were among those hit by soaring project costs.
Furthermore, some of Orsted’s flagship projects in the United States were no longer financially viable, leading the company to endure billions in writedowns, cancel two major projects and dismiss two top executives.
Nipper unveiled a turnaround plan early last year, cutting the company’s dividend and reducing its expansion plans. — Bloomberg
