Orsted shares tank after halting two major US wind farms
Orsted has halted two new offshore wind projects in the US as weighs up its energy portfolio – raising the prospect of the company scaling down its American ambitions.
In a gloomy third quarter update, the Danish energy giant confirmed the decision to suspend development of the Ocean Wind 1 and 2 projects off the coast of New Jersey, which had a combined capacity of 2.25GW – enough to power over a million homes.
It warned impairment costs could rise to nearly £5bn following the move, blaming the decision on rising borrowing costs, supply chain issues and an insufficient tax credits.
“Significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision,” chief executive Mads Nipper said.
Commenting on the group’s US operations, he said: “Based on the challenged US portfolio and the current market conditions, we’ve initiated numerous actions to ensure our capital structure and rating and to improve our competitiveness and value creation.”
The move casts doubt on US President Joe Biden’s aim to boost green energy through subsidies and replace fossil fuels with offshore wind, catching up with global leaders including the UK and China.
Orsted made the announcement while also revealing a 23 per cent year-on-year downturn in operating profits, with post-tax earnings falling from £2.96bn to £2.26bn for the first nine months of trading this year.
Following the news, its share price has tanked 17.5 per cent on the Copenhagen Stock Exchange, having fallen 40 per cent since August.
However, it has given the green light to the Revolution Wind project in the US, which Orsted owns a 50 per cent stake in.
The development will begin offshore construction in 2024 and is expected to be completed by 2025, with a capacity of 704MW.