Orsted A/S (CPH:ORSTED) booked an impairment of more than $500 million related to an offshore wind farm in the US and a canceled green hydrogen plant in Sweden.
The action shows that Chief Executive Officer Mads Nipper’s turnaround plan for the Danish wind developer still has some way to go before bearing fruit. In total, the company took a hit of 3.9 billion Danish kroner ($580 million) in the second quarter, including from delays at the Revolution Wind project off Connecticut and Rhode Island.
It’s the latest sign of trouble for the nascent US offshore wind market that’s been a key part of President Joe Biden’s plans to decarbonize the American power grid. Orsted had to cancel two major projects in the US last year after delays and supply chain issues added unmanageable costs. The latest trouble shows developers still can’t predict all the costs in this first generation of major projects.
“It is frustrating and unsatisfactory,” Nipper said on a call with journalists Thursday morning. “Risk is an integrated part of projects. The early stage US market is hit harder than anywhere else.”
Shares fell as much as 9.3% in Copenhagen, the biggest drop since November.
Analysts at Jefferies Financial Group Inc., including Ahmed Farman, said they expect the impairments to overshadow the rest the earnings report. Shares fell as much as 9.3% in Copenhagen before recovering to trade down about 7%.
© BloombergThe firm is one of the world’s biggest renewable power developers, focusing primarily on offshore wind. Its projects are key to help the European Union meet its climate goals. The company developed the first offshore wind park in Denmark in the 1990s.
On the positive side for investors, Orsted confirmed it’s on track for a full-year profit in the range of 23 billion kroner ($3.4 billion) to 26 billion kroner, excluding new partnership agreements and cancellation fees. It’s a sign that the company’s core business is strong enough to weather such negative surprises that have become common place in the wind industry.
After record losses in 2023, Nipper in February unveiled a plan that suspended the company’s dividend, cut its target to grow renewable power generation and eliminate as many as 800 jobs. Nipper said that he’s committed to staying on as chief executive to continue with the plan.
“Orsted required a number of quarters of solid operational delivery and performance to recover investors’ trust following the recent incidents within its US offshore wind portfolio,” analysts at Barclays Plc led by Dominic Nash wrote in a note. “Impairments keep coming.”
The US wind project has seen a delay to the construction of an onshore substation, which will result in the project coming online one year later, in 2026. The substation is being built by Orsted’s partner in the project, Eversource Energy that’s selling its stake to Global Infrastructure Partners LP. It was discovered during construction that the site on an old naval station had more extensive soil contamination than previously though, requiring additional work.
The Swedish green hydrogen project known as FlagshipONE was poised to be the biggest ever to make green shipping fuel when Orsted made its final investment decision in late 2022. But the firm has been unable to find buyers for the output from the $175 million facility.
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