wind energy
The Danish Orsted made the switch from oil company to wind energy giant, but indulged in overly ambitious investments. The world’s largest developer of offshore wind farms is making major cuts to staff, dividends and investments.
In the autumn of 2023, the wind changed for Orsted. The Danish company had successfully made the step from oil company to the largest developer of offshore wind farms in the world. But in November it had to pull the plug on two billion-dollar investments in the United States.
Due to rising interest rates, higher raw material prices, supply problems and delays, the company had incurred a write-down of 3.8 billion euros in the first nine months of that year. The news then led to a 25 percent fall in Orsted’s share price. Although the share price has partly recovered since then, shareholder confidence in Orsted’s growth plans suffered a blow. It wanted to develop 50 gigawatts of wind capacity by the end of the decade.
The management announced a strong restructuring plan. The ambition is being scaled back to 35 to 38 gigawatts of new capacity by 2030. Orsted is withdrawing from the Norwegian, Spanish and Portuguese markets. Eight hundred jobs will be cut and dividend payments will be put on hold until 2025. The company will also sell 15 billion in assets.
The company hopes to restore its financial health without having to raise additional money. Orsted will continue to bid for new concessions and projects, but with more guarantees. The problem with the American projects was, among other things, that Orsted had committed to a fixed electricity price, but had not stipulated any protection against inflation or sudden price increases in the contract. Due to the rise in interest rates, the billion-dollar investment could never become profitable. The American debacle ended a period of overheating in the offshore market, where the combination of cheap money and unbridled ambition had plunged the sector into a scorching bid for new concessions.
CEO Mads Nipper now hopes to remain a global player in the offshore wind sector with a “leaner and more efficient” company.
