Orsted, the globe's foremost offshore wind developer, is set to reveal modified investment strategies and potential dividend reductions on Wednesday, addressing challenges exacerbated by inflation, interest rate hikes, and supply chain disruptions within the offshore wind sector.
Once celebrated as a stalwart in green investments, Orsted, alongside other industry players, confronted a confluence of challenges leading to the abandonment of offshore projects. The nascent U.S. offshore wind industry witnessed setbacks last year, with stalled developments and significant write-offs predicted to exceed $9 billion, according to industry leaders like BP, Shell, and Equinor. In November, Orsted's decision to halt two offshore wind projects in New Jersey resulted in impairments surpassing $5 billion, significantly impacting its share value.
Investor apprehension surrounds Orsted's upcoming announcement, with analysts presenting two viable options: either adhere to the initial growth plan by securing new capital or adjust targets through dividend cuts and asset sales. The company's ambitious target of installing 50 gigawatts (GW) of renewable capacity, particularly offshore wind, may face revision, prompting a need for strategic adjustments aligning with financial realities.
Orsted CEO Mads Nipper, during the strategic review launch in November, stated, “There are no active plans” to raise equity. However, market skepticism persists, with concerns that such plans could materialize given the financial challenges highlighted in the balance sheet.
A decade ago, Orsted transitioned from an oil and gas-focused utility to an offshore wind pioneer, earning acclaim as a renewable energy leader. Analysts emphasize the delicate balance the company must strike between meeting investor expectations and navigating potential government considerations, given the Danish state's significant stake in Orsted.
While Orsted shares have seen a recovery since early November, rising by approximately two-thirds, they remain below levels observed before the announcement of the initial write-downs. Analysts caution that further challenges may lie ahead, emphasizing the need for a prudent strategic approach to navigate the evolving landscape of the offshore wind sector.