Orsted has reported a series of impairments totaling €1.6 billion ($1.7 billion) for the fourth quarter of 2024, primarily due to construction delays and rising costs in its US offshore wind business. The charges include a €576 million ($635 million) hit related to the 924MW Sunrise Wind project, which is now expected to be commissioned in the second quarter of 2027, delayed from its original target of late 2026.
The delays are partly attributed to updated expectations for the installation of the first-ever US offshore high-voltage direct current (HVDC) system, including the finalization and installation of jacket foundations and export cables. Additionally, Orsted reassessed its turbine installation rates after work at its Revolution Wind project, anticipating further delays and higher costs.
“These developments, combined with considerably increased project costs related especially to the monopile foundations to keep fabrication and installation on track, have led to higher cost expectations related to the execution of the Sunrise Wind project,” the company said in a statement.
Orsted also faced financial setbacks from the development of long-dated US interest rates, which caused a 75-basis-point increase in its weighted average cost of capital. This adjustment negatively impacted the value of its US offshore wind portfolio, leading to an impairment of €576 million ($635 million).
Further impairments were recorded due to “market-informed valuation indications” for seabed leases off the coasts of New Jersey, Maryland, and Delaware, amounting to €470 million ($510 million).
Despite these financial challenges, Orsted confirmed that its operating profit for 2024 is expected to remain in line with its guidance of Dkr24.8 billion ($3.5 billion). CEO Mads Nipper expressed disappointment over the impairments and delays, but remained optimistic about the company's long-term prospects.
“These developments are very disappointing. We are, however, encouraged by the performance of our operations, and we're confirming our full-year EBITDA guidance, supported by the increasing power production from our growing global fleet of renewable energy assets,” Nipper said.
Orsted reiterated its commitment to the US market, citing the potential for renewables to meet growing electricity demand and create thousands of industrial jobs. The company acknowledged the challenges faced in the nascent US offshore wind industry but pledged to continue strengthening execution and addressing supply chain challenges.
“Delivering the project within the updated schedule and cost is an absolute top priority for Ørsted. Including these adverse developments, the Sunrise Wind project is still profitable with a mid-single-digit lifecycle internal rate of return (IRR) and an attractive forward-looking IRR based on current assumptions,” Nipper added.
The Sunrise Wind project, once completed, is expected to power nearly 600,000 homes in New York and generate hundreds of long-term jobs, contributing to the state's renewable energy economy.
