'Abandonment of Revolution Wind less likely' after stop work order lifted – analyst
As Orsted shares surge on Copenhagen stock exchange, risk of downgrade to 'junk' status less likely says Sydbank's Pedersen
The preliminary court injunction allowing Orsted to resume working on its nearly completed Revolution Wind offshore array in the US is “really good news” for the Danish developer and makes an “outright abandonment” of the project “significantly less likely now,” Sydbank chief stocks analyst Jacob Pedersen said.
Orsted shares surged on the news on the Copenhagen stock exchange, rising 8.8% to DKr120.55 ($19.04) shortly after the opening Tuesday.
Orsted can now resume work on the 704MW project off the states of Rhode Island and Connecticut while the lawsuit against the Trump administration is ongoing. The utility and its partner Skyborn Renewables have already installed all 65 foundations as well as two-thirds of its Siemens Gamesa 11MW wind turbines.
“This is really positive news. Other remaining risks may still make life difficult for Orsted, but the risk of a downgrade of its credit rating to junk should actually have been reduced slightly,” Pedersen said in a research note early Tuesday.
The stop work order caused the developers $16m in losses every week.
“An outright abandonment of Revolution Wind is also significantly less likely now – and will save Orsted DKr11bn-plus ($1.74bn-plus) in losses and write-downs.”
Although nothing has been decided in relation to whether the stop work order is a political assault or legally sustainable, the judge’s comments point to the fact that the court is not blind to the value of the approvals already obtained, Pedersen added.
This may be an indication that the stop work order may be difficult to defend in court for the Trump camp, he said.
“Revolution Wind has demonstrated likelihood of success on the merits of its underlying claims, it is likely to suffer irreparable harm in the absence of an injunction,” district judge Royce Lamberth had written.
Trump’s reaction to the court’s decision cannot be predicted, however, Pedersen said.
“We do not dare to rule out that a stop work order on Sunrise Wind could be in the toolbox of unpleasantness,” he said.
That could then still trigger a downgrade of Orsted by S&P to ‘junk’ status, the analyst cautioned, which the company warned would have a serious negative impact on its operations.
Sydbank believes that yesterday’s court decision should reduce the risk of a credit downgrade of Orsted, as the company has shown that a stop work order can be overturned in just one month, and maintained its ‘hold’ recommendation for Orsted stocks.
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