'I could not believe my eyes': Expert expects Orsted to finish US project – but at what cost?
“I have never seen anything like this in equity research across a wide variety of industries in 20 years,” says Jacob Pedersen of Sydbank after Revolution Wind’s stop order
Orsted told shareholders in a statement in the early hours of Saturday, European time, that it is considering its options.
However, Pedersen expects it will take time and cost Orsted a significant amount of money.
Jacob Pedersen, Sydbank
He points to the fact that Equinor suggested the legal battle and delays to Empire Wind might cost $50m per week. That was for a project in its early stages. Revolution Wind is 80% complete, with most turbines already installed.
The worst-case scenario is that Revolution Wind is not finished. That would imply write-offs of many billion Danish kroner. Pedersen does not believe that is a realistic scenario. But he also notes: “This is the Trump administration. In reality, anything is possible.”
Pedersen does not believe that the courts will uphold the stop order, if Orsted chooses to challenge it — which they essentially need to do, otherwise the project is dead.
“My best-case scenario is that Revolution Wind will be erected and deliver power to the American grid,” Pedersen says.
But how will the markets respond on Monday morning, when they open after the weekend?
“We do not know when further information will emerge from Orsted. If nothing happens before Monday morning, I would expect the share price to drop quite significantly, since this represents huge uncertainty.”
When Equinor resolved the Empire Wind issue, it also involved diplomatic efforts from Norwegian Prime Minister Jonas Gahr Støre (Labour Party) and former NATO Secretary General Jens Stoltenberg, who is now Norway’s Minister of Finance. If the Danish Prime Minister sits down with President Trump, there will be political stakes far beyond offshore wind, Pedersen notes.
It is, for example, well known that Trump wants more influence over Greenland.
On top of the problems caused by the stop order for Revolution Wind, Orsted is already seeking DKr60bn in a rights issue. The news emerged two weeks ago and caused the share price to drop by more than 30% in the following days. The market closed at DKr214.10 per share on Friday, before the US announcement.
The company needs more cash because the sales process for the US project Sunrise World collapsed.
The process for that rights issue has already been announced, with an expected closure in mid-October.
“There could be a need for another rights issue,” Pedersen says, while pointing out the huge uncertainty at present.
“We do not know how this is going to end up.”
The total cost for the Revolution Wind offshore project is reported as $4bn. The project is owned by Orsted and Global Infrastructure Partner’s Skyborn Renewables in a 50/50 joint venture.
Revolution Wind is fully permitted, having secured all required federal and state permits. The project has been in the works for around a decade.
(Copyright)