Orsted plans $9.4bn rights issue amid 'adverse US market development'

Orsted plans a DKr60bn ($9.4bn) rights issue with the support of the Danish state as majority shareholder, as the utility is unable to complete an envisaged partial divestment and associated project financing of its 920MW Sunrise wind project off New York.

Existing shareholders – among them the Danish state with a 50.1% pro rata stake – will have a pre-emptive right to subscribe for their respective pro rata share of the capital increase in the rights issue and thereby retain the same relative ownership as they have today.

Investors reacted sourly to the announcement.

Orsted shares plunged 31.24% to DKr212.20 at the Copenhagen Stock Exchange in mid-afternoon trading Monday.

The proceeds will be used to strengthen the company’s capital structure and ensure it is sufficiently capitalised from 2025-2027, during which Orsted targets to deliver its 8.1GW offshore wind construction portfolio.

”Long-term, the fundamentals for offshore wind remain strong in our core markets in Europe. However, Orsted and our industry are in an extraordinary situation with the adverse market development in the US on top of the past years’ macroeconomic and supply chain challenges,” Orsted CEO Rasmus Errboe said.

“To deliver on our business plan and commitments in this environment, we’ve concluded that a rights issue is the best solution for Orsted and our shareholders.”

The rights issue will reinforce the utility’s ability to realise the full value potential of its existing portfolio and capture future value-creating opportunities in offshore wind, he said, adding that the measure is aimed at ensuring a capital structure that will support Orsted’s investment-grade credit rating.

Orsted shareholders at a 5 September extraordinary general meeting will be asked to authorise the rights issue, which is a formality given the backing of the Danish State, which holds a majority stake.

The company’s board of directors took the decision to plan the rights issue after “a comprehensive assessment of all options” given the “unprecedented regulatory development in the US”, chairwoman Lene Skole said.

Orsted was already well progressed in negotiations with relevant equity investors for selling off a stake in Sunrise Wind, Errboe said at a conference call with investors.

"However, following the stop work order on Equinor's Empire Wind project, the perceived risk of the US offshore wind market among investors and banks increased significantly," he said.

The stop-work order was later retracted, but the damage to investor sentiment was irreparable.

The "extraordinary and unprecedented development" that arose "outside of our control" then impacted dialogues with potential investors for Sunrise Wind, Errboe said, who "substantially increased their required risk protections and return requirements".

That led to banks involved in project financing not being able to continue the process under current market conditions, he added.

Orsted, as part of its growth strategy, customarily sells half or more of each of its projects to other developers or financiers to fund its current and next projects.

Not being able to part-divest Sunrise Wind as it had planned, Orsted must fund the construction of the entire project on its balance sheet, leading to an additional funding requirement of about DKr40bn.

Any shares not subscribed for by existing shareholders are fully underwritten by Morgan Stanley & Co. International to provide certainty that the rights issue will be completed.

Other divestments continue as planned.

Orsted said it is progressing on a previously announced farm-down for its Changhua 2 and Hornsea 3 offshore wind farms in Taiwan and the UK, respectively. The company has also launched a sales process for a potential full divestment of its European onshore business.

The utility expects to raise more than DKr35bn in proceeds from divestments during 2025-2026.

Target updates

Orsted also updated its medium-term financial targets.

The utility now plans to invest about DKr145bn from this year through 2027, relating to its current construction portfolio.

The company expects earnings before interest, taxes and depreciation (Ebitda) excluding new partnerships and cancellation fees of more than DKr28bn next year and in excess of DKr32bn in 2027.

It expects a return on capital employed (ROCE) of about 11% on average in the 2025-27 period and over 13% in the 2028-30 period.

Despite the US funding challenges, Orsted’s results during the second quarter and first half were stable.

“I’m satisfied with our strong operational performance during the first half of 2025, where we saw strong earnings of DKr13.9bn [Ebitda excl. new partnerships and cancellation fees] supporting our full-year Ebitda guidance of DKr25-28bn,” Errboe said.

“We continued to make good progress across our entire construction portfolio according to plan, with almost 70% of the offshore wind turbines installed at Revolution Wind and the first foundations installed at Sunrise Wind in the US.

“In addition, we’ve successfully reached first power at Greater Changhua 2b and 4, which is a significant milestone for the project.”

Half-year net profit shot up to DKr8.2bn, from DKr931m in the same period last year.

In the second quarter, net profit came in at DK3.4bn, compared to a net loss of DKr1.7bn in the same period last year when Orsted had suffered from DKr3.9bn in impairment – also due to adverse US developments.