Orsted takes $576m hit as green fuel project scrapped and US offshore wind farm delayed
Danish group stops previously hyped Swedish e-methanol project FlagshipONE and pushes Revolution Wind to 2026 as taxes also bite
The net loss at Orsted more than doubled during the second quarter of this year as the Danish offshore wind champion took substantial impairment losses from the scrapping of a previously hyped Swedish e-fuels project, a delay at its Revolution Wind project off the US East Coast and negative tax effects.
Earnings before interest, taxes, depreciation and amortisation (Ebitda) in the second quarter of 2024 almost doubled to DKr6.57bn ($969m) from the year-earlier period, aided by an increase in earnings in offshore wind, onshore wind, gas-fired power stations and the company’s combined cycle business.
“This means that we have pushed the commercial operation date [for Revolution Wind] from 2025 into 2026, which led to an impairment,” CEO Mads Nipper said, adding: “The liquid e-fuel market in Europe is developing slower than expected, and we have taken the strategic decision to de-prioritise our efforts within the market and cease the development of FlagshipONE.
“We will continue our focus and development efforts within renewable hydrogen, which is essential for decarbonising key industries in Europe and closer to our core business.”
Minor positive price updates at the Block Island offshore wind pilot array in the US and onshore assets somewhat offset the impairments.
Tax on profit for the second quarter was substantially higher, amounting to DKr1.1bn, due to the recognition of a deferred tax liability related to tax equity contribution for the Eleven Mile solar project in the US state of Arizona, and by net unrecognised deferred tax assets, including impairment losses and cancellation fees on Orsted’s US and Swedish portfolio.
As a result, the utility’s net loss in the second quarter jumped to DKr1.68bn ($248m), up from DKr538bn in the same quarter a year earlier.
Orsted shares plunged by 6.7% on the Copenhagen stock exchange to DKr394.20 in late morning trading Thursday in reaction to the losses.
"Net losses of DKr1.7bn underscore the impact of project delays and impairments, notably the postponement of the Revolution Wind project and the cancellation of the FlagshipONE e-methanol initiative," senior equity analyst Tancrede Fulop at Morningstar said in a comment.
But the analyst added that "while execution risks in U.S. projects remain, the undervaluation of shares provides a safety margin for investors", confirming a DKr540 per share fair value estimate.
"Orsted's second-quarter results reveal a 59% surge in underlying Ebidta to DKr5.27bn, significantly outperforming consensus by 21%. The company's offshore wind farms saw substantial Ebitda growth of 40%, bolstered by new projects and favourable wind conditions," Fulup said.
Nipper despite the losses put a positive spin on the figures, saying he was pleased with the results and pointed to the commissioning of 2GW of renewable capacity during the first half of this year.
“Orsted's operations are performing well, and particularly the earnings from our offshore wind farms, and thus our core business, have increased. Therefore, we maintain our Ebitda guidance for the full year, and we increase our earnings expectations for our offshore wind business.”
The company maintained its full-year 2024 guidance for an Ebitda of DKr23-26bn, excluding earnings from new partnerships and impact from cancellation fees.
In offshore wind, the utility raised its guidance to ‘neutral’ from ‘lower’, in reference to its 2023 Ebitda figure for the business unit of DKr19.1bn, but it also lowered its overall investment guidance by DKr4bn to DKr44-48bn this year.