A view of the turbines at the Orsted offshore wind farm near Nysted, Denmark, September 4, 2023. Portal/Tom Little/File Photo Acquire License Rights
- The company is halting development of two offshore wind projects in the US
- Wind power companies are suffering from higher interest rates and supply chain problems
- Stocks fall up to 22%
Nov 1 (Portal) – Renewable energy company Orsted (ORSTED.CO) on Wednesday halted development of two offshore wind projects in the United States, saying associated impairment losses could amount to up to 39.4 billion Danish crowns ($5.58 billion).
The stock, which had fallen about 40% since August, fell another 22% in early trading.
Orsted, the world’s largest developer of offshore wind energy, announced that the company is continuing to develop its 2,248 megawatt (MW) Ocean Wind 1 and 2 projects in New Jersey as part of an ongoing review of its offshore wind portfolio the USA.
“Significant negative developments due to supply chain challenges leading to delays in the project schedule and rising interest rates have led us to this decision,” said Chief Executive Mads Nipper.
The Danish company announced in August that it could face impairments of 16 billion crowns in the U.S. due to supply chain problems, rising borrowing costs and a lack of new tax credits.
On Wednesday, Orsted increased that figure to 28.4 billion crowns and said provisions for the cancellation of the two projects in the fourth quarter would amount to 8 billion to 11 billion.
According to Bernstein analyst Deepa Venkateswaran, the writedowns were in line with expectations.
Stopping Ocean Wind 1, the most advanced of the two projects, also sends “a positive signal that they are committed to only moving forward with high-value projects,” Venkateswaran said.
Rising costs from rising inflation, interest rate hikes and supply chain delays have cast doubt on plans by US President Joe Biden and several states to use offshore wind energy to replace fossil fuels in energy production and reduce carbon emissions .
On Tuesday, energy giant BP (BP.L) booked a $540 million write-down on wind projects in the third quarter after officials in New York state rejected a request for better terms to reflect what BP called “inflationary pressures.” and the allowance of delays”.
Norway’s Equinor (EQNR.OL), BP’s partner in these New York offshore wind projects, on Friday recorded a $300 million impairment charge on the projects.
($1 = 7.0641 Danish Kroner)
Reporting by Gursimran Kaur in Bengaluru. Editing by Michael Perry and Mark Potter
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