REG-Ørsted A/S Ørsted ceases development of its US offshore wind projects Ocean Wind 1 and 2, takes final investment decision on Revolution Wind, and recognises DKK 28.4 billion impairments

Oersted A/SAnnouncement

31/10/2023 23:30

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   Ørsted A/S (Orsted)
   Ørsted ceases development of its US offshore wind projects Ocean Wind 1
   and 2, takes final investment decision on Revolution Wind, and recognises
   DKK 28.4 billion impairments

   01-Nov-2023 / 00:21 CET/CEST

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   1.11.2023 00:21:13 CET | Ørsted A/S | Inside information

   Following decisions of its Board of Directors, Ørsted will cease
   development of the Ocean Wind 1 and 2 projects and has taken final
   investment decision on the Revolution Wind project. The decisions are part
   of an ongoing review of Ørsted’s US offshore wind portfolio. 

   Impairment update
   On 29 August 2023, Ørsted announced anticipated impairments on its US
   portfolio of up to DKK 16 billion. 

   Since the announcement, the US offshore wind projects have experienced
   further negative developments from adverse impacts relating to supply
   chains, increased interest rates, and the lack of an OREC (Offshore
   Renewable Energy Certificate) adjustment on Sunrise Wind. The total
   impairments recognised in the interim financial report for the first nine
   months of 2023 amount to DKK 28.4 billion, and the majority of these (DKK
   19.9 billion) relate to Ocean Wind 1. 

   Ocean Wind 1 and 2
   Ørsted has taken the decision to cease the development of the Ocean Wind 1
   and 2 projects. This is a consequence of additional supplier delays
   further impacting the project schedule and leading to an additional
   significant project delay. In addition, Ørsted has updated its view on
   certain assumptions, including tax credit monetization and the timing and
   likelihood of final construction permits. Finally, increases to long-dated
   US interest rates have further deteriorated the business case. 

   A provision related to Ørsted ceasing the development of Ocean Wind 1 will
   negatively impact Q4 2023 EBITDA. The provision accounts for potential
   contract cancellation fees not already covered by the impairments but
   excludes any potential reuse value of existing contracted equipment.
   Ørsted currently estimates the provision to be approximately DKK 8-11
   billion.

   Mads Nipper, Group President and CEO of Ørsted, says: 

   “We are extremely disappointed to announce that we are ceasing the
   development of Ocean Wind 1 and 2. We firmly believe the US needs offshore
   wind to achieve its carbon emissions reduction ambition, and we remain
   committed to the US renewables market and truly value the efforts by the
   US government to support the build-up of the US offshore wind industry.
   However, the significant adverse developments from supply chain
   challenges, leading to delays in the project schedule, and rising interest
   rates have led us to this decision, and we will now assess the best way to
   preserve value while we cease development of the projects. At the same
   time, with an attractive forward-looking value creation, we progress the
   Revolution Wind project into the construction phase.”

   Capital structure
   The impairments and provision mentioned above will impact Ørsted’s capital
   structure. Therefore, Ørsted is taking measures to support its capital
   structure and long-term commitment to its credit rating. In addition to
   cost-savings initiatives, such measures include working capital
   improvements such as supply chain financing, prioritisation of development
   activities, portfolio rationalisation, and other actions aimed at
   strengthening the company's capital structure.

   As part of the ongoing review of its US portfolio, Ørsted will assess the
   potential implications for its current long-term strategic build-out
   ambition and financial targets. 

   Ørsted expects to update the market no later than in the Q4 2023 results
   announcement, including (if relevant) potential implications to its
   long-term strategic ambition and financial targets.

   Revolution Wind
   Ørsted has today taken the final investment decision (FID) on the 704 MW
   Revolution Wind project, which Ørsted owns in a 50/50 partnership with
   Eversource. Onshore construction has started, and offshore construction
   will start in 2024, with the project expected to be completed in 2025.
   Notwithstanding the impairment of DKK 3.3 billion that Ørsted is recording
   in its Q3 results, Revolution Wind has an attractive forward-looking value
   creation with a forward-looking spread to WACC above Ørsted’s guided
   range. 

   Sunrise Wind
   Ørsted welcomes NYSERDA’s (New York State Energy Research and Development
   Authority) request for information on an accelerated solicitation for
   offshore wind capacity, which could provide an opportunity to rebid
   Sunrise Wind, which Ørsted owns in a 50/50 partnership with Eversource, at
   a price level that reflects current component and financing costs. Ørsted
   awaits the conditions of the request for proposal to determine whether to
   rebid or not. 

   Skipjack Wind
   Ørsted continues to reconfigure this project with minimal project spend
   and expects to have more clarity on its path forward in the Q4 2023 report
   as Ørsted continues discussions with stakeholders in Maryland. 

   2023 guidance
   Ørsted's previously guided EBITDA for 2023, excluding new partnership
   agreements, of DKK 20-23 billion remains unchanged, when excluding the
   provision of approximately DKK 8-11 billion related to Ocean Wind 1. Due
   to a later timing across its project portfolio and the termination of
   investments on Ocean Wind 1, Ørsted's gross investment for 2023 is now
   expected to amount to DKK 40-44 billion, a reduction of DKK 4 billion.

   For further information, please contact:

   Media Relations
   Tom Christiansen
   +45 99 55 6017
    1 tomlc@orsted.com 

   Investor Relations
   Rasmus Keglberg Hærvig
   +45 99 55 90 95
    2 ir@orsted.com  

   About Ørsted
   The Ørsted vision is a world that runs entirely on green energy. Ørsted
   develops, constructs, and operates offshore and onshore wind farms, solar
   farms, energy storage facilities, renewable hydrogen and green fuels
   facilities, and bioenergy plants. Ørsted is recognised on the CDP Climate
   Change A List as a global leader on climate action and was the first
   energy company in the world to have its science-based net-zero emissions
   target validated by the Science Based Targets initiative (SBTi).
   Headquartered in Denmark, Ørsted employs approx. 8,700 people. Ørsted's
   shares are listed on Nasdaq Copenhagen (Orsted). In 2022, the group's
   revenue was DKK 132.3 billion (EUR 17.8 billion). Visit  3 orsted.com or
   follow us on Facebook, LinkedIn, Instagram, and Twitter.

       Attachments

     •  4 Company announcement final.pdf

   News Source: Ritzau

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   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   ISIN:          DK0060094928
   Category Code: MSCH
   TIDM:          Orsted
   Sequence No.:  281806
   EQS News ID:   1762053


    
   End of Announcement EQS News Service

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References

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