Ørsted shares fall after cancelling two US offshore wind projects
Pamela Largue
Posted on: 2 November 2023
Danish wind energy giant Ørsted will stop development of the Ocean Wind 1 and 2 projects off the US coast of New Jersey.
Danish wind energy major Ørsted will stop development of the Ocean Wind 1 and 2 projects off the US coast of New Jersey, an announcement which caused a significant drop in the company's share price.
The company took the decision citing additional supplier delays, the timing of construction permits impacting the project schedule, as well as increased interest rates.
Mads Nipper, group president and CEO of Ørsted, commented on the decision: “We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2.
"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."
Shares in Ørsted plunged over 20% after the announcement, with the company recording impairments of DKr 28.4 billion ($4 billion).
In August 2023, Ørsted warned of anticipated impairments on its US portfolio of up to DKK16 billion, ($2.2 billion) predicting that the Ocean Wind 1 and 2 projects might not happen and highlighting the need for more financial subsidies approved by New Jersey.
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Since the August announcement, the US offshore wind projects have experienced further negative impacts from supply chains, increased interest rates, and the lack of an OREC (Offshore Renewable Energy Certificate) adjustment on Sunrise Wind.
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.
Despite the news of Ocean Wind 1 and 2, Ørsted has taken the final investment decision (FID) on the 704MW Revolution Wind project, 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.
US headwinds
As was recently reported by Renewable Energy World, the US offshore wind industry has been grappling with uncertainties recently, with multiple power purchase agreements (PPAs) coming to an end, and developers and utilities backing out of projects.
Rhode Island Energy recently pulled out of its PPA with Ørsted and Eversource for the Revolution Wind 2 offshore project, citing higher interest rates, increased expenses, and questionable federal tax credits, concluding that the project had become uneconomical.
In July, Avangrid agreed to pay $48 million to pull out of a PPA with Eversource Energy, National Grid, and Unitil for another offshore wind project, the 1,223MW Commonwealth Wind located 20 miles south of Martha’s Vineyard.
