Ørsted faces $1.7 billion decline due to headwinds in US by Investing.com

COPENHAGEN – Danish energy company Ørsted A/S announced major provisions totaling 12.1 billion Danish kroner ($1.7 billion) for the fourth quarter of 2024, attributing the financial setbacks to higher U.S. interest rates, a decline in the value of seabed leases, and increased project implementation costs. Sunrise. Wind project.

The impairment is primarily due to a 75 basis point increase in the weighted average cost of capital as a result of the development of long-term US interest rates. This increase significantly impacted the value of Ørsted’s offshore wind projects in the United States, resulting in an impairment of DKK 4.3 billion. In addition, the company recognized a DKK 3.5 billion impairment charge on seabed leases off the coasts of New Jersey, Maryland and Delaware, citing uncertainty in the market.

Challenges in the construction of the Sunrise Wind project, including supply chain issues and the need to increase costs to maintain schedule, contributed to an impairment of DKK 4.3 billion. The project’s operation has been postponed to the second half of 2027.

Despite these setbacks, Ørsted’s 2024 pro-forma and unaudited EBITDA for 2024 is reported to be DKK 24.8 billion, in line with the company’s latest guidance. Operating profits from the offshore and onshore segments were in line with expectations and were the main contributor to this number.

Mads Nipper, Group President and CEO of Ørsted, expressed disappointment about the construction challenges but remains optimistic about the company’s operational performance and long-term commitment to the US market. Nipper stressed the strategic value of seabed leases and the importance of the Sunrise Wind Project, which is expected to generate enough offshore wind energy to power nearly 600,000 American homes and create hundreds of jobs.

Despite the drawbacks, Nipper maintains that the Sunrise Wind project remains profitable, with a single-digit life cycle internal rate of return (IRR) and an attractive forward-looking IRR based on current assumptions.

Ørsted is scheduled to host an investor and analyst call on January 21, 2025 to discuss 2024 impairment and EBITDA. The company will publish its 2024 annual report on February 6, 2025. This article is based on a Ørsted press release.

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