Orsted ceases development of its US offshore wind projects Ocean Wind 1 and 2
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, according to the company's release.
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.
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.
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.
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.
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).
