Orsted gets $900m vote of confidence after Trump turmoil
The biggest operator of wind farms in UK waters has been boosted by a Norwegian state-controlled oil and gas group’s backing for its $9.4 billion rights issue.
Equinor is to sink another $939 million into the Danish developer Orsted to maintain the 10 per cent stake it acquired for $2.3 billion less than a year ago.
The Norwegian group is also developing its own offshore wind business and both companies have been subject to attacks by the Trump administration, which has issued “stop work” orders against their projects in American waters.
• Business live: the latest on companies, markets and economics
Orsted said last month that the “unprecedented” actions of the US government had left it unable to sell a stake in a wind farm off New York or to raise project financing for it, forcing it into a rights issue to cover the funding shortfall.
Equinor’s response to the rights issue had been keenly awaited by the market and on Monday it gave a vote of confidence in Orsted by announcing it would take part fully and pledging to collaborate more closely in response to the challenges faced. Orsted shares rose 2 per cent in morning trading.
Orsted started life as Dong Energy, the Danish state oil and gas group, before pivoting to offshore wind and becoming the world’s most prolific developer. It has 10 gigawatts of offshore wind farms globally and another 8 gigawatts under construction.
It operates 12 wind farms in UK waters that together generate 7 per cent of Britain’s electricity, including Hornsea Two, the world’s largest offshore wind farm. It is also building the even bigger Hornsea Three, but recently shelved plans to build Hornsea Four amid rising costs. Orsted is 51 per cent owned by the Danish state.
Equinor said both companies would benefit from “a closer industrial and strategic collaboration”
CARINA JOHANSEN/BLOOMBERG/GETTY IMAGES
Equinor, formerly Statoil, has a much smaller offshore wind portfolio with 0.4 gigawatts of net installed capacity and 3 gigawatts under development. The company is 67 per cent owned by the Norwegian state.
In April the Trump administration ordered Equinor to halt construction of its Empire Wind project off New York. Although the move was reversed a month later, Orsted said it had spooked would-be investors in its neighbouring Sunrise Wind project.
Shortly after announcing its rights issue, Orsted was itself hit with a stop work order from the Trump administration targeting its almost-completed Revolution Wind project off Rhode Island.
Equinor said: “As a long-term industrial shareholder, Equinor intends to participate in the rights issue and maintain its 10 per cent ownership share in Orsted. Ahead of the next annual general meeting, Equinor will also nominate a candidate to Orsted’s board of directors.
“Equinor’s support of the rights issue reflects confidence in Orsted’s underlying business, and the competitiveness of offshore wind in the future energy mix, in selected geographies.
“In response to the challenges facing offshore wind, the industry will see consolidation and new business models. Equinor believes that a closer industrial and strategic collaboration between Orsted and Equinor can create value for all shareholders in both companies.”
Biraj Borkhataria, analyst at RBC Capital Markets, said: “We wonder whether this move is the first step to Equinor considering a potential merging between the two offshore wind portfolios.”
He said that Equinor was “doubling down” on its Orsted investment as not participating would have diluted its ownership, but that by participating fully it was increasing its exposure to US offshore wind farms for which “political support remains uncertain”.
Borkhataria added: “The incremental positive is that alongside its maintained shareholding, Equinor will now be having board representation, making the most of a challenging situation.”