Renewables giant Orsted exits several offshore wind markets, pauses dividend after turbulent year - CNBC
Orsted exits several offshore wind markets, pauses dividend
- Orsted, the world's largest offshore wind developer, said it planned to take steps "to become a leaner and more efficient" organization following a year marked by "substantial challenges."
- These measures include a reduction of as many as 800 jobs worldwide, a pause for dividends and a retreat from markets in Norway, Spain and Portugal.
- "Despite a year with strong underlying business progress, 2023 marked a year with substantial challenges for Ørsted," Mads Nipper, chief executive of Orsted, said in a statement.
Danish renewables giant Orsted on Wednesday announced plans to cut jobs, pause its dividend payouts to shareholders and exit several offshore wind markets after a tumultuous year of rising costs.
Orsted, the world's largest offshore wind developer, said it planned to take steps "to become a leaner and more efficient" organization following a year marked by "substantial challenges."
These measures include a reduction of as many as 800 jobs worldwide, a pause for dividends for the financial years 2023 to 2025 and a retreat from markets in Norway, Spain and Portugal.
Shares of Orsted traded 1% lower at 11 a.m. London time (6 a.m. ET).
The Copenhagen-listed stock price has fallen more than 40% over the past 12 months, with the company beset by challenges facing the broader wind industry. Supply chain disruption and higher interest rates sent wind energy stocks tumbling last year.
"Despite a year with strong underlying business progress, 2023 marked a year with substantial challenges for Ørsted," Mads Nipper, chief executive of Orsted, said in a statement.
Nipper said the company's financial results had been "adversely affected" by impairments on U.S. offshore projects taken in the third quarter of 2023.
Orsted canceled two major offshore wind farm projects in the U.S. late last year, citing high inflation, rising interest rates and supply chain bottlenecks.
Orsted said it was now targeting 35 to 38 gigawatts of power generation capacity by the end of the decade, a downward revision from its previous target of 50 GW.
Project cancellations and the phasing out of capital expenditure across the portfolio will result in roughly 35 billion Danish kroner, or $5.05 billion, of capital expenditure relief in 2024 to 2026, the company added.
"We've revisited our portfolio to prioritise growth options with the highest potential for value creation and at the same time reduce risks in the development and execution of our projects," Nipper said.
"We remain optimistic about the future of the renewable energy industry, and we're confident we can be a key contributor in accelerating the renewable build-out in the years to come."
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Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.