Denmark's largest renewable energy company and installer of offshore wind farms (ORSTED.DK) is losing more than 6.5% today. A few days ago, management warned of postponed wind farm construction programs in the U.S., and the declines accelerated today after comments from CEO Mads Nipper.
- According to Nipper, the postponement of projects is influenced by a problematic supply chain and higher interest rates in the United States, through which the energy transition trend has lost a good deal of momentum. Along with Orsted shares, turbine manufacturer and service provider Vestas (VWS.DK) is also losing ground.
- Wood Mckenzie analysts point out that Orsted's concerns about wind projects off the east coast of the US won't be the last this year, and it's a broader industry problem.The company is considering abandoning a project that was supposed to provide power to residents of the states of New York, Connecticut and New Jersey.
- The projects have been affected by delays by suppliers and contractors, including wind turbine component manufacturers and the specialized vessels needed to assemble the massive windmills, whose blades are as long as soccer fields. According to Orsted, iIthere is a growing risk that suppliers will fail to meet their commitments, which could lead to higher costs and slower wind power revenues.
- It also said that at this stage it will continue preliminary work on the construction of wind farms, although abandoning the project is under consideration. Director Mads Nipper was said to have said unofficially today that the company although continuing with the work is willing to abandon it if it does not see value in the project. Renewable energy projects require billions of dollars in upfront investment. Orsted also said it may not be able to get as much tax relief from the United States as it anticipated.
So far, the company has invested $4 billion to develop 'offshore' farms in the US at a total estimated cost of $10 billion. The U.S. remains an important future market for the sector as a whole, and Nipper believes that quitting would not benefit Orsted shareholders. The market was clearly spooked by the company's departure from US investments.
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Source: xStation5
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