Orsted Net Loss Widens After Hefty Impairments — Update

By Dominic Chopping

Orsted's second-quarter net loss unexpectedly widened after it booked hefty impairments on wind and synthetic fuel projects.

The Danish renewable-energy company said Thursday that impairments in the quarter totaled 3.91 billion Danish kroner ($577.1 million), mainly due to delays in the construction of an onshore substation for its U.S. Revolution Wind offshore project and as it has decided to walk away from its FlagshipONE synthetic fuels project in Sweden.

Orsted's FlagshipONE project was being built to produce e-methanol, a liquid fuel made using green hydrogen and carbon dioxide to power shipping and heavy industries.

Shares fell over 9% in early trade.

"The liquid e-fuel market in Europe is developing slower than expected, and we have taken the strategic decision to de-prioritize our efforts within the market and cease the development of FlagshipONE," Orsted Chief Executive Mads Nipper said.

The company will now focus its synthetic fuel development efforts on green hydrogen, a fuel produced by using electricity sourced from renewable sources to separate hydrogen from oxygen in water.

Orsted, which transformed itself in recent years from what was Denmark's small state oil company into a global giant in wind energy development, last year hit major headwinds as it pushed aggressively to expand into new markets, particularly the U.S.

After struggling with supply-chain bottlenecks in the U.S., higher interest rates and trouble getting tax credits, it said late last year it would pull out of two high-profile wind projects off the coast of New Jersey due to spiraling costs.

It launched a comprehensive restructuring earlier this year to right itself from the costly move into the U.S. offshore wind market that includes cost cuts, paused dividend payments over several years, asset sales and a refocus of business priorities.

While some of its issues have begun to ease, the company has faced specific problems at its Revolution Wind project. The project's onshore substation, which will serve as the hub to receive electricity produced from the offshore turbines, is being built on a military landfill site and Orsted said that permitting and site preparation have proved to be more challenging than anticipated.

The delays will result in knock-on effects to revenue and installation costs and also mean that commercial operation of Revolution Wind is pushed back into 2026 from 2025, despite offshore construction remaining on track.

The company reported second-quarter earnings before interest, taxes, depreciation and amortization excluding new partnerships--the company's preferred metric--of 5.27 billion kroner from 3.32 billion kroner, beating a FactSet consensus of 4.75 billion kroner.

The net loss attributable to shareholders came in at 1.72 billion kroner from a loss of 596 million kroner a year earlier, as revenue rose 3.1% to 15.02 billion kroner. A FactSet consensus had seen net profit at 1.33 billion kroner on revenue of 16.57 billion kroner.

The company still expects 2024 Ebitda excluding new partnership agreements and provisions of between 23 billion and 26 billion kroner, but gross investments in 2024 are now expected to be between 44 billion and 48 billion kroner, which is 4 billion kroner below previous guidance, due to project timing effects.

Profitability at Orsted's offshore wind business is now expected flat on year, from lower previously, while the bioenergy business is seen higher from significantly higher.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

August 15, 2024 03:59 ET (07:59 GMT)

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