Orsted shares tumble as it cancels two US wind projects
BP’s renewables boss says the US offshore wind industry is ‘fundamentally broken’
Renewable energy company Orsted on Wednesday halted the development of two US offshore wind projects and said related impairments could spiral to as much as 39.4-billion Danish kroner ($5.58bn).
The stock, which had dropped about 40% since August, plunged another 22% in early trade.
Orsted, the world’s largest offshore wind developer, said it would stop developing its 2,248MW Ocean Wind 1 and 2 projects in New Jersey as part of an ongoing review of its US offshore wind portfolio.
“Significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision,” CEO Mads Nipper said.
The Danish company flagged in August it could see US impairments of 16-billion kroner due to supply chain issues, soaring borrowing costs and a lack of new tax credits.
On Wednesday, Orsted raised that number to 28.4-billion kroner and said provisions relating to the cancellation of the two projects would amount to between 8-billion kroner and 11-billion kroner in the fourth quarter.
The writedowns were in line with expectations, according to Bernstein analyst Deepa Venkateswaran.
Halting Ocean Wind 1, the most advanced of the two projects, also sends “a positive signal that they are committed to only proceeding with valuable projects”, Venkateswaran said.
Soaring costs from rising inflation, interest rate hikes and supply chain delays have cast doubt on plans by US President Joe Biden and several states to use offshore wind to replace fossil fuels in energy production and reduce carbon emissions.
BP’s renewables boss said on Wednesday the US offshore wind industry is “fundamentally broken” as BP and its partner Equinor study options to develop huge projects off the coast of New York after writing down $840 million of their value.
Anja-Isabel Dotzenrath, BP’s head of gas and low carbon, said that problems in the US included permitting, the time lag between signing power purchase agreements and projects being built and a lack of inflationary adjustment mechanisms.
“Ultimately, offshore wind in the US is fundamentally broken,” Dotzenrath told an FT Energy Transition conference in London. “There is a fundamental reset needed in the speed of permitting, security of permitting, etc.”
She added that BP and Equinor are studying a new 10-point proposal by US regulators that would allow the companies to bid again for projects in an “accelerated” process. “There is a path forward but it's challenging,”
Norway’s Equinor booked a $300m impairment on the projects on Friday.
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