Orsted Books $4 Billion Impairments, Walks Away From Two US Offshore Projects

By Dominic Chopping

Orsted booked a 28.4 billion Danish kroner ($4.02 billion) impairment charge in the third quarter related to its U.S. offshore wind portfolio and said it will stop development of two wind farm projects off the coast of New Jersey amid spiraling costs and supplier delays.

The Danish renewable-energy company had previously warned of up to DKK16 billion of impairments after flagging increasing supply-chain risks at U.S. projects, while a lack of favorable progress on U.S. tax credits and higher interest rates were also sending project costs higher.

Since then, the situation has intensified, with further supply-chain issues, higher interest rates, and the lack of a funding adjustment at its Sunrise Wind project off New York's coast leading to the higher-than-expected impairment.

At the Ocean Wind 1 and 2 projects offshore New Jersey, Orsted said additional supplier delays have further impacted project schedules, leading to an additional significant delay, while updated assumptions on tax credit monetization, timing, likelihood of final construction permits and increases to long-dated U.S. interest rates have further deteriorated the business case.

The company has therefore decided to cease development of the Ocean Wind 1 and 2 projects and expects to book a provision of DKK8 billion to DKK11 billion in the fourth quarter to cover contract cancellation fees that aren't already covered by the impairments.

"The significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision, and we will now assess the best way to preserve value while we cease development of the projects," said Orsted's Chief Executive Mads Nipper.

However, the company said it has taken the final investment decision on the Revolution Wind project offshore Rhode Island, meaning it will now proceed to construction phase. Orsted owns the project in a 50/50 partnership with Eversource and it is expected to be completed in 2025.

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

(END) Dow Jones Newswires

November 01, 2023 03:26 ET (07:26 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.