Orsted Sets Out Cost-Saving Plan After U.S. Wind Projects Cancellation — 2nd Update

By Dominic Chopping

Orsted, the struggling European wind-energy giant, said it will cut costs, pause dividend payments over several years, sell assets and refocus business priorities as it tries to right itself from a costly move into the U.S. offshore wind market.

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

After betting big on offshore wind development on the U.S. East Coast, it has pared back dramatically, and seen its stock-market valuation--at one point eclipsing that of some of its more traditional oil and natural gas peers--crater.

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

The Danish renewable-energy company at the time booked a 26.8 billion Danish kroner ($3.86 billion) impairment charge and has also taken a DKK9.6 billion provision in 2023.

As it continues to shuffle its portfolio, Orsted last month canceled a deal to supply power from another U.S. offshore project due to unfavorable terms and said it will purchase 50% of another project to become sole owner, subject to securing higher tariffs for its output.

Orsted said Wednesday that it will now implement further measures to bolster its balance sheet and support long-term growth and what it called capital structure resilience through 2030.

To reduce development costs and create further strategic market focus, it is exiting several offshore markets closer to home, including Norway, Spain, and Portugal, deprioritizing development activities in Japan, and planning for leaner development costs for projects, including its floating offshore wind projects.

It said it will also pause dividends for the financial years 2023-25 and aims to reinstate dividends from the financial year 2026.

Around 600-800 positions will be cut globally, with 250 roles to be made redundant in the coming months, it said.

"Orsted's strategic update is everything [the] market expected," Citi analysts Jenny Ping and Rory Graham-Watson said in a note. "[The] question is, is this enough for the shares to go further."

"For Orsted, it's all about delivery of targets and building investor confidence, which will take time."

The measures were outlined alongside the company's earnings. It reported fourth-quarter earnings before interest, taxes, depreciation and amortization excluding new partnerships--the company's preferred metric--of DKK8.62 billion compared with DKK6.62 billion a year earlier, beating a FactSet consensus of DKK6.08 billion.

The company sees 2024 Ebitda excluding new partnership agreements and provisions of between DKK23 billion and DKK26 billion, before rising to DKK39 billion-DKK43 billion in 2030.

Gross investments in 2024 are seen at DKK48 billion to DKK52 billion.

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

(END) Dow Jones Newswires

February 07, 2024 04:57 ET (09:57 GMT)

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