Orsted Shares Slump After New York Regulators Reject Higher Rate Request

By Dominic Chopping

Shares in Orsted are among the biggest fallers this morning after New York regulators denied requests from offshore wind developers to give them a higher price for electricity generated from their projects off the state's coast.

The New York State Public Service Commission said changing the contracts for developers including BP, Equinor and Orsted, would push ratepayers' bills higher, with residential customers paying as much as 6.7% more for their electricity while commercial or industrial customers could see their monthly bills rise by up to 10.5%.

Developers are struggling to justify moving ahead with large, capital intensive offshore wind developments after facing surging costs from inflation, supply-chain backlogs and higher cost of capital due to rising interest rates.

This has put projects currently in development--which were agreed when costs were much lower--at risk of becoming unprofitable and forcing developers to consider the viability of moving ahead with them.

Orsted recently warned of up to 16 billion Danish kroner ($2.26 billion) in possible impairments related to three wind projects off the east coast of the U.S. amid supply delays, higher interest rates and a lack of tax credits.

One of those projects is Sunrise Wind, which it is developing offshore New York with joint venture partner Eversource. It will have the capacity to power nearly 600,000 homes, but it could now be at risk.

"We are disappointed in the PSC's decision," David Hardy, Chief Executive of Orsted's America's division said in an emailed statement. "Sunrise Wind's viability and therefore ability to be constructed are extremely challenged without this adjustment. We will evaluate our next steps."

Citi analyst Jenny Ping wrote that Orsted now has to choose between the lesser of two evils: Impair the asset further while pushing ahead with the build, or walk away and pay the termination fees which she estimates could be as much as $215 million.

Orsted shares are down 48% so far this year and at 1011 GMT Friday they traded 8.5% lower at DKK328.60.

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

(END) Dow Jones Newswires

October 13, 2023 06:39 ET (10:39 GMT)

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