Posted on August 18, 2024
The world’s biggest offshore wind developer pushed back the start of commercial operations at its 704 megawatt (MW) Revolution Wind project off Rhode Island and Connecticut to 2026 from 2025, it said in its quarterly results statement.
The announcement was the latest blow to the fledgling U.S. offshore wind industry, which is a major part of President Joe Biden’s climate change agenda but has been struggling with soaring costs.
In the last month alone, U.S. officials have cancelled a planned Gulf of Mexico offshore wind auction due to lacklustre industry demand, and construction on the nation’s first major project was halted due to a shattered turbine blade that sent pieces of fiberglass washing up on nearby beaches.
Orsted’s impairment losses also related to its Ocean Wind project in the United States whose development it halted last year, an increase in U.S. interest rates, and its decision to cease development of its green e-methanol FlagshipOne project, which was due to open in Sweden next year.
Shares in Orsted, once a green investor favourite, ended down 7.2%, having fallen as much as 9.3% earlier. They remain at less than one-third of their value since peaking in early 2021.
The company last year found itself at the centre of a perfect storm of rising inflation, higher interest rates and supply chain delays, forcing it to cancel offshore projects in the United States, and related impairments surged above $4 billion.
In February, it trimmed its investment and capacity targets and paused dividend payouts following a strategic review of its business.
‘FRUSTRATING AND UNSATISFACTORY’
The delay at Revolution Wind, which Orsted is developing in partnership with Eversource Energy (ES.N), opens new tab, was due to soil contamination at an onshore transformer station.
The onshore facilities are being developed on the site of a naval air station that was decomissioned in the 1970s. The land includes buried waste from the demolished former facility, according to project planning documents filed with the federal government.
“This is not supply chain related. It is related to a specific challenge, which of course is frustrating and unsatisfactory,” CEO Mads Nipper told journalists on a call, adding that offshore installation was going according to plan.
Impairment losses related to the project alone amounted to 2.1 billion crowns.
Still, the company beat analyst expectations with a 59% rise in second-quarter profit before interest, tax, depreciation and amortisation and excluding new partnerships of 5.27 billion Danish crowns.
That topped an average forecast of 4.41 billion crowns in a poll of analysts provided by Orsted.
Orsted kept its full-year profit forecast unchanged, but said it would lower investments this year.
Orsted said it halted FlagshipOne, which was the largest e-methanol project under construction in Europe, because the green fuels market was developing slower than expected.
“We have decided to de-prioritize our green fuels business and focus our efforts on renewable hydrogen in northern Europe which is closer to our strategic core,” Nipper said.
($1 = 6.7768 Danish crowns)
