This heavy depreciation is attributed to several factors, notably rising interest rates, which are weighing on the financing of large-scale projects. But also the downward revaluation of the US portfolio, reflecting structural challenges in the market. Finally, the rising costs of the Sunrise Wind project, a key offshore wind farm located off Long Island, New York.
Orsted acknowledged that delays and soaring costs on this iconic project, which is set to become the largest offshore wind farm in the US, have weighed heavily on its results. The company's CEO, Mads Nipper, described these impairments as "very disappointing", underlining the continuing difficulties associated with the construction.
Trump's return further complicates matters
Orsted's earnings warning comes against an increasingly uncertain backdrop for the US offshore wind industry. Since the beginning of his term, President Donald Trump has taken a skeptical stance towards the industry, deeming it "costly" and "harmful to the environment". On Monday, he suspended new federal leases for offshore wind farms, pending a thorough review of their economic and environmental impact.
This decision could have a significant impact on the ambitions of Orsted and other offshore wind developers, heightening uncertainties about the sector's growth prospects in the US. Barclays analysts believe that this policy could slow or even halt new offshore wind projects in the medium term.
Impact on Equinor and market outlook
Norwegian oil giant Equinor, which recently increased its stake in Orsted to 10%, is also feeling the repercussions of this situation. The company has already recorded a loss of NOK 9 billion on this investment. According to Pareto analyst Tom Erik Kristiansen, Equinor may be forced to announce further write-downs.
Jefferies analysts believe that the market will continue to keep a close eye on the company's financial health, particularly when it publishes its 2024 annual results. In their view, Orsted's market capitalization has already fallen by DKK 40 billion since November 2024, reflecting investors' growing concerns about the execution risks of offshore wind projects in the USA. However, Danske Bank maintained its buy recommendation on the stock this morning, with a price target reduced from DKK 465 to DKK 445.
MarketScreener has long been wary of Orsted. At the time of Equinor's acquisition of a stake in the company in the autumn, we wrote that "it is extremely difficult to put a value on the developer, given the many complexities and uncertainties of each project in the portfolio. The most we can say is that the current valuation at x8 EBITDA is half its historical average, but this is possibly biased by the speculative excesses seen during the pandemic." We haven't changed our mind.