Orsted Books $4 Billion Impairments, Walks Away From Two US Offshore Projects
November 01 2023 - 2:41AM
Dow Jones News
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)
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