A deep dive from the Wall Street Journal, November 20:
Ørsted’s pullback from East Coast wind farms left the region scrambling
The poster child for the wind-power revolution was supposed to help build America’s clean-energy future. Its messy pullback from the Northeast is threatening those aspirations.
Denmark’s national oil-and-gas company, now known as Ørsted, bet big on renewables a decade ago. It renounced fossil fuels, renamed itself after a 19th-century physicist and embarked on a debt-fueled expansion, becoming the biggest offshore-wind developer outside China. Surfing investor enthusiasm for all things green, Ørsted surpassed
in market value early in the pandemic.A hotbed of activity was the U.S., where Ørsted made a play at dominating the nascent wind market. The company lined up high-profile projects off the East Coast championed by Democratic-led states with ambitious climate targets.
Much of that work is at risk of running aground.
The company’s cancellation of two New Jersey wind farms on Halloween drew charges of incompetence from the governor and sparked what could be a $300 million legal spat. In New York, a pricing dispute has threatened to delay Albany’s renewable-energy goals. A New England utility partner is trying to unload stakes in three joint projects. Suppliers across the region are in limbo.
Ørsted might need to cancel more projects, sell parts of existing wind farms, or cut its dividend or issue stock to shore up its balance sheet, analysts and investors say. Any turnaround will come under a new-look C-suite after the chief financial officer and chief operating officer stepped down last week.
Ørsted’s stock has plunged more than 75% from its high in 2021, including a roughly 19% drop this quarter.
Similar upheaval is rippling across an industry that the Biden administration placed at the heart of America’s green-energy ambitions. Inflation drove up prices for turbines, labor and steel. Higher interest rates lifted financing costs. Creating an East Coast network of factories, ports, transmission lines and interconnection facilities—all while companies await a glacial permitting process—proved easier said than done.
Even in Europe, a capital-intensive industry that thrived when interest rates were low and costs fell year after year is in trouble. “I don’t think we are out of the woods,” said Manuel Losa of Pictet Asset Management, who sold Ørsted shares in 2021.
Ørsted was more vulnerable than most to a surge in inflation and interest rates because stiff competition had already driven down power prices and expected returns from offshore-wind projects, former executives say. Some analysts say higher prices planned for the next round of projects in New York and the U.K. could help the industry rebound and aid states in upgrading aging energy infrastructure....
....MUCH MORE
