Energy
Wednesday, February 7th, 2024 4:07 pm EDT
Key Points
- Orsted, the world’s largest offshore wind developer, announced plans to cut jobs, suspend dividends, and exit offshore wind markets in Norway, Spain, and Portugal to streamline operations amidst rising costs and challenges in the wind industry.
- The company aims to become “leaner and more efficient” after facing substantial challenges in 2023, including impairments on U.S. offshore projects, leading to a reduction of up to 800 jobs globally and a pause in dividend payouts for the financial years 2023 to 2025.
- Orsted’s stock price has plummeted over 40% in the past year due to supply chain disruptions and higher interest rates, prompting the company to cancel two major offshore wind farm projects in the U.S. The company now targets a power generation capacity of 35 to 38 gigawatts by the end of the decade, down from its previous goal of 50 GW, and plans to relieve capital expenditure by roughly 35 billion Danish kroner ($5.05 billion) from 2024 to 2026 by phasing out projects and prioritizing growth opportunities with high value creation potential while mitigating risks.
Orsted, a Danish leader in renewable energy, unveiled a series of strategic moves aimed at streamlining operations and navigating challenges following a tumultuous year marked by significant cost escalations. The company, renowned as the world’s largest offshore wind developer, announced plans to trim its workforce by up to 800 jobs globally, suspend dividend payouts to shareholders for the financial years 2023 to 2025, and withdraw from offshore wind markets in Norway, Spain, and Portugal. The decision comes in the wake of a sharp decline in Orsted’s Copenhagen-listed stock price, plummeting over 40% in the past year amidst industry-wide disruptions stemming from supply chain constraints and escalating interest rates. Despite underlying business progress, CEO Mads Nipper acknowledged that 2023 posed considerable challenges for Orsted, with financial results adversely impacted by impairments on U.S. offshore projects incurred in the third quarter. The company’s move to cancel two major offshore wind farm projects in the U.S. further underscored the impact of inflation, rising interest rates, and supply chain bottlenecks on its operations. Orsted now aims to scale back its power generation capacity target to 35 to 38 gigawatts (GW) by the end of the decade, down from the previous goal of 50 GW. This revised strategy includes canceling projects and phasing out capital expenditure across the portfolio, resulting in approximately 35 billion Danish kroner ($5.05 billion) of capital expenditure relief from 2024 to 2026. Nipper emphasized a renewed focus on growth opportunities with high potential for value creation while mitigating risks in project development and execution. Despite the challenges, Orsted remains optimistic about the future of the renewable energy sector and reaffirms its commitment to accelerating the global transition to sustainable energy solutions in the years ahead.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/02/07/orsted-exits-several-offshore-wind-markets-pauses-dividend.html
