Diving overview:
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Danish offshore wind giant Ørsted last week announced plans to recover from the damage caused by last year's financial turmoil in the offshore wind industry. The plan includes layoffs, suspending the dividend, reducing production capacity targets and selling some assets.
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Chairman Thomas Thune Andersen also announced last week that he would step down, and S&P Global said it had downgraded Orsted's credit rating to BBB from BBB+.
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“We have had a good and constructive dialogue with S&P in recent months and were aware of the possibility of a one-notch downgrade,” Rasmus Arbaugh, Orsted's interim chief financial officer, said in a statement. said. “This downgrade will not have any unintended impact on our updated business plan or related financing strategy.”
Dive Insight:
Ørsted said the “fundamental strategic choices regarding technology and geography have not changed” and the company “still aims to be a world leader” in offshore wind, but the portfolio has been revised to manage risk. He said he is reviewing the.
Last year, the company canceled its New Jersey offshore wind projects Ocean Wind 1 and Ocean Wind 2. In January, Ørsted announced it would “reposition” its 966MW Skipjack wind project off the coast of Maryland, seeking a new power contract because existing terms were no longer commercially viable.
Orsted said it is taking lessons from the U.S. offshore wind market and will place greater emphasis on contingency planning, anti-inflation, “more flexibility in project schedules and commissioning dates” and project governance. Ta.
In the meantime, the company has laid off 600 to 800 positions globally, exited the offshore wind markets in Norway, Spain and Portugal, focused its U.S. portfolio on the Northeast Atlantic region and expanded its floating wind power market. Plan for “slim development.”
After Orsted announced its new strategy, S&P Global announced that it had downgraded the company's long-term issuer credit rating to BBB from BBB+, but maintained its short-term rating of A-2.
“We recognize that the offshore wind industry is more risky than ever before, and while we note Ørsted’s weak project management, particularly in the US, the company has “We expect that our divestiture plan will enable us to successfully manage the significant industry risks we face,” S&P Global said.
Mr. Andersen resigned as chairman after the new business plan was approved, he said. The board of directors will submit its recommendation for a new chairman at the annual general meeting on March 5th.
Kevin Bake, Morningstar DBRS vice president of project finance and infrastructure, said in an interview that Ørsted's position as the world's largest offshore wind developer is a significant boost for the company as the industry struggled last year due to supply chain disruptions. He said that it meant that he had experienced the greatest hardship. inflation and rising interest rates.
“The announcement of significant write-downs due to the cancellation of certain projects or the cancellation of contracts for certain projects is certainly credit negative for Ørsted,” Beike said.
As a result, Ørsted will now prioritize flexibility in contract negotiations, he said.
“They don't want to end up on the wrong end of a contract in the future where they have to cancel the contract because the costs have increased so much that there's nothing they can do about it,” Beike said. “They don't want to take any more write-downs going forward. That's bad for shareholders and bad for the stock price.”
He said states with offshore wind procurement targets are being encouraged to offer more flexible contracts going forward to ensure developers are well-positioned to meet their targets. He said industry is supported by the facts.
New York — with a goal of procuring 9 GW of offshore wind power by 2030 — proposes Developer-friendly terms in the latest solicitationsThis allows developers who terminate a contract to re-bid in an expedited bidding process with termination fees waived.
The announcement of Ørsted's early sale program was “necessary to allay shareholder concerns,” Beik said.
“To finance these future projects, Orsted will raise funds by issuing stocks and bonds, or by selling a portion of the projects it owns, and use the proceeds to offset the equity issuance. “You can,” he said. “If fewer shares are issued, and some of that is financed by asset sales of non-core assets, there will be less new issuance and therefore less concern for shareholders.”
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