COPENHAGEN, Nov 1 — Renewable energy firm Orsted today halted the development of two US offshore wind projects and said related impairments could spiral to as much as 39.4 billion Danish crowns (RM26 billion).
The stock, which had dropped about 40 per cent since August, plunged another 22 per cent in early trade.
Orsted, the world’s largest offshore wind developer, said it would stop developing its 2,248-megawatt (MW) Ocean Wind 1 and 2 projects in New Jersey as part of an ongoing review of its US offshore wind portfolio.
“Significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision,” Chief Executive Mads Nipper said.
The Danish company flagged in August it could see US impairments of 16 billion crowns due to supply chain issues, soaring borrowing costs and a lack of new tax credits.
Today, Orsted raised that number to 28.4 billion crowns and said provisions relating to the cancellation of the two projects would amount to between 8 billion and 11 billion in the fourth quarter.
The writedowns were in line with expectations, according to Bernstein analyst Deepa Venkateswaran.
Halting Ocean Wind 1, the most advanced of the two projects, also sends “a positive signal that they are committed to only proceeding with valuable projects”, Venkateswaran said.
Soaring costs from rising inflation, interest rate hikes and supply chain delays have cast doubt on plans by US President Joe Biden and several states to use offshore wind to replace fossil fuels in energy production and reduce carbon emissions.
Yesterday, energy major BP booked a third-quarter writedown of US$540 million (RM2.7 billion) on wind projects after officials in New York state rejected a request for better terms to reflect what BP called “inflationary pressures and permitting delays”.
Norway’s Equinor, BP’s partner on those New York offshore wind developments, booked a US$300 million impairment on the projects on Friday. — Reuters
