The world is fully committed to green energy, and while the wind and photovoltaic industries hold promising prospects, offshore wind power is facing headwinds. Following a failed investment in the US market, Ørsted, the global leader in offshore wind power, announced a series of measures on the 7th. These include the elimination of 600 to 800 jobs, a dividend suspension from 2023 to 2025, the withdrawal from the offshore wind power markets in Norway, Spain, and Portugal, and a temporary halt to development in Japan. S&P Global has downgraded Ørsted's long-term credit rating from BBB+ to BBB.
The prospects for wind power are promising. Offshore wind power leader Orsted has entered multiple markets, but its expansion in the United States has been unsuccessful and has resulted in huge losses.
Major setback in market expansion and entry into the US
Orsted has built more than 1,900 offshore wind turbines in Europe, North America and Asia, accounting for 25% of the world's total. It is the world's largest offshore wind power developer and is also involved in projects such as marine wind power and the Greater Changhua Offshore Wind Farm in Taiwan.
Orsted entered multiple markets, but suffered a major setback in the United States. In November 2023, the company announced that it had canceled the development of its Ocean Wind 1 and Ocean Wind 2 offshore wind farms in New Jersey due to inflation, rising interest rates, and supply chain disruptions. The company also recorded a 28.4 billion kroner (US$4 billion) asset impairment charge. Upon the announcement, Orsted's stock price plummeted to a six-year low during intraday trading.
In January of this year, Orsted announced again that the Skipjack offshore wind project in Maryland was not commercially viable and would seek alternative power contracts. On February 7, the Orsted board approved a reduction in the company's 2030 renewable energy installation capacity target from 50 GW to 35-38 GW. The company also announced plans to withdraw from the Norwegian, Spanish, and Portuguese markets, suspend its Japanese project, streamline its floating wind power portfolio, and diversify its power development efforts.
Orsted also announced that it would cut 600 to 800 jobs, clarifying that reducing positions does not mean layoffs, but confirmed that the first wave of layoffs in 2024 would be approximately 250 people.
沃旭集团董事长安德森（Thomas Thune Andersen）也宣布请辞。沃旭已在去年11月撤换财务长与营运长。Orsted Group Chairman Thomas Thune Andersen also announced his resignation. Orsted replaced its chief financial officer and chief operating officer in November.
Utility Dive, a US energy media outlet, reported that S&P Global has downgraded Orsted's long-term credit rating from BBB+ to BBB, while maintaining its short-term rating at A-2.
Interest rate hikes, supply chain disruptions, and inflation put wind power production on the test
Utility Dive noted that this marked Orsted's first strategic retreat after years of aggressive market expansion. Orsted stated that they had learned from the US offshore wind market and would strengthen emergency response and inflation mitigation plans to provide greater flexibility in project management.
The Financial Times analyzed that the offshore wind industry has generally faced challenges over the past two years, including rising interest rates and supply chain disruptions. Orsted has faced even greater challenges due to its expansion into the United States. The US offshore wind market is immature, and Orsted has complained about difficulties obtaining tax credits and excessive regulations for local component manufacturing.
Orsted CEO Mads Nipper said he remains confident in the global energy transition and hopes this wave of strategy adjustments will restore investor confidence.
According to The Guardian, Orsted has no plans to exit the US market and the Revolution Wind offshore wind farm project in Rhode Island will continue.
Ørsted already operates 12 offshore wind farms in the UK, including Hornsea 2, the world's largest offshore wind farm. Despite a mature market and proximity to the supply chain, inflation and cost pressures are unavoidable. Development of the new Hornsea 3 wind farm proved challenging, leading Ørsted to consider withdrawing before confirming its continued development at the end of 2023.
References:
* Ørsted (February 7, 2024), Ørsted Capital Markets Day update: Updated financial targets, Thomas Thune Andersen resigns as Group Chairman
* Financial Times (FT, February 7, 2024), Ørsted suspends dividend, cuts jobs and exits offshore wind markets
* The Guardian (February 7, 2024), Danish windfarm firm Ørsted to axe up to 800 jobs and pause dividend
* UtilityDive (February 12, 2024), Ørsted cuts costs with new business plan, receives S&P downgrade over offshore wind risk
Source: Environmental Information Centre
