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High rates of interest will hold the prices of renewable power elevated, Ørsted’s boss has warned, as he hailed the wind developer’s “positive steps” following a dismal 2023.
“The longer interest rates stay high, the longer prices in [renewable energy] auctions will stay high,” Mads Nipper stated, though he added that Ørsted’s tasks had been much less delicate than others’ as a result of many had been already beneath development with prices locked in. “We expect and hope they will come down.”
Renewable power tasks are delicate to rates of interest, which have been rising since 2021, as a result of builders want to lift cash to cowl excessive upfront prices — notably within the wind sector.
Energy consultancy Wood Mackenzie present in a latest report {that a} 2 proportion level rise in US rates of interest might drive up the general price of a renewable power mission by 20 per cent.
The US Federal Reserve implied on Wednesday that charge cuts can be delayed till the second half of the 12 months on the earliest. Fed chair Jay Powell stated it was “likely to take longer for us to gain confidence that we are on a sustainable path down to 2 per cent inflation”.
Nipper is making an attempt to revive the fortunes of Ørsted, the world’s largest offshore wind developer, after rising prices as a consequence of excessive rates of interest and different challenges prompted it to stroll away from two giant US tasks final 12 months, triggering multibillion-dollar impairments.
The firm in February suspended its dividend and reduce targets for the quantity of renewables it plans to develop. It additionally stated it could reduce as much as 800 jobs and withdraw from offshore wind markets in Norway, Spain and Portugal.
Shares in Ørsted have fallen 70 per cent since peaking in January 2021 on the top of investor frenzy over environmentally pleasant shares, when the corporate was feted for efficiently shifting away from oil and fuel.
They climbed greater than 3 per cent on Thursday as the corporate reported greater earnings from offshore wind websites.
It additionally reversed an impairment of DKr800mn ($115mn) it had booked final 12 months on its 924-megawatt Sunrise Wind mission in New York, after a remaining funding resolution in March to proceed with the mission in any case.
That is certainly one of a number of “important milestones”, together with ending its Greater Changhua offshore wind farms in Taiwan, which Nipper stated would assist restore investor confidence. “This is a long journey,” he added.
The firm continues to be experiencing strains in its provide chains, Nipper stated, however is making an attempt to beat them together with by putting long-term agreements for entry to set up vessels. It now has 7.6GW of offshore wind beneath development, its highest ever.
Overall, Ørsted reported quarterly revenues of DKr19.2bn and a pre-tax revenue of DKr4.4bn.
It comes as fellow Danish group Vestas, the most important turbine provider outdoors of China, reported a quarterly pre-tax lack of €105mn, towards a €31mn revenue in the identical interval a 12 months earlier, with fewer generators delivered.
Henrik Andersen, chief govt, stated earnings had been sometimes weighted in the direction of the second half of the 12 months and the outcomes had been “in line with expectations”. The firm is sustaining its steering for the 12 months of a 4-6 per cent revenue margin.
“I think the industry is in a better place,” he added. “It is maturing. Most interactions I see show that we are becoming much more disciplined.”
Vestas shares on Thursday fell roughly 4 per cent to DKr179.2, whereas Ørsted’s rose nearly 3 per cent to DKr391.8.