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Orsted Narrows 2024 Guidance as Turnaround Plan Progresses

(Bloomberg)

(Bloomberg) -- Orsted A/S slightly narrowed its full-year earnings forecast as the Danish utility’s recovery plan gathers pace after a dreadful 2023. 

The revision comes at a critical time and is another sign that Chief Executive Officer Mads Nipper’s plan to shore up the balance sheet is working. The company recently announced a series of divestments, and a 14% rebound in the stock this year suggests investors are warming to the strategy.

Orsted sees 2024 earnings before interest, taxes, depreciation and amortization at 24 billion Danish kroner ($3.5 billion) to 26 billion kroner, excluding earnings from new partnerships and impact from cancellation fees, it said in a statement Tuesday. That’s up from 23 billion kroner to 26 billion kroner earlier. 

“It has been a tough couple of years,” Chief Executive Officer Mads Nipper said on a call with reporters. “We are now in a new situation where the realities of costs and interest rates are being built in, and therefore we remain convinced that there’s a market.”

Orsted and its peers are emerging from a turbulent period marked by soaring costs and supply-chain bottlenecks. The company found itself at the center of the crisis last year, abandoning two US projects, dismissing two top executives and recording multibillion-dollar writedowns. 

“Now the industry is looking at a reset where some many developers, including Orsted, have left projects that were not financial or not billable in terms of returns,” Nipper said. 

Still, there were further impairments in the first nine months, totaling 3.4 billion kroner. They are linked to the decision to abandon the Swedish green hydrogen project FlagshipONE, as well as the Revolution Wind in the US. The impact was partly countered by a positive effect from the Sunrise Wind project. 

Shares in Orsted fell 0.7% in Copenhagen trading. 

“We continue to focus on Orsted’s balance-sheet repair, which they are making some progress on, at the expense of selling valuable cash generating assets, in our view,” Citigroup Inc. analyst Jenny Ping said in a note, adding she thinks shares will be largely rangebound. 

Earlier this year, Nipper unveiled his program to overhaul the business, including an aggressive asset-sale strategy. Last month, the CEO offloaded an interest in four UK wind farms. He also divested a $2.5 billion stake in Orsted to Norway’s Equinor ASA.

“A lack of visibility over disposals beyond the October deal in the UK signals funding risks persist,” said Patricio Alvarez, a global utilities analyst at Bloomberg Intelligence. 

The developer said that its two US projects, Revolution Wind and Sunrise Wind, are progressing according to an updated construction plan. Orsted flagged however that there is still a risk associated with the construction of such large projects. 

The outcome of America’s presidential election will be key to the industry’s future in the US, although demand for green power will remain whoever the winner is, Nipper said on the call. 

Republican nominee Donald Trump has harbored a long-running disdain toward the sector, while Democratic contender Kamala Harris has hailed investment in clean energy as a way to drive economic growth.

(Updates with CEO quote from call with reporters from fourth paragraph.)

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