9M23: Costly adventure ends for Ocean Wind 1 & 2

Orsted announced the cessation of US offshore parks Ocean Wind 1 & 2 resulting in a massive impairment of DKK28.4bn ($4bn) booked in 9M23, plus an additional impairment of DKK8-11bn to be booked in the Q4 – a substantial increase from the initial DKK16bn ($2.3bn) announced in August. The FY23 EBITDA guidance remains unchanged in a DKK20-23bn range whilst the capex guidance has been reduced for the second time this year, by DKK4bn to DKK40-44bn.

Offshore outlook darkens, more than 50% of the US portfolio written-down

Orsted surprised the market with the announcement of an impairment series of up to DKK16bn ($2.35bn) related to US offshore wind assets. The group is facing many issues associated with additional delays, supply-chain disruptions, expected tax reduction not achieved, increased costs, and the impact of rising interest rates. The market’s expectations of offshore projects are high and Orsted reminds us that their execution is complex and that in the end it is all a matter of DCF with its multiple v

H1 23: Disappointing Q2 amid lower prices and poor wind conditions

After a weak Q1 which was negatively affected by lower prices and poor wind conditions, the Q2 results were down owing to the same reasons, with no compensation this year from new partnerships/farm-downs which had contributed DKK1.6bn in H1 last year. Orsted nevertheless confirmed the guidance provided for 2023 at the beginning of the year with EBITDA expected in a DKK20-23bn range. However, the Capex guidance has been officially lowered by DKK6bn for timing reasons, from DKK50-54bn to DKK44-48

CMD 2023: Higher leverage but no dilution to invest DKK475bn by 2030

Orsted confirmed its 2030 ambition to reach c.50GW of installed renewable capacity worldwide. To reach this objective and keep its No.1 position in offshore wind, they now foresee investing a gross amount of DKK475bn vs DKK350bn in the previous 2020-27 plan excluding JVs and Engineering, procurement, and construction partnerships (EPC).

Q1 23: lower prices but offshore has the wind in its sails

Orsted’s EBITDA registered a 27% decline in Q1 23 against the backdrop of a sharp decline in gas prices since Q4 22. Unfavourable spreads for power-condensing generation weighed on the CHP plants with EBITDA on Bioenergy & Other down by 79% yoy to DKK2bn. However, the normalisation in power prices allowed the group to reverse last year’s loss, due to ineffective overhedging positions, with a DKK2bn positive contribution to EBITDA.

FY22: after such a record year, what perspectives for 2023?

After a year against a backdrop of unprecedented volatility on the energy markets, Orsted set a record in 2022, with EBITDA up by 32% yoy to DKK32.1bn, including new partnership agreements, despite lower than expected results in Q4. The group benefited from growth in onshore and solar PV units, as well as Bioenergy & Other segment, which offset the lower earnings in offshore wind. Given a normalisation in energy prices, Orsted confirmed a conversative EBITDA guidance of DKK20-23bn.

Q3 22: another quarter supported by Bioenergy & other segment

Orsted reported another encouraging Q3 22 with EBITDA up by 313% to DKK12.317bn vs Q3 21, leading the Danish offshore giant to upgrade its FY2022 guidance by DKK1bn. Here again, the outlook was driven by a good performance in the Bioenergy & other segment, amid volatile energy prices, offsetting the decrease in offshore and onshore wind power generation. The group also conserves its dynamic in renewable investments which also supported in its EBITDA guidance increase.

Q1 22: a non-core beat

Orsted saw a strong Q1 22 with EBITDA coming in 14% above the consensus driven by the Bioenergy & Other segment. The CHP plants and gas-related activities took advantage of very high and volatile power prices to record extra gains. This is not sustainable. More interesting, it shows analysts’ inability accurately to estimate earnings in such an environment. We fly by the seat of our pants. At least the full-year guidance was confirmed.

FY21: Orsted limits the damage and reassures on its perspectives

As a continuation of the 9M results, Orsted saw a strong miss in the Offshore business (-11% vs consensus) amid low wind speeds, almost fully offset by the performance of CHP plants and gas-related activities. However, the group reassured on its outlook: FY22 guidance is in line with expectations, a promising position within the industry backed by the renewables expansion pipeline, and long-term wind speed perspectives that remain unchanged.

Q3 21: a slight miss in trompe l’oeil, offshore collapsed

At first sight, Orsted’s Q3 21 seems decent with EBITDA missing consensus by 2.6%. However, it hides an abysmal performance from the offshore activities which suffered from exceptionally bad wind conditions to stand 40% below EBITDA expectations, partially offset by the outstanding performance from CHP plants and gas businesses. More than ever, the volume risk is Orsted’s Achilles’ heel. Full-year guidance is reaffirmed in the low end of the range. Negative view confirmed.

H1 21: estimates beaten despite lower wind speeds

In the first half of 2021, Orsted’s EBITDA fell c. 3% above consensus as significant farm-downs and strong results from the CHP plants offset the significantly lower wind speeds for offshore assets. As a result, the group has confirmed its FY21 guidance but is now targeting the low end. Moreover, it increased its investment targets by 20% to reflect some M&A transactions, especially in onshore wind (BRI). Cautious view confirmed.

Back on shore ?

From a market point of view, Orsted’s CMD was disappointing. By accelerating towards more onshore wind and solar PV, the Danish group is expanding its asset base (capacity x3 by 2027) while reducing its gross return by GW (EBITDA x2.2 by 2027), one of its main competitive advantages. However, we consider Orsted’s strategy to be correct. The market wrongfully expected unrealistic growth prospects, and is now realizing that the premium applied to the stock is not sustainable. Cautious view confi

Orsted faced headwinds, profits dipped

The Danish utility has failed to meet expectations as it has been severely affected by negative wind speeds during the first quarter. In addition there was an array cable issue on several offshore farms, which together decreased offshore EBITDA by 44% yoy. The divestment of the distribution, residential customer and city light businesses last year also weighed. However, FY21 guidance is reiterated as the group should benefit from significant PPAs, CfDs awarded and farm-downs. In short, nothing t

FY20: in line

FY20 EBITDA was up by 4% to DKK18,124m, thanks to a strong Q4 (up by 8%, to DKK5,003m) and the promising growth of onshore wind (up by 44% over the year, to DKK1,131m). The FY21 EBITDA guidance of DKK15-16bn is disappointing, but there is the possibility of a positive surprise coming from partnership revenues. We confirm our negative recommendation, considering that the market does not integrate the growing competition.

Q3.20 - Down but in line

EBITDA was down by 18% to DKK3,360m due to lower EBITDA generation by offshore partnerships (down by DKK941m YoY) which took precedence over higher EBITDA generation from offshore sites (up by DKK454m YoY). The group confirmed its guidance, implying a Q4 in line with the rest of the year.

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Q1 Operating Results

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HY22/23: resilient business model supported by an ambitious Capex plan FY202

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FY22/23: High visibility on inflation-protected results

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