COPENHAGEN - Danish energy company Ørsted A/S has announced significant impairments totaling DKK 12.1 billion ($1.7 billion) for the fourth quarter of 2024, attributing the financial setbacks to rising US interest rates, devaluation of seabed leases, and increased costs in executing the Sunrise Wind project.
The impairments are primarily due to a 75-basis-point increase in the weighted average cost of capital influenced by the development of long-dated US interest rates. This increase has significantly impacted the value of Ørsted's US offshore wind projects, resulting in a DKK 4.3 billion impairment. Additionally, the company has recognized a DKK 3.5 billion impairment on its seabed leases off the coasts of New Jersey, Maryland, and Delaware, citing prevailing market uncertainties.
Challenges in the construction of the Sunrise Wind project, including supply chain issues and the need for increased costs to maintain the schedule, have further contributed to a DKK 4.3 billion impairment. The project's commissioning has been delayed into the second half of 2027.
Despite these setbacks, Ørsted's preliminary and unaudited EBITDA for 2024 is reported to be DKK 24.8 billion, aligning with the company's latest guidance. The operational earnings from offshore and onshore sectors were in line with expectations and were the main contributors to this figure.
Mads Nipper, Group President and CEO of Ørsted, expressed disappointment over the construction challenges but remains optimistic about the company's operational performance and long-term commitment to the US market. Nipper emphasized the strategic value of the seabed leases and the importance of the Sunrise Wind project, which is expected to generate enough offshore wind energy to power nearly 600,000 US homes and create hundreds of jobs.
Despite the impairments, Nipper maintains that the Sunrise Wind project is still profitable, with a mid-single-digit lifecycle IRR (Internal Rate of Return) and an attractive forward-looking IRR based on current assumptions.
Ørsted is set to host an investor and analyst call on January 21, 2025, to discuss the impairments and its 2024 EBITDA. The company will publish its annual report for 2024 on February 6, 2025. This article is based on a press release statement from Ørsted.
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