Orsted records $4 bln in impairments, ceases development of some US offshore wind projects

Denmark’s Orsted said on Wednesday it had recorded a 28.4 billion Danish crowns ($4.03 billion) impairment charge for the first nine months of 2023, and that it will cease work on its US offshore wind projects Ocean Wind 1 and 2.

The world’s largest offshore wind farm developer has made a final investment decision on Revolution Wind, Orsted said in a statement, adding that it is expected to be completed by 2025.

Development of the wind projects had been adversely affected by supply chain issues, increased interest rates and a lack of an OREC (offshore renewable energy certificate) adjustment on it’s Sunrise Wind project, the company said.

Orsted said there would be a provision related to it ceasing the development of Ocean Wind 1, which would have negatively impact its fourth quarter 2023 earnings before interest, taxes, depreciation and amortization (EBITDA).

Orsted said it anticipates 8 billion to 11 billion Danish crowns in the provision that accounts for potential contract cancellation fees not already covered by the impairments but excludes any potential reuse value of existing contracted equipment.

“Significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision,” Orsted chief executive officer Mads Nipper said.

As a result of this, Orsted said its gross investment for 2023 is reduced by DKK 4 billion and is now expected to amount to 40 to 44 billion Danish crowns.

In August, Orsted said it may see US impariments of $2.3 billion due to supply chain problems, soaring interest rates and a lack of new tax credits.

Soaring costs from rising inflation, interest rate hikes and supply chain delays have cast doubt on plans by US President Joe Biden and several states to use offshore wind to replace fossil fuels in energy production and reduce carbon emissions. – Reuters