President Donald Trump torpedoed the business model of the world’s largest offshore wind developer.
Now, Ørsted is attempting a high-stakes financial maneuver to keep alive a major New York wind project.
Historically, the Danish wind giant has raised money by selling a portion of its projects to a third party, such as a bank or another power company. The arrangement provided Ørsted with an infusion of cash that helped manage the risks associated with building projects that can cost billions of dollars.
But the strategy was struck by a Trump-shaped projectile in April, when the Interior Department issued a stop-work order to a rival company building a project off New York.
The order ultimately was lifted, but the move ricocheted around the offshore wind industry and tripped up Ørsted’s plans to sell a portion of Sunrise Wind, its own New York offshore project. Suddenly, prospective buyers weren’t willing to offer Ørsted the money it was seeking for a piece of a wind farm capable of generating enough electricity to power 600,000 homes in New York.
The situation came to a head Monday, when Ørsted said it planned to raise 60 billion Danish kroner ($9.4 billion) in a so-called rights issue, where existing shareholders are invited to buy an additional stake in the company.
Ørsted executives stressed that Sunrise Wind was moving forward, noting 13 of the project’s 84 foundations already have been installed, and that they had the full backing of the Danish government, which is the majority shareholder in the wind developer.
But those assurances did little to calm investors’ fears. Ørsted shares tumbled 29.7 percent Monday, wiping out more than 40 percent of the company’s total valuation.
“There is a heavy implication that the company is struggling,” Jordan May, an analyst who tracks the industry at 4C Offshore, wrote in a post on Linkedin. “This is not a good sign for the industry.”
Ørsted was once heralded as a model for the energy transition, but it increasingly looks like a cautionary tale.
A former oil and gas company, it committed to decarbonizing its business by focusing on clean energy development. In early 2021, its shares reached a peak of $74.60, briefly making it more valuable than oil companies such as ConocoPhillips. The company bet big on U.S. offshore wind, pursuing plans for projects serving New England, New York, New Jersey and Maryland.
The intervening years have not been kind to the company.
Rising interest rates and a snarled supply chain prompted Ørsted to cancel plans for two projects in New Jersey and shelve plans for a project in Maryland. As the costs piled up, the company was repeatedly forced to write down the value of its projects by billions of dollars. It replaced its CEO in January, promising to build only the best projects in its portfolio.
But by the time markets closed Monday, Ørsted shares were valued at $11.21.
In a call with financial analysts, Ørsted executives said the rights issue was needed to cover the cost of Sunrise Wind, maintain financial flexibility and give the company the strength to pursue its business and raise additional capital.
“We will have a more value creative and flexible approach to timing of partnerships and divestments, which will be driven by value optimization rather than funding requirements,” said Ørsted Chief Financial Officer Trond Westlie.
Ørsted originally planned on building three projects serving New England and New York with Eversource Energy, a New England utility. But Eversource unloaded its shares in those projects in 2023. It sold its stake in South Fork Wind and Revolution Wind to Global Infrastructure Partners for $1.1 billion while Ørsted purchased complete control of Sunrise Wind for $625 million.
Efforts to sell a portion of Sunrise Wind were proceeding well until Trump issued a stop-work order to Empire Wind, Ørsted CEO Rasmus Errboe told financial analysts.
“The perceived risks of the U.S. offshore wind market among investors and banks increased significantly,” Errboe said. “This extraordinary and unprecedented development, which arose unexpectedly and was outside of our control, impacted our dialogues during recent months where investors involved in the equity process substantially increased their required risk protections and return requirements.”
Pressed by analysts on why the company did not cancel Sunrise Wind, Errboe said the company already had sunk the vast majority of construction costs on the project.
Ørsted last year completed South Fork Wind, a 132-megawatt project serving New York.
It is 80 percent done with Revolution Wind, a 704-MW project serving Connecticut and Rhode Island. Ørsted executives said the company had completed foundation installation for Revolution Wind and 70 percent of the project’s turbines have been installed.
Revolution Wind is expected to be fully operational next year. Sunrise Wind, meanwhile, is 35 percent complete.
Errboe said he would not “speculate on potential regulatory changes” when asked if the company was prepared for a potential stop-work order from the Trump administration. The company has “no indication of a similar decision” on the horizon, he said.
