COPENHAGEN – Danish energy company Ørsted A/S announced significant impairment charges totaling DKK 12.1 billion (US$1.7 billion) for the fourth quarter of 2024, attributing financial problems to rising US interest rates, devaluation of seabed leases and increased costs implementation of the project Sunrise Wind project.
The decrease is primarily due to an increase in the weighted average cost of capital of 75 basis points under the influence of the development of US long-term interest rates. This increase had a significant impact on the value of Ørsted’s US offshore wind projects, resulting in a DKK 4.3 billion impairment. In addition, the company recognized a DKK 3.5 billion impairment on its seabed leases off the coasts of New Jersey, Maryland and Delaware, citing prevailing market uncertainty.
Challenges in the construction of the Sunrise Wind project, including supply chain issues and the need for increased costs to maintain the schedule, further contributed to the DKK 4.3 billion impairment. The commissioning of the project has been postponed to the second half of 2027.
Despite these setbacks, Ørsted’s preliminary and unrevised EBITDA for 2024 is DKK 24.8 billion, which is in line with the company’s latest guidance. Operating earnings from the offshore and onshore sectors were in line with expectations and contributed the most to this figure.
Mads Nipper, Group Chairman and Chief Executive Officer of Ørsted, expressed disappointment at 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 seabed leases and the importance of the Sunrise Wind project, which is expected to generate enough offshore wind energy to power nearly 600,000 American homes and create hundreds of jobs.
Despite the downgrades, Nipper maintains that the Sunrise Wind project is still profitable, with a mid-single-digit lifecycle IRR (internal rate of return) and an attractive IRR based on current assumptions.
Ørsted is scheduled to host a call with investors and analysts on January 21, 2025 to discuss impairments and 2024 EBITDA. The company will publish its 2024 annual report on February 6, 2025. This article is based on a press release from Ørsted.
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