COPENHAGEN – Danish energy company Ørsted A/S has announced significant impairments totaling 12.1 billion Danish crowns ($1.7 billion) for the fourth quarter of 2024, attributing the financial setbacks to rising interest rates in the United States , the devaluation of seabed leases and the increase in costs in the execution of the Sunrise project. Wind project.
The impairments are mainly due to an increase of 75 basis points in the weighted average cost of capital influenced by the evolution of long-term interest rates in the United States. This increase has significantly impacted the value of Ørsted’s US offshore wind projects, resulting in an impairment of DKK 4.3 billion. Additionally, the company has recognized an impairment of DKK 3.5 billion on its seabed leases off the coasts of New Jersey, Maryland and Delaware, citing prevailing uncertainties in the market.
Challenges in the construction of the Sunrise Wind project, including supply chain issues and the need for higher costs to stay on schedule, have further contributed to a DKK 4.3 billion impairment. The launch of the project was delayed until the second half of 2027.
Despite these setbacks, Ørsted’s preliminary, unaudited EBITDA for 2024 is reported to be DKK 24.8 billion, in line with the company’s latest forecasts. Operating income from the offshore and onshore sectors was in line with expectations and were the main contributors to this figure.
Mads Nipper, group president and CEO of Ørsted, expressed disappointment with the construction challenges but remains optimistic about the company’s operational performance and its 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 impairments, Nipper maintains that the Sunrise Wind project remains profitable, with a life cycle IRR (internal rate of return) in the mid-single digits and an attractive forward-looking IRR based on current assumptions.
Ørsted will host an investor and analyst call on January 21, 2025 to discuss the impairments and its 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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