In the realm of renewable energy, Danish energy company Orsted has been a prominent player. However, the first nine months of 2023 have been marked by mixed financial results, project delays, and the termination of key projects. In this article, we will delve into Orsted’s financial performance, its challenges, and its future outlook.
Orsted’s Financial Performance
Orsted reported its financial performance for the first nine months of 2023. The company’s operating profit (EBITDA) reached DKK 19.4 billion, with EBITDA excluding new partnerships standing at DKK 15.4 billion, marking a DKK 1.0 billion increase from the previous year.
Offshore Sites and Challenges
Offshore sites like Hornsea 2 and Greater Changhua 1 and 2a played a substantial role in the company’s earnings, contributing DKK 13.0 billion. However, Orsted faced several challenges, including supply chain delays, increased interest rates, and a need for OREC adjustment on Sunrise Wind.
Impairment Losses
These challenges led to impairment losses of DKK 28.4 billion being recognized in the first nine months of 2023, primarily associated with the US offshore project Ocean Wind. The net profit for Orsted was reported at DKK -19.9 billion, with a return on capital employed (ROCE) at -14%. If impairment losses are excluded, the net profit and ROCE stood at DKK 8.5 billion and 13%, respectively.
Future Projections
Despite these setbacks, the company has kept its EBITDA guidance for 2023 unchanged at an estimated DKK 20-23 billion, indicating a certain level of resilience and optimism in Orsted’s outlook.
Cancellation of Ocean Wind Projects
Orsted also decided to cease developing Ocean Wind 1 and 2 projects, which is expected to result in a provision of approximately DKK 8-11 billion related to potential cancellation fees. The gross investment for 2023 is projected to be DKK 40-44 billion due to project delays and termination of investments in Ocean Wind.
Progress on the Revolution Wind Project
On a positive note, despite these challenges, Orsted confirmed that the Revolution Wind project is progressing into the construction phase. More information about these issues will be discussed in an earnings call for investors and analysts scheduled for November 1, 2023.
Orsted’s Environmental Commitment
Orsted, which generated a revenue of DKK 132.3 billion in 2022 and employs approximately 8,700 people, is recognized by the CDP Climate Change A List and the Science Based Targets initiative (SBTi) for their net-zero emissions target. The company’s shares are listed on Nasdaq Copenhagen.
InvestingPro Insights
Orsted’s financial performance for the first nine months of 2023, as reported, has been underlined by several key metrics and trends. The InvestingPro data reveals that Orsted’s market capitalization stands at an adjusted 20241.8M USD. The company’s P/E ratio is 12.91, indicating that it is trading at a low earnings multiple, a point also highlighted as one of the InvestingPro Tips.
The company’s revenue for the last twelve months as of Q2 2023 is 17304.25M USD, with a growth rate of 12.19%. However, the quarterly revenue growth for Q2 2023 has declined by 37.34%, aligning with the InvestingPro Tip that the company’s revenue growth has slowed.
Two key InvestingPro Tips to note are that Orsted has raised its dividend for 7 consecutive years and is a prominent player in the Electric Utilities industry. The dividend yield as of 2023 is 3.97%, with a growth rate of 8.0% over the last twelve months as of Q2 2023.
The InvestingPro platform offers numerous additional tips and data points for Orsted, providing a comprehensive view of the company’s financial performance and market standing.
Conclusion
Orsted’s journey in the first nine months of 2023 has been marked by turbulence, but the company remains steadfast in its commitment to renewable energy. Its challenges are significant, but its determination to progress is evident in the continuation of the Revolution Wind project. As Orsted navigates through the complexities of the renewable energy sector, it keeps its eye on a sustainable and eco-friendly future.
FAQs
What led to Orsted’s impairment losses in 2023?
Orsted’s impairment losses in 2023 were primarily associated with challenges in the US offshore project Ocean Wind, including supply chain delays and a lack of OREC adjustment on Sunrise Wind.
What is Orsted’s net-zero emissions target?
Orsted is committed to achieving net-zero emissions and has been recognized for this commitment by the CDP Climate Change A List and the Science Based Targets initiative (SBTi).
What are the key financial metrics for Orsted as of 2023?
Orsted’s key financial metrics include an EBITDA of DKK 19.4 billion and a market capitalization of 20241.8M USD.
Why did Orsted decide to cancel the Ocean Wind 1 and 2 projects?
Orsted decided to cancel these projects due to challenges and delays, resulting in a provision of approximately DKK 8-11 billion related to potential cancellation fees.
What is the outlook for Orsted in 2023?
Despite challenges, Orsted maintains its EBITDA guidance for 2023 at an estimated DKK 20-23 billion, indicating optimism for the future.