Offshore

Orsted shares fall 20% as it faces $2.3 billion risk

Orsted shares fall 20% as it faces $2.3 billion risk

Danish energy company Orsted saw its share price fall 20% after the company announced it faces a $2.3 billion loss in value in its US operations due to supply chain issues, high interest rates, and a lack of tax credits, Reuters reports.

The company’s share price is at its lowest level in four years, down nearly 20% from its peak in 2021.

Orsted said its Ocean Wind 1, Sunrise Wind, and Revolution Wind projects have been affected by supplier delays that could cause more than $727 million (5 billion Danish crowns) in impairments. High interest rates affecting onshore and offshore wind projects could cause another $727 million in impairments, the company said, and the lack of tax credits could result in more than $870 million in impairments.

Orsted’s issues are not unique – the offshore wind industry is facing cost challenges across the board, as utilities and developers alike pay the price to pull out of agreements. The developers of SouthCoast Wind recently agreed to pay $60 million to scrap its power purchase agreement. Avangrid, the developer of the Commonwealth Wind offshore farm, also recently requested to terminate the PPA signed with utilities in 2022, Commonwealth Magazine reports. Avangrid will pay $48 million in penalties to the three utilities for backing out of the PPA, which had been under review since spring 2022. Rhode Island Energy has pulled out of its PPA with Ørsted and Eversource for the offshore wind farm Revolution Wind 2, citing higher interest rates, increased expenses, and questionable federal tax credits.

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