DONG Energy’s Profit Surges on Wind Power

  • Business & Finance

DONG Energy recorded DKK 6.4 billion (EUR 860 million) net profit for the first six months of 2016, up 129% compared to DKK 2.8 billion net profit reported for the first half of 2015, largely driven by a strong growth in the company’s Wind Power division.

The Danish energy company reported DKK 12.4 billion operating profit (EBITDA), a 19% increase compared to the same period a year earlier.

The underlying profit, adjusted for one-off items, increased by 34%, driven by a 68% rise in Wind Power. The strong growth in Wind Power was partially offset by the impact of lower gas, oil and power prices.

In H1 2016, free cash flows amounted to DKK 5.3 billion compared with DKK -1.8 billion in H1 2015. The improvement was driven by higher EBITDA, a lower level of funds tied up in working capital and lower net investments.

The company’s net debt decreased from DKK 9.2 billion at the end of 2015 to DKK 3.8 billion at the end of June 2016.

With regards to offshore wind, two major developments marked the first six months of the current year.

On 24 June, DONG Energy made the investment decision to build the 450MW Borkum Riffgrund 2, with expected full production in H1 2019. With this decision, DONG will reach a total installed capacity from offshore wind of 6.7 GW by 2020.

On 5 July, DONG Energy was awarded the concession to build the Dutch Borssele 1 and 2 offshore wind farms, totalling 700 MW, at a price of EUR 72.7 per MWh, excluding costs for transmission infrastructure, for the first 15 years. These wind farms will be built within the next four years, with a flexibility margin of 1 year.

“We achieved very satisfactory results for H1 2016. The Group’s operating profit increased by 19% compared to the same period last year, driven by strong growth in Wind Power,” Henrik Poulsen, CEO and President, said.

”In June, we decided to invest in the German offshore wind farm Borkum Riffgrund 2, and in July we were awarded the right to build the Dutch offshore wind farms Borssele 1 and 2. The German and Dutch offshore wind projects are based on our strong and differentiated business model and will contribute to the continued profitable growth of the Group. Our winning bid for the Dutch wind farms is the result of our systematic efforts to reduce the costs of offshore wind power – and tangible evidence of the long-term potential of offshore wind power. With Borssele 1 and 2, we will for the first time be below EUR 100 per MWh in LCoE.”

Looking ahead, DONG has reaffirmed the previously set out outlook for EBITDA and gross investments for 2016, with EBITDA expected to amount to DKK 20-23 billion in 2016, and gross investments for 2016 expected to reach DKK 18-21 billion.

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