Ørsted Takes a Hit Offshore, Still Expects Highest Yearly Operating Profit

Business & Finance

January 20, 2023, by Adnan Durakovic

World’s leading offshore wind developer Ørsted expects operating profit (EBITDA) for 2022 to total DKK 32.1 billion (EUR 4.3 billion), the company’s highest EBITDA to date, based on preliminary and unaudited reporting.

The results are within the latest guidance and above the company’s initial expectations for the year, achieved during a year with unusual market conditions, including very volatile energy prices and a substantial increase in inflation, the comany said.

The gain from the 50 per cent farm-downs of Hornsea 2 and Borkum Riffgrund 3 amounted to DKK 11.0 billion in total.

EBITDA excluding new partnership agreements is expected to be DKK 21.1 billion, an increase of DKK 5.3 billion compared to 2021.

This was attributed to the company’s diverse portfolio and significantly higher earnings from the onshore wind and solar PV business, the combined heat and power plants, and the gas activities, while earnings in Offshore decreased from DKK 9.5 billion in 2021 to DKK 8.6 billion in 2022.

”In a year with unusual market conditions, not least the very volatile energy prices and a substantial increase in inflation, we’re happy to achieve a record-high EBITDA for 2022 within our latest guidance and above our initial expectations for the year. The composition and development of our earnings mix was significantly different than expected and once again showed the benefits from having a diverse portfolio,” Mads Nipper, Group President and CEO of Ørsted, said.

The unexpected decrease in Offshore was primarily due to adverse impacts from hedges, and delays at the Hornsea 2 and Greater Changhua 1 & 2a construction projects.

Also, as a result of project-specific CAPEX increases, an unprecedented cost inflation, and rapidly rising interest rates in 2022, the company will recognise an impairment of DKK 2.5 billion on its 50 per cent owned US-based offshore wind development project Sunrise Wind in 2022.

”During the year, we have seen adverse impacts from overhedging, ineffective hedges, and delays at Hornsea 2 and Greater Changhua 1 & 2a, which is not satisfactory,” Daniel Lerup, CFO of Ørsted, said.

”As a response to the unintended impacts from hedges, we have established and are in the process of implementing a new risk management framework to reduce the volatility from financial instruments and bring back the inherent predictability of earnings that our contracted and regulated activities possess.”

Outlook for 2023

EBITDA excluding new partnership agreements is expected to be DKK 20-23 billion in 2023. The EBITDA guidance assumes significantly higher earnings in Offshore, the same level in Onshore, and significantly lower earnings in Bioenergy & Other compared to 2022.

”We expect that earnings from our operational renewable energy assets will increase significantly in 2023 and contribute to reaching a Group EBITDA excluding new partnerships of DKK 20-23 billion, and we remain confident in our long-term financial estimates and growth ambitions,” Nipper said.