Amid high interest rates, inflation and supply-chain woes, U.S. wind-energy sector facing a wave of impairments and forcing developer to cancel projects and casting doubts over the industry’s outlook.
Orsted, BP and Equinor have collectively written off $4.8 billion against U.S. offshore wind projects in recent days.
Orsted shares plunged 26% on Wednesday (11/1) after this world’s largest offshore wind developer announcing 2 wind projects off the coast of New Jersey—Ocean Wind 1 and 2 cancellations cause 4.02 billion of impairments. S&P Global Ratings could lower the rating of Ørsted which previously flagged increasing risks for its projects in the country, citing the lack of favorable progress on tax credits.
“The significant adverse developments from supply-chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision,” said Orsted Chief Executive Mads Nipper.
Also on Tuesday, BP booked a $540 million pretax impairment charge on three wind projects off the coast of New York after regulators rejected the company’s request to renegotiate power-purchase terms. Last Friday, Equinor, BP’s partner on the Empire Wind and Beacon Wind projects, booked an impairment of around $300 million on its U.S. portfolio.
Other projects have been canceled. For instance, Iberdrola subsidiary Avangrid, Shell New Energies US’s joint venture with Ocean Winds North America, Swedish developer Vattenfall all temporarily halt some projects.
“The industry isn’t in a good shape,” said Martin Tessier, Stifel’s vice president of equity research for utilities and renewables. “I think we’ll see a softening of long-term targets…and less projects will be developed in the long term.”
Alexander Wheeler, an analyst at RBC Capital Markets, said pulling the two US projects “may actually provide better visibility on Orsted going forward”. New York times also said that offshore wind is not dead, but the industry and its backers are certainly learning some harsh lessons.
Beyond the deepening challenges in the US, Nipper said the third quarter had been “really good,” with the company reporting an adjusted net profit of DKr5.9bn. He has confidence in its portfolio of European and Asia Pacific construction and development properties. “The underlying operations and earnings ability of the company remains solid” he said.
This June, Orsted has paused market development activities in Vietnam, but its senior vice president and Asia-Pacific president, Per Mejnert Kristensen, note that Vietnam is still "an important supplier market". Petrovietnam Technical Services Corp（PTSC）signed a contract in May to build offshore wind farm foundations for Orsted, becoming the first Vietnamese business to receive a mass order for offshore wind power equipment.