COPENHAGEN – Danish energy company Ørsted A/S announced a significant impairment loss of DKK 12.1 billion ($1.7 billion) for the fourth quarter of 2024, attributing the financial shortfall to rising US interest rates, lower offshore leases, and and additional costs for sunrise operations. Air project.
The decrease is primarily due to a 75-basis-point increase in the weighted average cost of capital driven by the development of the US prime interest rate. This increase had a significant impact on the value of Ørsted's US offshore wind projects, which resulted in a loss of DKK 4.3 billion. In addition, the company has recognized a DKK 3.5 billion impairment on offshore leases off the coast of New Jersey, Maryland and Delaware, citing current market uncertainty.
Challenges in the construction of the Wind Out project, including supply issues and the need for increased costs to maintain the schedule, further contributed to the DKK 4.3 billion reduction. Commissioning of the project has been delayed to the second half of 2027.
Excluding this disruption, Ørsted's first and unaudited EBITDA for 2024 is reported to be DKK 24.8 billion, in line with the company's latest guidance. Operating earnings from the offshore and offshore sectors were in line with expectations and were the main contributors to the number.
Mads Nipper, Group President and CEO of Ørsted, expressed disappointment about the construction challenges but remains optimistic about the company's performance and long-term commitment to the US market. Nipper emphasized the strategic value of subsea leases and the importance of the Sunrise Wind project, which is expected to generate enough offshore wind energy to power nearly 600,000 US homes and create hundreds of jobs.
Despite the disruption, Nipper maintains that the Sunrise Wind project is still profitable, with a single-digit IRR (Internal Rate of Return) and an attractive forward-looking IRR based on current assumptions.
Ørsted is set to host an investor and analyst call on January 21, 2025, to discuss the damage and its 2024 EBITDA. The company will publish its 2024 annual report on February 6, 2025. This article is based on a press release from Ørsted.
This article is powered by AI and updated by an editor. For more information see our T&C.