(Bloomberg) – Equinor ASA will spend almost $1 billion backing Orsted A/S’s share sale, in a crucial show of support as the Danish firm seeks to steady its finances following the Trump’s administration’s attacks on offshore wind.
U.S. President Trump has increased efforts in recent weeks to block wind projects from advancing.
The Norwegian energy company plans to maintain its 10% stake in Orsted by subscribing for as much as 6 billion Danish kroner ($940 million) of new shares in the wind developer. Backing from Equinor — Orsted’s second-biggest shareholder — is seen as crucial to getting wider support from investors for the proposed 60 billion-krone ($9.4 billion) capital raise.
Equinor is doubling down on its support for Orsted, even after its original $2.5 billion investment lost about half its value as President Donald Trump triggered an existential crisis for the offshore wind industry. Last month, his administration ordered a stop work order against Orsted’s 80% complete Revolution Wind project off the coast of Rhode Island.
Trump’s targeting of wind energy doesn’t appear to have deterred Equinor, one of the few oil majors to maintain a significant green agenda. Last year, there were preliminary talks over an apparent rescue plan between representatives of Orsted and counterparts at Equinor about the possibility of a merger, Bloomberg reported at the weekend, citing people familiar with the matter. Those talks were abandoned, but Equinor signaled on Monday that it saw opportunities for the companies to work together more closely, without providing details.
“In response to the challenges facing offshore wind, the industry will see consolidation and new business models,” Equinor said in a statement on Monday. “Equinor believes that a closer industrial and strategic collaboration between Orsted and Equinor can create value for all shareholders in both companies.”
Equinor’s backing for Orsted could be a precursor to it eventually taking a larger stake in the wind company, Jacob Pedersen, head of equity research at Sydbank A/S, wrote in a note.
“The closer strategic cooperation with Equinor opens up for speculation as to whether Equinor, at a time when the Orsted business has been restored financially and in terms of earnings, may be interested in increasing its ownership share and influence considerably,” he said.
On Monday, Equinor expressed “confidence in Orsted’s underlying business,” in a boon for the Danish company’s management. Top executives met with investors in London and Frankfurt last week to shore up support for the offering after the US decision to halt the wind project sent the stock to a record low.
“There was no right answer here, just trade-offs,” Biraj Borkhataria, an analyst at RBC Europe, said in a note to investors Monday. “The challenge with participating fully is that the company will effectively increase its net exposure to two 100%-owned U.S. offshore wind projects, neither of which look likely to be farmed down in the near term, and where political support remains uncertain.”
