View of an offshore wind energy park during a press moment of Orsted, on Tuesday 06 August 2024, on the transportation of goods with Heavy Lift Cargo Drones to the offshore wind turbines in the Borssele 1 and 2 wind farm in Zeeland, Netherlands.
Nicolas Maeterlinck | Afp | Getty Images
Shares in wind farm developer Orsted tumbled soon as trading kicked off on Monday after the U.S. government ordered the company to halt construction of a nearly completed project.
By mid-morning, the company’s shares were around 17% lower, with shares hitting a record low according to LSEG data.
Late on Friday the U.S.’ Bureau of Ocean Energy Management had issued a stop-work order for the Revolution Wind Project off of Rhode Island. According to Orsted, the project is 80% complete and 45 out of 65 wind turbines have been installed.
The company also said that it would comply with the U.S. order and that it was considering options to resolve the issue and press ahead with construction.
The order comes at a critical time for Orsted, which is seeking to raise much-needed capital under plans that analysts suggested were now under pressure.
Orsted had announced plans for a 60 billion Danish kroner ($9.4 billion) rights issue earlier this month. On Monday, the company said it would continue with the proposal, noting that it had the support of its majority stakeholder, the Danish state.
Shares have pulled back sharply since the rights issue plans were announced.
In a Monday note, Jacob Pedersen, head of equity research at Sydbank, said the potential financial consequences of the U.S.’ order had led to uncertainty about whether Orsted would be able to continue with its capital raising plans.
“The financial consequences of the stop-work order will at best be the ongoing costs of the work being stopped,” he said, according to a Google translation. In the worst-case scenario, the Revolution Wind Project would never supply electricity to the U.S., he added.
“In that case, Orsted faces a double-digit billion write-down and significant additional costs to get out of contracts. This will, by all accounts, increase the capital raising requirement to significantly more than DKK 60 billion,” Pedersen said.
He that the company’s Monday announcement to push ahead with its rights issue plans suggested it did not expect the worst-case outcome and was expecting its 60 billion Danish kroner target to be sufficient.
“Orsted’s assessment of this is positive – but it is no guarantee that it will end up like this,” Pedersen said.
