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    HomeBusiness‍Orsted hit by up to $5.6 billion impairment on halted US projects

    ‍Orsted hit by up to $5.6 billion impairment on halted US projects

    A view of the turbines at Orsted’s offshore wind farm near Nysted, Denmark, September 4, 2023. REUTERS/Tom Little/File Photo Acquire Licensing Rights

    • Company halts development of 2 US offshore wind projects
    • Wind firms hit by higher interest rates, supply chain problems
    • Shares drop as much as 22%

    Nov 1 (Reuters) – Renewable energy firm Orsted (ORSTED.CO) on Wednesday halted the development of two U.S. offshore wind projects and said related impairments could spiral to as much as 39.4 billion Danish crowns ($5.58 billion).

    The stock, which had dropped about 40% since August, plunged another 22% in early trade.

    Orsted, the world’s largest offshore wind developer, said it would stop developing its 2,248-megawatt (MW) Ocean Wind 1 and 2 projects in New Jersey as part of an ongoing review of its U.S. offshore wind portfolio.

    “Significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision,” Chief Executive Mads Nipper said.

    The Danish company flagged in August it could see U.S. impairments of 16 billion crowns due to supply chain issues, soaring borrowing costs and a lack of new tax credits.

    On Wednesday, Orsted raised that number to 28.4 billion crowns and said provisions relating to the cancellation of the two projects would amount to between 8 billion and 11 billion in the fourth quarter.

    The writedowns were in line with expectations, according to Bernstein analyst Deepa Venkateswaran.

    Halting Ocean Wind 1, the most advanced of the two projects, also sends “a positive signal that they are committed to only proceeding with valuable projects”, Venkateswaran said.

    Soaring costs from rising inflation, interest rate hikes and supply chain delays have cast doubt on plans by U.S. President Joe Biden and several states to use offshore wind to replace fossil fuels in energy production and reduce carbon emissions.

    On Tuesday, energy major BP (BP.L) booked a third-quarter writedown of $540 million on wind projects after officials in New York state rejected a request for better terms to reflect what BP called “inflationary pressures and permitting delays”.

    Norway’s Equinor (EQNR.OL), BP’s partner on those New York offshore wind developments, booked a $300 million impairment on the projects on Friday.

    ($1 = 7.0641 Danish crowns)

    Reporting by Gursimran Kaur in Bengaluru
    Editing by Michael Perry and Mark Potter

    Our Standards: The Thomson Reuters Trust Principles.

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    Based in Copenhagen, Jacob oversees reporting from Denmark, Iceland, Greenland and the Faroe Islands. Specializes in security and geopolitics in the Arctic and Baltic Sea regions, as well as large corporates such as brewer Carlsberg and shipping group A.P. Moller-Maersk. His most impactful reporting on Arctic issues include a report on how NATO allies are slowly waking up to Russian supremacy in the region, uncovering how Greenland represents a security black hole for Denmark and its allies, and how an abundance of critical minerals has proven a curse for Greenland.
    Before moving to Copenhagen in 2016, Jacob spent seven years in Moscow covering Russia’s oil and gas industry for Dow Jones Newswires and The Wall Street Journal, followed by four years in Singapore covering energy markets for WSJ and Reuters. As a Russian speaker, he has been involved in covering the war in Ukraine. He publishes a newsletter each weekday focused on the most important regional and global news. Contact Jacob via email if you are interested in receiving the newsletter.

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