Trump's anti-Net Zero stance prompts wind energy giant Orsted to seek additional financing
Orsted, the world's largest offshore wind operator, is grappling with financial difficulties due to the adverse impact of the US President's opposition to wind energy. The Trump administration's suspension of new federal wind leases after inauguration has created political risks and hampered the company's ability to sell stakes in key projects like the Sunrise Wind offshore wind farm off New York.
The result is that Orsted is left to finance the entire $6.2 billion cost of the Sunrise Wind project alone, straining its capital resources and leading to a downgrade of its credit rating to near "junk" status by S&P Global Ratings.
Orsted's CEO, Rasmus Errboe, acknowledged the company's predicament, stating that they are facing an "extraordinary situation" due to adverse market developments in the US, as well as macroeconomic and supply chain challenges from previous years.
In an attempt to address this financial issue, Orsted has announced a £7 billion fundraising plan. However, this move has not been met with optimism by analysts, with RBC Capital Markets predicting a negative market reaction to the announcement. Indeed, Orsted's stock suffered a 30% slump following the announcement.
The company's traditional strategy of funding new sites by selling off completed projects has been paused due to the current situation. This has forced Orsted to seek alternative means of raising capital, leading to the decision to pause the sale of its Sunrise Wind hub off the coast of New York and instead raise funds through a rights issue.
The challenges in the US market have also led Orsted to abandon plans to sell a stake in a project off the US east coast. Moreover, the Scottish wind farms were paid £117m to stop producing energy that could have powered every home in Scotland for six months.
Despite these setbacks, Orsted continues to push for renewable energy. The Biden administration's more renewable-friendly stance offers hope for the future. However, the company still faces operational and financing challenges in the US market.
As the UK government pledges to make Britain a clean energy superpower and aims to halve the time it takes to build network infrastructure, the focus remains on finding solutions to the challenges faced by companies like Orsted in the renewable energy sector.
Orsted, due to the US President's opposition to wind energy, finds itself in a predicament, needing to finance the entire cost of the Sunrise Wind project alone, thereby straining its capital resources. In an effort to address this issue, Orsted has announced a £7 billion fundraising plan, but analysts predict a negative market reaction to this move.
