(Bloomberg) — Shares in Orsted A/S fell to a record low after the renewable energy company warned of up to 16 billion Danish kroner ($2.3 billion) in impairments to its U.S. portfolio due to supply chain issues and rising interest rates.
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Fall – up to 25% – from the company’s It’s a further blow to the offshore wind industry, which has struggled with high material costs.
The company’s Ocean Wind 1, Solar Wind and Revolution Wind projects are being hit by supplier delays, with write-offs of up to 5 billion kroner, it reported on Tuesday. Higher interest rates could add another 5 billion.
In addition, the developer is negotiating with federal stakeholders to qualify for additional tax credits, which has not yielded the expected progress. If it fails, it could lead to a deficit of 6 billion crores.
“While the bulls can argue most of the issues related to the handicap, the announcement doesn’t bode well for Orsted’s already weak stock price,” Citigroup Inc. said. Analyst Jenny Ping said in a note on Wednesday. “We continue to see a number of challenges for onshore wind,” including affordability and stiff competition.
Oersted’s problems are the latest in a series of struggles for the wind power industry as nations around the world seek clean energy technology. Rising supply chain costs have clouded the revenue outlook for some developers, while others face disruption from critical mechanical issues.
Read more: Orsted’s $2.3 billion settlement exposes US offshore wind woes
“Signs of additional supply chain headwinds on the offshore segment could be a major focus on offshore wind and solar development,” Bloomberg Intelligence analyst Patricio Alvarez said.
Share rejection
The troubled shares are down 33 percent this year and were trading at their lowest intraday since November 2018. The stock weighed on the European Renewable Energy Index this year, with other wind developers such as RWE AG, EDP Renovaveis SA and Vestas Wind Systems A/S falling on Wednesday.
Orsted earlier this month reported a drop in revenue for the second quarter, weighed down by weaker wind speeds and lower margins in some segments. Still, it expects a return on capital employed of around 14% for the 2023-2030 period.
In another sign of a troubled industry, Swedish developer Vattenfall AB halted a UK project last month because the high costs were no longer viable. Meanwhile, Siemens Energy AG has tried to delay the development of new wind turbines from the 5.X platform due to the defects of the machines.
Read more: Iberdrola doesn’t fit Orsted’s writing as wind rival
Orsted said it will continue to install on recent offshore wind projects in the US and work to address supply delays.
Still, Danske Bank said the impairments would have “no impact” on earnings before interest, taxes, depreciation and amortization, and could reduce the company’s development capital spending budget.
“From this our overall impression is slightly credit negative,” the bank said in a note.
–With assistance from Priscilla Azevedo Rocha, Sanne Was and Paul Jarvis.
(Share price updates in the second and eighth paragraphs.)
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