Shares of Orsted Company A/S fell to their lowest level ever after the renewable energy firm issued a warning that problems with its US portfolio’s supply chain and rising interest rates might result in impairments of as much as 16 billion Danish kroner ($2.3 billion).
The decline, which may have reached 25%, was the worst since the company’s IPO in 2016, wiping off the equivalent of more than $8 billion in market value. It’s another setback for the offshore wind sector, which is already dealing with rising material prices.
Supplier delays are hurting the company’s Ocean Wind 1, Sunrise Wind, and Revolution Wind projects in the US and might result in writedowns of up to 5 billion kroner, it warned late Tuesday. High borrowing rates may potentially result in an additional $5 billion.
Additionally, the developer is still in discussions with federal stakeholders to be eligible for extra tax incentives, but these discussions have not gone as planned. Its failure might result in losses of up to 6 billion kroner.
Orsted’s Decline Amid Offshore Wind Hurdles
Even if the bulls can claim that many of these problems with the impairment are previously known, the news is probably not going to help the share price of Orsted, which is already on the decline. Offshore wind still faces a lot of difficulties, such as affordability and intense competition.
The difficulties faced by Orsted are only the latest in a string of setbacks for the wind energy sector at a time when more nations want this kind of sustainable energy. The income picture for certain developers has been clouded by rising supply chain expenses, while other developers are struggling with serious mechanical problems.
On an intraday basis, Orsted shares traded at their lowest level since November 2018 and are down 33% for the year. The stock has been a drag on the European Renewable Energy Index this year, and on Wednesday, Vestas Wind Systems A/S, RWE AG, and EDP Renovaveis SA all saw their shares fall.