now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
Asia Connect
Orsted halts Ocean Wind 1 and 2 projects off New Jersey
Danish energy firm cites supply chain issues, higher interest rates
Michael Marray 8 Nov 2023

In the latest sign of challenges facing the global offshore wind industry, Danish renewable energy firm Orsted is halting the development of the Ocean Wind 1 and 2 projects off the coast of New Jersey.

Orsted is recognizing US$4 billion in impairments as a result of cost issues on projects under construction. The cancellation of Ocean Wind 1 alone has resulted in an impairment of US$2.8 billion.

New Jersey governor Phil Murphy reacted angrily to the decision, calling it “outrageous” and adding that it called into question Orsted’s credibility and competence.

Ocean Wind 1 (with a planned capacity of 1,100 megawatts) and Ocean Wind 2 (1,148MW) were Orsted’s largest projects in development, and were to have been located about 24 kilometres off Atlantic City.

According to chief executive officer Mads Nipper, supply chain issues played a significant role in the decision, including a global shortage of vessels needed for the construction. Inflation has also increased costs, and interest rates have risen sharply.

The company will be moving ahead with the 700MW Revolution wind farm off Rhode Island and Connecticut,  a 50/50 partnership with Eversource. Onshore construction has started and offshore construction will start next year, with completion scheduled for 2025.

On August 29, Orsted announced anticipated impairments on its US portfolio of up to 16 billion Danish kroner (US$2.3 billion). Since the announcement, the US offshore wind projects have experienced further negative developments related to supply chains, increased interest rates, and the lack of an offshore renewable energy certificate (Orec) adjustment on Sunrise Wind.

Total impairments recognized in the company’s financial report for the first nine months of 2023 amounted to 28.4 billion kroner, of which 19.9 billion kroner was related to Ocean Wind 1. 

However, global earnings from offshore sites amounted to 13 billion kroner, or 6.8 billion kroner higher than in the same period last year, which were positively affected by the ramp-up at Hornsea 2 in the United Kingdom, and Greater Changhua 1 and 2a in Taiwan), while the negative impact from hedges in 2022 was not repeated.

Due to a later timing across its project portfolio, and the termination of investments on Ocean Wind 1, gross investment for 2023 is now expected to amount to 40-44 billion kroner, a reduction of 4 billion kroner.

Federico Cristina
Federico Cristina
Memento Blockchain
In-person roundtable
What next for digital assets
View Highlights
Sagarika Chandra
Sagarika Chandra
director, Asia-Pacific sovereigns
Fitch Ratings
Fitch on Vietnam
Overcoming challenges, sustaining growth
View Highlights