Rising costs of offshore wind power business in the United States

In the fourth quarter of 2024,Ørsted reported impairment losses of KRK 12.1 billion(approximately EUR 1.62 billion).This loss is mainly attributed to the increase in costs of its US offshore wind business,particularly related to the development of the 924 MW Sunrise Wind project along the coast of New York.

Financial pressure stems from various factors,including rising interest rates,declining value of US seabed leases,and increased construction costs for the Sunrise Wind project.The Sunrise Wind project is facing tight construction schedules,supply chain,and construction challenges.The expected commissioning time has been postponed to the second half of 2027,and costs have also increased,especially for single pile foundations.

In addition,in July 2024,Ørsted acquired Eversource’s stake in Sunrise Wind,a new offshore wind farm in New York called Revolution Wind,with offshore work planned to begin this year.

Mads Nipper,President and CEO ofØrsted Group,stated that the company will be committed to strengthening execution and addressing supply chain challenges to ensure project completion within the updated timeline and cost.

Meanwhile,the decline in the value of coastal seabed leases in New Jersey,Maryland,and Delaware resulted in a loss of 3.5 billion Danish kroner.The change in long-term interest rates in the United States also led to a 75 basis point increase in the weighted average cost of capital,which had a negative impact on the US investment portfolio(mainly offshore wind projects),resulting in an impairment of DKK 4.3 billion.

Despite facing challenges,Ørsted’s operating profit for 2024 still reached 24.8 billion Danish kroner,in line with expectations.Nipper stated that although the impairment and ongoing construction challenges were disappointing,the company’s operational performance was encouraging,with full year EBITDA guidance confirmed,thanks to the increase in electricity production brought about by the growth of the global renewable energy asset portfolio.

On the other hand,US President Trump recently issued an executive order suspending offshore wind power leasing on the US Outer Continental Shelf(OCS)and requiring a review of the federal government’s leasing and licensing practices for wind power projects,prohibiting the issuance of new or renewed approvals until the review is completed.