Orsted Shares Plunge 27% as US Policy Shift Derails Project

Orsted shares, the global leader in offshore wind development, fell 26.8% in initial London trading on Monday.

It happened after the Danish energy giant said it would raise 60 billion Danish kroner through a rights issue. This follows what the firm termed a ‘material adverse development’ in the US market, which thwarted the sale of a large project stake that was likely to strengthen its balance sheet.

The rights issue, supported by the Danish state, Orsted’s biggest shareholder, will give existing investors first refusal on new shares.

What Became of the Sunrise Wind Project?

Orsted had been in advanced discussions to sell part of its Sunrise Wind project off the New York coast. The transaction was meant to allow it to deliver the ‘required strengthening’ of its capital structure to cover investments and business growth.

Deteriorating market conditions led Orsted’s board to withdraw from the sale process. This caused a decline in the Orsted share price. They forwent the proceeds, and related project finance exposed an additional funding of approximately 40 billion Danish kroner. This compelled the company to raise new equity.

The setback is against a volatile policy environment in the US since President Donald Trump’s return to the White House last month. On his first day back at work, Trump signed an executive order halting all new or renewed onshore and offshore wind leases.

Pledging full support to America’s oil and gas sector, Donald Trump bluntly told reporters in January, “We’re not going to do the wind thing,” and described turbines as big, ugly windmills that ruin your neighborhood.” This policy stance has significantly undermined prospects for offshore wind investments in the US, including Orsted’s projects.

What Does the Company Say?

“Orsted and our sector find themselves in a unique position with the negative market evolution in the US, in addition to previous years’ macroeconomic and supply chain issues,” CEO Rasmus Errboe mentioned in a statement.

He further said that the rights issue was the optimal means of realizing the full value potential of Orsted’s portfolio while setting up for future opportunities.

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How are Investors and Analysts Responding?

UBS analysts stated the rights issue came as a ‘surprise’ following Orsted’s previous guidance towards selling assets for DKK 70-80 billion. The equity raise size, equal to 46% of its market value, is considered unusually big.

“In an environment of high interest rates, the offshore wind business model is much less feasible and more equity-driven,” UBS said, adding that investors will now seek a comprehensive business plan following the rights issue.