Copenhagen — Denmark’s Orsted on Monday asked its shareholders for 60-billion krone ($9.4bn), sending the stock sharply lower as the wind farm developer seeks to boost its finances amid US President Donald Trump’s opposition to wind power.
Struggling in recent years with soaring inflation and logistical problems that sent costs soaring, the offshore wind industry faced a further setback when Trump suspended licensing on his first day back in office in January.
“Orsted and our industry are in an extraordinary situation with the adverse market development in the US on top of the past years’ macroeconomic and supply chain challenges," CEO Rasmus Errboe said in a statement.
Increased uncertainty in the US market in recent months meant that potential investors for Orsted’s Sunrise Wind project under development on the US East Coast pulled out.
As a result, the company is forced to cover all costs related to the project, which led to increased funding requirements of about 40-billion krone, it said.
Orsted depends on selling full or partial stakes in its offshore wind farms to finance new projects.
The rest of the expected proceeds from the rights issue would strengthen Orsted’s capital structure and help it develop the 8.1GW of offshore wind projects under construction by 2027, the company said.
Orsted shares fell as much as 29% to a nine-year low on Monday. In midmorning trade they were down 27.6% at 223.2 krone.
“The US offshore wind market was crippled after Trump took office," said Sydbank analyst Jakob Pedersen. “Orsted's plan to raise capital was not just the correct option, it was the only option."
Offshore wind industry
Trump campaigned on a promise to end the offshore wind industry, saying it is too expensive and hurts whales and birds.
In April, his administration ordered Equinor to halt development of a fully-permitted wind farm off New York, sending shock waves through the industry. The order was, however, reversed in May.
Errboe, who replaced former CEO Mads Nipper earlier this year, has sought to cut costs and cancelled projects in the US and UK.
The rights issue is worth almost half of Orsted’s market value of about 130-billion krone at Friday’s close.
Jefferies analysts said in a note that while the fundraising would help to derisk the company’s balance sheet, the near-term dilution for shareholders “seems substantial".
‘Green transition’
Orsted said in a statement that the Danish state, which owns 50.1% of the company, had agreed to subscribe to a similar portion of the share issue, thus retaining a majority stake.
“Orsted is an extremely important company in the green transition, and there is also a security policy dimension where we need to be independent of energy from Russia," Denmark finance minister Nicolai Wammen told broadcaster TV2.
A spokesperson for Equinor, which holds a 10% stake in Orsted, said it would “assess the proposal". Shares not subscribed for by the existing shareholders or other investors will be fully underwritten by Morgan Stanley, Orsted said.
The company also said it expects to raise more than 35-billion krone from selling its European onshore wind business as well as from planned divestments of stakes in its Changhua 2 offshore wind farm in Taiwan and Hornsea 3 in Britain.
Reuters
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