Danish company Ørsted, the world’s largest offshore wind developer, released its latest financial report yesterday (Wednesday).
What’d it say? This year, the company has:
- ❌ Cancelled two large US offshore wind projects, and
- 📉 Suffered $4B in impairment losses (ie, abrupt asset value drops).
Hours after this report dropped, the company’s shares had tanked 26%.
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Where’s the intrigue? Most wind developers are now facing headwinds:
- 🇯🇵 Various trading houses have cancelled wind projects in Japan, and
- 🇸🇪 Swedish group Vattenfall halted one of the UK’s largest offshore wind projects in July due to “market conditions”.
What’s the problem?
- 📈 High interest rates have made project finance costly
- 💸 Stubborn inflation has caused production costs to spike
- 🚢 Supply chain bottlenecks have caused delays, and
- 💼 Governments are struggling to adjust their rules and incentives to keep projects viable over long time horizons.
Intrigue’s take: There’s a whirlwind of different objectives at play here: maximise shareholder value; keep energy costs low; hit net-zero targets; and put government debt on a sustainable trajectory.
When you mix them all together, the result is some clear market signals right now: renewable energy stocks have dropped around 30% since July, while fossil fuel stocks keep rising (and the sector looks as bullish as ever).
The path to net-zero is looking a little bumpy.