In the process of advancing its ongoing maturation and conducting a pre-final investment decision (FID) evaluation for its imminent offshore projects in the US, Ørsted has analysed the combined negative effects associated with the supply chain, the absence of favourable advancements in Investment Tax Credit (ITC) guidelines, and the rise in interest rates.
The Ocean Wind 1, Sunrise Wind, and Revolution Wind initiatives have been negatively affected by several delays from suppliers. Ørsted’s assessment reveals a growing concern about these suppliers’ capacity to fulfil their obligations and meet the agreed-upon timetables. This situation might trigger subsequent consequences necessitating additional mobilisation efforts to complete installations. Moreover, there’s a potential for postponed revenue, increased expenses, and implications for the overall business case. As a result of these challenges, impairments of up to DKK5bn ($730m) are expected, assuming no further detrimental developments occur within the supply chains of these projects.
Furthermore, the company’s ongoing dialogues with key federal officials regarding further qualification for ITCs for Ocean Wind 1 and Sunrise Wind have not progressed as anticipated. It is actively involved in discussions with federal stakeholders to secure additional tax credits beyond the 30% mark. However, should these endeavours not yield positive results, potential impairments reaching up to DKK6bn could occur. The extent of such impairment will be determined based on a comprehensive assessment considering the probability of attaining the supplementary ITCs.
Moreover, the recent increase in long-term interest rates in the US has cast an impact on both our offshore projects in the US and specific onshore projects. Should these interest rates persist at their current levels through the conclusion of the third quarter, it will result in impairments amounting to approximately DKK5bn.
The impairments associated with Ocean Wind 1, Sunrise Wind, Revolution Wind, South Fork Wind, Block Island Wind Farm, and several US onshore projects will be recorded in Ørsted’s interim report for the first nine months of 2023.
Ørsted remains committed to advancing its near-term offshore wind projects in the US, which involves securing the necessary federal and local permits. It is actively collaborating with suppliers to address and minimise potential delays, and we’re maintaining an ongoing dialogue with stakeholders to achieve qualification for at least 40% ITCs across all projects.
The company is working to make Final Investment Decisions (FID) for the Ocean Wind 1, Sunrise Wind, and Revolution Wind projects by the late stages of 2023 or early 2024. Subject to the FID process, we currently anticipate the commissioning of Ocean Wind 1 to take place in 2026.
Ørsted Region Americas executive vice president and CEO David Hardy said: “The US offshore wind market remains attractive in the long term. We will continue to work with our stakeholders to explore all options to improve our near-term projects including continued dialogue about ITC qualification, OREC adjustments, and other business case levers.”
This announcement does not alter Ørsted’s previously provided Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) guidance for the fiscal year 2023, nor does it affect the previously disclosed projected investment amount for the year 2023.
