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Renewables leader Orsted hit by low wind speeds

Orsted AS

Renewables leader Orsted hit by low wind speeds

World’s biggest offshore developer says ‘extraordinarily poor’ weather conditions will eat into profits

Low wind speeds have affected several European companies active in renewable energy © Chris James/Orsted

Orsted blamed low wind speeds across Europe as the world’s largest offshore wind developer warned that its profits for 2021 were likely to come in at the low end of its guidance.

Mads Nipper, chief executive of the Danish group, told the Financial Times that April, May and June had been the third-worst quarter for wind in the past 22 years in the North Sea, where Orsted has most of its wind farms.

“Out of 88 quarters on record, it is an extraordinarily poor wind quarter,” Nipper said. “It is very serious. It is like you’re a farmer and it doesn’t rain.”

The lower wind speeds cost Orsted DKr1.4bn ($220m) in lost earnings before interest, tax, depreciation and amortisation up to the end of July, the company said on Thursday.

It said it expected full-year ebitda to be at the lower end of its DKr15bn-DKr16bn ($2.4bn-$2.5bn) forecast, assuming wind speeds returned to normal for the rest of 2021.

Low wind speeds have affected several European companies active in renewable energy including SSE in the UK and RWE in Germany.

RWE on Thursday blamed the less blustery conditions this year in northern and central Europe for a 21 per cent fall in adjusted earnings at its offshore wind business in the first six months of the year.

The German utility booked a €42m loss at its onshore wind and solar division, down from a €299m profit the previous year, as it also took a €400m hit from February’s Arctic blast in Texas, which froze turbines. 

Nipper said history suggested that low wind speeds in one season had little influence over how they would be in others, and noted that the two worst quarters previously had ended up with annual speeds of about average.

Shares in Orsted, which have fallen more than a quarter this year after doubling in 2020, were down another 2 per cent on Thursday.

The Danish group, which aims to be a renewable “supermajor”, has suffered as competition in offshore wind has risen, particularly from large oil and gas groups such as BP and Equinor looking to diversify their energy assets.

Even as the UN published a landmark report on climate change this week that its director-general characterised as “code red for humanity”, renewable energy companies have faced more prosaic challenges such as raw material price inflation, increased auction prices for wind farms and a lack of seabed leases for turbine installations.

Orsted reported ebitda from offshore and onshore wind farms of DKr7.9bn in the first half, down DKr300m from a year earlier. Its overall ebitda of DKr13.3bn was boosted by a DKr5.4bn gain from selling part of its Borssele 1 and 2 wind farms in the Netherlands to Norway’s $1.4tn oil fund. The 2021 ebitda target of DKr15bn-DKr16bn strips out any gains from such “farm-downs”.

The company, which grew out of Denmark’s national oil and gas group, is expanding from a sole focus on offshore wind into onshore wind and solar energy after it increased its target for installed renewable projects by 2030 from 30GW to 50GW earlier this year.

Nipper said he was “satisfied” with the results and keeping company guidance for 2021 after not just the low wind speeds but also DKr3bn of costs announced in April to repair damaged cables at 10 wind farms.

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