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Orsted withdraws from contract for Maryland offshore wind farm
Credit: By Will Mathis and Josh Saul | January 25, 2024; Updated on January 26, 2024 at bloomberg.com ~~
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Translate: FROM English | TO English
Orsted A/S withdrew from an agreement with regulators in the US state of Maryland to sell electricity from a big offshore wind farm it’s planning to build in the Atlantic Ocean.
It’s the latest step for the Danish firm to reconfigure its portfolio of American projects after soaring costs forced it to take billions of dollars of write downs last year. Orsted’s executives plan to update investors on Feb. 7 on how they will reset the company after the setbacks.
The prices set in the power contract for the Skipjack Wind project were no longer viable because of inflation, high interest rates and supply-chain problems, the Danish company said late Thursday. Orsted will still move forward with the almost 1 gigawatt project. Shares rose as much as 1.6% in early Copenhagen trading on Friday before paring gains.
“Today’s announcement affirms our commitment to developing value creating projects and represents an opportunity to reposition Skipjack Wind,” David Hardy, head of Orsted’s Americas division said in a statement.
The nascent US offshore wind industry is struggling to adjust to higher costs, raising concerns about its future. Developers have been forced to recalculate the figures for proposals originally modeled years ago, with some delayed or even canceled.
Last year, Orsted canceled two US offshore wind projects and recorded $4 billion in impairments.
The company didn’t announce any financial penalties for withdrawing from the deal in Maryland. It also didn’t cite any costs related to contracts with suppliers.
“We presume at this stage limited supply chain contracts would have been placed given its commercial operation date and potentially higher power prices in future contracts could limit any near-term write downs,” Jenny Ping, analyst at Citi said in an emailed note.
Out of 4.1 gigawatts of projects Orsted has in the US, 10% have reached a final investment decision, 35% are being rebid and 55% canceled, Citi’s Ping noted.
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