Group EBITDA: DKK8.9 billion, an 18% increase compared to last year. EBITDA Excluding New Partnerships: DKK8.6 billion. Net Profit: DKK4.9 billion, significantly increased compared to last year. Net Interest-Bearing Debt: DKK68.4 billion, an increase of approximately DKK10 billion during the quarter. Full Year EBITDA Guidance: DKK25 billion to DKK28 billion. Gross Investments: DKK13.8 billion for the quarter. Divestment Proceeds: DKK3 billion from farm-down of Eleven Mile and Sparta projects. Return on Capital Employed: Adjusted at 10.2%, reported at 4.6%. Effective Tax Rate: 5%, underlying rate at 23% after adjustments. Scope 1, 2, and 3 GHG Intensity: Decreased by 7% compared to last year. Offshore Wind Capacity Installed: Over 10 gigawatts. Renewable Generation Share: 99% of total generation. Hornsea 4 Project Impact: Potential negative EBITDA impact of DKK3 billion to DKK3.5 billion in Q2 2025.

Warning! GuruFocus has detected 7 Warning Signs with DNNGY.

Release Date: May 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Orsted AS (DNNGY) reported a solid operational performance with a group EBITDA increase of 18% compared to last year. The company successfully completed the 50% farm-down of two solar farms in the US and a part of the West of Duddon Sands offshore wind farm in the UK, generating proceeds of around DKK7 billion. Orsted AS (DNNGY) commissioned the Gode Wind 3 project, marking the installation of over 10 gigawatts of offshore wind capacity. The renewable share of Orsted AS (DNNGY)'s generation reached 99% in the first quarter, driven by the closure of a large coal-fueled CHP plant. The company reported a significant reduction in the total recordable injury rate from 2.9% last year to 1.9% this year, reflecting a strong focus on safety.

Negative Points

Orsted AS (DNNGY) faces challenges in the offshore wind industry due to supply chain issues, regulatory uncertainty, and macroeconomic developments. The company decided to discontinue the development of the 2.4 gigawatt Hornsea 4 project in the UK due to adverse developments, including cost increases and higher interest rates. The imposition of a 25% tariff on imports of steel and aluminum in the US has led to increased costs and an additional impairment of DKK1.2 billion for Orsted AS (DNNGY). The company's net interest-bearing debt increased by approximately DKK10 billion during the quarter, reaching DKK68.4 billion. Orsted AS (DNNGY) anticipates a potential negative impact on EBITDA of approximately DKK3 billion to DKK3.5 billion in the next quarter due to the discontinuation of Hornsea 4.

Story Continues

Q & A Highlights

Q: What are the reasons behind the decision to discontinue the development of Hornsea 4? A: Rasmus Errboe, Group President and CEO, explained that the decision was driven by increased costs in the supply chain, higher interest rates, and increased execution risks. The company is focusing on a value-over-volume strategy and decided to discontinue the project in its current form to limit financial implications. They still hold the lease rights and plan to explore future development options for Hornsea 4.

Q: How is Orsted managing the risks associated with the US tariffs on steel and aluminum? A: Trond Westlie, CFO, stated that the company has accounted for a DKK1.2 billion impairment due to the tariffs. The tariffs will be paid when goods enter the US, impacting cash flow. They are monitoring the situation and have not included potential impacts from additional tariffs in their current assessments.

Q: Can you provide an update on the progress of the Sunrise and Revolution Wind projects in the US? A: Rasmus Errboe noted that Revolution Wind is about 75% complete, with nearly half of the turbines installed. Sunrise Wind is around 35% complete, with significant progress on the onshore converter station and monopile fabrication. Both projects are part of a single program, allowing for shared learnings and efficiencies.

Q: What is Orsted's outlook on the profitability of new offshore wind projects in Europe given current market conditions? A: Rasmus Errboe expressed confidence in the long-term fundamentals of offshore wind in Europe, driven by increasing electricity demand and a focus on energy security. He emphasized the need for predictable frameworks centered around Contracts for Difference (CfDs) to ensure project bankability and competitiveness.

Q: How does Orsted view the potential impact of zonal pricing in the UK on its existing projects? A: Rasmus Errboe stated that Orsted is closely monitoring the zonal pricing discussions and emphasized the importance of grandfathering existing projects to mitigate revenue uncertainty. The company is engaging with UK authorities to ensure that any changes do not adversely affect their current portfolio.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments