Ørsted has decided to discontinue the development of the 2,400 MW offshore wind project Hornsea 4 in the UK in its current form. The reason for dropping the project, which is the company's largest offshore wind farm to date, is due, among other things, to rising supplier costs, higher interest rates and an increased risk that the project cannot be realized within the planned timeframe. The company stated this in a statement.
According to Ørsted, the project's value creation has deteriorated, and the company has therefore chosen to terminate the supplier contracts and discontinue investments. This means that Hornsea 4 will not be delivered under the contract for difference (CfD) that Ørsted was awarded in September 2024.
- We are determined to continue to be an important partner for the British government in its efforts to achieve its ambitious goals for the expansion of offshore wind, and we greatly appreciate the work it has done to set clear framework conditions to support offshore wind. However, as our capital allocation is based on a disciplined and value-focused approach, we have, after careful consideration, decided to discontinue the development of the Hornsea 4 project in its current form well in advance of the planned investment decision later this year, says Rasmus Errboe, CEO of Ørsted.
Can still revive the project
Ørsted states that the company will continue to own seabed rights, grid connection agreement and regulatory approval, which allows for the possibility of resuming the project at a later date.
- I would like to emphasize that we at Ørsted continue to firmly believe in the long-term economic and value prospects for offshore wind in the UK. We will retain the project rights to the Hornsea 4 project in our development portfolio, and we will seek to develop the project at a later date in a way that creates more value for us, our shareholders.
As a result of this decision, Ørsted expects to incur decommissioning costs of DKK 3.5-4.5 billion in 2025. The impact on EBITDA is expected to be DKK 3.0-3.5 billion, which includes a write-down of the offshore transmission facilities and a provision for contractual cancellation costs (not included in EBITDA guidance). In addition, capitalized construction costs of approximately DKK 0.5-1.0 billion will be written down (not affecting EBITDA).
However, Ørsted maintains its EBITDA expectation for the year of DKK 25-28 billion and gross investments of DKK 50-54 billion. kr.
Investment economist: Too many unforeseen things are hitting Ørsted
As a result of rising interest rates, Ørsted has been forced to write down a number of projects worth many billions of kroner several times recently. In the fourth quarter of last year, the company had to write down 12.1 billion kroner, and in August Ørsted also wrote down the value of several projects.
Per Hansen, who is an investment economist at Nordnet, believes that far too many unforeseen things have happened for Ørsted in recent years.
- Uncertainty has unfortunately become part of Ørsted's DNA and a word that is repeated too many times, it says in a written comment to Ritzau.
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