Equinor Comes To Ørsted’s Aid Amid Wind Energy Challenges
Equinor Injects US$939 Million Into Ørsted As The Danish Wind Giant Seeks Cash To Offset Project Setbacks.
(Image Courtesy Of Equinor)
Danish wind giant, Ørsted, has been under immense pressure as financial and regulatory pressures clash. Ørsted had been canceling or delaying projects to shore up its balance sheet. Despite the headwinds, the company remained a key driver of US offshore wind development.
In August, the US Bureau of Ocean Energy Management issued a stop-work order for its Revolution Wind project offshore Rhode Island. The project was already 80% complete, with 45 out of 65 wind turbines installed. leaving Ørsted with yet another potentially catastrophic write down.
Seemingly overnight, the Revolution Wind project went from a potential cash cow to a money pit. Ørsted was left with few options but to raise cash. It deployed a US$9.4 billion rights issue worth about half of the company’s value. A rights issue is basically an opportunity for existing shareholders to buy new shares at a discounted price.
On September 1, Norwegian energy giant, Equinor, announced that it would support Ørsted with US$939 million in new capital. The news follows Equinor’s October announcement to buy a 9.8% stake in Ørsted. Equinor had been a leader in offshore wind but has pulled back on many projects in favor or investing in its core offshore oil and gas projects and carbon capture and storage.
(Image Courtesy Of Northern Lights)
“As a long-term industrial shareholder, Equinor intends to participate in the Rights Issue and maintain its 10% ownership share in Ørsted,” said Equinor in a press release. “Ahead of the next annual general meeting, Equinor will also nominate a candidate to Ørsted’s board of directors. Equinor’s support of the Rights Issue reflects confidence in Ørsted’s underlying business, and the competitiveness of offshore wind in the future energy mix, in selected geographies. In response to the challenges facing offshore wind, the industry will see consolidation and new business models. Equinor believes that a closer industrial and strategic collaboration between Ørsted and Equinor can create value for all shareholders in both companies. Equinor is following recent developments around the offshore wind industry in the US closely and will remain in dialogue with Ørsted as the situation evolves. Subject to the final terms of the Rights Issue, Equinor will subscribe for new shares at a consideration of up to DKK 6 billion, or around US$939 million, based on a USD/DKK exchange rate of 6.39. Equinor will participate in the Rights Issue within its communicated financial framework and remains committed to delivering competitive capital distribution.”
Equinor’s offshore wind portfolio consists of 0.4 GW net installed capacity, and a further 3.0 GW under development. The current focus is on completing the ongoing development projects in North-West Europe and Empire Wind 1 in the US.
