Shares in Orsted A/S stock fell as much as 19 percent to a record low after US President Donald Trump’s administration blocked construction of an almost-finished offshore wind farm, throwing a wrench into a planned 60 billion kroner (US$9.4 billion) share sale backed by the Danish government.
The Danish wind company’s management is meeting with investors and advisers in London today to reassure them that a growing crisis is under control and that the planned rights issue will go ahead. Orsted has yet to formally launch or price the offering and is being advised by banks including JPMorgan Chase & Co and Morgan Stanley.
Orsted declined as much as 19 percent in Copenhagen yesterday. Shares are down almost 50 percent this year, wiping nearly US$8 billion off the company’s value.
Photo: Nichlas Pollier, Bloomberg
The events mark the latest push by the Trump administration to halt the expansion of offshore wind farms, an energy source that the US president personally dislikes. Those efforts have included stopping new leases on sites and permits for new offshore wind farms and rolling back tax credits that support projects.
“We expect all of this to create a more challenging setup for the upcoming rights issue regarding issue price and investor demand,” Jefferies International Ltd analyst Ahmed Farman said in a note.
Friday’s stop-work order is for Revolution Wind off the coast of Rhode Island — a project that’s costing US$4 billion to build, according to an estimate by Jefferies. It’s the latest in a string of bad news for Orsted that led to its credit rating being cut to the lowest investment grade.
Investors want to know whether the company can find an agreement to appease the government and how long that could take, or if it will be forced to abandon the project and how much it would cost. The uncertainty could damage investor interest in the rights issue or mean the Danish government needs to increase its stake in the company even further.
The company tried to reassure investors yesterday that plans are going ahead.
“The planned rights issue has been sized to provide the required strengthening of Orsted’s capital structure to execute its business plan, even when taking into account the impact of this uncertainty on Orsted’s US offshore wind portfolio,” the company said in a statement.
The Danish government, which owns 50.1 percent of Orsted, still plans to take part in the capital raise, saying it had accounted for the risk when deciding on the matter.
“I can confirm the state’s continued backing,” Danish Finance Minister Nicolai Wammen said in an e-mailed statement yesterday, just as opposition parties resumed calls for the government to sell its stake.
It would be the biggest share sale for the European energy sector in over a decade, with the government planning to buy about half of the securities.
For Orsted, one of the world’s largest offshore wind developers, the order marks a new low point in the company’s failed effort to replicate its European business in the American market. In recent years, a variety of issues including costly supply chain bottlenecks have forced the company to cancel two major projects, issue a series of writedowns and led to the replacement of its top executives.
“Orsted is evaluating all options to resolve the matter expeditiously in dialogue with permitting agencies and potentially through legal proceedings, with the aim being to proceed as quickly as possible,” the company said.
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