Orsted, the Danish renewable-energy company, revealed potential impairments of up to DKK 16 billion ($2.34 billion) in its U.S. portfolio. This announcement was made due to several factors, including supply chain issues, lack of progress in tax credit guidance, and increased interest rates.
Concerns with Suppliers
Orsted expressed concerns that some of its suppliers may not be able to fulfill their commitments and contracted schedules for the Ocean Wind 1, Sunrise Wind, and Revolution Wind projects in the U.S. Should these issues persist, it could result in increased costs, revenue delays, and impairments of up to DKK 5 billion.
Stalled Tax Credit Qualifications
The company also revealed that discussions with senior federal stakeholders regarding additional Investment Tax Credit qualifications for Ocean Wind 1 and Sunrise Wind are not progressing as initially anticipated. If Orsted fails to qualify for credits beyond 30%, impairments of up to DKK 6 billion may occur. Currently, the company is actively engaged in talks to secure at least 40% tax credits for all projects.
Impact of Higher Interest Rates
Furthermore, Orsted highlighted the potential booking of additional impairments, approximately DKK 5 billion, to account for the influence of higher U.S. interest rates on its U.S. offshore projects and select onshore projects.
David Hardy, Chief Executive of Orsted Americas, stated, “The U.S. offshore wind market remains attractive in the long term. We will continue to work with our stakeholders to explore all options to improve our near-term projects.”
Despite these impairments, Orsted maintains its full-year guidance for earnings before interest, taxes, depreciation, and amortization (EBITDA), excluding new partnerships, which is anticipated to be between DKK 20 billion and DKK 23 billion. The expected gross investment level remains at DKK 44 billion to DKK 48 billion.
The impairments will be officially recognized in Orsted’s nine-month report of 2023.