Orsted Seeks Green Supermajor Role With $57 Billion Plan

Source: By Will Mathis, Bloomberg • Posted: Wednesday, June 2, 2021

Orsted A/S plans to spend 350 billion Danish kroner ($57 billion) by 2027 to be the world’s leading green energy provider.

But the Danish firm, already the biggest developer of offshore wind farms, faces increasing competition from other utilities as well as oil majors that aim to be major players in the transition to clean energy, an area it pioneered when it ditched its fossil-fuel business for an all-renewable strategy.

As green energy grows from a niche to a key way the world gets electricity, Orsted is speeding up investment to keep its edge. The new target is an average annual increase of about 50% from the company’s last strategy update in 2018, it said Wednesday.

“We must become one of the largest green electricity producers,” Chief Executive Officer Mads Nipper said in a webcast at the company’s capital markets day. “We plan to continue to up our ambition.”

Orsted’s shares dropped as much as 5.6% in Copenhagen on the announcement.

Morgan Stanley said the company’s target to expand capacity was more aggressive than expected, but was reassured by its expected return on capital employed of 11% to 12% from 2020 to 2027.

The spending plan is still below what some of its closest competitors are targeting. Spain’s Iberdrola SA has earmarked 150 billion euros ($183 billion) through 2030 to become the biggest renewable power company. Italy’s Enel SpA unveiled plans last year to roughly triple its renewable capacity to 120 gigawatts by 2030, part of a 160 billion-euro investment plan.

The company has traditionally been an offshore wind specialist. The technology is one of the fastest-growing sectors in renewable energy, but each development takes years to build. Orsted expects to more than triple its offshore wind capacity by the end of the decade to 30 gigawatts from 7.6 gigawatts today. However, all of that is from projects already in the pipeline.

Competition for offshore wind projects has been particularly difficult as oil majors such as BP Plc and Total SE target the space as a key way to leverage their experience at sea to decarbonize their own production.

Orsted aims to leverage its already established pipeline to pursue new projects selectively, rather than bid whatever it takes to win new capacity. Limiting the offshore wind target to 30 gigawatts by 2030 strikes a balance between maintaining a market-leading position and focusing on value, the company’s Chief Commercial Officer Martin Neubert said.

Orsted is also ramping up its onshore wind and solar business, a space in which its further behind Enel and Iberdrola. Orsted plans to have over 17 gigawatts of onshore renewable capacity by 2030, compared with 2.4 gigawatts currently. Most of that growth will come in the U.S., already its largest market for onshore wind.

(Updates with analyst comment in sixth paragraph)