A World That Runs Entirely on Green Energy

On 12 August, Ørsted released its results for the first half-year of 2021. Perhaps the most notable figure in the Danish multinational power company’s filing was the effect of lighter winds in the first half of the year. Developing, constructing, and operating offshore and onshore wind farms, solar farms, energy storing facilities and bioenergy plants, Ørsted’s vision is a world that runs entirely on green energy. The half-year filing highlights the fact that the renewable energy industry remains very exposed to weather conditions. However, according to Mads Nipper, CEO of Ørsted, over time the wind speeds have been incredibly stable, remaining confident that wind speeds will return to more normal levels.  

Largest Onshore Wind Project to Date

Earlier this month, Ørsted announced the completion of the largest onshore wind project to date. With the completion of the 367 MW Western Trail wind farm in Wilbarger and Baylor counties in Texas, Ørsted secures a total onshore capacity of over 2.8 GW of wind, solar, and battery storage operation. The project has already secured long-term contracts with PepsiCo, Hormel Foods, and Nucor. As made evident by the latest financial filing, the industry remains susceptible to fluctuations in the level of winds and sunshine, despite strong fundamentals. To mitigate the risks associated with fluctuations in weather conditions, Ørsted has emphasized the importance of geographical diversification, as opposed to limiting operations to the North Sea. As stated by Markus Krebber, CEO of RWE, “We also need diversification… because sometimes the business is volatile. And ideally, it’s diversification across different technologies but also across different regions”. The completion of the Western Trail wind farm in Texas is thus Ørsted’s latest step towards a more diversified portfolio. In order to further diversify operations, similar projects are also being carried out in other parts of the United states and in Taiwan, along with investments in technologies such as solar photovoltaics.

Power Purchase Agreement with the Microsoft Corporation

“Given the strong alignment in focus on emission reductions between our two organizations, I’m excited about our continued collaboration”. These were the words spoken by Vishal Kapadia, Senior Vice President and Chief Commercial Officer in Ørsted Onshore upon the signing of the agreement between Ørsted and Microsoft. Per the terms of the agreement, Microsoft will buy power from Ørsted’s 430 megawatts (MWAC) solar energy center in Fort Bend County, Texas, which is expected to be operational by the second quarter of 2022. As made evident in the announcement on 10 August, the Old 300 Solar Center is located on approximately 2,800 acres of land and represents an investment of more than USD400 million in the local community. As stated by Ørsted, in order to meet the Biden administration’s 2030 targets, project permits on similar projects most speed up.   

Interim Report

On 12 August, Ørsted published their results for the first half-year of 2021. Operating profit (EBITDA) is up DKK 3.3 billion compared to the same period last year. The increased figure was however mainly driven by the 50% farm-down (whereby stakes in green power assets are sold to institutional investors) of the Dutch offshore wind farm Borssele 1 & 2. Although generation capacity from new wind farms increased, it was largely offset by the lowest April-June wind speeds in more than 20 years. Thus, Ørsted maintains its full-year EBITDA guidance of DKK 15-16 billion but has indicated that due to the weather conditions prevailing earlier in the year, the outcome will be in the low end of the guided range. CEO Mads Nipper however emphasizes that over the long term, wind speeds have been incredibly stable and maintains that wind speeds will return to more normal levels.       

Stock Overview

Ørsted A/S is currently trading at DKK 1006.5 (26.08.2021). The stock reached its yearly high of DKK 1339.94 (07.01.2021) and yearly low of DKK 835.4 (10.06.2021). 13 Bloomberg analysts place the stock on BUY, 11 on HOLD and 7 analysts on SELL.