Orsted cancels major UK offshore wind project amid rising costs

Orsted announced on Wednesday that it will no longer proceed with the construction of a significant offshore wind farm in Britain. 

The company attributed this decision to a worsening global business climate for renewable energy projects, according to a Reuters report. 

This move represents a setback for the UK’s goals to reduce carbon emissions from its energy sources.

The Denmark-based company has experienced an approximately 80% decline in its market value since its 2021 high. 

This decrease can be attributed to increasing costs, supply chain disruptions, and diminished investor confidence stemming from opposition to offshore wind by US President Donald Trump.

Hornsea 4 project cancelled

Cancelling the Hornsea 4 offshore wind farm, a major global project, could cost Orsted up to 5.5 billion Danish crowns ($837.85 million) in break fees and write-downs, according to the report. 

The company stated that the anticipated value of the project has decreased.

Orsted CEO Rasmus Errboe said in a statement:

The combination of increased supply chain costs, higher interest rates, and increased execution risk has deteriorated the expected value creation of the project.

Appointed CEO in January, Errboe is tasked with restoring investor confidence and restructuring the company to align with the evolving offshore wind sector.

“We believe the decision was needed to ensure we only bring forward assets which we are confident will deliver the value that we would like to see,” Errboe was quoted in the report.

The Hornsea 4 project had not yet reached a final investment decision. 

However, Britain’s Department for Energy Security and Net Zero expressed hope for a potential revival of the project plans.

“We recognise the effect that globally high inflation and supply chain constraints are having on industry across Europe, and we will work with Orsted to get Hornsea 4 back on track,” a spokesperson was quoted by Reuters in the report.

Trump proves negative for shares

Orsted shares fell by more than 2% on Wednesday. However, their value has decreased by approximately one-third since Trump’s re-election in November of the previous year.

“The cancellation of Hornsea 4 comes as a surprise but highlights stronger discipline under the new CEO,” Bernstein said in a research note.

Despite Trump’s support for fossil fuels, Britain, Orsted’s typically stable growth region and the largest offshore wind market outside China, is focused on decarbonising its electricity sector to combat global warming.

In September of the previous year, Orsted was awarded a 2.4 gigawatt contract for its Hornsea 4 project. 

This offshore wind farm is situated off the coast of Yorkshire in northern England. 

The contract was secured through a British renewables power auction, the purpose of which was to bolster the project’s viability.

Errboe said:

We believe that the UK government is doing everything right in terms of the framework.

Operational headwinds and financial performance

The industry has faced headwinds recently due to increasing costs, supply chain disruptions, elevated interest rates, and the more recent emergence of trade tensions.

Orsted announced on Wednesday that US tariffs on steel, aluminum, and related items have inflated the costs of its two US offshore wind projects. 

This has led to a 1.2 billion crown impairment. However, the company affirmed that construction will proceed as planned.

For the first quarter of the year (January to March), the company reported a profit of 8.6 billion Danish crowns before interest, tax, depreciation, and amortisation, excluding new partnerships and cancellation fees.

Analysts had generally anticipated an EBITDA of 7.88 billion crowns, according to a company poll.

Orsted maintained its 2025 forecast, which excludes new partnerships and cancellation fees. However, this outlook did not factor in the expenses associated with the Hornsea 4 cancellation.

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