Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orsted A/S (DNNGY, Financial) reported a 59% increase in EBITDA for Q2 2024, totaling DKK5.3 billion, driven by higher earnings from offshore sites.
- The company commissioned around 2 gigawatts of renewable capacity in Q2, contributing to its long-term target of 35-38 gigawatts by 2030.
- Orsted A/S (DNNGY) has a fully funded business plan and maintains its full-year EBITDA guidance of DKK23 billion to DKK26 billion.
- The company has made significant progress in its offshore wind projects, including the commissioning of Greater Changhua 1 and 2a, South Fork, Eleven Mile, and Helena Energy Center.
- Orsted A/S (DNNGY) has entered into a partnership to advance four stand-alone battery energy storage systems in the US Midwest, diversifying its technology portfolio.
Negative Points
- The Revolution Wind project in the US has faced delays due to higher-than-anticipated soil contamination, leading to an impairment of DKK2.1 billion.
- The company has decided to discontinue the liquid e-fuels project Flagship 1, resulting in a provision for cancellation fees of DKK0.3 billion and an impairment of DKK1.5 billion.
- Valuation indications for the Ocean Wind 1 seabed led to an impairment of DKK0.6 billion in Q2.
- The Sunrise Wind project faces a potential delay in commissioning from the end of 2026 into the first half of 2027, posing a risk to project timelines.
- Orsted A/S (DNNGY) has lowered its gross investment guidance by DKK4 billion to DKK44 billion-DKK48 billion, driven by timing effects pushing CapEx spend into 2025.
Q & A Highlights
Q: My question goes to your long-term gross investment target of DKK270 billion. With the change to the flagship 1 product and your comments on investments in e-fuels, how should I think about the investment needs for this segment going forward?
A: We will stay flexible. We are constructing the carbon capture and storage facility in Denmark and committing to our green hydrogen portfolio while de-prioritizing green fuels. There is no reason to change the investment target, but we will uphold flexibility in CapEx allocation. (Mads Nipper, CEO)
Q: Can you confirm whether you have placed a bid for Hornsea 4 in the CfD auction?
A: We refrain from commenting on whether we have submitted a bid as it is an ongoing solicitation. (Mads Nipper, CEO)
Q: On Revolution Wind, what annualized EBITDA are you expecting, and what change might you make to your 2026 EBITDA guidance?
A: We do not see any reason for changing our targets for 2026 and 2030. We will update on long-term targets as necessary. Regarding impairments, any changes to the business case will likely lead to adjustments. (Trond Westlie, CFO)
Q: The DKK4 billion impairment was a surprise. How much of that is non-cash, and what is the risk of further impairments?
A: The majority of the impairment is due to the delay in schedule. We have scrutinized other onshore substation constructions and found no similar issues. We believe the current plan is realistic. (Trond Westlie, CFO; Mads Nipper, CEO)
Q: Can you remind us of the total invested capital in P2X projects outside your core business?
A: The remaining part on the balance sheet is minor. Flagship 1 was our big commitment. Other ongoing projects have tiny amounts invested. (Trond Westlie, CFO)
Q: Regarding the impairment on the seabed related to the Ocean Wind project, why are there no impairments on other seabeds?
A: The valuation of other leaseholds is considered in an ongoing business mindset. Ocean Wind's valuation was based on market value due to unwinding. (Trond Westlie, CFO)
Q: How does the recent Taiwanese offshore wind auction outcome affect the Greater Changhua 3 project?
A: We cannot use Changhua 3 due to site overlap. We are reviewing our development pipeline in Taiwan and plan to develop new sites for future auctions. (Mads Nipper, CEO)
Q: How do you see the impairment on Revolution Wind compared to last year's supply chain issues?
A: The root cause of the Revolution Wind impairment is fundamentally different. It is not supply chain-related but due to onshore substation construction issues. (Mads Nipper, CEO)
Q: Can you update on the DKK70 billion to DKK80 billion disposal plan through to 2026?
A: We see positive development in investor interest and return requirements. We maintain our self-funded plan and expect to deliver on the 2026 level. (Trond Westlie, CFO)
Q: What is your view on the suitability of Chinese offshore wind equipment for your projects?
A: We have no current plans for Chinese turbines but will consider all technologies based on quality, technical maturity, performance, and regulatory risks. (Mads Nipper, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
