Orsted Shares Slump After New York Regulators Reject Higher Rate Request
13 October 2023 - 9:54PM
Dow Jones News
By Dominic Chopping
Shares in Orsted are among the biggest fallers this morning
after New York regulators denied requests from offshore wind
developers to give them a higher price for electricity generated
from their projects off the state's coast.
The New York State Public Service Commission said changing the
contracts for developers including BP, Equinor and Orsted, would
push ratepayers' bills higher, with residential customers paying as
much as 6.7% more for their electricity while commercial or
industrial customers could see their monthly bills rise by up to
10.5%.
Developers are struggling to justify moving ahead with large,
capital intensive offshore wind developments after facing surging
costs from inflation, supply-chain backlogs and higher cost of
capital due to rising interest rates.
This has put projects currently in development--which were
agreed when costs were much lower--at risk of becoming unprofitable
and forcing developers to consider the viability of moving ahead
with them.
Orsted recently warned of up to 16 billion Danish kroner ($2.26
billion) in possible impairments related to three wind projects off
the east coast of the U.S. amid supply delays, higher interest
rates and a lack of tax credits.
One of those projects is Sunrise Wind, which it is developing
offshore New York with joint venture partner Eversource. It will
have the capacity to power nearly 600,000 homes, but it could now
be at risk.
"We are disappointed in the PSC's decision," David Hardy, Chief
Executive of Orsted's America's division said in an emailed
statement. "Sunrise Wind's viability and therefore ability to be
constructed are extremely challenged without this adjustment. We
will evaluate our next steps."
Citi analyst Jenny Ping wrote that Orsted now has to choose
between the lesser of two evils: Impair the asset further while
pushing ahead with the build, or walk away and pay the termination
fees which she estimates could be as much as $215 million.
Orsted shares are down 48% so far this year and at 1011 GMT
Friday they traded 8.5% lower at DKK328.60.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
October 13, 2023 06:39 ET (10:39 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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