Shares in Ørsted, one of the global leaders in the energy transition, go into free fall

Danish energy giant Ørsted announced at the beginning of last month that it intends to carry out a new share issue worth up to USD 9.4 bn. The issue would amount to more than two-thirds of the company’s current market capitalisation and is a response to a combination of adverse factors facing Ørsted. However, the share issue could be significantly complicated by a decision by Donald Trump’s administration, which ordered construction to be halted on a project that was already close to completion.

Danish company Ørsted is currently associated primarily with the development of wind farms, particularly offshore wind farms. Its largest shareholder is the Danish state, which holds 50.1 % of its shares. However, the sector faces numerous obstacles – one of the largest is the change in US policy towards offshore wind farm development since Donald Trump took office. This includes cuts to tax incentives and, in some cases, orders to halt work on projects that are under construction and have already received permits (for example, Equinor’s Empire Wind project, although the order was later revoked).

However, that is not all, as reported by Reuters. Ørsted must also contend with rising interest rates, supply-chain disruptions causing project delays, and, more generally, a rapid increase in costs over the past 5 years.

The above-mentioned factors are making it difficult for Ørsted to secure the financing needed for the further development of both existing and new projects. It therefore opted for a new share issue. However, the planned issue is enormous, and shareholders received the news with considerable concern – on Monday, 11 August, the share price fell by more than 30 % from 310 DKK to 203 DKK. Denmark decided to maintain the size of its existing stake.

Later in the month, bad news arrived for Ørsted and its shareholders – Donald Trump’s administration ordered work to be halted on the Revolution Wind project off the coast of Rhode Island. According to Jefferies’ estimate, the investment could amount to around USD 4 bn. The project is thought to be approximately 80 % complete, with installation completed on 45 of 65 wind turbines.

The suspension of the project represents significant complications, not only for the project itself but also for the new share issue, given the risk of investment impairment. Following the news of the forced halt to work, Ørsted shares fell by more than 15 % to as low as 173 DKK. They subsequently rebounded, and as of 9 September, the share price was again around 203 DKK. In the meantime, Ørsted secured shareholder approval for the planned share issue.