Ørsted scales back renewable energy targets, prepares to trim jobs
Danish multinational Ørsted has reduced its targets for installing renewable capacity by 2030, coupled with a downsizing of its workforce, in a bid to rebound from a financially challenging year.
Ørsted had been planning to operate 50GW of renewable energy capacity by 2030 but has scaled back its forecast to 35-38GW.
As a result, the company expects a reduction in its workforce, with approximately 600-800 positions set to be cut globally.
Nearly 250 positions are slated for elimination in the upcoming months.
Moreover, Ørsted has suspended dividends, with plans to reinstate them from the fiscal year 2026 onwards.
The company also aims to accelerate its divestment program, aiming to generate approximately 115bn Danish kroner by 2030 through farm-downs and divestments, with a considerable portion expected between 2024 and 2026.
After nearly a decade in the position, the company’s chair, Thomas Thune Andersen, will step down following the departure of two senior executives in November.
The announcement comes after Ørsted faced challenges, especially in its US offshore projects, last year. These challenges led to significant impairments and additional costs due to terminated contracts, affecting the company’s credit metrics.
Ørsted terminated two significant offshore wind farm projects in the US, the Ocean Wind I and II schemes, citing a substantial increase in costs. This decision resulted in a financial setback of 28.4bn Danish kroner (£3.3bn) for the company.
Ørsted Group’s president and chief executive officer Mads Nipper said: “Despite a year with strong underlying business progress, 2023 marked a year with substantial challenges for Ørsted.
“We’ve revisited our portfolio to prioritise growth options with the highest potential for value creation and at the same time reduce risks in the development and execution of our projects. We remain optimistic about the future of the renewable energy industry.”
Offshore wind industry faces headwinds
In December of last year, Ørsted confirmed its investment in the Hornsea 3 wind farm in the North Sea, aiming for completion by late 2027. With a capacity of 2.9GW, this project is set to become the world’s largest offshore wind farm.
However, costs and supply chain challenges loom over the industry, with developers in the UK, EU and US pausing or cancelling projects due to rising supply chain costs.
These increases, partly due to soaring energy and commodity prices and ongoing disruptions from Covid-19, have impacted growth prospects.
For example, Vattenfall suspended its Norfolk Boreas project in the UK last June due to similar supply chain concerns.
Additionally, the Contracts for Difference (CfD) auction round in September saw a record number of clean energy projects secure funding, but no offshore wind projects had bids accepted, reducing total capacity.
Furthermore, a shift is coming for offshore wind developers in the UK. Starting in 2025, they will be compensated not only for delivering low-cost clean energy but also for broader socio-economic benefits.