Ørsted’s Offshore Revenue Soaring in 2021

Ørsted has reported a 43 per cent increase in revenue in its Offshore segment for the third quarter and a 32 per cent increase for the first nine months of this year, both compared to the same periods of 2020. While the company’s operating profit (EBITDA) in the Offshore segment halved in the third quarter of 2021 in comparison with Q3 2020, it saw a 20 per cent increase on a nine-month basis.

Overall, including all segments, Ørsted’s EBITDA totalled DKK 16 billion (approx. EUR 2.2 billion) in the first nine months of this year, an increase of 22 per cent compared to the same period of the last year, with the farm-down of Borssele 1 & 2 one of the significant earnings contributors. Revenue increased by 27 per cent to DKK 47 billion (approx. EUR 6.3 billion).

For the third quarter of the year, the company reported DKK 14.5 billion in revenue, up by 45 per cent from the same period of 2020, while EBITDA fell by 11 per cent to DKK 3 billion (approx. EUR 403 million).

In the first nine months of this year, offshore wind power generation decreased by 1.0 TWh compared to the same period of 2021, the developer said, with significantly lower wind speeds and the divestment of 50 per cent of Borssele 1 & 2 in May as the main contributing factors, which were only partly offset by the ramp-up of generation from the company’s Dutch offshore wind farm.

Wind speeds amounted to a portfolio average of 8.7 m/s, which was both below a normal wind year (9.3 m/s) and last year (9.8 m/s), with low wind throughout the year. Availability ended at 94 per cent, which was in line with the same period in 2020.

From January until September, Ørsted’s Offshore business brought in a revenue of DKK 31.4 billion (approx. EUR 4.2 billion), up by 32 per cent from the last year’s DKK 23.7 billion (approx. EUR 3.2 billion).

Revenue from construction agreements increased due to the divestment of the offshore transmission asset at Hornsea One in March 2021. In the first nine months of 2020, revenue was primarily related to the divestment of the offshore transmission asset at Walney Extension, the construction of Coastal Virginia Offshore Wind (CVOW) project, and the completion of Hornsea One.

Revenue from offshore wind farms in operation decreased by 8 per cent compared to the same period last year due to the lower power generation, while revenue from power sales increased by 103 per cent due to significantly higher power prices despite lower volumes sold.

The developer’s Offshore EBITDA increased by 20 per cent relative to the nine-month period of 2020, going from DKK 10.6 billion (approx. EUR 1.4 billion) to DKK 12.8 billion (approx. EUR 1.7 billion).

The increase was driven by EBITDA from partnerships, which amounted to DKK 5.1 billion (approx. EUR 686 million) and primarily related to the 50 per cent farm-down of Borssele 1 & 2, resulting in a gain from new partnerships of DKK 5.3 billion (approx. EUR 712 million), which was partly offset by a DKK 0.8 billion (approx. EUR 108 million) warranty provision towards the company’s partners related to cable protection system (CPS) issues at some of its offshore wind farms in Q1 2021.

EBITDA from the operating offshore wind farms fell by 14 per cent due to the impact of lower wind speeds, with lower earnings also being contributed by higher Transmission Network Use of System (TNUoS) tariffs following the divestment of the offshore transmission assets at Walney Extension in mid-2020 and Hornsea One in Q1 2021, lower ROC recycle prices, and lower earnings from Horns Rev 2 due to the subsidy period ending in October 2020.

This was only partly offset by ramp-up of generation from Borssele 1 & 2 and the addition of Contract for Difference (CfD) for the last 400 MW of generation from Hornsea One, together with a positive effect from ceasing to report according to the business performance principle in 2021. EBITDA from other activities, including project development, fell by 17 per cent, which was mainly related to project development costs.

From January through September, Ørsted also invested in several projects, amounting to gross investments of DKK 16.4 billion (approx. EUR 2.2 billion). The amount is primarily related to investments in Greater Changhua 1 & 2a in Taiwan, Hornsea Two in the UK, the developer’s US portfolio (Ocean Wind 1, Sunrise Wind, Revolution Wind and South Fork), and the Baltica 2 & 3 projects in Poland.

In the third quarter of this year, Ørsted’s offshore wind power generation decreased by 28 per cent compared to Q3 2020, primarily due to significantly lower wind speeds, the divestment of half of Borssele 1 & 2, and a slightly lower availability. The lower availability was mainly due to wind turbine outages at Hornsea One, partly offset by higher availability in Denmark and Germany.

Wind speeds amounted to a portfolio average of 7.6 m/s, which was lower than in Q3 2020 (8.6 m/s) and the normal wind speeds expected in the third quarter (8.3 m/s).

Despite lower wind speeds and other factors, the developer’s Q3 revenue increased by 43 per cent, from DKK 6.4 billion (approx. EUR 860 million) reported in 2020 to DKK 9.2 billion (approx. EUR 1.2 billion).

While revenue from offshore wind farms in operation decreased by 18 per cent, mainly driven by the lower power generation, revenue from power sales more than tripled due to the higher power prices despite lower volumes sold.

There was no significant revenue from construction agreements in Q3 2021, while in Q3 2020 revenue was primarily related to the construction of the two-turbine CVOW and the completion of Hornsea One.

EBITDA in the third quarter of this year decreased 50 per cent, from DKK 2.6 billion (approx. EUR 350 million) in Q3 2020 to DKK 1.3 billion (approx. EUR 175 million).

Ørsted’s Q3 2021 EBITDA from operational offshore wind farms dropped 40 per cent due to the aforementioned lower power generation following a third quarter with very low wind compared to Q3 last year, with the higher TNUoS tariffs following the divestment of the offshore transmission asset at Hornsea One and lower earnings from Horns Rev 2 due to the subsidy period ending in October 2020 contributing to the lower earnings.

Power portfolio earnings decreased due to higher balancing costs and lower volumes. This was only partly offset by the addition of the last 400 MW of Hornsea One receiving CfDs in April, together with a positive effect from ceasing to report according to the business performance principle in 2021, the developer said.

In terms of investments the developer made in the third quarter, DKK 6 billion (approx. EUR 806 million) were poured into offshore wind farms, including Hornsea Two, Greater Changhua 1 & 2a, Ocean Wind 1, and the northeast cluster in the US (Sunrise Wind, Revolution Wind and South Fork).