Ørsted A/S - Global Leader in Renewable Energy

Brief Summary for Investors: Ørsted is a Danish, globally leading developer and operator of offshore wind farms, increasingly diversifying into onshore wind, solar power, and green fuels. The company is going through a period of significant financial volatility following a strategic realignment away from fossil fuels.

Development The share price performed strongly from 2020 to the beginning of 2022, driven by the global energy transition and high profitability (EPS 2021: DKK 8.70). A steady downward trend began in mid-2022, accelerating with a share price drop of over 50% at the end of 2023. This slump directly correlates with the announcement of billions of euros in write-downs on US projects due to rising interest rates, increased project costs, and supply chain issues. The latest annual figures for 2023 (revenue: DKK 69.1 billion, net income: DKK -20.5 billion) and the negative EBITDA in the most recent quarter of Q4/2024 underscore these ongoing challenges.

Opportunities:

• Long-term megatrends: The global energy transition and political initiatives such as the US Inflation Reduction Act are creating a strong, long-term demand environment for renewable energies.
• Restoring profitability: Despite the negative Q4, the current quarters of 2024 show a volatile but partly positive earnings trend (e.g., Q3/2024: net income of DKK 5.1 billion), which could indicate initial successes in project risk management.
• Strong market position: Ørsted holds a first-class global market position in the high-barrier offshore wind segment, which can generate competitive returns in the long term.

Risks:

• Project and capital cost risk: High debt (debt-to-equity: ~2.2) and persistently high interest rates are putting a strain on financing costs for future major projects and jeopardizing profitability.
• Operating volatility: Recent losses and highly volatile quarterly results indicate continued operational instability and incalculable project risks.
• Economic and political dependence: The business model is highly dependent on government subsidies, auction results, and the general economic situation.

Additional information: The strong free cash flows despite losses (2023: DKK 66.7 billion) are typical for capital-intensive infrastructure companies with high depreciation and amortization and do not directly reflect profitability. The liquidity situation appears secure in the short term, with current and quick ratios >1.

Conclusion: Ørsted is operating in the right market at the right time, but is experiencing an acute crisis of confidence due to significant project risks and high debt levels. The recent share price declines are a direct reaction to fundamental problems. An investment currently represents a high-risk play on management's successful operational turnaround strategy and a falling interest rate environment. Without a sustained improvement in project profitability and return on equity (ROE 2023: -6.6%), the outlook remains cautious despite the positive long-term outlook.

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