Orsted gas assets offset slow winds and energy crisis
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Orsted’s “brown” gas and power assets helped shield the world’s largest offshore wind developer from a blow to earnings at its “green” business amid unfavourable weather conditions and the European energy crisis.
Full-year results released on Wednesday showed low wind speeds, high development costs and intermittent power prices had weighed on operating profit at the Danish group’s main offshore business.
However, full-year earnings before interest, tax, depreciation and amortisation at Orsted’s gas business jumped 345 per cent against the previous year. Ebitda at its power plants, which burn wood pellets and coal to generate electricity, rose 188 per cent.
“We successfully navigated the challenges during the year,” said chief executive Mads Nipper. “We expect operating profit, excluding new partnerships, to be DKr19-21bn [$2.9bn-$3.2bn] in 2022, positively impacted by ramp-up from new wind and solar assets.”
Net profit for the year was 35 per cent lower than the previous year, slightly lower than analysts’ expectation.
Group revenues grew 48 per cent in 2021, while ebitda fell 13 per cent excluding new partnerships.
Orsted has been expanding in the US market, as well as in onshore wind.
While Orsted’s assets are primarily in wind energy, it also operates seven power plants, which benefited from “very high” power prices during the last four months of 2021.
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Six of these power plants burn biomass (such as wood pellets). One burns coal, and is scheduled to shut next year.
Together, Orsted’s power plants and its gas division accounted for 30 per cent of the company’s ebitda in 2021, excluding new partnerships, much higher than in previous years.
Ebitda from these power plants and related services was DKr3.2bn, while the gas unit reported ebitda of DKr1.8bn.
However, the high European electricity prices that benefited Orsted’s power plants had the opposite effect for its offshore wind assets.
Earnings from that part of the business were lower than expected because of the high cost of purchasing intermittent power to balance wind generation and of hedging during such a volatile period.
Orsted’s board raised the dividend 8.7 per cent to DKr2.5 per share. The company’s share price was up 3.2 per cent in morning trading on Wednesday.
It also announced the appointment of Daniel Lerup, a senior vice-president at the company, as its new chief financial officer.
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