(Reuters) – Shares in Danish energy company Orsted (ORSTED.CO) tumbled by more than 7% on Friday after announcing a writedown on a large U.S. offshore wind project and an earnings forecast for 2023 that fell short of analyst estimates.
Despite rising demand for green energy, dark clouds are gathering over the offshore wind power industry as rising interest rates and cost inflation begin to hit corporate earnings, potentially forcing energy companies to renegotiate energy supply contracts.
Late on Thursday Orsted, the world’s biggest offshore wind farm developer, announced a 2.5 billion Danish crown ($366 million) writedown on its Sunrise Wind project off the coast of New York, citing changes to its earnings projections.
Earnings at the prices it had agreed will be squeezed by the significant inflationary pressures and higher interest rates now faced across the sector.
The project is due to become fully operational in 2025.
Chief executive Mads Nipper told reporters on Friday that the price for power produced at Sunrise was agreed “several years ago when there was a totally different expectation for the market outlook”.
Orsted expects 2023 earnings before interest, tax, depreciation and amortisation (EBITDA) excluding new partnerships of 20-23 billion crowns, short of the 24.2 billion crowns expected by analysts in a company-compiled consensus.
The company said its guidance assumes significantly higher earnings from its offshore business, while earnings from its onshore division are expected to remain at last year’s level.
Shares in Orsted were trading 6.6% down by 0937 GMT. The shares have shed more than half their value since a record peak in August 2021.
Earnings last year also took a hit from overhedging and ineffective hedging, Orsted said.
Announcing preliminary results for 2022, the company said it expects EBITDA excluding new partnerships at 21.1 billion crowns. Full-year results are scheduled for release on Feb 1.