Ørsted, the Danish energy company, was once a Wall Street darling. Today, however, the company faces a different future. According to Financial Times, Ørsted:
“suspended its dividend and slashed targets for developing renewables as the world’s largest offshore wind developer plots a recovery following a calamitous 12 months. The Copenhagen-listed company said on Wednesday it would also cut up to 800 jobs and withdraw from offshore wind markets in Norway, Spain and Portugal, marking a retreat after several years of aggressive expansion. Chief executive Mads Nipper said the moves were necessary to turn Ørsted into a ‘leaner and more efficient company’ after a surge in interest rates and challenges in the US left it with multibillion-dollar impairments.
… Ørsted’s share price has fallen more than 70 per cent since peaking in 2021 at the height of investor frenzy over environmentally friendly stocks.”
Yet this contrasts oddly with its latest financial results released yesterday. Mads Nipper, Group President and CEO of Ørsted, said in a statement:
“We delivered strong operational results in 2023 with an adjusted EBITDA slightly above our guidance and with several important milestones achieved. Earnings from our offshore sites more than doubled compared to last year, and in 2023, we advanced three large offshore wind projects with a total capacity of 4.5 GW to final investment decision, one in the UK, the US, and Taiwan, respectively…”
This paradox is emblematic of companies getting out over their skis on climate/sustainability matters – making commitments about which they may not be fully informed, or are too dogmatic. On the other hand, maybe they took a business risk that didn’t pan out. The FT article explained that Ørsted, in their zeal, became “particularly exposed in part because of its aggressive, early expansion into the still embryonic US [wind] market, where it has struggled to get tax credits and complained of onerous requirements for parts to be made locally.”
Ørsted is not alone in being perhaps too aggressive on climate matters, but they are one of the more dramatic examples. Companies face a difficult choice at the moment: take a risk on first-mover advantage in the climate business/risk management or wait until regulatory frameworks and market solutions settle. Different stakeholders are pushing for different directions.
Which is your company, and how thorough was the process in making the decision/assessing risks? Does the current environment require you to reassess/reconsider?
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Disclaimer: I do not own any shares of Ørsted.
Photo credit: piter2121 – stock.adobe.com
