Rsted continues to develop its projects while announcing projected impairments to its U.S. portfolio (WK internal) – rsted has evaluated the overall negative effects related to supply chain, lack of positive progress on investment tax credit (ITC) guidance, and increased interest rates impacting its U.S. portfolio as part of the continued maturation and a pre-final investment decision (FID) review of its near-term offshore development projects in the U.S.
Several delivery delays have an effect on the projects Ocean Wind 1, Sunrise Wind, and Revolution Wind.
The capacity of these suppliers to adhere to their obligations and agreed-upon timelines is subject to increased risk, according to rsted. This might have a domino effect that necessitates subsequent mobilizations to finish the installation, as well as the possibility of delayed income, added expenses, and other negative business implications. If there are no more unfavorable changes in the supply chains of these projects, these consequences will result in impairment costs of up to DKK 5 billion.
Additionally, the continuing conversations we are having with important federal stakeholders about new ITC requirements for Ocean Wind 1 and Sunrise Wind are not going as planned. We’re still in talks with federal stakeholders about being eligible for tax credits exceeding 30%. Failure to succeed in these efforts might result in impairment charges of up to
Additionally, the US long-term interest rates have gone up, which has an impact on our US offshore projects as well as certain domestic ones. If interest rates stay where they are through the third quarter, there will be an impairment charge of almost 5 billion Danish kroner.
Our intermediate report for the first nine months of 2023 will note the impairments linked to Ocean Wind 1, Sunrise, Revolution, South Fork Wind, Block Island Wind Farm, and numerous US onshore projects.
While rsted’s near-term U.S. offshore wind development portfolio falls short of our lifetime value creation estimate, we still think that the portfolio will create value that is between 150 and 300 basis points to WACC.
In order to develop short-term offshore wind projects in the United States, rsted will keep talking to stakeholders and trying to get final state and municipal permissions. We will also continue working with suppliers to reduce delays.
Around the end of 2023 or the beginning of 2024, we will strive to get FID for the Ocean Wind 1, Sunrise Wind, and Revolution Wind projects. Depending on FID, rsted currently anticipates putting Ocean Wind 1 into service in 2026.
The Americas region’s executive vice president and CEO, David Hardy, of rsted states, “Over the long run, the U.S. offshore wind industry remains attractive. We’ll keep working with our stakeholders to look into every possible way to get better.
The details contained in this statement do not alter rsted’s previously given EBITDA projection for the fiscal 2023 period or the previously disclosed anticipated level of capital expenditures.
rsted announces anticipated value reductions for his US portfolio and moves through with his projects.
In the ongoing review and evaluation of his short-term offshore development projects in the USA prior to the final investment decision (FID), rsted has evaluated the detrimental effects on the supply chain, the lack of favorable advancements in the investment tax credit (ITC), and the rising interest rates that pertain to his US-Portfolio.
One or two delays at the suppliers have an impact on the Ocean Wind 1, Sunrise Wind, and Revolution Wind projects. rsted has come to the conclusion that there is a steadily increasing risk associated with the ability of these suppliers to fulfill their promises and adhere to contractually agreed-upon timelines. This might have repercussions that make further mobilizations necessary to complete the installation as well as potentially delayed revenue, additional expenses, and other effects on the business model. These effects will result in value reductions of up to 5 Mrd. DKK, provided that there are no more adverse developments in the supply chains for these projects.
Additionally, our ongoing discussions with powerful interests on the federal level about additional ITC-qualifications for Ocean Wind 1 and Sunrise Wind are not progressing as quickly as we had anticipated. We continue to have discussions with government interest groups in order to qualify for additional tax credits exceeding 30%. If these efforts prove unsuccessful, it may result in value reductions of up to 6 million Danish kroner.
Additionally, the long-term interest rates in the USA have increased, which has an impact on some of our onshore projects as well as our offshore projects there. If the current rate of interest is maintained until the end of the third quarter, it will result in value reductions of about 5 Mrd. DKK.
In our interim report for the first nine months of 2023, we will list the value reductions related to Ocean Wind 1, Sunrise, Revolution, South Fork Wind, Block Island Wind Farm, and many US-Onshore projects.
Although our value growth objective on a life cycle basis was not met by rsted’s short-term US offshore wind portfolio, we remain confident that the portfolio’s value growth on a future-focused basis will fall between 150 and 300 basis points Spread-to-WACC.
In consideration of the anticipated value reductions, we maintain our stance
rsted pushes projects forward
rsted will continue to advance the short-term offshore wind projects in the USA. The granting of final permits at the federal and local levels, cooperation with suppliers to minimize delays, and the continuation of discussions with stakeholders to try and get at least 40% ITCs for all projects are also included.
We will work to ensure that the FID for the projects Ocean Wind 1, Sunrise Wind, and Revolution Wind occurs by the end of 2023 or the beginning of 2024. Until the FID, rsted is calculating with Ocean Wind 1 going into operation in 2026.
According to David Hardy, Executive Vice President and CEO of the Region Americas at rsted, “The US offshore wind market will continue to be attractive in the future. We will continue to collaborate with our stakeholders to explore all options for improving our short-term projects, including continuing our conversation on ITC qualification, OREC adjustments, and other business-case-hebel.
The previously announced expected investment level for 2023 and the company’s previous EBITDA forecast for the business year 2023 are unaffected by the information in this announcement.