Equinor ASA has taken a $2.5 billion stake in Danish wind energy giant Orsted A/S, merging one of the Nordics’ largest fossil fuel companies with its largest renewable energy developer.
The deal with Equinor represents one of the most notable endorsements for the beleaguered offshore wind industry in years, just as lower interest rates and easing supply chain bottlenecks are brightening the prospects for renewable technology essential to meeting Europe’s climate goals. Orsted shares jumped as much as 8% on the news.
The deal comes at a critical time for the giant wind developer as CEO Mads Nipper tries to implement a turnaround plan after the company posted multibillion-dollar writedowns last year due to problems at offshore wind farms in the United States.
“The offshore wind industry is currently facing a range of challenges, but we remain confident in the long-term outlook for the sector, and the crucial role offshore wind will play in the energy transition,” said Anders Opedal, CEO of Equinor. In a statement.
The deal gives Equinor a roughly 10% stake in Orsted, making it the second-largest shareholder after the Danish government, according to a statement. Equinor does not intend to increase its shareholding further at this time, will not seek seats on the board and says it supports Orsted’s strategy and management.
For Equinor, it’s a simple way to boost its renewable energy portfolio. The company aims to produce between 12 and 16 gigawatts of green energy by 2030. Shares of the gas giant fell as much as 3%.
“Equinor gets access to net 1 gigawatt of operating assets for $2.5 billion, which is similar to the cost of building offshore wind projects – without the risk to construction and delivery, as well as supply chains,” said Biraj Borkhataria, head of energy research at Equinor. Equinor. RBC Europe Limited
Ørsted is trying to fight his way back to growth. Shares have soared during the pandemic as ultra-low interest rates and a green investing craze pushed its market value to nearly $94 billion in early 2021, just as Nipper took over as CEO. When borrowing costs rose, the projects Ørsted was planning to develop looked more expensive, forcing the company to write down its assets and exit several locations in the United States.
The company canceled two major US projects and fired top executives. Investors fled, sending the company’s shares so low that Ørsted was at one point worth less than the sum of its operating wind farms.
Nipper responded in February with a turnaround plan that saw the company cancel its dividend, lay off employees and scale back its plans for growth this decade. The company has gradually recovered its value this year, although it is still much lower than it was before the crisis last year.
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