Key Takeaways
- Orsted shares saw a record fall on Aug. 11, losing 30%.
- One European ETF has a near 15% exposure to the Danish wind energy company.
- Templeton and Ninety One funds among active funds exposed.
Orsted ORSTED stock suffered a record fall on Aug. 11 after the Danish wind power firm told investors it wants to raise DKK 60 billion, or EUR 8.1 billion, through a fully secured rights issue. This selloff left funds that invest in one of Europe’s largest renewable energy stocks looking exposed. And after Novo Nordisk’s slide on July 29, this is the second Danish stock in as many weeks to suffer a sharp fall in valuation on one day.
The fundraising will be backed by the Danish government, which owns half of Orsted. However, the plans sparked concerns in the market, sending its share price 30% lower.
To see which European funds and ETFs are most exposed, we analyzed those with a Morningstar Medalist Rating that have a concentrated position in Orsted stock.
Out of 617 funds, the list highlights the top 10 holders of the wind power giant, from the highest to lowest portfolio weighting, based on the most available portfolio disclosure date. We then compared the weighting of Orsted stock with their Morningstar Category peers.
Only one fund held Orsted stock at a weighting above 10%: as of August 7, Global X Wind Energy UCITS ETF allocated 14.69% of its portfolio to the wind power company. The fund was 11.92 percentage points overweight relative to the equity alternative energy category, where the average weight of the stock is only 2.77%.
The three top spots are all held by ETFs, with Global X Renewable Energy Producers UCITS ETF taking second place with a weighting of 5.99%, resulting in an overweight of 3.22 percentage points compared with its category peers. Bronze-rated Xtrackers MSCI Global SDG 9 Industry Innovation & Infrastructure ETF was third with 3.25% of its portfolio allocated to Orsted.
Besides alternative energy, equity ecology funds were a common denominator in the list. With an average category allocation to Orsted of 1.77%, Templeton Global Climate Change Fund, Ninety One Global Environment Fund and Ninety One Global Strategy Fund would all have been hit hard by Orsted’s share price fall on Aug. 11 with portfolio allocations ranging between 4.05% and 4.14%. The Templeton fund portfolio data is as of June 30 whereas the Ninety One funds are as of April 30.
Some of the funds had smaller weightings to Orsted, yet they were overweight the stock compared with their category peers. For example, Orsted represented 2.44% of the portfolio in Prestige Luxembourg Uzès Biodiversité I as of March 31, but with other global large-cap blend equity funds only allocating 0.17% to the Danish wind company, its overweight in the portfolio is noticeable.
Danish Equity Funds Take the Biggest Hit
The category with the highest average allocation to Orsted stock is Denmark equity, where the average allocation to Orsted is 3.11% of the portfolio. BIX Danske Aktier Ansvarlig Udvik Akk and BIX Danske Aktier Ansvarlig Udvikling, both with a Negative Medalist Rating, held Orsted stock at 4.89% as of July 31 and were 1.79 percentage points overweight to their category peers.
Gold-rated Danish equity fund Nykredit Invest Engros Danske Fokusaktier held Orsted stock 3.77% as per June 30, resulting in a small overweight of 0.67 percentage points.
The only other fund in the top list with a Gold Medalist Rating was Norway-domiciled DNB Miljøinvest. The fund allocated 5.08% of its portfolio to the Danish wind giant as of June 30, resulting in a 2.23 percentage point overweight compared with the average alternative energy fund allocation of 2.77%.
“We see Orsted trading at a significant discount to underlying fundamental value and would expect the balance sheet improvement from the equity offering to narrow this gap as the company execute its revised business plan”, says Christian Rom, fund manager at DNB Miljøinvest.
Rom adds that the wind sector valuation is “at a clear discount to the broader market despite stronger earnings growth as it comes out of its cyclical downturn.”
The fund manager also believes that reduced uncertainty around US sector policy and improving global power demand from general electrification and AI data centers could also support the sector.
Half of the 20 funds with the highest exposure to Orsted stock were Danish equity funds, followed by seven alternative energy funds, and three funds in the equity ecology category.
Why Is the Offshore Wind Market in Crisis?
Struggling in recent years with soaring inflation and logistical problems that sent costs soaring, the offshore wind industry faced a further setback when US President Donald Trump signed an executive order banning any new federal approval for offshore wind farms earlier this year.
“Orsted and our industry are in an extraordinary situation with the adverse market development in the US on top of the past years’ macroeconomic and supply chain challenges,” Rasmus Errboe, CEO Orsted, said at the time.
Jacob Pedersen, analyst at Sydbank, said that Orsted’s rights issue is connected to its inability to find a partner for its Sunrise Wind project in the US, a near 1,000 MW project off the coast of Montauk, New York.
Morningstar analyst Tancrede Fulop cut Orsted’s fair value estimate by 29% to DKK 283 following what he described as an “ill-timed” rights issue.
