Key Morningstar Metrics for Orsted
- Fair Value Estimate: DKK 170.00
- Morningstar Rating: ★★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: High
On Dec. 22, the Trump administration suspended leases on the five offshore wind projects under construction in the United States, citing national security concerns due to the risk of radar interference from the turbines. This sent Orsted shares down by 13%.
Why it matters: Orsted is building two offshore wind farms in the US, Sunrise Wind and the 50%-owned Revolution Wind. The former is 40% completed, while the latter is 85% completed. On Dec. 22, Orsted received orders from the Bureau of Ocean Energy Management to suspend all offshore activities for the next 90 days.
- On Aug. 22, BOEM issued a stop-work order on Revolution Wind that was lifted around one month later. This resulted in USD 25 million of weekly costs for Orsted, potentially implying USD 325 million, or DKK 2 billion, of additional costs over 90 days, equivalent to 18% of our 2026 net income estimate on an aftertax basis.
- If Sunrise Wind and Revolution Wind were definitely scrapped, the negative impact on our valuation would be DKK 31 billion, or DKK 24 per share (14% of our fair value estimate).
The bottom line: We see a likelihood above 50% that the projects will be allowed to proceed, in line with what happened with the two bans issued this year. Therefore, we confirm our DKK 170 per share fair value estimate for no-moat Orsted.
- If the projects were terminated, our fair value would go down to DKK 146—still above the current share price of DKK 117, which reflects the nervousness of investors after the string of setbacks over the last three years.
- Yet the rights issue has considerably shored up the balance sheet. Should the projects be terminated, the economic net debt/EBITDA ratio would rise from 2.0 to 2.4, which is still manageable.
Coming up: The US Department of the Interior stated the pause would give the government “time to work with leaseholders and state partners to assess the possibility of mitigating the national security risks posed by these projects.”
