Orsted shares sink to record lows after US halts wind farm off Rhode Island

Orsted shares plunged 17% to record lows after the U.S. Bureau of Ocean Energy Management (BOEM) issued a work-stop order for its $1.5 billion Revolution Wind project off Rhode Island, which was 80% complete. This halt, attributed to U.S. political pushback against renewable energy and compounding existing challenges like rising costs and supply chain disruptions, has contributed to Orsted's market value plummeting 87% since its 2021 peak. Despite the setback, the Danish state-backed developer reiterated its commitment to U.S. projects and proceeded with a planned $9.4 billion emergency rights issue to bolster its capital structure, with analysts suggesting the suspension could be reversed through political or legal means.

Analysis

Orsted's shares have plunged 17% to a record low following a work-stop order from the U.S. Bureau of Ocean Energy Management for its $1.5 billion Revolution Wind project, which was already 80% complete. This politically-driven halt adds significant pressure to a company already grappling with rising costs, higher interest rates, and supply chain disruptions, which have collectively erased 87% of its market value since its January 2021 peak. The move introduces a severe layer of regulatory and political risk to Orsted's U.S. portfolio, potentially jeopardizing the viability of its planned $9.4 billion emergency rights issue designed to strengthen its capital structure. While the Danish state, Orsted's majority owner, views this setback as within the expected risk profile for the capital raise, the situation is complicated by strained U.S.-Danish diplomatic relations. A precedent exists with Equinor's Empire Wind 1 project, which saw a similar suspension reversed, offering a potential, though uncertain, path to resolution through political or legal channels.

Key Decisions for Investors

• Investors must closely monitor the U.S. political and regulatory environment, as the primary catalyst for Orsted's recovery is a favorable resolution of the project halt, either through diplomatic or legal means.
• The successful execution and investor uptake of the planned $9.4 billion rights issue is a critical near-term event that will signal the market's confidence in management's ability to navigate the crisis and stabilize the balance sheet.
• Given the stock's historic low and the 87% value erosion from its peak, potential investors should weigh the deep value argument against the exceptionally high political risk and the significant dilution expected from the emergency capital raise.
• The strong opposition to the suspension from the governors of Rhode Island and Connecticut represents a key domestic counter-pressure that could facilitate a reversal of the federal order, and developments on this front should be watched carefully.