Orsted to cut 2,000 jobs as Trump's offshore wind battle continues

Danish wind farm operator Orsted announced a strategic plan to reduce its global workforce by 25%, or 2,000 employees, by the end of 2027, including 500 by year-end, to enhance competitiveness and refocus on Europe. This restructuring is expected to yield annual savings of 2 billion Danish krona ($311 million) from 2028 and follows recent pressures in the U.S. market and a cut in full-year guidance due to lower wind speeds. Shares reacted positively, rising 0.7% on the news, as the company aims for a more efficient and flexible organization ready for new value-accretive offshore wind projects.

Analysis

Beleaguered wind farm operator Orsted announced Thursday that it intends to reduce its workforce by a quarter toward the end of 2027, in a bid to become more competitive and refocus its efforts on Europe. Shares were 0.7% higher in European trade on Thursday. The stock came under pressure earlier this year amid concerted efforts from the White House to reduce renewable energy generation in the United States. On his first day in office, U.S. President Donald Trump signed an executive order suspending new or renewed onshore and offshore wind leases. He also told reporters earlier this year that during his presidency, America was "not going to do the wind thing." Over the summer, the Trump administration ordered Orsted to halt construction on its Revolution Wind project off the coast of Rhode Island — which was 80% complete and set to power more than 350,000 homes. A U.S. court overturned that order last month. In September, Orsted cut its full-year guidance, citing lower-than-normal offshore wind speeds across its offshore portfolio. "Today, we've told our employees that from now and until the end of 2027, we'll be saying goodbye to many skilled and valued colleagues who've contributed greatly to Ørsted," Rasmus Errboe, the company's CEO, said in a statement on Thursday. Orsted currently employs around 8,000 people worldwide, and said it would reduce its headcount by 500 before the end of this year, culminating in a total of 2,000 reductions. The firm will trim employee numbers through natural attrition, cutting positions, divestment, outsourcing, and layoffs, it said. The annual savings for Orsted are expected to amount to 2 billion Danish krona ($311 million) from 2028. "This is a necessary consequence of our decision to focus our business and the fact that we'll be finalising our large construction portfolio in the coming years – which is why we'll need fewer employees," Errboe added on Thursday. "At the same time, we want to create a more efficient and flexible organisation and a more competitive Ørsted, ready to bid on new value-accretive offshore wind projects." — CNBC's Sam Meredith and Spencer Kimball contributed to this article. Orsted announced a significant strategic restructuring, including a 25% workforce reduction of 2,000 employees by the end of 2027, with 500 cuts planned by year-end. This aggressive move aims to enhance competitiveness and refocus the company's operational efforts primarily on the European market, with anticipated annual savings of 2 billion Danish Krona ($311 million) from 2028. Despite the underlying "moderately negative" sentiment associated with job cuts and prior challenges, Orsted's shares increased by 0.7% in European trade. This positive market reaction suggests investors view the strategic pivot as a necessary measure to address recent pressures, including a September full-year guidance cut due to lower wind speeds and significant regulatory headwinds in the U.S., such as an executive order suspending wind leases and a temporary halt of the 80% complete Revolution Wind project. The company's CEO emphasized creating a more efficient and flexible organization, positioning Orsted to bid on new value-accretive offshore wind projects. This proactive management response to external and operational pressures, focusing on cost efficiencies and a concentrated European strategy, indicates a drive towards improving long-term profitability and capital allocation within the renewable energy sector.

Key Decisions for Investors

• Investors should closely monitor Orsted's execution of the announced workforce reductions and its ability to achieve the projected 2 billion DKK annual savings from 2028, as this will be critical for margin improvement.
• Evaluate the potential for Orsted's renewed focus on the European market to deliver "value-accretive" projects, considering the competitive landscape and regulatory environment within that region.
• Keep an eye on future U.S. political developments and regulatory changes regarding renewable energy, as these could still impact Orsted's long-term global strategy, despite its current European pivot.
• Assess if the announced strategy leads to a sustained improvement in Orsted's profitability and cash flow generation, especially given past guidance cuts and project challenges.