Ørsted’s operating profit increased in 2021 despite challenges including lower wind speeds and having to replace damaged inter-array cables.
However, its overall profits were down compared with the previous year, when the company had made lucrative divestments.
In a conference call, CEO Mads Nipper explained that wind speeds in 2021 were “unusually low” in regions where the company has operating wind farms. This meant that wind revenues were €2 billion less than the developer might expect in a normal year, he added.
Other generation
The Danish developer recorded an operating profit (Ebitda) of DKK 24.3 billion (€3.3 billion) in 2021, up 34% year on year.
This increase came despite lower wind speeds and warranty provisions related to cable protection systems (about DKK 800 million) and wake effects. It was mainly due to an exceptionally good performance by its combined heat and power (CHP) plants and its gas business, Ørsted explained.
Nipper added that the company’s CHP plants are not hedged against power price fluctuations and do not receive fixed prices through power purchase agreements or fixed tariffs. Therefore, Ørsted benefited from higher power prices in Europe.
Ørsted also benefited from selling half of its 752MW Borssele I & II and 605MW Greater Changhua 1 offshore wind farms, which raised DKK 8.5 billion for the company.
Meanwhile, Ørsted’s overall profit was squeezed 35% to DKK 10.9 billion in 2021. The company explained that this annual figure for 2021 was down due to the divestment of its Danish power distribution, residential customer and city light businesses in 2020, which had resulted in a gain of DKK 10.9 billion that year.
Portfolio building
Ørsted secured 4.5GW of firm offshore wind capacity in tenders in the US and Poland in 2021, and added 1.2GW of onshore capacity through acquisitions in the US and Europe.
CEO Nipper said the developer now has 26.1GW of renewable energy capacity and is well on track to deliver its 2030 ambition of reaching 50GW.
He added that the company was “really happy” to have secured a seabed lease for its first floating offshore wind in Scotland’s recent tender, even if other companies won more leases. Nipper attributed this to many of the winners having more “substantial financial activity” in Scotland than Ørsted.
The year ahead
Ørsted expects to achieve an operating profit (Ebitda) of DKK 19-21 billion — up from the total it realised in 2020 — due to the ramp-up of new wind and solar assets.
This expectation for earnings does not include proceeds from the expected sales of 50% of its 913MW Borkum Riffgrund 3 and 1320MW Hornsea Project Two offshore wind farms this summer. However, Ørsted has factored in the related reduction in earnings from Hornsea Project Two in the second half of the year in its guidance.
The company also expects a year-on-year increase in offshore wind earnings due to wind speeds returning to a “normal wind year” and a lack of warranty provisions related to cable protection systems.
It also expects to make gross investments of DKK 38-42 billion, reflecting a high level of activity in building its renewable assets, it explained. Ørsted invested DKK 39.3 billion in 2021.
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