Orsted experiences a setback with proposal to secure $9.4 billion through stock offerings
Orsted, once a success story in the transition from fossil fuels to renewable energy, is currently grappling with significant fundraising issues due to adverse developments in the U.S. offshore wind market.
The Danish energy giant, which derives 86% of its energy from renewable sources, has announced a $9.4 billion rights issue to shore up its finances and support ongoing projects. This move comes after potential investors withdrew from Orsted’s Sunrise Wind project on the U.S. East Coast, forcing Orsted to cover all associated costs, which increased capital requirements by about 40 billion Danish crowns (approximately $6 billion).
The challenges faced by Orsted stem from several factors. Political opposition in the U.S., notably from former President Donald Trump, who suspended offshore wind project licensing upon re-entering office in January 2025, created uncertainty and regulatory delays. Soaring inflation and supply chain/logistical problems have also increased project costs over recent years. The failure to sell stakes in the Sunrise Wind project has disrupted Orsted's typical funding model, contributing to the urgent need for capital.
The rights issue represents almost half of Orsted’s market value, resulting in a sharp drop in its share price to near nine-year lows. The Danish government, holding a 50.1% majority stake, has committed to subscribe to its proportional share in the rights issue, aiming to maintain control. Other major shareholders, like Norway’s Equinor (10% stake), are still evaluating participation.
Proceeds from the rights issue will primarily fund the Sunrise Wind and Revolution Wind projects along the U.S. East Coast and strengthen Orsted’s overall capital structure to continue the development of approximately 8.1 gigawatts of offshore wind projects expected by 2027.
Analysts express mixed views. The capital raise is viewed as necessary to reduce financial risk and sustain project development, though it causes significant shareholder dilution.
In summary, Orsted’s fundraising challenges are closely tied to the stalled U.S. offshore wind market due to political opposition and economic headwinds. The company is forced to raise substantial funds via a rights issue to maintain its project pipeline and financial health amid these disruptions.
- The business challenges Orsted faces are largely attributed to the U.S. offshore wind industry, as political opposition and adverse developments have disrupted its funding model.
- To maintain its project pipeline and financial health, Orsted, a leader in renewable-energy, has announced a $9.4 billion rights issue, aiming to shore up its finances and support ongoing projects in the renewable-energy sector.
- Analysts view the capital raise as a necessary move to reduce financial risk and sustain project development, despite causing significant shareholder dilution.
- Orsted's need for investing large sums of money through the rights issue underscores the ongoing financial pressures in the renewable-energy industry, as it navigates inflation, supply chain issues, and regulatory delays.
