Equinor Buys 9.8% Stake in Orsted as Part of Renewables Push — 2nd Update

By Dominic Chopping

Equinor acquired a 9.8% stake in Danish wind energy producer Orsted as it looks to ramp up its exposure to renewable energy generation.

The company has built its position in Orsted over time through market purchases and a block trade, and it said that based on Orsted's closing share price on Friday its stake was valued at $2.5 billion.

Orsted shares were 4% higher in Monday afternoon trade in Europe, while Equinor shares dipped 3.2%.

The move comes as Equinor plans to allocate more than 50% of its investments in renewable and low-carbon projects by 2050, with around 20% of investments in these areas in 2023. The deal will contribute to its energy transition plan that includes delivering energy with progressively lower emissions by boosting renewable energy capacity.

It aims to have 12 to 16 gigawatts of installed renewable energy capacity by 2030, up from 0.9 gigawatts in 2023.

Equinor currently operates three U.K. offshore wind farms and is building the huge Dogger Bank project in the North Sea with partners SSE and Vargronn. The project should see 277 turbines producing enough electricity to power six million British homes.

It is developing the U.S. Empire Wind project offshore New York, has an interest in four Baltic Sea projects and operates a floating wind farm off the coast of Norway that helps power its offshore oil and gas rigs.

With Orsted's net renewable generation capacity at around 10.4 gigawatts, Equinor now gets access to around 1 gigawatt of operating assets for a price that is similar to the cost of building an offshore wind project, but without the risk from construction and delivery, RBC Capital Markets analyst Biraj Borkhataria said.

Orsted plans to more than triple its renewable generation capacity by 2030 to between 35 and 38 gigawatts.

Orsted has transformed itself in recent years from Denmark's small state oil company into a global giant in wind energy development, but last year hit major headwinds as it pushed aggressively to expand into new markets, particularly the U.S.

After struggling with supply-chain bottlenecks, higher interest rates and trouble getting tax credits, it said late last year it would pull out of two high-profile U.S. offshore wind projects due to spiraling costs. It launched a comprehensive restructuring earlier this year to right itself from the costly move into the U.S. offshore wind market that includes cost cuts, paused dividend payments over several years, asset sales and a refocusing of business priorities.

"The offshore wind industry is currently facing a set of challenges, but we remain confident in the long-term outlook for the sector, and the crucial role offshore wind will play in the energy transition," Equinor Chief Executive Anders Opedal said.

The acquisition sees Equinor become Orsted's second largest shareholder, after the Danish State, which holds a controlling stake in the company. Equinor said that it hopes to increase its holding to 10%, but beyond that has no plans to increase the stake further and it won't seek board representation.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

October 07, 2024 08:30 ET (12:30 GMT)

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