reports
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK310.00) - US regulatory risks still in focus
We forecast Q1 EBITDA excluding new partnerships of DKK8.0bn, largely in line with consensus, with offshore wind speeds below normal. We continue to see headwinds in the US, and expect focus to be on the impact from US tariffs and potential construction halts on the US wind farms under construction, as well as other risks in the country. We reiterate our HOLD and DKK310 target price, and believe uncertainties related to the US operations, farm-down execution, and liquidity need to be resolved fo...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK310.00) - Walking a tightrope
Although we welcome the message of disciplined value-focused growth and no equity needed, we do not consider Ørsted to be out of the woods yet, as we still see financial and US-related risks. On our estimates, the lowered capex guidance just about gets the company to the low end of its FFO/NIBD target, leaving limited room for error ahead. We reiterate our HOLD and DKK310 target price, and still struggle to see a meaningful valuation upside despite the stock trading at an 15% discount to our SOT...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK310.00) - Still lacking US control
While Ørsted’s DKK12.1bn of incremental impairments exposed some of the underlying uncertainties in the company’s US offshore wind portfolio, we still see further issues related to its US operations (including execution and policy risks), farm-down execution, and liquidity. We see an improved risk/reward profile after yesterday’s 11% sell-off, with the stock trading 10% below our core NAV, but still believe the abovementioned issues need to be resolved for any potential material upside to unfold...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK320.00) - Headwinds still present
We forecast Q4 EBITDA excluding new partnerships of DKK8.6bn, largely in line with consensus, with wind speeds slightly below normal. Ørsted’s stock is trading slightly below our NAV. However, we still believe the stock will continue to struggle until the execution risk on asset disposals is lower and the capital markets have more clarity on the magnitude of potential US policy changes. We reiterate our HOLD, but have lowered our target price to DKK320 (390) owing to higher underlying interest r...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK390.00) - Balance sheet risk still in focus
Ørsted reported underlying results on the downside and further construction issues in the US. The reversal of cancellation fees and deferred capex helps near-term liquidity, but we still believe significant asset sales are needed to fix its balance sheet. We reiterate our DKK390 target price and have upgraded the stock to HOLD (SELL), as it is valued on a par with existing business and visible growth. However, we see uncertainty in the US and a weak balance sheet to continue to weigh on the stoc...
- Helene Kvilhaug Brøndbo
Ørsted (Sell, TP: DKK390.00) - Awaiting divestments
With a stretched balance sheet, Ørsted’s equity story is increasingly about the asset divestments needed to maintain its credit rating without raising equity. Hence, we believe the prospects for near-term disposals will be the key point of focus in the upcoming Q3 report. Although we see low risk to the “under construction” portfolio after several rounds of impairments, there are still wider industry issues, with too-high costs and a stretched value chain. We reiterate our DKK390 target price, b...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK390.00) - Higher liquidity risk
Strong operational Q2 results were overshadowed by impairments and further US project delays, increasing concerns about the construction risk for offshore wind. With only small onshore farmdowns announced YTD, many more are needed for Ørsted to cover its committed capex. Hence, believe its liquidity situation should be followed closely. We reiterate our HOLD, but have cut our target price to DKK390 (405).
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK405.00) - Strong operating quarter expected
We forecast Q2 underlying EBITDA of DKK4.1bn, excluding new partnerships and cancellation fee changes, reflecting normal wind speeds and operations. The DKK1.2bn lower Ocean Wind 1 settlement in the quarter should be a slight relief for liquidity, but we do not expect further large reductions in termination fees. We reiterate our HOLD and DKK405 target price, given the lack of potential near-term catalysts with the stock trading at a 2024e EV/EBITDA of 9.8x.
- Helene Kvilhaug Brøndbo
Private markets seen cooling down
Renewable energy stocks have benefitted from higher private market valuations, despite elevated interest rates and lower power price expectations hitting project economics. We believe this is due to the tight supply/demand balance, underpinned by record-high infrastructure funds available for investment. As the private capital surplus diminishes with lower fundraising and more transactions, we see a risk of the sector valuation reverting. Among the names we cover, Scatec had the highest valuatio...
- Helene Kvilhaug Brøndbo
Trump vows to stop offshore wind development with executive order on d...
Over the weekend, former US president Donald Trump said he would issue an executive order targeting offshore wind on his first day as president if elected. A president can issue an executive order directing a study of the impact while halting permitting of new projects. While this could negatively affect US permitting and thus the growth of offshore wind in the country, all other elements for the wind farms are determined on a state level. Hence, permitted wind farms would likely see a limited e...
- Helene Kvilhaug Brøndbo
Positive read-across from OX2 offer
This morning, renewable energy project developer OX2 announced it has received an offer from infrastructure fund EQT at a 43.4% premium to Friday’s close. We view this as further evidence of a greater willingness to pay for renewables in the private markets than the public ones, and thus believe the bid offers a positive read-across for renewable energy companies with strong development capabilities in the Nordics/Northern Europe, such as Cloudberry and Bonheur. We also believe it could be posit...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK405.00) - A neutral Q1 report
Investors were relieved after Ørsted’s decent Q1 results, despite the cash flow being a tad weak, with a ‘no news is good news’ attitude. As the stock is trading largely in line with our valuation of the company’s underlying assets, we consider this fair. We believe further signs of higher project profitability are needed for the stock to move higher, and thus consider the comments about a better farm-down market in interest and pricing to be supportive. In all, we consider the report neutral an...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK405.00) - Anticipation for 2024 tender activity
With record-high 2024 tender activity (up to 40GW of offshore wind capacity set to be awarded by year-end), the supply/demand balance for new capacity is starting to look more promising. With limited growth priced into Ørsted’s share price, we believe any awards at accretive offtake prices could spark capital markets’ belief in renewed profitable growth and spark investor interest. On the other hand, we expect some of the tenders to remain competitive, and the high auctioned capacity could put f...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK375.00) - Good, but not enough
In line with our expectations, Ørsted’s strategic plans featured lower growth, more extensive farm-downs, a dividend halt for 2023–2025, and no new equity. While this should leave the company better capitalised, it was not enough to avoid a credit rating downgrade by S&P from BBB+ to BBB. As the company still has an investment grade rating and more robust growth plans than before, we do not expect a material negative effect. However, we believe it could result in slightly higher financing costs ...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK375.00) - Catalysts look priced in
We believe Ørsted’s strategic plan will be the key focus in conjunction with its annual report, and retain our view of the company not needing to raise equity to maintain its BBB+ credit rating. With lower interest rates and more clarity on its balance sheet and growth plans after the strategic update, we expect to see greater investor willingness to price in a moderate contribution from growth again. With this, a lower WACC and a higher contribution from Hornsea 3, we have raised our target pri...
- Helene Kvilhaug Brøndbo
Supportive changes to Norwegian wind energy resource tax
Last night, the Norwegian Parliament agreed on an effective resource tax on wind energy of 25% versus the 35% previously proposed. At first glance, it seems the scheme will now be investment-neutral for new wind farms, which was a key pushback from the industry to the previous proposal. Among the renewable energy producers under our coverage, the new resource tax scheme will benefit Cloudberry and Bonheur. While some details are still unclear, we estimate it will increase the value of Cloudberry...
- Helene Kvilhaug Brøndbo
Ørsted (Buy, TP: DKK325.00) - Darker before the dawn
Ørsted has started addressing investor concerns over capital allocation and weak profitability, walking away from the unprofitable Ocean Wind 1 and 2 projects, and acknowledging its challenged capital structure. We see a risk of challenged liquidity based on its capex plans, and believe a significant cut in growth targets would be necessary for the company to avoid raising equity. That said, the stock is trading 22% below our calculation of its underlying asset value, reflected by our DKK325 (36...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK360.00) - Growth target revision likely
With no recent project awards and several awarded projects at risk, we believe Ørsted will need to lower its 50GW growth target. With limited growth priced in, we believe a message of capital discipline would be received well by the capital markets, although we see the potential for some negative consensus revisions. We reiterate our HOLD, but have cut our target price to DKK360 (430), as we no longer include growth beyond awarded projects given the challenging market environment and weak prospe...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK430.00) - Moody’s outlook cut to ‘negative’
Moody’s change in Ørsted’s credit outlook to ‘negative’ from ‘stable’ after the warned impairments of up to DKK16bn last week has added fuel to investor concerns related to the company’s willingness to invest in projects with low profitability and liquidity. Credit curves suggest that a potential downgrade could raise the company’s credit margin by ~25bp, increasing its WACC by ~10bp. This, in turn, would slightly lower our DCF-based valuation of Ørsted’s existing business and visible growth of ...
- Helene Kvilhaug Brøndbo
Ørsted (Hold, TP: DKK430.00) - Back to reality
We believe the latest impairments in the US were another reality check for investors about the profitability of growth in the struggling offshore wind market. Assigning a lower value to growth beyond awarded projects and the US portfolio, we have cut our target price to DKK430 (474). We have upgraded to HOLD (SELL) after the 25% sell-off yesterday, but highlight that the stock is still trading 27% above our valuation of the company’s existing business and visible growth. To maintain a premium to...
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