Ørsted, which is developing the world’s largest offshore wind farm, the £8bn Hornsea 3 array off the UK in the North Sea, is to cut hundreds of jobs and pause its dividend in an attempt to recover from a financially difficult 12 months.
The various measures it plans to take include cutting its target for developing renewable energy capacity by 2030, reducing it from 50 GW to 35-38GW.
Its chair, Thomas Thune Andersen, will step down after almost a decade in the role, after the two senior executives who left the business in November.
The company, which is majority owned by the Danish government, said the reset plan was designed to make it a leaner and more efficient company. Ørsted has struggled in the face of high inflation, supply-chain disruption and rising interest rates, which have hit the wind farm industry. The company has also experienced problems in the USA in attempts to secure tax credits.
Last year, Ørsted, which has 12 wind farms in the UK, cancelled two big offshore wind farm projects in the USA, the Ocean Wind I and II schemes, citing a sharp rise in costs. It took a 28.4bn Danish kroner (£3.3bn) hit as a result of the decision. The company had also raised doubts over the cost of the Hornsea 3 project early last year. However, in December it reaffirmed its commitment to 2.9 GW development.
Ørsted’s Board of directors has now approved a new business plan with the ambition of 35-38 GW of installed capacity by 2030 and updated financial targets, following the completion of a comprehensive portfolio review.
Part of the plan is to cut up to 800 jobs globally, pull back from markets in Spain, Portugal and Norway, and suspend dividend payments to shareholders covering the 2023-25 financial years.
Mads Nipper, Group president and CEO of Ørsted, commented: “We have prioritised projects within our portfolio and are implementing significant changes in our business, including revising our operating model to reduce risks. We now present a robust business plan, and with an uncompromising focus on value creation, we plan to more than double our current installed capacity of renewable energy by 2030.”
Besides reducing capital expenditure and project development costs, Ørsted pauses dividends for the financial years 2023-2025. It will also accelerate its divestment programme. Divestments are expected to contribute with proceeds of approximatley DKK 115 billion towards 2030, of which about DKK 70-80 billion are expected in 2024-2026.
In addition, Ørsted will look at measures to become a leaner and more efficient organisation and has set a target to reduce its fixed costs by DKK 1 billion by 2026 compared to 2023, on a like-for-like basis. This will include a reduction of 600-800 positions globally. Not all reductions will result in redundancies, but there will be redundancies throughout 2024, and today, Ørsted is announcing that approx. 250 people globally will be made redundant and leave Ørsted within the coming months. Rge company expects to achieve a return on capital employed (ROCE) of approximately 14 % on average during 2024-2030.
Image: Turbines at Ørsted’s Hornsea One offshore wind farm in the UK. The company is also behind the £8bn Hornsea 3 project off the UK in the North Sea (courtesy of Ørsted)
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