Shares in Orsted A/S fell to the lowest on record after President Donald Trump’s administration ordered construction to halt on an almost-finished offshore wind farm, two weeks after the company announced plans to raise 60 billion Danish kroner (US$9.4 billion) in a share sale backed by the government.
The Danish wind company’s management is meeting with investors and advisers in London on Tuesday to reassure them that a growing crisis is under control and that the planned rights issue will go ahead. Orsted has yet to formally launch or price the offering and is being advised by banks including JP Morgan and Morgan Stanley.
Orsted declined as much as 19% in Copenhagen on Monday. Shares are down almost 50% this year, wiping nearly US$8 billion off the company’s value.
It’s the latest push by the Trump administration to halt the expansion of offshore wind farms, an energy source that the president personally dislikes. Those efforts have included halting new leases on sites and permits for new offshore wind farms and rolling back tax credits that support projects.
Friday’s stop-work order is for Revolution Wind off the coast of Rhode Island - a project that’s costing US$4 billion to build, according to an estimate by Jefferies International Ltd. It’s the latest in a string of bad news for Orsted that led to its credit rating being cut to the lowest investment grade.
Investors want to know whether the company can find an agreement to appease the government and how long that could take, or if it will be forced to abandon the project and how much it would cost. The uncertainty could damage investor interest in the rights issue or mean the government needs to increase its stake in the company even further.
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The company tried to reassure investors on Monday that plans are going ahead.
“The planned rights issue has been sized to provide the required strengthening of Orsted’s capital structure to execute its business plan, even when taking into account the impact of this uncertainty on Orsted’s US offshore wind portfolio,” the company said in a statement.
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It would be the biggest share sale for the European energy sector in over a decade, with the government planning to buy about half of the securities.
For Orsted, one of the world’s largest offshore wind developers, the order marks a new low point in the company’s failed effort to replicate its European business in the American market. In recent years, a variety of issues including costly supply chain bottlenecks have forced the company to cancel two major projects, issue a series of writedowns and led to the replacement of its top executives.
“Orsted is evaluating all options to resolve the matter expeditiously in dialogue with permitting agencies and potentially through legal proceedings, with the aim being to proceed as quickly as possible,” the company said.
Earlier this year, Trump halted construction of another US offshore wind farm, Equinor ASA’s Empire Wind but reversed it after reaching a deal with New York Governor Kathy Hochul that could allow new natural gas pipelines to be built in the state.
Orsted will be hoping to do something similar. The governors of Connecticut and Rhode Island said they are working to amend the decision.
“This political move by the Trump administration will drive up the cost of electricity bills and contradicts everything the administration has told us,” Connecticut Governor Ned Lamont said in a statement over the weekend. “It wastes years of state investment in renewable energy designed to diversify our energy supply and lower costs for families and businesses.”
The uncertainty hovering over the sector made it impossible for Orsted to sell a stake in another wind farm it’s building off the coast of the US, its Sunrise Wind project. The lack of additional funds from the sale of the wind farm, was given as the reason the company decided to raise money from investors.
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The US Department of Interior’s Bureau of Ocean Energy Management said it needs to address concerns that have arisen during a review of the project. It cited issues related to national security and the prevention of interference in exclusive economic zones.
But the targeting of Revolution Wind, a project which is so far advanced in its development, is a new level of intervention by the Trump administration.
“We don’t think abandonment of the project is likely for now, given that Revolution is ~80% complete,” Ahmed Farman, analyst at Jefferies said in a note. “We expect all of this to create a more challenging setup for the upcoming rights issue regarding issue price and investor demand.”
The remaining share of Orsted investments into its two US projects is approximately 45 billion Danish kroner. As of June 30, the carrying value of Revolution Wind and Sunrise Wind on the company’s balance sheet is 17 billion Danish kroner, according to the statement.
