Orsted Withdraws From Contract for Maryland Offshore Wind Farm

(Bloomberg) -- Orsted A/S withdrew from an agreement with regulators in the US state of Maryland to sell electricity from a big offshore wind farm it plans to build in the Atlantic Ocean.

It’s the latest step for the Danish firm to reconfigure a portfolio of American projects after soaring costs forced it to take billions of dollars of writedowns last year. Orsted’s executives intend to update investors Feb. 7 on how they’ll reset the company after the setbacks.

The prices set in the power contract for the Skipjack Wind project were no longer viable because of inflation, high interest rates and supply-chain problems, the Danish company said late Thursday. Orsted will still move forward with the almost 1 gigawatt project. 

The company doesn’t expect any material cancellation fees and won’t take an impairment because of the decision, a spokesperson said by email. Shares rose as much as 2.5% in Copenhagen.

“Today’s announcement affirms our commitment to developing value creating projects and represents an opportunity to reposition Skipjack Wind,” David Hardy, head of Orsted’s Americas division, said in an earlier statement.

The nascent US offshore wind industry is struggling to adjust to higher costs, raising concerns about its future. Developers have been forced to recalculate the figures for proposals originally modeled years ago, with some delayed or even canceled.

Why Offshore Wind Is Stumbling and What Can Be Done: QuickTake

Last year, Orsted canceled two US offshore wind projects and recorded $4 billion in impairments. 

“We presume at this stage limited supply chain contracts would have been placed given its commercial operation date,” Jenny Ping, analyst at Citigroup Inc., said in an emailed note. “Potentially higher power prices in future contracts could limit any near-term writedowns.”

Of the 4.1 gigawatts of projects Orsted has in the US, 10% have reached a final investment decision, 35% are being rebid and 55% were canceled, Ping said.

(Updates with company comment in fourth paragraph.)

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