The world’s biggest offshore wind developer, Denmark’s Ørsted, has lost two of its most senior executives after it abandoned a pair of windfarm projects off the US coast at a cost of more than £3bn.
Ørsted told investors that its chief financial officer, Daniel Lerup, and chief operating officer, Richard Hunter, had agreed to step down from their roles with immediate effect because the company needed “new and different capabilities”.
Less than a fortnight ago, Ørsted reported heavy losses for the last financial quarter after cancelling two big windfarms off the New Jersey coast because of escalating costs.
The company blamed high inflation, rising interest rates and supply chain bottlenecks for the decision to scrap its plans for the Ocean Wind I and II offshore schemes. It has also pulled out of a consortium that was due to bid for offshore wind projects in Norway.
Mads Nipper, the Ørsted chief executive, will remain in his role. He said the board of directors agreed with the outgoing executives that the company needed “new and different capabilities” to “strengthen Ørsted’s journey into the future”.
He added: “Ørsted, along with the rest of the industry, is experiencing a challenging and volatile business environment.”
The construction of multibillion-pound offshore windfarms has become significantly more costly in recent months because the price of materials has spiralled in line with rising inflation. This has been compounded by higher financing costs due to the recent hike in interest rates.
The global cost pressures have wiped billions from the market value of major offshore wind developers and cast doubt on the future of big projects. This has raised concern over government clean energy targets and whether climate goals can be achieved.
Sweden’s Vattenfall has scrapped plans for a huge offshore windfarm off the UK’s Norfolk coast because rising costs meant it was no longer profitable. The company won a government contract to build the Norfolk Boreas project after bidding a record low price of £37.35 a megawatt hour (MWh) for the electricity generated, but it said costs had “changed dramatically” since then.
Ørsted is expected to decide whether to move ahead with the third phase of its giant Hornsea offshore windfarm off the Yorkshire coast before the end of the year. Hornsea 3 would be the single largest windfarm in the world and would play a key role in the UK’s ambition to increase its offshore wind capacity five-fold to 50GW by the end of the decade. The company also bid £37.35 a MWh to win a government subsidy contract.
News of the Ørsted shake-up came as the German government said it had agreed a multibillion-euro rescue deal with Siemens Energy to shore up its balance sheet amid increasing problems at its wind turbine division.
The government announced on Tuesday it would provide Siemens, one of the world’s biggest wind turbine makers, with guarantees worth €7.5bn (£6.5bn) as part of a deal with other stakeholders to help the company fulfil its order book. The company had warned that heavy losses at its wind turbine arm, Siemens Gamesa, meant it could struggle to secure guarantees needed to support a growing order book from its usual banking partners.
The company is expected to report a €4.5bn loss this year due to the cost of correcting a string of technical faults on its newest onshore wind turbine models, which has been compounded by inflation.