Ørsted, the Danish renewable energy company, reported a strong start to 2024 with progress in various offshore wind projects and financial growth, despite some operational challenges. The company announced a first-quarter EBITDA of DKK 7.5 billion, a DKK 600 million increase from Q1 2023, largely driven by earnings from offshore wind sites.
However, net profit for the quarter was down at DKK 2.6 billion, attributed to higher interest expenses and a deferred tax liability. Ørsted's CEO Mads Nipper expressed confidence in managing risks associated with their portfolio of offshore and onshore projects and reiterated the full-year EBITDA guidance of DKK 23 billion to DKK 26 billion.
Key Takeaways
- Ørsted's EBITDA for Q1 2024 reached DKK 7.5 billion, a DKK 600 million increase from the same period last year.
- Net profit was reported at DKK 2.6 billion, lower than the previous year due to higher interest rates and a deferred tax liability.
- The company reported progress in various offshore wind projects, including securing licenses in Victoria, Australia, and submitting bids for projects in Taiwan and the US.
- Ørsted is actively managing operational challenges, such as reduced capacity on export transmission cables at Hornsea 1, with expectations to return to full capacity in Q2 2024.
- The company remains focused on developing, building, and operating wind and renewable farms, with the US being its largest onshore market.
Company Outlook
- Reiterated full-year EBITDA guidance of DKK 23 billion to DKK 26 billion.
- Gross investment guidance for the year is set at DKK 48 billion to DKK 52 billion.
- Ørsted is committed to increasing the renewable share of energy and phasing out coal-based generation.
- The company is prioritizing safety improvements after expressing concerns about safety performance.
Bearish Highlights
- Earnings from existing partnerships decreased due to adjustments in construction agreements.
- Net debt increased to DKK 49.9 billion, driven by investments and compensation payments to partners.
- Safety performance has been a concern, prompting measures to improve safety awareness and performance.
Bullish Highlights
- Positive milestones achieved in Q1, including the selection for the Sunrise Wind project in New York.
- Secured licenses for two offshore wind projects in Victoria, Australia.
- Signed agreements to reduce emissions and secure offshore installation vessel capacity.
- Expressed excitement about the growth potential in the data center and AI sector for corporate PPAs.
Misses
- Reduced capacity on Hornsea 1 export transmission cables due to electrical infrastructure issues.
- Net profit impacted by higher interest rates and a deferred tax liability.
Q&A Highlights
- CEO Mads Nipper confirmed no blockages in the Revolution Wind project, with offshore construction to begin soon.
- Ørsted is exploring equipment reuse opportunities for the Ocean Wind and Skipjack projects.
- The CC U.S. facility in Copenhagen is on track to start carbon capture in 2025.
Ørsted (ORSTED.CO) remains focused on its strategic goals, navigating through operational challenges, and leveraging opportunities in the renewable energy sector. The company is poised to continue its expansion and efficiency improvements while maintaining a risk-aware approach in new markets like Australia. Despite the lower net profit this quarter, Ørsted's overall progress and strategic partnerships position it for sustained growth in the renewable energy industry.
InvestingPro Insights
In light of Ørsted's recent financial and operational performance, insights from InvestingPro provide additional context to the company's market position. With a market capitalization of $23.68 billion, Ørsted stands as a significant player in the energy sector. Despite a negative price-to-earnings (P/E) ratio of -7.81, analysts have a positive outlook, as reflected in the adjusted P/E ratio for the last twelve months as of Q4 2023, which stands at 36.03. This suggests expectations of future profitability, aligning with the company's strategic goals and operational advancements.
InvestingPro Tips indicate that Ørsted's net income is expected to grow this year, reinforcing the company's confidence in achieving its full-year EBITDA guidance. Moreover, Ørsted has demonstrated a strong commitment to shareholder returns, having raised its dividend for 7 consecutive years, which may appeal to income-focused investors. These tips underscore the company's resilience and potential for growth amid the challenges it faces.
InvestingPro Data Metrics:
- Market Cap (Adjusted): $23.68B
- P/E Ratio (Adjusted) LTM Q4 2023: 36.03
- Revenue Growth (Quarterly) Q4 2023: -19.27%
For readers interested in a deeper analysis of Ørsted's financial health and future prospects, more InvestingPro Tips can be found at https://www.investing.com/pro/ORSTED. There are additional tips available on the platform, providing a comprehensive view of the company's performance and market standing. To access these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Dong Energy ADR (DNNGY (OTC:DNNGY)) Q1 2024:
Operator: Wonderful good afternoon ladies and gentlemen. Welcome to the Ørsted Q1 2024 Earnings Call. For the first part of this call, all participants will be in a listen-only mode. And after the presentation, you have possibility to ask questions during the question-and-answer session. Today's speakers are Group President and CEO Mads Knipper and CFO Trond Westlie. Gentlemen, please go ahead.
Mads Nipper: Thank you very much and hello everyone and thank you for joining our earnings call. First of all, I'm very happy to be joined today by you, Trond, our newly appointed CFO, Trond Westlie. Trond has strong competences and experience from his career as CFO in several global listed companies such as A.P. Moller-Maersk, Telenor and Aker Kvaerner. I will leave the word to Trond for introductory remarks when I hand over for the financials. We decided to change and simplify the executive management structure at Ørsted to further sharpen the company's focus on project execution, financial discipline and value creation. As part of the new management structure, we have established a new commercial organization under the leadership of Rasmus Errboe, who is appointed Deputy CEO and Chief Commercial Officer. And a lot of you have in the past quarter met with Rasmus in his capacity as interim CFO. At the same time, Patrick Harnett, who is heading our European offshore construction portfolio and has been responsible for the construction of Hornsea 2, has been appointed new Executive Vice President and Chief Operating Officer. Going forward, the Ørsted Group Executive Team will consist of Rasmus Errboe, Trond Westlie, Patrick Harnett, Henriette Fenger Ellekrog as CHRO and myself. Our annual General Meeting on March 5th also led to changes with new chairmanship of our Board of Directors, as our previous Vice Chair, Lene Skole, stepped up and replaced Thomas Thune Andersen after 10 years as Chair. And our now ex-interim COO, Andrew Brown, has been appointed Vice Chair. We have been off to an encouraging start to 2024. On the back of our updated business plan, which we presented in the beginning of February, we have made good progress in regard to executing the plan and we have reached a number of important milestones. And let me take you through the most significant. First of all, our 924 megawatt Sunrise Wind project, has been selected for award in New York's fourth offshore wind solicitation. I will cover the project and the path forward in detail on the next slide. We have submitted a bid into the Taiwanese Round 3.2 auction with our Greater Shanghai 3 project. The outcome of the auction is expected during the summer. We also submitted a proposal for our 1.2 gigawatt starboard project into the solicitation in Rhode Island and Connecticut, where we expect the outcome in Q3. This week, we secured licenses to develop two large-scale offshore wind projects off the coast of Gippsland, Victoria. The licenses provide us with site exclusivity to develop the two offshore wind sites with a potential combined capacity of 4.8 gigawatt. We will progress the projects through site investigation, environmental assessments and supply chain development to be able to bid into future procurement processes with the first auction expected to start in late 2025. As part of our partnership and divestment program, we have executed on two milestones. In the U.S., we have divested a share of four onshore wind assets to Stonepeak, who takes on an equity ownership stake in a portfolio of 952 megawatt. In our European onshore business, we continue to focus on the most value-creating opportunities. In line with this focus, we have agreed to divest our onshore platform in France to ENJIE and concentrate our build-out in the U.K., Ireland, Germany and Spain. This transaction was signed this week and is expected to close during this quarter. Both transactions are in line with the assumptions of our business plan and will serve to recycle capital to support our execution. Let's move to project execution and the construction completion of both South Fork in the U.S. and Changhua 1 and 2a in Taiwan. These are huge milestones that our team can take great pride in as lots of challenges have been overcome and the projects are the first completed utility scale offshore wind farms in each country. The final commissioning of the 130 megawatt South Fork project and the 900 megawatt Greater Changhua 1 and 2a is expected during this quarter. In the first quarter, we signed a memorandum of understanding with Dillinger, the largest heavy steel plate producer in Europe, to secure access to lower emission steel plates for our future offshore wind foundations. With the agreement, we will secure supply of key raw material for our future projects as well as executing on our ambition to use lower emission steel to decarbonize our supply chain. Additionally, we signed a long-term lease agreement with Cadilla, securing offshore installation vessel capacity from 2027 all the way to the end of 2030. Securing long-term capacity with strategic supplies is key to us in order to build collaboration and together manage risks and execution of our offshore wind construction program towards 2030 and beyond. Our partnership with Cadilla exemplifies how we can provide suppliers with the clarity and scale that they need to invest in new technology and organizational capabilities. On the financial side, EBITDA, excluding new partnerships and cancellation fees for the first quarter were in line with our expectations and amounted to DKK7.5 billion, DKK 0.6 billion higher than in Q1 of 2023. Earnings from our offshore sites amounted to DKK6.9 billion, which was an increase of DKK1.1 billion compared to the same period of last year. Let's turn to slide four and a closer look at our Sunrise Wind project. At the very last day of February, our Sunrise Wind project was selected for a conditional award in New York's fourth offshore wind solicitation and thanks to New York's continued offshore wind leadership, this was a successful and competitive accelerated procurement that allowed our project to stay on track and helped New York continue to advance its decarbonisation goals. Following the award, we are currently negotiating the final terms for a 25-year offshore wind renewable energy certificate with NYSERDA. We expect to conclude the negotiations and sign the new OREC during this quarter. Therefore, I am also very satisfied that the project has received its federal record of decision and that we have taken the final investment decision of the project based on a business case with a positive life cycle NPV. The project has been a 50:50 joint venture between us and Eversource. As Eversource concluded their strategic review and decided to exit offshore wind, we negotiated a commercial agreement to take over the full ownership of the project subject to the signing of the OREC agreement, receipt of the construction and operations plan, and relevant regulatory approvals. We continue to progress the project and are advancing the onshore construction activities. The Sunrise wind design has been reviewed and accepted by all relevant state entities, and the project has secured project labor agreements and all major supplier agreements, including turbines, where we will deploy 11 megawatt turbines from Siemens Gamesa. Final federal permits, including the construction and operations plan, or cup, are expected this summer, after which we will start offshore construction with expected completion in 2026. As you might recall from the Capital Markets update in the beginning of February, the outcome of the New York fall round was one of the absolute key milestones for our business plan, and following the award, we reversed part of the impairment relating to offshore or to Sunrise Wind. Let's turn to slide five, where I'll give a status on our construction projects. We continue our strong focus on project execution and are working diligently to de risk the continued supply chain challenges to ensure that we successfully deliver on our construction portfolio. Our current emphasis continues to be the mitigation of challenges concerning monopile manufacturing and securing additional installation vessel availability. During the first quarter of this year, we have been constructing 7.6 gigawatts of offshore wind across our three regions, and as I mentioned, we have completed the construction of Greater Changua 1 and 2a and South Fork, and are now finalizing the commissioning work. Moving to the German program and Gode Wind 3 project where all 23 foundations and cables have been installed. Turbine installation is ongoing and we expect to reach first power production in the coming days or weeks and to commission the project during summer of 2024. Borkkum Riffground 3 continues to progress on a tight schedule, primarily due to the supply of monopiles who experience continuing ramp up issues. Key mitigations have been agreed and implemented in the installation schedule. Our focus areas remain the progress around ramp up of monopiles fabrication and potential need to secure an extension of installation vessel. The installation of turbines is expected to commence during the coming months. For Greater Changhua 2b and 4 the final offshore construction permit application has been approved by the Energy Administration end of last year, while the offshore substation topside has reached structural completion ahead of schedule. To ensure timely delivery of the project, we are looking at numerous options to secure additional vessel capacity in the event there is a delay of the transport and installation vessel. Revolution Wind is progressing its execution. For the monopile delivery the supplier has presented the project with a fabrication schedule that supports the current commission date towards the end of 2025. Our prioritization right now is the two monopiles for the offshore substance stations which is crucial for the power transmission. Our Sunrise Wind project has entered the construction phase after the recent FID. We continue to work closely with the projects monopile suppliers to mitigate potential further ramp up delays. Their monopile delivery has been descoped and two additional suppliers have filled in the remaining capacity and they are both on track. We have now secured installation vessels for the foundations and wind turbines, including a full replacement for the Tiriptis [ph]. Lastly, in the U.K., we continue to progress our 2.9 gigawatt Hornsea 3 project according to plan following the FID in December last year. In Onshore, our 4 U.S. construction projects, amounting to 1.4 gigawatts, show good progress. Eleven Mile. Solar Center, a solar and battery energy storage system in Arizona, is conducting final testing and commissioning remains on track for the summer of 2024. In Texas, the construction of our Mockingbird Solar Center is going as planned, with COD expected in the second half of this year. For the two solar projects, Old 300 and Sparta Solar, all the modules are now in the U.S. and final installations have commenced. We expect COD for both projects during 2024. In Europe, we are progressing well on our approximately 200 megawatt construction portfolio with COD over the coming three years. We remain comfortable around our offshore and onshore construction portfolio and while it contains challenges and risks, we continue to work to manage and mitigate these risks to execute on the more than 9 gigawatt renewable construction portfolio. And with that, let me hand over the financials to you Trond.
Trond Westlie: Good afternoon from me as well and thank you Mads. I'm very excited to join Ørsted as CFO and start delivering on the updated business plan for which we will ensure the financial discipline through a robust capital structure, the investments into value creating renewable energy projects. I'm also looking forward to meet and engage with you over the coming months in our investors and analyst meetings. So if we then go to slide six and the EBITDA for the quarter we are using Danish Kroner, so I'm not going to state that for every number. For the group, we realized a total of EBITDA of DKK7.5 billion, excluding new partnerships, no cancellation fees this quarter. This was around DKK600 million higher than the same quarter last year, with offshore sites being the key driver for the increase. Let me walk through the main earnings development for the quarter compared to first quarter last year. For our offshore sites, earnings increased by DKK1.1 billion. This was driven by ramp up generation of Greater Changhua 1 and 2a South Fork. Higher prices on our Inflation-indexed CfDs as well as strong wind speeds. On the availability side in the first quarter we had reduced capacity on the export transmission cables at Hornsea 1. The transmission cables have experienced issues with the electrical infrastructure and therefore being curtailed for periods of times with high wind speeds. We are closely collaborating with the owner of the transmission cable and as we are the operator of the assets we have been able to quickly identify the root cause of the issue and been part of the work in remedial actions as similar electrical infrastructure design has been deployed for Hornsea 2 and we have had limited curtailment of the wind farm in April and may see future curtailment until the issue is resolved. We expect that the remedial work will be fully completed and that both wind farms will operate up to full capacity again in second quarter of 2024. Earnings from our existing partnerships decreased as a result of minor adjustment to construction agreements completed in previous years. Lastly other including and that means lastly for the offshore is including development cost came in about last year's level mainly due to costs related to ceasing development of ocean wind bond with the negative effect of DKK157 million. Turning then to onshore, earnings were at the same level as last year with a ramp up generation from new assets in operation. The weather conditions in the U.S. in January was worse than normal and resulted in a lower generation and availability during the period. Going then to Bioenergy and Others. Earnings from our CHP plants decreased due to both lower generation and market basis spreads. Within our gas business, we saw earnings improve compared to last year, although still slightly negative contribution. Last year, we saw a temporary negative effect in revaluation of our gas storage and this was not repeated to the same extent this year. Then turn to slide seven. To the left, our reported net profit totaled DKK2.6 billion which was approximately DKK600 million lower than last year. Net profit benefited from higher EBITDA as well as the net impairment reversal as a result of the Sunrise OREC award, partly offset by higher interest rates. The tax expense was affected by the recognition of a deferred tax liability amounting to approximately DKK800 million related to a tax equity contribution for our Eleven mile project, while the underlying tax rate was 25%. So if we look at the net profit excluding the impairment reversal and out of the peer out of the period tax corrections both in the first quarter 2023 and 2024, we deliver an increase in net profit of approximately DKK400 million or just short of an increase of 20%. Going then to the ROCE adjusted for impairments and cancellation fee, our return on capital employed came in at 12.5%, which was a decrease compared to last year, driven by a higher capital employment. The decrease in the reported ROCE to a negative of 12.2% was primarily attributable to the lower EBIT as a result of the impairments as well as the cancellation fees. At the end of the quarter, our equity stood at 83 billion. The increase was driven by the comprehensive income as well as our hybrid capital issuance. The majority of the negative hedge reserved relate to hedges with delivery during 2025. Then let's turn to slide eight. At the end of the first quarter of 2024, our net debt amounted to DKK49.9 billion, an increase of approximately DKK2.5 billion during the quarter. Our cash flow from operating activity was positively impacted by EBITDA and release of collateral, partly offset by cancellation fee payments of DKK2.4 billion related to the Ocean Wind 1. For the quarter, our gross investment totaled DKK7.6 billion, driven by our investments into construction of our renewable project portfolio. The approximately DKK700 million in divestments comes from a customary compensation to our partners at Hornsea 1 relating to the weight loss effects from Hornsea 2. When we undertake a farm-down, we normally receive proceeds from the partner based on an assumption of no wake loss effects from potentially neighbouring wind farms. However, we make a provision at that point in the time of the farm-down based on our estimated wake cost. Consequently, we compensate the partner at a later point in time when we have clarity about actual rate effects. As we have made a provision, this compensation has no P&L effect. During the quarter we issued a new green hybrid capital of roughly DKK5.6 billion, partly offset by the buying bank of already issued hybrids that are callable later this year. Finally, net debt was affected by DKK1.4 billion related to exchange rate adjustment, lease obligation as well as hybrid coupon payments. Onshore divestments that we have signed during the first quarter in U.S. and France were not closed during the quarter and consequently did not impact the numbers. Then, going up to our credit metric, the FFO to adjusted net debt stood at 19% at the end of the first quarter compared to last year. The decrease is driven by higher adjusted net debt as well as lower funds from operations in the twelve months rolling period. We remain committed to our target level of around 30% in 2025 and above 30% by 2026, but we highlighted at our capital markets update in February that the ratio is expected to be below 30% for 2024 due to the payments of cancellation fee, and I would probably like to clarify that slightly bit on the 19% because when we are paying all the provisions, hopefully during the year of 2024, this 19% will likely decline somewhat relative to that this number is a last twelve month figure and as a result of that that number will come down. And also as a result of that, if we assume payments within 2024, the last twelve months in 2025 will not come up to the level around 30% until the end of the year. Slightly complicated, but at least that's how we foresee this number to move going forward. Let's then turn to slide nine. For the first quarter of 2024, our taxonomy-aligned metrics were in line with expectations. Renewable share of energy came in at 97%, compared to 89% for the same period last year. The development was primarily driven by ramp up generation in offshore higher wind speeds and larger share of generation from sustainable biomass, as well as lower coal based generation. Our plans to phase out coal based generation during 2024 remains on track. And in March we achieved a significant milestone as we, for the first time in Ørsted's history, did not have any coal usage at our CHP plant. On safety, we regrettably do not see a performance which is up to our expected standards. We have seen more recordable injury for both our own employees and contractors. To strengthen the safety awareness and improve on the general safety performance, safety days will be carried out at Ørsted location during this quarter. In addition, a supplier safety day for the most critical suppliers will be hosted on a program to improve safety leadership on all levels for the organization is initiated. Then going, then finally to slide 10 on our guidance with the financial development for the first quarter is in line with our expectation. We reiterate our full year EBITDA guidance of DKK23 billion to DKK26 billion for 2024, as well as our gross investment guidance of DKK48billion to DKK52 billion. And to round this off, I am just going to quote Mads statement in our quarterly report and say that all-in-all we are off to an encouraging start for 2024 and on our way to deliver on the targets that we presented in February. So with that we'll open up for questions. Operator, please.
Operator: [Operator Instructions] And our first question today comes from Harry Wyburd from BNP. Please go ahead with your question.
Harry Wyburd: Hi everyone. Thanks. It's Harry Wybard from Exane. So firstly, congrats to Rasmus and Trond and Patrick and hello, Trond. I'll just keep it to one. Can I ask about these Hornsea 1 and 2 curtailments that you mentioned. How much of an earnings impact did those have? Or how much of an earnings improvement can we get when they're fixed later in the year? How much is it going to cost to fix them? And how sure are you that they will be fully fixed? Thank you.
Trond Westlie: Yes, thanks a lot, Harry. So this is, we're not going to give you the specific number, but it is one that, as you can see, does not move. The fact that we have delivered a quarter as expected and with higher offshore earnings and one that does not in any way impact the full year guidance. We are, we are going into a low wind quarter now. And given that, as mentioned, that this is a transmission issue that only has an impact at the highest loads, then this is something where we expect that the additional impact will be minimal and we have high confidence that we will be able to fix it. The costs are not high. It is expected to be a relatively simple fix, but we will continue to monitor the developments to ensure that it is fixed after. We will do that during Q2.
Harry Wyburd: Okay, thank you.
Operator: The next question comes from Ahmed Farman from Jefferies. Please go ahead.
Ahmed Farman: Yes, hi. Thank you so much for taking my question. I just wanted to ask, on the slide where you outlined the projects and the project timelines, if I just look at the commissioning dates, they haven't sort of really changed since you last gave us the update. But I just wanted to ask you if there's any additional color you can share off the progress that you have made over first quarter, which either sort of enhances your confidence on the deliverability on these targeted timelines or if there have been any developments which make them sort of have somehow reduced visibility in a meaningful way. And I'm specifically thinking here about revolution wind with Changhua 2b and 4 and Borkkum Riffground 3. Thank you.
Mads Nipper: Yes. Thanks a lot, Ahmed. The short answer is that no, there has not been any material movements. As I mentioned, maybe the most specific example of a decision already made to make further derisking is the now full chartering of vessel instead of Tiriptis [ph] where at the capital markets update in February, we shared that we had done a full descoping of revolution and partly of Sunrise. Now we have taken the decision and secured capacity for an alternative vessel, and therefore will not be using Tiriptis at all, which is a further de risking on revolution. There is. I mean, this is. The plans are unchanged, the schedule is unchanged. As we said, we are prioritizing the two offshore substation monopiles, and we are working to ensure that any slippage of monopile delivery is something that will be mitigated by extension of vessels. And that goes for both Borkholm 3, and that goes also for revolution and Changhua 2b and 4, but no material changes to the outlook of the commission date. So not getting any closer, but also nothing that makes us materially concerned that they have been pushed further.
Ahmed Farman: Thank you.
Operator: The next question comes from Kristian Tornoe from SEB. Please go ahead.
Kristian Tornoe: Yes, thank you. I actually had a question on the same topic, so maybe more on the book from free to understand the situation around the monopile and your commentary around securing further vessel capacity. So in case you need more vessel capacity, who will carry that cost? It sounds like such an issue will be driven by your monopoly supplier being delayed.
Mads Nipper: Yes, thank you, Kristian. This is right. I mean, we are followed. We continue to follow this very closely. What we are very happy to see is that the actual production of the monopiles from our key supplier for three of our projects has stabilized. So now the planning becomes safer. And what we are now doing is we are ramping up on the capacity to do the actual coating of those, which is everything else equal, a simpler process to do. So we actually do expect that the predictability of those deliveries will continue to be more visible in the coming months. The most important thing we focus on right now is to ensure that that additional potential vessel capacity is available. And it is generally so. Now it's a matter of deciding, will we then pull the trigger of actually securing that capacity if we need to do that in order to secure the option? The cost is generally borne by us. I mean, the LDs that we could impose on the suppliers will not cover at least the majority of that. So generally something that is borne by us. But bear in mind that already at our CMD we mentioned that there were increased contingencies to cover things like this. But it is correct that in some cases, for example, with the full descoping in the U.S. project that that has come with an additional cost on capex, but nothing that makes us concerned in relation to the targets of the plan that we presented.
Kristian Tornoe: And can you comment, because obviously, as you mentioned, the situation around the return impact on the U.S. projects we have discussed several times, but on the European projects and Borkum Riffgrund 3, the sensitivity to the value creation, considering the remaining risk, how should we think about that?
Mads Nipper: We don't comment on the project specific returns, but this is with the knowledge we have right now, nothing that materially impacts the return of the products.
Kristian Tornoe: Thank you.
Operator: The next question comes from Deepa Venkateswaran from Bernstein. Please go ahead.
Deepa Venkateswaran: Thank you. This is Deepa Venkateswaran Bernstein. Two questions. One is, could you give us an update about how the farm-down process is going? I think today in an interview, Mads, you mentioned about farming down Sunrise Wind. So could you basically maybe comment about that? And then what's also happening in Taiwan? I presume that the exclusivity with café had expired. So could you update on that? So that's my first question. And second one is, in terms of the auctions you've participated, clearly your ambitions for the U.S. are now lower. So just wondering what the timeline for the U.S. starboard project might be if you win that and then can you confirm if Hornsea 4 you put the project in the AR 6 or not?
Mads Nipper: Yes. Thanks a lot Deepa. I forgot to press the button. Apologies for that. Yes, progress on the farm-downs, it's generally going to plan. So we are satisfied with the progress we have seen. And although we don't comment on individual transactions, the one exception that we have to that is we are still happy to confirm that with the progress we have in Taiwan on Changhua 4, we are still expecting to sign and close this during this year and also seeing the progress with our partner, café, that we're hoping for. On Sunrise, it is too early to say specifics about timing of that. We are preparing for that, but we do not have the exact timing for that yet. On the auctions, you have the two auctions where we have confirmed that we have bid is on -- is in Taiwan. And then also to your point, in with our 1.2 gigawatt Starboard project in the Northeast where we bid into Rhode Island and Connecticut because we believe that they offer the strongest framework for risk protection and COD flexibility, which was a critical part of our operating model. And we do expect the outcome of that during Q3 of this year. And then specifically on Hornsea 4, not much to comment on that, except that we can confirm that it is eligible to bid in to allocation around 6, but not with a decision of whether to do so or not just yet.
Deepa Venkateswaran: Okay. So if you win the U.S. project, would you not be exceeding your targets for the U.S.? And -- or do you think this is a much later in the decade kind of a project if you do win in the U.S.
Mads Nipper: No, this would be with all possible likelihood for a post 2030 COD. So -- and COD flexibility was one of the key criteria we assessed when deciding where and with what to bid in.
Deepa Venkateswaran: Okay, thank you. [Technical Difficulty]
Trond Westlie: So just excuses. I'm sorry about that, but you have to excuse us a bit because we are having slightly challenges to get through to the operator. And therefore, it's difficult to actually proceed on the questions. So a slight time and then we'll try to get back to you as soon as possible.
Operator: Ladies and gentlemen, we apologize for the inconvenience, and we will continue with the next question, which is Alberto Gandolfi from Goldman Sachs (NYSE:GS). Please go ahead.
Alberto Gandolfi: I hope you can hear me.
Mads Nipper: We can.
Alberto Gandolfi: Thank you Mads. I have a question and a curiosity. The first question is, can you give us an update on what we might expect this year and maybe first half of next year in terms of divestment farm-down announcements. This is a key component of your strategy. I suspect you're going to focus mostly on completed projects. So I wanted to ask you if you still see interest from potential buyers? If you are seeing buyers out there? What is your expectations in terms of how liquid the market may be, and I don't know if you can mention any specific assets. The curiosity, I'll be very brief here. I haven't heard you mentioned anything about data center, AI, which seems to be a very, very key topic, particularly in the United States. And I was wondering if you've had already any thoughts on how this might impact your business long term. We saw last night, a 10-gigawatt PPA from Microsoft (NASDAQ:MSFT), probably I've been the biggest ever. And I was very curious if you've been having any thoughts on that? Thank you so much.
Trond Westlie: On our farm-down progress, we are continuing as we have planned. And what we actually see in the market is that even though it has been the pricing of the assets has been higher or lower due to the fact of the interest rate and how that has developed in the last 24 months, we see a slightly better sort of market relative to and also interest in that regard. So we're still on plan, and we're not commenting Alberto on the different assets. So we're not going to do that. We're not commenting on the plan as such. But slightly positive vibes relative to how it was in February, but we're still on plan, and we're also thinking alternatives as always has been the case on the targets that we have put in place.
Mads Nipper: And let me comment on the data centers and AI, but we're also saying that supplementing on that. I think generally, what we see is that the appetite for not at least the larger infrastructure funds on quality assets is growing quite steeply. So that's a really positive sign for the PDP plan that we have indeed. On data centers and AI, you're absolutely right. We are excited about that opportunity. It is not a new thing. Bear in mind that of all the corporate PPAs, the tech sector sort of with a large -- really large offtakers like AWS, Meta (NASDAQ:META), Microsoft and Google (NASDAQ:GOOGL). That is already the biggest sectors we have on the corporate PPAs. It is to the tune of 2 gigawatts that we have sold both from offshore and onshore. And we're excited about this, both because it's a very high growth in demand, but also because it is companies that generally are very committed to the transformation of the footprint, and that means that it will be a very targeted increase in renewables. So already a big sector for us, probably a double-digit percentage of our offtake already, and one that lends itself particularly well also to offshore because if we can do these data centers close to the node of the access point of offshore then this is something that can offer high loads of attractive power. So something we will certainly dive into both in Europe and U.S. to look at that opportunity and how to monetize that best.
Alberto Gandolfi: Thank you so much.
Operator: The next question comes from Casper Blom from Danske Bank. Please go ahead.
Casper Blom: Thank you very much. And welcome onboard, Trond. I actually have a question regarding this week's announcement about you getting licenses in Australia. As far as I know, Australia is a rather immature market for offshore wind. And there's no real supply chain, etcetera, as things are today. And of course, what I would really not like to see is a repetition of what has happened in the U.S. over the last years. So how do you sort of secure yourself when you now start to be involved in the new emerging market and don't -- probably don't want to spend too much money on something that is still a bit uncertain. If you could maybe elaborate a little bit on your thoughts on sort of these new market entries.
Mads Nipper: Yes, happy to do so. So this is not a market where you should be concerned that we'll end up in a U.S. situation, both because we have learned the entire industry have learned that it is certainly a challenge to build a new industry entirely from scratch. And I think both we and the entire industry are taking those learnings. We do think it is really important for companies like ours to build the long-term opportunity pipeline. And we do see Australia as a long-term opportunity in offshore. Specifically, this is an area where, for example, the grid connections due to decommissioned coal power plants in the area where we would likely interconnect. A lot of the infrastructure is already there, but we will go with very open eyes as to what are the risks that would come with an entirely new market and also potentially building a new supply chain in there. So it's not something we will jump on to. We will take a risk-based approach, but we do firmly believe that the long-term potential of the Australian offshore market is attractive.
Casper Blom: If I just may follow up with this still being early days and there's still several hurdles to climb before this potentially comes a firm project. How much CapEx would you have or investments would you have to do sort of to build such a pipeline in Australia, if you can put any numbers to it at all?
Mads Nipper: No, I can't put numbers on it, but it's a very -- it's a limited amount. The process for getting this is one where we will do some site investigations, but this is limited DEVEX only.
Casper Blom: Okay. Thanks so much.
Operator: The next question comes from Rob Pulleyn from Morgan Stanley (NYSE:MS). Please go ahead.
Robert Pulleyn: Hey thank you and good afternoon. A lot of the questions have been asked already, but I just had one extra one on the supply chain, if I may. And given the news from the New York 3 auction, the developers' bids were contingent on a future turbine model. May we ask what buying size Ørsted is assuming in its bids that you mentioned in Taiwan, in the U.S. for Starboard and in the U.K., if you were to submit Hornsea 4, of course, or at least could you clarify whether it's an existing model rather than a future model pending? Thank you very much.
Mads Nipper: Yes, Rob, the answer is going to be the latter part of it. We can confirm that this is not on a future model that we are hoping will be there, but on it. And it's a technology platform that is already well under development. So no new and sort of coming technology platform with big uncertainty.
Robert Pulleyn: That’s pretty [Indiscernible] thank you.
Operator: The next question comes from Mark Freshney from UBS. Please go ahead.
Mark Freshney: Thank you for taking my questions. Firstly, Mads, I know we've spoken about this before, but on the supply chain, a lot of marginal players have now -- projects have now exited, players have pulled back ambitions. How are you finding the discussions with the supply chain on availability of resource? I mean you spoke about finding 2 extra vessels, but how do you find that? And secondly, just on the U.S. elections. One, your problems in the U.S. can probably be traced back to defunding probably four years, five years ago -- five years ago now. How your projects under construction protected if a future President decides that they're going to intervene? What is the risk there? And what's the advice that you've received from your lawyers? And just finally, if I may, on cost reduction. You can see from some of the numbers, costs have come down pretty substantially. Can you -- is there any number that you can give for the -- how you're progressing against your cost out plans and how much fixed cost has been taken out of the business. Thank you.
Mads Nipper: Yes. Thanks a lot, Mark. So on availability, let me start by saying the importance of continuing to secure long-term capacity is still there. And that's also why we explicitly in today's introduction, mentioned that signing the 4-year agreement with Carla on installation vessels and also the availability of heavy plate steel for foundation is something which remains really important and something we will continue to do with our most strategic suppliers. Generally, we do see that the availability -- also because in the last several months, we have had intense discussions with the vessel suppliers. And therefore, we are generally seeing that the vessels for backup, for example, with a slightly prolonged installation schedule are available. So we are not seeing the same tightness as we experienced, for example, with Ocean Wind 1 where there was simply no vessel capacity available. That does not mean that it is not tight. It is, it is. It is still generally a tight supply chain across offshore and especially some capacity groups, but we are seeing that the opportunity to, for example, extend lease agreements are better. On the U.S. risks, yes, you're right that there are certainly risks that we are being very -- that we are very explicitly handling, most importantly, to ensure that we have all permits in place, which we feel comfortable we will. So for our existing portfolio, only the COP for Sunrise is outstanding. And that is expected over summer of this year. And that is the only thing that we will need in principle from the federal agencies, including BOEM on that existing portfolio. So that risk should be limited. But let me also just generally say that it is very clear that offshore is becoming an increasingly bipartisan industry. And this is despite some of the rhetoric, this is being recognized that this is very high joint priority for both in both blue and red states is job creation, and we do see and being recognized that offshore is creating jobs both in Texas, the Carolinas and on the Gulf Coast in general. And these are some of the things that we are trying very hard to make visible. On our new bid, so on Starboard, which we put in. One of the reasons for -- to the question from before, to focus so much on COD flexibility in terms of timing is exactly to be able to absorb potential extended delays in permitting, which we don't hope not believe, but it is something we prepared for should it happen again.
Trond Westlie: On the cost takeout side, we have, of course, started our programs in relative to take out the 800 job reductions that we stated in February. During February, March, approximately 250 people have been made redundant. And the program we have during the year is actually to execute on most of it. So the cost effect is, of course, not going to come in 2024. It will come in 2025 at the earliest. So -- but we do see progress on this, and we at least have clear goals to do more leaner and a more efficient organization, and we are en-route on delivering on that.
Mark Freshney: Thank you. I just have a follow-up. Would we expect any onetime charges below the line for these -- this cost reduction program? Or is it all being absorbed in the continuing EBITDA line?
Trond Westlie: Well, we haven't come that far to actually define that element yet. So the project hasn't come that far yet. So whether it's going to be sort of a single line or one line. I don't believe, at least whether it's going to -- how significant that number is going to be, we'll be transparent when we know.
Mark Freshney: Thank you very much.
Operator: The next question comes from Jenny Ping from Citi. Please go ahead.
Jenny Ping: Hi, thanks very much. A couple of questions from me, please. With regards to the wake effect, this is obviously -- there's been a number of times that you've actually charged cash for the assets that have been sold. So can I just ask of the DKK17 billion provisions that you've got on your balance sheet, how much of that is actually related to potentially providing future wake effect? So that would be my first question. And then second one, just going back to the onshore assets for Hornsea 1 and 2. Can you just help us to understand the specific issue? Is it design? Is it the product itself? Or actually thinking back at the time of the IPO, I think a lot of the offshore discussions were taken off the table in the sense that it would be -- and operational risks associated with the transmission cable itself and you get compensated for that? So can you just sort of clarify where we are on that compensation process? Thanks very much.
Trond Westlie: Not quite sure if I managed to -- it was a bit hard to actually hear you. So -- but what I understood was how much we have a wake loss provisioning relative to on the total provision of the DKK17 billion. Was that correct?
Jenny Ping: Yes. Relating to the wake effect.
Trond Westlie: Relative to the sort of the split of the provisions, we're not going to disclose the elements of that because that will be sort of difficult. But when we take all those provisions in both of the sort of the canceling provision as well as all the other provisions, we think as a general comment, we're well covered and progress has been made on many of the smaller issues as such. But when it comes to that, we have evaluated that we will have that taken into consideration. And I can say more than just that. Of the payment of the provision, we've done DKK2.4 billion this year -- this quarter, and we have settled quite a bit of the minor and the medium elements. And we sort of retained that our provision is sufficient as we see it now.
Mads Nipper: And to your question about the offshore asset, Jenny, unfortunately, given that we are not the owner of that, there's a limit to how much detail we can give you. But it is about the electrical infrastructure design. And -- but because we are the operator of that, we know the issue very well, and I've also supported actively to ensure that the remedial action, which is being implemented here in Q2 is something which we feel confident about. So we know it well. It is something there where we also know about the technical solutions that are being put in place. Unfortunately, as opposed to those in Continental Europe, there is no such thing as a compensation for outages on availability that's being offered from offshore to the owner of the generation asset also. So this is not something where we can expect a compensation from…
Jenny Ping: Thanks.
Operator: The next question comes from Marc Ip Tat Kuen from Berenberg. Please go ahead.
Marc Ip Tat Kuen: Hi guys, thanks for taking my questions. Just one from me. It's on Greater Changhua 2b and 4. So on Slide 5, there's a comment there, which says assessing opportunities to secure additional best capacity. I just wanted to check that to stay ahead of schedule? Or is that required to keep the project on track? Or is that just as a backup capacity? Thank you.
Mads Nipper: Yes. Thank you, Marc. That is as a backup capacity. So this is to ensure that we are proactively prepared for -- if there is any slippage in the supply of components. This is not something which is decided yet and not even deemed whether it is necessary yet, but it is to ensure that should there be any of those events that would materialize, we are prepared and can extend that installation window slightly. So it's a backup.
Marc Ip Tat Kuen: Thank you.
Operator: The next question is from Dominic Nash from Barclays (LON:BARC). Please go ahead.
Dominic Nash: Good afternoon and thanks for taking my questions. I've got a couple, please. The first one is on sort of the capital cost of offshore wind and kind of following on from sort of Mark Freshney's question on supply chain, potentially loosening as sort of ambitions of the players for. I'd like to sort of have a view on what your thoughts are on whether the peak pricing for offshore wind as being reached, whether we're in a deflationary environment? And whether we can have some sort of ballpark figure for an offshore wind farm ex transmission costs in around the world? And the second question that I've got is on Revolution Wind. I see you're going to start construction proper later this year. But can you give us some color on the court case I believe is blocking construction of Revolution? And how and when we think that, that is going to play out? And at what point does the 2025 COD they need to be moved back? Thank you.
Mads Nipper: Yes. Thanks, Dominic. So on the cost of offshore wind, as you know very well, it very much, of course, hinges on where do the interest rates go because the cost of capital, if that actually does go down, of course, that will be directly reflected in the future solicitations that will be there. I don't think it's possible to say whether there's a peak in pricing, but it is a fact that the inflation is a lot supply chain inflation is a lot less steep than where we came from, but it is still too early to say whether that is flattening or even deflationary but we do see a much flatter inflation. So I'm not going to give you any specific numbers about what it costs to build the generation asset around the world. But we do expect clearly that the increases will be lower. But impossible to say whether they have peaked yet and on the way down as that will hinge very much on the macroeconomic factors and the rates specifically. On the Revolution court case, thanks for asking that because nothing is being blocked. There was an attempt. As you know, the American legal system allows for these to happen, and there are several across the industry. There was an attempt to make sort of an injunction against the Revolution construction process that was rejected on April 30. So there is nothing blocking this. And we have gotten a new buy up. So the new permit that fully customary was opened after review, and now we have now gotten that again. So awaiting the last formalities of the permits that should be here very short term, then we will start offshore construction.
Dominic Nash: Thank you.
Operator: The next question comes from Louis Boujard from Oddo BHF. Please go ahead.
Louis Boujard: Yes, thank you good afternoon. Maybe two question on my side. First one on the onshore regarding the pipeline. Currently, you have a lot of under-construction assets, notably in the U.S. and very limited in Europe, I was wondering because we don't have visibility on the pipeline and the development, if you plan to keep on having a strong foothold in the U.S. and if you can, that this remain larger than in Europe, but if you plan to rebalance a little bit in the future on this field? Maybe my second question would be on the Danish tender. It's pretty large, 6 gigawatts, even if it's not tomorrow by 2025, but it's 6 gigawatt. I was wondering because it's a bit different maybe than the normal ones and it's your home market, of course. Do you have any specific development that you plan to tender here? And do you think that this can be available by 2030 to reach our 2030 target as well? Or if it's already too late for that and it will be only delivered after 2030? Thank you very much.
Mads Nipper: Thank you, Louis. Shut me up if I'm answering a different question. So I thought -- on the first question, when you talked about the pipeline in onshore, and the opportunities in U.S. versus Europe. Clearly, the U.S. will remain our biggest onshore market. We do see -- we do have a pipeline and one where we also see several attractive opportunities and also are quite excited about some of the opportunities that are in combined generation and storage. So we are working on that, both on the development side but also looking at are there any sort of project-specific opportunities for acquisition. Europe are many much smaller in the pipeline. We have a strong pipeline, as you're aware, both with Brookfield Renewables, but also Austrian that we acquired in Germany. That is now what we have left from that one. We do have an attractive pipeline, but it is many and much smaller opportunities. But we feel confident that we have a strong and attractive pipeline in onshore in both regions and hoping that I'm addressing the issue that you raised. On the Danish offshore tender, you're right, that is big. It is 6 gigawatts minimum with over planting, it can likely be bigger. It is one where we are studying intensely the details of the tender material. There's been a good market dialogue between the industry and the government but it is too early to say something firm about how we evaluate the attractiveness of this tender compared to other opportunities around the world. On the timing, yes, you're right, it is tight, but it's not our privilege to deem at this stage whether this is something which is realistic or not.
Louis Boujard: Thank you.
Operator: We have a follow-up question from Mr. Casper Blom. Please go ahead.
Casper Blom: Yes, thank you for the opportunity. I just thought I would take the opportunity. And I wanted to check if there is any update on the potential reuse of equipment from Ocean Wind and maybe also from Skipjack? Thank you.
Mads Nipper: Yes, not a lot of update, Casper. It is -- we do continue to mature those opportunities. And as we said before, by far, the biggest one where we have a strong reason to believe there's a reuse opportunities on export cables. We also see that on vessels. So we are -- we continue to work. But on the bigger scopes, it is primarily in export cable and vessel. Nothing that at this stage changes the overall provision where we still feel comfortable with what we have set aside is what is realistic that we're executing on.
Casper Blom: Thanks very much.
Operator: [Operator Instructions] And we have another follow-up from Mr. Mark Freshney. Please go ahead.
Mark Freshney: Hello, thank you. Can I ask on the CC U.S. facility that you're constructing in Copenhagen, I mean there's no commentary in the results on that. How is it progressing so far?
Mads Nipper: Yes, thank you, Mark. That is progressing well, we -- as a reminder, we are building on 2 sites. So the Asnæs and Avedore power plants, we are working with Aker Carbon Capture Norwegian, our key suppliers. And even though this is a first of its kind, it is progressing to plan. And as of now, we have no reason to believe that we cannot keep the COD deadlines of starting to catch carbon in 2025.
Mark Freshney: Thank you.
Operator: Mr. Dominic Nash. Please go ahead.
Dominic Nash: Sorry, a follow-up question for me. So over the last sort of 2024 year-to-date, I think the valuations of most of your renewable peer groups have fallen quite hard. Clearly, also it's done relatively well. But the question I've got here is that when you're looking at building and developing pipelines, are you also sort of comparing whether it's might potentially in today's well be better to buy rather than build? Or is that something that's completely off the table? Thank you.
Mads Nipper: Yes. I mean our business is to develop, build and operate wind farms and renewable farms. And this is what we do best. And we would, with the exception of projects, for example, in onshore, where we do buy and further develop, we are focused on developing and building and operating. So no -- I mean, for example, acquiring assets or platforms within our core business of offshore is at this stage not a priority where, as you have seen in onshore, it's different. We bought two platforms and are also, from time to time, acquiring projects. So two different approaches, but nothing we have any immediate plans to change.
Dominic Nash: Okay. Thank you very much.
Operator: Ladies and gentlemen, that was our last question, and I would like to turn back to Mads Nipper for closing comments.
Mads Nipper: Yes. Thank you very much, and thank you all for joining. I appreciate the great questions and really apologize for the technical challenges we had in the middle. As always, if you have any further questions, don't hesitate to reach out to our IR team. They are here to answer them. So thank you. Stay safe, and have a great day.
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