Ørsted chief executive Henrik Poulsen says the first six months of 2019 were good ones for the leading developer of offshore windfarms, although it experienced a number of operational issues
“2019 has been a very good year for Ørsted so far,” he told a conference call about the company’s results. “Operating profit for the first half of the year amounted to Dkr8.8Bn (US$1.3Bn), which was in line with our expectations and keeps us well on track to deliver on our full-year guidance of Dkr15.5-16.5Bn (US$2.3-2.5Bn).”
Mr Poulsen highlighted that the company was selected as preferred bidder in offshore wind auctions in New Jersey, with its 1.1-GW Ocean Wind project, and New York, with the 880-MW Sunrise Wind project, which it owns in a joint venture with Eversource. Subject to final investment decisions, the windfarms are expected to be completed by 2024.
“We are very pleased with these awards and are well on track to reach our ambition of 15 GW of offshore wind capacity by 2025,” Mr Poulsen said. In June, the company also inaugurated the Borkum Riffgrund 2 offshore windfarm in Germany.
Earnings from offshore windfarms in operation increased by 18%, driven by a ramp-up of generation from new windfarms. The company’s onshore wind business contributed positively to year-on-year development as did higher earnings from trading related to hedging energy exposures and strong margins in the company’s gas portfolio. The green share of generation in that portfolio increased from 71% to 82%. Return on capital employed increased to 29%, up 6 percentage points compared to H1 2018.
However, according to a company presentation, the increase in earnings from operational windfarms will be lower than initially expected due to curtailment and operational issues the company experienced during H1 2019, issues that are expected to persist in Q3 2019.
Ørsted said that despite the significant growth in profits, it is not fully satisfied with generation in H1 2019 where the number of outages and curtailments across its portfolio was higher than normal. This was mainly related to Horns Rev 1 in Denmark due to a platform fire in October 2018 (all 79 wind turbines were back in operation at the end of June 2019), converter station outages at Borkum Riffgrund 2, as well as array cable repair campaign at London Array and various array cable and export system outages at Race Bank, West of Duddon Sands, and Burbo Bank in the UK.
In addition, the company had higher than expected non-compensated curtailments at its German windfarms in H1 2019. It estimates that these effects in total have resulted in a non-compensated generation shortfall of roughly 0.3TWh during H1 2019. In addition, it had 0.2TWh lower generation in H1 2019 due to curtailment, where it was fully compensated by the grid operator.
Earnings from existing partnership agreements, which amounted to Dkr3.7Bn (US$0.6Bn) in 2018, are now expected to be in line with last year. “Previously, we expected the earnings to decline. This is mainly due to higher than expected earnings from the construction of Hornsea 1 for partners due to good progress during 2019, and positive effects from settlement of construction projects finalised in 2018,” the company said.
Further positive effects from the ongoing divestment of offshore transmission assets were also included in H1 2019. “We expect to divest the offshore transmission asset at Race Bank during 2019, whereas the offshore transmission asset at Walney Extension is expected to be divested in 2020,” said the company.
“We remain very pleased with the operational and financial performance of the company as we continue to expand our position as a global leader in green energy,” Mr Poulsen concluded.