Ørsted (ORSTED DC) Hold: Green, but no end to risks yet

Research evidence excerpt

12 February 2025

Ørsted (ORSTED DC)

Equities

Multi-Utilities

Hold: Green, but no end to risks yet

Denmark

◆ We believe Orsted’s downgraded investment plan to

MAINTAIN HOLD

strengthen its balance sheet is a step in the right direction

◆ However, is it enough? We see continued risks to execution

and Orsted’s long-term ability to grow profitably

◆ We update our model after the FY2024 results and lower our

TP to DKK320 (previously DKK 395); maintain Hold

Green, but no end to risks yet: After further impairments on the back of continued

construction setbacks and adverse US interest rate developments, Orsted lowered its

2024-30 development ambitions to strengthen its capital structure. We believe the

updated investment plan is a step in the right direction, but we think uncertainty

remains high on execution of under construction projects, funding via farm downs,

attractiveness of next in line large projects, such as Hornsea 4 or Baltica 3, as well as

Orsted’s long-term 2030+ ability to create profitable growth. We think Orsted must

rebuild trust via detailed communication as well as execution.

FY2024 results review: Orsted lowered its investments and 2026 EBITDA

expectations (and dropped its 2030 targets) to support a stronger capital structure.

The company maintains its 2026 FFO/net debt target of 30% and plans to reinstate

the dividend in 2026. Our five takeaways from the FY2024 results: (i) we think it is a

positive step in the right direction that Orsted presented a clear message of lowering

growth to strengthen its balance sheet; however, is it enough? (ii) we think Orsted’s

2026 FFO/net debt target of 30% is now more difficult to achieve with delays to

cashflows and increased 2025/26 costs. The margin of error for further setbacks has

been eroded (iii) can Orsted grow profitably in the long term? Our and consensus

2030 and 2034 EBITDA and net income estimates imply low single digit growth (iv)

we believe FY2024 results revealed continued development weakness. Timelines

have moved further ahead while Orsted’s like-for-like cost estimates increased (v)

farm downs for funding but no upside. Orsted confirmed that it is a buyer’s market.

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