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Renewables Giant Orsted Adopts Austerity Measures After Challenging Year

In the wake of a tumultuous year marked by challenges in the wind energy sector, global renewables leader Orsted is implementing a series of strategic moves to navigate a changing landscape. The Danish company, recognized as the world’s largest offshore wind developer, is embracing measures to enhance efficiency and weather the storm of recent setbacks.

Orsted’s Chief Executive, Mads Nipper, announced plans to make the organization “leaner and more efficient” by reducing its workforce by up to 800 jobs globally. Simultaneously, the company is opting to pause dividend payouts for the financial years 2023 to 2025, signaling a commitment to financial prudence in the face of uncertainties.

The turbulent year has prompted Orsted to exit markets in Norway, Spain, and Portugal, strategically realigning its focus. Despite the challenging circumstances, Nipper highlighted the company’s strong underlying business progress, demonstrating resilience in the face of adversity.

Shares of Orsted, listed on the Copenhagen stock exchange, saw a 1% decline at 11 a.m. London time, reflecting the broader challenges faced by the wind energy industry. The company’s stock price has witnessed a significant 40% drop over the past 12 months, mirroring the impact of rising costs and disruptions in the supply chain.

The financial difficulties faced by Orsted in 2023 were accentuated by impairments on U.S. offshore projects, particularly in the third quarter of the year. This led to the cancellation of two major offshore wind farm projects in the United States, citing challenges such as high inflation, rising interest rates, and supply chain bottlenecks.

In response to these challenges, Orsted has revised its power generation capacity target, now aiming for 35 to 38 gigawatts (GW) by the end of the decade, a reduction from its initial goal of 50 GW. Project cancellations and a reduction in capital expenditure across the portfolio are expected to result in approximately 35 billion Danish kroner ($5.05 billion) of capital expenditure relief from 2024 to 2026.

Nipper emphasized that the company is reevaluating its portfolio to prioritize growth options with the highest potential for value creation while simultaneously mitigating risks in project development and execution. This strategic move aligns with Orsted’s commitment to remain a key contributor in accelerating the renewable energy build-out in the years to come.

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