Equinor’s Strategic Bet on Orsted Amid Offshore Windheadwinds: A Calculated Gamble or a High-Risk Exit?

The offshore wind sector in 2025 is a paradox of promise and peril. As global demand for renewable energy surges, developers like Ørsted and Equinor are navigating a landscape marked by regulatory turbulence, soaring costs, and geopolitical headwinds. Equinor’s deepening partnership with Ørsted—through a DKK 6 billion (USD 939 million) rights issue to maintain its 10% stake—has sparked debate about whether this alliance represents a compelling entry point for investors or a risky exit from a volatile market.

Strategic Alignment Amid Turbulence

Equinor’s decision to bolster its investment in Ørsted underscores its confidence in the long-term viability of offshore wind, despite the latter’s recent struggles. Ørsted’s U.S. projects, including the 80%-complete Revolution Wind farm, have been halted by regulatory actions under the Trump administration’s One Big Beautiful Bill Act (OBBBA), causing a 30% drop in its share price [1]. Equinor, having faced similar setbacks with its Empire Wind 1 project, has offered operational insights to Ørsted, leveraging its experience in navigating U.S. regulatory hurdles [2]. This collaboration aligns with Equinor’s broader green transition strategy, which prioritizes offshore wind as a cornerstone of its energy portfolio [3].

However, the partnership’s strategic value is contingent on Ørsted’s ability to stabilize its balance sheet. The Danish developer’s DKK 60 billion rights issue—a move backed by the Danish government and major institutional investors—aims to fund its Sunrise Wind project and mitigate risks from U.S. policy shifts [4]. While this capital infusion could strengthen Ørsted’s position in Europe and South Korea, it also raises questions about the company’s financial resilience. Analysts at Bloomberg Intelligence caution that clarity on the fate of Ørsted’s U.S. projects is critical before shareholders approve the rights issue [1].

Market Dynamics and Financial Realities

The offshore wind sector is projected to grow at a 14.6% CAGR through 2034, driven by technological advancements like floating wind platforms and supportive policies in the EU and China [5]. Yet, project costs have risen by 30–40% over the past two years due to inflation, supply chain bottlenecks, and elevated interest rates [6]. Ørsted’s recent financial struggles—exacerbated by delays in the Hornsea 4 project and U.S. regulatory uncertainty—highlight the sector’s vulnerability to these pressures.

Equinor’s Q2 2025 results, by contrast, reveal a more stable financial foundation: an adjusted operating income of USD 6.53 billion and a net debt-to-capital ratio of 15.2% [7]. This financial strength positions Equinor to absorb risks associated with its stake in Ørsted, but it also raises questions about whether the partnership is a hedge against market volatility or a long-term commitment to offshore wind’s potential.

Analyst Perspectives: Entry or Exit?

Major investment firms are divided. Berenberg upgraded Ørsted to “Buy” in August 2025, citing its strengthened balance sheet post-rights issue and long-term growth prospects in Europe [8]. Morgan Stanley and UBS similarly maintained “Overweight” and “Buy” ratings, respectively, emphasizing Ørsted’s leadership in offshore wind and green hydrogen [8]. However, S&P Global Ratings downgraded Ørsted to BBB- in July 2025, warning of potential credit risks from its U.S. exposure [9].

For investors, the partnership’s appeal hinges on two factors:
1. Geographic Diversification: Ørsted’s pivot to stable European markets and floating wind projects could offset U.S. risks.
2. Strategic Synergies: Equinor’s operational expertise and financial backing may accelerate Ørsted’s recovery, particularly in North-West Europe and green hydrogen [3].

Risks and Mitigations

The partnership faces three key risks:
- Regulatory Uncertainty: U.S. policy shifts could delay or derail projects, impacting Ørsted’s revenue streams.
- Cost Overruns: Rising CAPEX and supply chain bottlenecks may erode margins, even in stable markets.
- Market Volatility: Ørsted’s stock has lost USD 1 billion in value since October 2024, reflecting investor skepticism about its U.S. strategy [3].

Mitigations include the Danish government’s support for the rights issue, Ørsted’s pivot to Europe, and Equinor’s financial resilience. However, these measures may not fully offset the risks of overexposure to a sector still grappling with high capital intensity and project-specific challenges [6].

Conclusion: A Calculated Gamble

Equinor’s partnership with Ørsted is a high-stakes bet on the future of offshore wind. While the collaboration leverages Equinor’s financial strength and Ørsted’s technological expertise, it also exposes both companies to the sector’s inherent volatility. For investors, the decision to enter or exit hinges on their risk tolerance and confidence in the sector’s ability to overcome regulatory and financial headwinds. In a market where project margins have shrunk by 400 basis points and auction failures are rising [6], this partnership represents both a strategic opportunity and a cautionary tale.

Source:
[1] Orsted's American Dream Becomes a Multi Billion-Dollar Nightmare [https://www.bloomberg.com/news/articles/2025-08-30/orsted-s-american-dream-becomes-a-multi-billion-dollar-nightmare]
[2] Equinor Offers Orsted Insight in Face of Wind Farm Halt in US [https://www.bloomberg.com/news/articles/2025-08-25/equinor-offers-orsted-insight-in-face-of-wind-farm-halt-in-us]
[3] Double down or walk away? Equinor's Orsted dilemma [https://www.rechargenews.com/analysis/double-down-or-walk-away-equinor-s-orsted-dilemma/2-1-1860661]
[4] Orsted's big cash call jars with its fresh start [https://www.reuters.com/commentary/breakingviews/orsteds-big-cash-call-jars-with-its-fresh-start-2025-08-11/]
[5] Offshore Wind Energy Market Size, Global Report 2025-2034 [https://www.gminsights.com/industry-analysis/offshore-wind-energy-market]
[6] Offshore Wind Industry Update [https://www.bcg.com/publications/2025/offshore-wind-industry-update]
[7] Equinor second quarter 2025 results [https://www.equinor.com/news/equinor-second-quarter-2025-results]
[8] Berenberg Upgrades Orsted Stock Rating to Buy Despite US Offshore Challenges [https://www.investing.com/news/analyst-ratings/berenberg-upgrades-orsted-stock-rating-to-buy-despite-us-offshore-challenges-93CH-4213883]
[9] Stop-work order for Orsted's Revolution Wind project [https://www.spglobal.com/commodity-insights/en/news-research/latest-news/electric-power/082525-stop-work-order-for-orsteds-revolution-wind-project-surprises-market]