Orsted's Stock Plummets 16% Amid U.S. Project Uncertainty

Orsted, a Danish renewable energy giant, is grappling with uncertainty surrounding its planned $94 billion capital increase following the Trump administration's decision to halt one of its offshore wind projects in the United States. The company's management is set to meet with shareholders in London on Tuesday to address investor concerns and stabilize confidence.

This meeting comes after Orsted's stock price in Copenhagen experienced a significant drop of 16%, reaching a historic low and reducing its market capitalization to approximately 753 billion Danish kroner (around $118 billion). Despite this market turmoil, the Danish government, which holds a majority stake, remains committed to participating in the 600 billion kroner rights issue.

The U.S. Bureau of Ocean Energy Management denied the construction permit for the "Revolution Wind" project off the coast of Rhode Island, which had already completed 80% of its progress. This decision has raised concerns that Orsted's "Sunrise Wind" project off the coast of New York could face a similar fate, adding to the uncertainty surrounding the company's U.S. operations.

Analyst Emil Haargaard from DNB Carnegie noted that if both projects are canceled, Orsted would face a total penalty of around 120 billion kroner. Although the likelihood of this scenario is low, the unpredictable situation adds uncertainty to the capital increase plan. "A rights issue of this magnitude requires a significant reduction in uncertainty and a clear resolution of the execution risks associated with the U.S. business," Haargaard stated in a report.

Orsted, a long-time favorite in the renewable energy sector, has struggled to replicate its European success in the U.S. market. The Trump administration's opposition to wind energy has further complicated the situation. Court documents filed last Friday revealed attempts to block another wind farm development near Maryland, adding to the regulatory challenges Orsted faces in the United States.

Investors are closely watching whether Orsted can find a way to appease U.S. regulators and the time it will take to resolve the issue. A glimmer of hope lies in the fact that the Trump administration reversed its decision to halt the "Empire Wind" project by the Norwegian state oil company after it reached an agreement to allow the construction of a new natural gas pipeline. Connecticut Governor Ned Lamont mentioned on Monday that there is room for negotiation, and Orsted is hoping for a similar breakthrough.

The rights issue is being underwritten by a consortium of banks, including BNP Paribas, Danske Bank, JPMorgan, and Morgan Stanley. The outcome of the shareholder meeting and the subsequent negotiations with U.S. regulators will be crucial in determining the future of Orsted's offshore wind projects and its planned capital increase.