Ørsted's Strategic Rights Issue: A Prudent Move Amid U.S. Offshore Wind Uncertainty

In August 2025, Ørsted A/S executed a DKK 60 billion ($9.36 billion) rights issue—a bold but calculated move to navigate the turbulence of the U.S. offshore wind sector while reinforcing its position as a global leader in renewable energy. The capital raise, driven by the need to fund the 924-MW Sunrise Wind project and address a DKK 40 billion funding gap after acquiring Eversource's stake, underscores a strategic pivot toward capital discipline and long-term resilience. For investors, this action raises critical questions: Does this rights issue strengthen Ørsted's capital structure, or does it expose vulnerabilities in a sector already grappling with regulatory and macroeconomic headwinds?

Capital Structure Resilience: A Post-Rights Issue Analysis

Ørsted's pre-rights issue debt-to-equity ratio of 1.18 and current ratio of 1.34 indicated a balanced but leveraged position for a capital-intensive industry. The DKK 60 billion infusion, with 50.1% guaranteed by the Danish government and the remainder underwritten by Morgan Stanley, is expected to reduce leverage ratios significantly. Analysts project the debt-to-equity ratio will drop to below 1.0 post-issuance, aligning with industry benchmarks for investment-grade firms. This improvement is critical in a high-interest-rate environment, where rising borrowing costs threaten to erode margins.

The rights issue also bolsters interest coverage. With H1 2025 EBITDA at DKK 15.5 billion and full-year guidance of DKK 25–28 billion, Ørsted's ability to service debt remains robust. The projected EBITDA of DKK 28–32 billion in 2026 and 2027, combined with reduced leverage, should enhance its interest coverage ratio to 4.0–5.0, well above the renewable energy sector's average of 3.36. This positions the company to maintain its investment-grade credit rating, a lifeline for securing low-cost financing for future projects.

Strategic Rebalancing: From Aggressive Expansion to Capital Efficiency

The rights issue coincides with a broader strategic shift. Ørsted has slashed its 2030 offshore wind capacity target by 25%, exiting underperforming markets like Norway, Spain, and Japan. Instead, it is focusing on high-internal rate of return (IRR) projects in stable markets such as the UK, Germany, and South Korea. This pivot reflects a sector-wide trend toward prioritizing profitability over scale, as rising WACC and supply chain bottlenecks make capital efficiency paramount.

The company's DKK 1 billion efficiency program, including 600–800 global job cuts, further underscores this shift. By trimming costs and divesting non-core assets (expected to generate DKK 35 billion in proceeds), Ørsted is creating a leaner, more agile business model. These measures, combined with the rights issue, provide a buffer against U.S. policy risks, where the Trump administration's suspension of offshore wind leasing and stop-work orders have already dented project timelines and valuations.

Long-Term Value Creation: Navigating Uncertainty

While the U.S. market remains a wildcard, Ørsted's focus on high-IRR projects in Europe and Asia-Pacific offers a path to sustainable growth. The Sunrise Wind project, now fully funded, and the Greater Changhua 2b and 4 projects in Taiwan represent high-conviction bets in regions with stable regulatory frameworks. These projects are expected to contribute to a revised EBITDA target of DKK 29–33 billion in 2026, with a projected return on capital employed (ROCE) of 13% through 2030.

For investors, the key question is whether this strategic rebalancing can offset the short-term pain of the 29% stock price drop post-announcement. The Danish government's commitment and Morgan Stanley's underwriting provide certainty, but the market's skepticism is understandable. The rights issue's 46% equity dilution and S&P's BBB- downgrade highlight the trade-offs between immediate capital needs and long-term value. However, the move to strengthen balance sheet resilience—particularly in a sector where credit ratings directly impact financing costs—suggests the company is prioritizing sustainability over short-term optics.

Investment Implications

Ørsted's rights issue is a defensive yet forward-looking strategy. While the U.S. offshore wind sector remains volatile, the company's geographic diversification and focus on high-IRR projects mitigate risks. Investors should monitor three key metrics:
1. Post-issuance leverage ratios: A debt-to-equity ratio below 1.0 and a current ratio above 1.5 would signal improved resilience.
2. EBITDA growth: Sustained EBITDA above DKK 28 billion annually would validate the company's capital efficiency.
3. Project execution: Timely completion of Sunrise Wind and Changhua 2b will be critical to unlocking value.

In the long term, Ørsted's ability to maintain its leadership in offshore wind—despite sector-wide challenges—positions it as a compelling play for investors seeking exposure to the energy transition. The rights issue, while painful in the short term, is a necessary step to ensure the company remains a leader in a rapidly evolving landscape.

For those with a multi-year horizon, the current valuation offers an opportunity to invest in a company that is recalibrating its strategy to align with both market realities and long-term renewable energy goals. The path forward is not without risks, but for Ørsted, prudence may prove to be the foundation of enduring value.