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DONG Energy Sees Profits Double In 2016 But Expects Tough 2017; Will Phase Out Coal By 2023

Danish offshore wind energy giant DONG Energy reported a massive 119% increase in operating profit in 2016, reported this week, and accompanied by the news that the company would completely phase-out coal by 2023.

Danish offshore wind energy giant DONG Energy reported a massive 119% increase in operating profit in 2016, as published this week, and accompanied it by the news that the company would completely phase-out coal by 2023.

DONG Energy published its 2016 full year financial results on Thursday, reporting an operating profit (EBITDA) of DKK 19.1 billion ($2.7 billion), an increase of 119%, or DKK 10.4 billion ($1.5 billion). In fact, the company experienced preternaturally strong results across the board, with increases in nearly every category including net profit (DKK 12.2 billion), gross investments (DKK 15 billion), and a decrease in the company’s net debt of DKK 5.7 billion down to only DKK 3.5 billion.

“The results for 2016 are highly satisfactory,” said Henrik Poulsen, CEO and President, obviously shooting for understatement. “We have delivered an underlying growth of 95% in operating profit (EBITDA), driven by strong growth in Wind Power.

Henrik Poulsen

“In 2016, we took important steps in the green transformation with the decisions to invest in a further three offshore wind farms, including Hornsea 1, which will be the largest in the world. We also completed the biomass conversion of two Danish power stations and initiated the construction of the world’s first commercial-scale REnescience plant in Northwich in the UK that converts unsorted household waste into green energy.”

Specifically, with wind power making up 80% of the company’s focus, the wind power section recorded profit of DKK 11.9 billion, up 93%. The company currently has 6.7 gigawatts (GW) of offshore wind energy installed globally, and intends to expand that to between 11 and 12 GW by 2025. This will be helped in part by the total 3 GW worth of project rights the company has in the United States.

DONG Energy put forward an expectation of reaching EBITDA for continuing operations of DKK 15 to 17 billion for 2017, with investments in 2017 expected to amount to DKK 18 to 20 billion.

“We will continue the green transformation in 2017,” continued Poulsen. “We expect to complete the offshore wind farm Burbo Bank Extension, the bioconversion of Skærbæk Power Station and the REnescience plant in Northwich. And today, we have announced that we will completely phase out coal from our power and heat generation by 2023.

“On the bottom line, we have delivered a strong profit from continuing operations of DKK 12.2 billion, which means that we can recommend to the annual general meeting that DKK 2.5 billion to be paid out in dividend.”

Of one further note, revealed by DONG Energy on Thursday, is its intention to become fully coal free by 2023. DONG Energy has already reduced coal consumption by 73% since 2006, and the company has now committed to completely phasing out coal from their power and heat generation by 2023.

Finally, in a meeting with analysts and investors, Henrik Poulsen explained that the company is anticipating tough competition in 2017 for projects across Europe and the United States, as new players enter the markets and margins continue to decrease. Low offshore wind prices have been driven to record lows, which DONG Energy expects to bring an end to the high returns the industry has experienced so far.

“We were all surprised about how fast prices have come down,” Poulsen told investors and analysts at a capital markets day in Copenhagen on Thursday (via Reuters). “Some people have said that the outcome of the (Dutch and Danish) tenders was the end of value creation in offshore wind. I firmly believe that’s a wrong conclusion.”

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