Ørsted, the company formerly known as DONG Energy, has reported strong financial growth in 2017 with increased profits and plans to expand into solar and energy storage, continuing the company’s transformation from traditional energy company into renewable energy behemoth.
Ørsted announced its annual financial report for 2017 late last week, revealing that the company had had yet another strong quarter with increased operating profits of DKK 22.5 billion, up 18% on 2016 levels. The company’s wind power business increased its operating profit by 74% to DKK 20.6 billion, thanks greatly to the 50% farm-downs of the 450 MW (megawatt) Borkum Riffgrund 2 offshore wind farm and the 659 MW Walney Extension offshore wind farm.
The farm-downs seem to have surpassed even Ørsted’s own expectations for their operating profit for the year. In its third-quarter earnings report, the company provided operating profit guidance of between DKK 17 to 19 billion. A month later, with the finalizing of the Borkum Riffgrund 2 farm-down, Ørsted increased its operating profit guidance for 2017 up to between DKK 19 to 21 billion — which ended up undershooting the company’s eventual total of 22.5 billion.
“In 2017, we took decisive steps towards completing our strategic transformation to a green energy company,” said company CEO Henrik Poulsen.
“We continued our build-out of green energy generation from offshore wind and biomass, we divested our oil and gas business, and we made the decision to be coal-free by 2023. It was also the year when we won projects both in Germany and the UK, and for the first time offshore wind was able to compete on cost with new-builds of coal- and gas-fired power stations.
“2017 was a financially strong year for us. We delivered our highest operating profit ever and achieved delivered performance across our business units. The farm-downs of Walney Extension and Borkum Riffgrund 2 also prove that our partnership model remains very attractive for institutional investors.”
The most interesting aspect of the company’s 2017 financial report was not how well it had done in 2017, but rather its plans for the future. According to Poulsen, Ørsted has recently “established a new unit to explore energy storage and solar PV projects, and we are also looking more closely at the market for onshore wind” as well as continuing its offshore wind build-out. “We also want to make our utility business greener, create a smart power distribution grid and improve our customer experience through digitisation and innovation of our products,” Poulsen added.
Financially, Ørsted has decided to only provide guidance based on existing offshore wind partnership agreements, rather than also including partnership agreements which made the company’s outlook particularly sensitive to the timing of farm-downs. As such, Ørsted expects operating profit excluding new partnerships to be in the range of DKK 12-13 billion in 2018 compared with DKK 12.7 billion in 2017. The company nevertheless expects the 50% farm-down of the 1.2 GW (gigawatt) Hornsea Project One offshore wind farm — which began construction last week — to take place in the second half of 2018 or sometime in 2019. If this takes place in 2018, Ørsted predicts operating profit will hit DKK 22.5 billion.
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