Ørsted Bolsters Strong First Half Results With Acquisition Of Lincoln Clean Energy

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Danish energy group Ørsted announced its earnings report for the first half of 2018 this week, revealing increased revenue and expected revenue for the full year towards the high end of guidance.

At the same time, Ørsted announced that it had acquired US onshore wind energy developer Lincoln Clean Energy and signed a wind turbine supply agreement with Spanish wind turbine manufacturer Siemens Gamesa Renewable Energy.

Orsted’s Burbo Bank Extension Offshore Wind Farm

Strong Performance

Thursday was a big day for Ørsted with three big announcements covering its latest earnings report, a large acquisition, and a supply agreement with the world’s leading wind turbine manufacturer. The company’s board of directors started proceedings off by announcing its interim earnings report for the first half of the year which showed Ørsted achieved revenue of DKK 8.6 billion ($1.32 billion) for the first half, up 11% on the same period a year earlier and due partly to a 32% increase in operating profits from wind farms in operation.

Henrik Poulsen, CEO of Ørsted

“We’re very satisfied with the first half of 2018,” said CEO Henrik Poulsen. “The solid results from our offshore wind business continued into the second quarter with increased earnings from our operating assets and continued strong progress on our construction projects. We commissioned the world’s largest offshore wind farm in operation, Walney Extension, in May, well ahead of schedule, and at Borkum Riffgrund 2, we installed the first wind turbines.”

For the second quarter, Ørsted took in revenue worth DKK 3.1 billion ($500 million), an expected decrease of 31% on the same quarter a year ago due to a deferred gain of DKK 1.4 billion in the second quarter of 2017 due to the farm-down of the Race Bank offshore wind farm. Profits from wind farms in the second quarter of 2018 increased by 8% to DKK 1.8 billion due primarily to the ramp-up at the Walney Extension and Race Bank offshore wind farms.

“We secured 2.4 GW of offshore wind projects in competitive processes in Germany and Taiwan,” Poulsen continued. “In April and June, we were awarded a total of 1,820 megawatts (MW) offshore wind capacity in Taiwan and have now secured a market leading platform for continued growth in Asia. In the auction in Germany in April, we were awarded an additional 552 MW of offshore wind capacity. In combination with the awards from the auction last year, we’ve secured a total capacity of 900 MW in the Borkum Riffgrund cluster without subsidy. In addition, we have secured a total capacity of 242 MW for Gode Wind 3 & 4 with a weighted average subsidy of EUR 81 per MWh.

“Assuming we take final investment decision on the awards in Taiwan and Germany, our total decided and installed capacity will reach 11.9 GW by 2025.”

Looking forward, Ørsted now expects full-year revenue for 2018 (excluding new partnerships) towards the high end of original guidance of DKK 12.5 to 13.5 billion. Further, the company expects to divest 50% of the Hornsea 1 offshore wind project during the second half of the year which, if it moves forward, will push full-year revenue well beyond the DKK 22.5 billion that was taken in during 2017.

Lincoln Clean Energy Acquisition

At the same time, Ørsted announced that it had entered into an agreement with global infrastructure investment manager I Squared Capital and management shareholders to acquire 100% of the equity interest in US onshore wind energy developer Lincoln Clean Energy in a deal worth approximately $580 million.

Lincoln Clean Energy Founder Declan Flanagan

Based in Chicago and founded in 2009 by Declan Flanagan, Lincoln Clean Energy (LCE) is a developer, owner, and operator of onshore wind farms across the United States to the tune of 1.8 gigawatts (GW) and boasts an active portfolio of 513 MW with another 300 MW under construction and a pipeline worth 1.5 GW which is expected to be completed by 2022.

“The global market for onshore wind power is expected to grow significantly in the coming years, and the US is a leading onshore wind market,” explained Henrik Poulsen. “The acquisition of Lincoln Clean Energy will provide a strong growth platform in the US, which is one of Ørsted’s strategic growth markets. It is an investment case with healthy economics based on prudent assumptions about key value drivers and market developments.”

“I have long admired Ørsted for their leadership in offshore wind power,” added Declan Flanagan, CEO of Lincoln Clean Energy. “The team and I at LCE look forward to replicating that leadership in onshore wind in the US. I also want to thank I Squared Capital for their deep financial and operating expertise and commitment to LCE during what has been a period of rapid and successful growth.”

“The Lincoln team is excited to join Ørsted and to work toward our shared goal of creating a world that runs entirely on green energy. This transaction will enhance our project execution and growth trajectory.”

Agreement With Siemens Gamesa

Topping off a day of big announcements, Ørsted and Siemens Gamesa Renewable Energy announced the signing of a subcontract to supply wind turbines for the Coastal Virginia Offshore Wind project which was founded by Dominion Energy. The project, upon completion, will be the first offshore wind farm in the United States to be built in federal waters. Though small, at only 12 MW — using two of Siemens Gamesa’s 6-MW SWT-6.0-154 wind turbines — the project is nevertheless another step forward for the nascent US offshore wind industry.

“We are delighted to be moving forward on the Coastal Virginia Offshore Wind initiative,” said Thomas Brostrøm, President of Ørsted North America. “Siemens Gamesa’s record of exceptional technology, combined with our prior successful partnership experience around the world, will demonstrate how Virginia residents and businesses can experience the benefits of clean, reliable, cost competitive offshore wind energy.”

“We are extremely proud to provide our turbines to Ørsted and Dominion Energy offshore wind project, and it marks a major milestone in our company’s history,” added Joergen Scheel, Siemens Gamesa Renewable Energy, Vice President, Offshore, North America. “We have always believed in the future of offshore wind power in the United States, and with so much wind potential off the Virginia coast, we are excited to finally add our state-of-the-art turbine technology to the country’s energy mix”.

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Joshua S Hill

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