Orsted Leaves Investors and Consumers Twisting in the Wind

Expensive offshore wind power is bad for consumers and just as bad for investors.

Introduction

Last week Orsted shocked the market by announcing a DKK60bn ($9.4bn or £6.9bn) rights issue. They have failed to sell a portion of their large US offshore wind project, Sunrise Wind so DKK40bn of the cash raised will go towards funding the full construction costs. They also need to “preserve and optimise the value of the company’s operational and construction portfolio.” This probably means they need to fully fund their Chingua 2 and Hornsea 3 offshore wind projects, having so far failed to find investment partners. You can tell they are getting desperate for cash because they have also put up for sale their European onshore wind farm business, hoping to raise another DKK35bn ($5.5bn or £4bn).

Orsted Investors Twisting in the Wind

This has sent Orsted’s share price into a tail-spin and at the close on Friday 15^th August, it was down 85% from the peak in January 2021 (see Figure 1).

Figure 1 - Orsted Share Price Chart (Source - Google)

In fact, the share price closed the week at its lowest level ever with the market capitalisation down to DKK87.2bn. The pain for existing shareholders may not be over because the issue price of the new shares has not yet been announced. The Danish state has committed to subscribe for its 50.1% share of the rights issue. However, Norwegian energy giant Equinor which holds a 10% stake in Orsted had a lukewarm reaction, saying it will “carefully evaluate” the announcement.

To rub salt into the wounds of existing investors, late last week S&P Global Ratings downgraded Orsted debt to BBB-, the lowest investment grade rating, just one notch above junk. This creates the risk that Orsted’s cost of capital may rise, exacerbating their problems. Investors have certainly been left twisting in the wind.

Consumers Left Twisting in the Wind

But what about consumers? Orsted has stakes in about 13 operating UK offshore wind farms. Figure 2 shows the strike price and subsidies received to the end of July 2025 for the Contract-for-Difference (CfD) funded units and the value of Renewables Obligation Certificates (ROCs) to the end of 2024.

Figure 2 - Subsidies Received by Orsted Windfarms

The current strike price is above the current market rate of about £75/MWh for all the CfD-funded units. They only receive subsidies if the strike price is above the market rate. The ROC-funded generators receive their certificates in addition to the market price they receive, so they always cost more than the market price. In total the wind farms that Orsted has a stake in have received almost £8.9bn in subsidies. We should note that these subsidies are shared by all the owners, not just Orsted. Despite receiving all these subsidies, Orsted wind farms do not generate enough cash to fund a viable business able to carry out new developments.

ROCs get paid for 20 years and current CfD contracts are for 15 years, so many of these operations will continue to receive subsidies for many years to come. Of course, as consumers we also pay the cost of grid balancing and backup and the extra costs to expand the grid. All to receive expensive, unreliable power. These subsidy contracts awarded to Orsted wind farms have certainly left consumers swinging in the wind.

Ponzi Business Model

Orsted’s business model resembles a Ponzi scheme. They win wind farm development contracts then spend some cash to develop the projects, but rely on outside investors to purchase stakes in the project, so they can recycle the cash into new projects. As the supply of new investors dwindles, the business model falls apart, just like a Ponzi scheme.

We can see why by looking at there most recent project to come on line. Because of the low strike price, Hornsea 2 is not profitable. According to the latest accounts, Hornsea 2 lost £150m before tax 2024 more than the loss of £107.5m in 2023. The windfarm generated £97.6m in cash from operations, but £89.9m of this was consumed by financing activities – paying interest and paying down debt. It should be noted that Hornsea 2 has a Power Purchase Agreement with a group company and the revenue it receives may not represent the full value of the electricity and subsidies received as they appear to accrue higher up the ownership chain. Nevertheless, Hornsea 2 is left with £2,092m of debt on the balance sheet and a decommissioning liability of £128.3m that when grossed up at their 4.25% discount rate for the remaining asset life amounts to about £320m.

The average strike price for Hornsea 3 is even lower than Hornsea 2 so the economics will likely be even worse, yet they are trying to sell off parts of Hornsea 3 to other investors. Good luck with that.

Conclusions

Investors in Orsted are certainly feeling the pain of investing in offshore wind. The prospects for the newer windfarms do not look bright, with operational cash generation barely enough to fund financing costs.

Consumers are also feeling pain from the costs of offshore wind. We are funding these eyewatering subsidies plus the extra costs of grid balancing, extension and backup. Because Ed Miliband is offering higher prices for longer in AR7 in an attempt to mitigate the pain to developers and investors, consumers will be made to suffer even more.

Offshore wind farms are a lose-lose deal for both developers and consumers. The only winners are the banks that lend the money. Only Governments could organise such an epic destruction of wealth. Orsted is leaving investors and consumers swinging in the wind.

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