The world’s biggest offshore wind developer, Denmark’s Ørsted, has lost two of its most senior executives after it abandoned a pair of windfarm projects off the US coast at a cost of more than £3bn.
Ørsted told investors that its chief financial officer, Daniel Lerup, and chief operating officer, Richard Hunter, had agreed to step down from their roles with immediate effect because the company needed “new and different capabilities”.
Less than a fortnight ago, Ørsted reported heavy losses for the last financial quarter after cancelling the two big windfarms off the New Jersey coast because of escalating costs.
The company blamed high inflation, rising interest rates and supply chain bottlenecks for the decision to scrap its plans for the Ocean Wind I and II offshore schemes. It has also pulled out of a consortium that was due to bid for offshore wind projects in Norway.
Mads Nipper, the Ørsted chief executive, will remain in his role. He said the board of directors agreed with the outgoing executives that the company needed “new and different capabilities” to “strengthen Ørsted’s journey into the future”.
He added: “Ørsted, along with the rest of the industry, is experiencing a challenging and volatile business environment.”
The construction of multibillion-pound offshore windfarms has become significantly more costly in recent months because the price of materials has spiralled in line with rising inflation. This has been compounded by higher financing costs due to the recent hike in interest rates.
The global cost pressures have wiped billions from the market value of major offshore wind developers and cast doubt on the future of big projects. This has raised concern over government clean energy targets and whether climate goals can be achieved.
Sweden’s Vattenfall has scrapped plans for a huge offshore windfarm off the UK’s Norfolk coast because rising costs meant it was no longer profitable. The company won a government contract to build the Norfolk Boreas project after bidding a record low price of £37.35 a megawatt hour (MWh) for the electricity generated, but it said costs had “changed dramatically” since then.
Ørsted is expected to decide whether to move ahead with the third phase of its giant Hornsea offshore windfarm off the Yorkshire coast before the end of the year. Hornsea 3 would be the single largest windfarm in the world and would play a key role in the UK’s ambition to increase its offshore wind capacity five-fold to 50GW by the end of the decade. The company also bid £37.35 a MWh to win a government subsidy contract.
Earlier this month, Nipper said: “We have an ongoing dialogue with the UK government and a constructive one about what can help and support all our projects, but specifically Hornsea 3. All options are still open and we are looking at all levers to make this project investable.”
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