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Big Oil’s Green Push Has Offshore Wind CEO Looking Over Shoulder

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These translations are done via Google Translate

(Bloomberg) The world’s biggest developer of offshore wind farms plans to ramp up investment to preserve its market-leading position as oil companies eager to boost their green credentials pile into the technology.

“The competition is increasing and, for the world, that’s a great thing. But it will mean that we will have to be on our best game,” Mads Nipper, the new chief executive officer of Orsted A/S, said in an interview. Nipper said the firm is looking at ways of increasing investment levels to keep ahead of the competition.

Nipper will give a crucial update to investors about the company’s long-term plans at a capital markets day in June. The last time executives gave such an update was in 2018, when the company was worth less than half what it is today and its main business, offshore wind, was a minor energy source mostly confined to northern Europe. With competition growing rapidly, Orsted will need to prove that it’s able to capitalize on its head start in one of the hottest sectors in green energy.

Nipper started his job at the beginning of the year. Since then, Orsted shares have fallen about 20% amid a broad drop in green energy stocks, while the pandemic has meant he’s had to meet most of his new colleagues over Zoom.

In the past twelve months, the Danish firm has lost tenders for new wind farms to the likes of BP Plc, Royal Dutch Shell Plc and Equinor ASA. As European oil majors move aggressively into the market his company helped start, Nipper plans to leverage Orsted’s decades of renewables experience to remain the biggest player in the market.

“No one expects them to win everything, but investors want them to win something,” said Deepa Venkateswaran, analyst at Sanford C. Bernstein & Co LLC.

The CEO declined to say what form the added investment will take or how much it will be exactly. More details will come at the June capital markets day. But there’s a clear model in place that has worked to this point.

As Orsted completes more wind farms, it will have more cash to invest. Nipper also said he plans to continue to sell stakes in wind farms, assets that have been in increasing demand.

Sky Eye Measurement
Sky Eye Measurement

Niche Business

When Orsted started building offshore wind farms more than a decade ago, it was a niche business and one of the most expensive ways to produce renewable energy. It spent big to help scale up turbine manufacturing to bring the cost of wind generation down enough to compete with fossil fuel-powered plants.

Sea Monster

Now an increasing number of countries around the world are planning to rapidly scale up offshore wind farms to cut their carbon footprints. While that’s good news for Orsted, it’s also meant a surge in competition. Most notable was BP agreeing to spend billions to secure access to parts of the British seabed, Orsted’s biggest market.

Still, the company has double the capacity of wind farms currently operating offshore as the next largest developer, according to data from BloombergNEF. It’s working on the construction of more than 4 gigawatts of projects that will come online in the next two years.

Nipper brushed off their spell of losses in recent auctions as too small of a sample size. There were only a handful of offshore wind competitions in the last 12 moths. The schedule in the next year is much busier. Their results in those contests may determine whether the recent lack of victories is a normal part of a the ebb and flow or a sign that the market is moving faster than the company is.

Orsted was recently awarded a contract for a pair of wind farms off the coast of Poland in partnership with Polish utility PGE. Elsewhere in Europe Orsted is building out its renewable power generation on land.

“I’m relatively sure we haven’t made our last acquisition in the European space,” Nipper said.

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