Ørsted posts Q2 net loss as Covid-19 hits harder

Pandemic catches up with the world's biggest offshore wind developer after "minimal" impact in first quarter

The ramp-up of power generation from the Hornsea One offshore wind farm boosted Ørsted's earnings in the first half of the year

Ørsted’s profits were squeezed in the first half of the year and its net result in the second quarter was pushed into a loss as the impacts of the coronavirus pandemic increased.

The Danish developer posted a net loss of DKK 825 million (€110 million) in the second quarter of 2020, but recorded an H1 net profit of DKK 2.5 billion, down 32% from one year earlier.

Its operating profit followed a similar pattern, as it was down 18% to DKK 3 billion in the second quarter, but up 11% to DKK 9.8 billion for the first half of 2020 overall.

Covid-19-related impacts – including reduced electricity demand  – delivered a DKK 150 million hit to Q2 earnings, the company said. By comparison, Ørsted had described the impact of the coronavirus pandemic as “minimal” in the first quarter of the year.

Ørsted explained that the year-on-year decrease in operating profit for Q2 2020 was due to higher construction activity at the 1.2GW Hornsea One offshore wind farm in the same period one year earlier. 

It attributed the net loss in Q2 2020 to its reduced operating profit, higher depreciation and higher net financial expenses due to a DKK 400 million loss in connection with termination of local project financing in the US.

The company’s asset base had remained fully operational despite the pandemic, and its onshore and offshore wind farms had maintained normal availability rates, said CEO Henrik Poulsen, who is due to stand down next year.

Its earnings from operational onshore and offshore wind farms increased by 17% to DKK 8.2 billion in the first half of the year, and by 7% to DKK 2.9 billion in the second quarter. This was due to the ramp-up of power generation from the Hornsea One offshore wind farm, and the Lockett and Sage Draw onshore projects in the US, as well as high wind speeds.

Projects under development

Construction projects in Europe, Asia and the US largely progressed according to plans, Poulsen added.

However, construction of offshore substations for 1320MW Hornsea Project Two and the Greater Changhua 1 & 2a offshore wind farms in Taiwan has been affected by pandemic-related shipyard closures. The shipyard in Singapore where the topsides were being built was closed down for two months, but has now begun to slowly rampingup again.

Poulsen added that Ørsted remains optimistic that it can complete the projects on budget and on time – despite facing an increased risk of delays – and that the overall impact on project economics will be “limited”.

The developer’s Ebitda guidance for the full-year – DKK 16-17 billion – is unchanged from its first-quarter report, but the utility has lowered its expectation for gross investment by DKK 2 billion to DKK 28-30 billion “due to the changed timing of payments”, the company stated.