Reading Time: 2 minutes
Ørsted has announced its decision to discontinue the development of the 2,400 MW Hornsea 4 offshore wind project in its current form, citing a range of macroeconomic and project-specific challenges. The move follows the project’s Contract for Difference (CfD) award in Allocation Round 6 (AR6) in September 2024.
According to the Danish energy giant, the project has been significantly affected by continued increases in supply chain costs, rising interest rates, and heightened construction and operational risks for a development of this magnitude. These factors have collectively increased execution risk and undermined the project’s value creation potential.
Ørsted stated it will halt further spending on the project and terminate its supply chain contracts. Consequently, Hornsea 4 will not be delivered under the existing AR6 CfD agreement.
“We remain fully committed to being an important partner to the UK government to help them achieve their ambitious target for offshore wind build-out and appreciate the work they’ve done to deliver a clear framework to support offshore wind. However, our capital allocation is based on a strict and value-focused approach, and after careful consideration, we’ve decided to discontinue the development of the Hornsea 4 project in its current form, well ahead of the planned Final Investment Decision later this year,” said Rasmus Errboe, Group President and CEO of Ørsted.
“We’ve been maturing the project over the past nine months and have been working relentlessly with stakeholders and suppliers to manage the different project risks for a project of this scale. Throughout the development phase we’ve been very diligent in our approach to capital commitment to our suppliers, and our committed capital is well below our threshold. The adverse macroeconomic developments, continued supply chain challenges, and increased execution, market and operational risks have eroded the value creation.”
“I’d like to emphasise that Ørsted continues to firmly believe in the long-term fundamentals of and value perspectives for offshore wind in the UK. We’ll keep the project rights for the Hornsea 4 project in our development portfolio, and we’ll seek to develop the project later in a way that is more value-creating for us and our shareholders.”
Ørsted retains the seabed rights, grid connection agreement, and Development Consent Order for Hornsea 4, and will explore future options for the project’s development.
The company anticipates break-away costs between DKK 3.5 billion and DKK 4.5 billion in 2025 as a result of the decision. The EBITDA impact is expected to be DKK 3.0 to DKK 3.5 billion, which includes write-downs of offshore transmission assets and provisions for contract cancellations. An additional write-down of DKK 0.5 to DKK 1.0 billion in capitalised construction costs will occur, though this will not affect EBITDA.
Despite these impacts, Ørsted reaffirmed its previously guided EBITDA for 2025, excluding new partnerships and cancellation fees, of DKK 25–28 billion, and gross investment guidance for the year remains unchanged at DKK 50–54 billion.
