Danish company Orsted has struggled to keep its promising wind projects alive in recent times. High costs tied to Inflation, elevated interest rates, and supply crunches took a toll on Orsted as it wrote off $4 billion linked to two large New Jersey wind projects in October.
At the time, the company described America as the “most painful part of its portfolio” that it would have to make that hard decision of de-risking from—a blow for President Joe Biden’s administration that had pinned great hopes to the country’s investment in green energy.
Now, Orsted announced a much bigger overhaul is in the works—and it involves job cuts, the suspension of dividends at least until 2025, and its exit from several European markets.
The Copenhagen-listed company’s CEO Mads Nipper said the changes were aimed at reducing risks and turning Orsted into a “leaner and more efficient organisation,” it said in a release Wednesday.
The company, which currently employs over 9,000 people, will trim up to 800 jobs globally and halt dividend payments until 2025. That’s not all—Orsted also plans to quit its markets in Norway, Spain and Portugal as part of the new effort.
“2023 was a challenging year for Orsted. We have learned from the challenges and today, we are announcing a robust business plan with revised strategic growth ambitions for 2030,” Orsted’s outgoing chair Thomas Thune Andersen said in a statement.
“We now have a new plan in place that will more than double Orsted’s capacity by the end of the decade and fulfill our continued ambition to be a major renewable energy company.”
Orsted, which is majority owned by the Danish government, has had a tumultuous 12 months, navigating high costs while setting its eyes on big expansion plans in the renewable-energy sector. While some of its obstacles were shared by the larger offshore-wind industry, Orsted’s exposure to the U.S.’s nascent offshore-wind industry complicated matters for the company in 2023.
Less than a year ago, Orsted announced plans to to spend $68 billion in building green power capacity of 50 gigawatts by 2030—but now, its 2030 target has been revised down to between 35-38 gigawatts. The company’s shares have plummeted nearly 42% in the last year, amid economic and operational challenges, which has forced Orsted to take drastic measures in reinventing itself in some ways.
When approached for comment, representatives at Orsted pointed Fortune to the company’s press release announcing its new strategic move.
Rising from the ashes
Although the wind-energy behemoth is facing tricky times, its turnaround plan might set it up for the future if it plays its cards right, Jonathan Robinson, head of global energy & power research at Frost & Sullivan, told Fortune in an email.
Orsted has had to muddle through inflation that hit the global offshore-wind industry the last two years, said Robinson, which is among the reasons investors view them as risky now.
“They [Orsted] need to project stability and part of that is focusing their efforts on their core territories, and minimising exposure to offshore wind overall. If they can show that they have got things under control and are delivering projects profitably then they will have the chance to expand their operations in the future,” Robinson said.
There are a few things that work in favor of Orsted now: Costs will start cooling in the current year, and governments are already starting to show signs of offering more incentives to offshore wind companies, he said.
Supply-chain snarls have also been easing compared to earlier years—as seen in the case of Vestas, the world’s largest wind-turbine maker that’s also from Denmark.
“The mood music for the industry should be very different in 2025 and Orsted should be able to ride that to recover some of the ground they have lost,” Robinson said, adding there’s no dearth of opportunities for Orsted in its core markets like Denmark, Germany, Netherlands, Poland, and the U.K.
“Most of these countries cannot take their decarbonisation to the next level without offshore wind,” Robinson said, which could mean more growth on the horizon.