Danish energy company Ørsted has announced the discontinuation of its Hornsea 4 offshore wind project, in a significant blow to the UK’s clean energy goals. The company attributed the decision to rising supply chain costs and heightened financial risks.
Initially awarded a Contract for Difference (CfD) in the sixth allocation round in September 2024, the 2,400MW project has faced mounting challenges that have compromised its feasibility and value creation.
The decision to halt further investment and terminate existing supply chain contracts means Ørsted will not pursue the Hornsea 4 project under the terms of the CfD awarded in AR6. The company highlighted the impact of higher interest rates and increased construction and operational risks as key factors influencing this decision.
The company was slated to make a Final Investment Decision (FID) on the offshore wind project later this year.
Ørsted Group President and CEO Rasmus Errboe said: ““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.”
Despite this setback, Ørsted intends to explore future possibilities for the Hornsea 4 site, leveraging its existing seabed rights, grid connection agreement, and Development Consent Order.
Financially, Ørsted anticipates break-away costs of between DKK3.5-DKK4.5bn ($530m-$680m) by 2025. The expected impact on EBITDA is estimated at DKK3bn to DKK3.5bn, considering write-downs of offshore transmission assets and provisions for contract cancellation fees. Additionally, capitalised construction costs of approximately DKK0.5-1.0bn will be written down, affecting figures below EBITDA.
Despite these financial implications, Ørsted reaffirms its previously guided EBITDA for 2025, excluding new partnership agreements and cancellation fees, at DKK25-28bn. The company’s gross investment guidance for 2025 remains steady at DKK50-54bn.
Recently, Ørsted sold a 24.5% stake in the West of Duddon Sands Offshore Wind Farm in the UK to funds managed by Schroders Greencoat, as part of a divestment programme.
