Manager hopes Equinor says no to Ørsted's giant mission: - There is no shame in turning back

Einar Johansen at DNB Asset Management says he would not have any major objections if Equinor "threw its cards" on Ørsted. – It would potentially be positive for Equinor's share price to limit this loss.

After writing down the Sunrise Wind project by a billion in the fourth quarter of last year , it became clear on Monday that Danish offshore wind giant Ørsted is embarking on a rights issue of 60 billion Danish kroner.

The capital raising comes as a direct consequence of the company's failure to secure a partner or project financing for the US offshore wind project, it was stated in a press release. The entire process surrounding this has now been cancelled and the money from the issue will be used to cover the financing of the project based on full ownership, as well as to strengthen the capital structure.

The Danish state, which is the largest owner with just over half of the shares, has already committed to taking its share. Equinor, which is the second largest owner in Ørsted after its acquisition last fall, told DN on Monday that it has not decided whether to participate in the issue .

– Offshore wind has not been a great experience for Equinor over time. It has been a slow process all the way and there is no good history. In Ørsted, there has been a negative development for both Equinor and the other shareholders, says DNB manager Einar Johansen.

Equinor CEO Anders Opedal will now thoroughly consider whether the company should participate in the giga-emission of the Danish offshore wind company Ørsted.

Hope Equinor says no

Sunrise Wind is one of four projects Ørsted has in the United States, which together have been the subject of significant billion-dollar investments in recent years.

In the fall of 2023, write-downs of DKK 28.4 billion were booked , almost double what the company had predicted to the market just a few months earlier. Just over a year later, the US projects were written down by a further DKK 12.1 billion in the fourth quarter of 2024 , after the company blamed everything from higher interest rates to challenging markets and most recently “a significant, negative development in the US offshore market”.

For Equinor, Ørsted is becoming another sad chapter in the offshore wind investment category that the market is clearly not particularly fond of. The negativity of Empire Wind has been duly covered in recent months , while Ørsted shares have fallen over 40 percent since Equinor announced its entry last fall. As of Monday afternoon, Equinor's Ørsted investment is about 11 billion Norwegian kroner in the red.

DNB manager Johansen believes that it is to some extent logical that Equinor has not yet signaled whether it will participate in the Ørsted issue, as the terms are not yet known. But he also notes that Equinor appears to be reticent:

– To defend its position in Ørsted, and to contribute to less speculation and the risk of price declines that further affect the investment, Equinor should have done as the Danish state did and made a commitment.

– The fact that Equinor now appears to be cautious can be interpreted as an assessment of whether the company should participate in the issue at all. It would potentially be positive for Equinor's share price to limit this loss further and sell down in Ørsted over time.

– No shame in turning around

Johansen believes it will be difficult for Equinor to acknowledge the loss, but reminds us that:

– There is no shame in turning around.

– And as a shareholder in Equinor, would you support such a decision?

– We wouldn't have any major objections to that, no.

Initially, DNB Norge managers viewed the Ørsted investment more positively, given that it was not an option for Equinor to abandon offshore wind altogether.

– Given that the company wanted to be in this industry, it was better to do it together with Ørsted than to do it alone. And it also opened up opportunities, such as buying further into the company or potentially buying it outright, or as some have wanted, trying to merge it with Equinor's own assets into a new company.

– That the management, by holding back so closely on the cards, is actually considering reducing ownership by not participating in the issue, is now perfectly fine. It is also perfectly fine to regret the investment. Even though we do not know all the terms of the issue yet, it will be a new non-negligible amount that Equinor may have to raise, says Johansen.

Think Equinor will join?

ABG Sundal Collier analyst Daniel Vårdal Haugland, for his part, believes it is likely that Equinor will participate in the issue.

– Equinor believed the underlying values ​​were higher when they bought at prices above 400 Danish kroner. If one assumes that the number of shares now increases by 50 percent, then it will very simply correspond to close to 270 Danish kroner per share – without adding that fresh money will come in. We have believed that Equinor's intentions are probably also about strategic interest in Ørsted, and then we do not believe the company will allow itself to be diluted.

When asked how he interprets Ørsted's communication about "significant, negative developments in the US offshore wind market," the analyst says:

– I believe that the fact that we are unable to attract investors or banks to the project is closely related to the Trump administration's negativity towards offshore wind.

Daniel Stenslet of Arctic Securities pointed out, for his part, that Ørsted would not have had enough money to cover the investment costs.

– If the farmdown market remains challenging, it means that a capital raise was probably the last option to secure the necessary liquidity and maintain the BBB credit rating, said an analysis.

The "farmdown" market refers to the market for securing partners or project financing for various projects.

Spends 30 billion

A rights issue means that existing shareholders will be offered new shares based on their existing ownership. The Danish state has provided support for the capital raising and has guaranteed its pro rata share, it was announced.

Denmark's Finance Minister Nicolai Wammen described the capital raising as a necessary move for Ørsted in a statement sent to Bloomberg on Monday.

He further stated that the Danish state will spend approximately 30 billion Danish kroner to defend its ownership stake in Ørsted, and that the guarantee also depends on the rest of the capital being covered by other investors.