Danske Bank: Ørsted – Updates long term strategic ambitions and capex plan

Ørsted (MW) has just announced its new longer term targets ahead of its CMD (starting at 13:00 CET). Ørsted has raised its 2030 target for installed renewable capacity to 50GW (currently has 9.3GW). The previous target was ‘+30GW’. To achieve this, Ørsted raises its annual capex budget considerably, aiming to deploy DKK350bn in the years 2020-2027. This corresponds to around DKK44bn a year compared to the previous annual capex target of DKK32-34bn. Ørsted expects this to lead to a clean EBITDA level of DKK35-40bn by 2027 from renewable activities. Ørsted states that it expects this level to be reached by annual growth levels of 12%, corresponding to an EBITDA guidance for 2021 of DKK17.7bn. Ørsted does not change its dividend policy. With the updated capex budget, we now see Ørsted as a likely issuer already in 2021 or early 2022, based on Ørsted’s short term liquidity profile. Overall, we consider Ørsted’s new and more aggressive growth strategy slightly worrying from a credit perspective, as Ørsted will be engaging further into the very competitive renewables market, risking participating in tenders/auctions with low return profiles. That said, we continue to prefer capex over higher dividends. Overall, we see today’s news as slightly credit negative.