Orsted A/S

The stable outlook on Orsted reflects our assumption that the wind power segment's operating performance will remain credit supportive over the next two years, thanks to the stable and predictable nature of the segment's operations. We expect that the company's relationship with the Danish government will be stable following the sale of the local power distribution assets, and there will be no significant changes to Orsted's strategy or financial policies, which support FFO to debt of about 30%. We expect the company will have some headroom over 2021-2023, with adjusted FFO to debt above 30%. Downside scenario: We could lower the rating if Orsted's operating performance were to deteriorate significantly over the next two years, which we see as unlikely.

...As a global leader in offshore wind (market share of about 30%), Orsted will continue to post stable and predictable returns, in our view. We view the company's cash flows as highly predictable, given that about 85% of 2020 EBITDA was generated from subsidized wind projects in Europe. Although this ratio will decline somewhat in coming years as Orsted expands outside Europe, we expect the ratio will remain significant over 2021-2025 and continue to provide stable cash flow streams. Construction risk in offshore wind activities is inherently high, particularly given rapidly improving technology. However, this is offset, in our view, by the company's strong track record of timely and on-budget wind farm construction. Orsted's resilient performance in 2020, amid difficult operating conditions, will provide flexibility for ambitious capex plans. During 2020, Orsted not only exceeded its EBITDA guidance of Danish krone (DKK)16 billion-DKK17 billion (about 2.2 billion-2.3 billion), but also delivered...

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