Research Update: Offshore Wind Giant Orsted A/S Affirmed At 'BBB' As Farm-Downs Reduce Debt; Outlook Stable

Orsted has announced several farm downs totaling about Danish krone (DKK) 27 billion in the fourth quarter of 2024, which will support its credit metrics. These measures will, however, cause dividend leakage to minority interests to increase to about DKK2.7 billion-DKK3.3 billion from 2025 onward. In our view, Orsted's gross impairments, which amounted to DKK6.8 billion in 2024 (mainly relating to its U.S. operations) demonstrate that the offshore wind industry remains risky, especially during construction. We estimate that consolidated S&P Global Ratings-adjusted funds from operations (FFO) to debt will reach 24%-26% in 2024 and, assuming continued execution of asset sales, could exceed 40% in 2025, depending on the speed of execution. We affirmed our 'BBB/A-2' long- and short-term ratings on

...- Orsted has announced several farm downs totaling about Danish krone (DKK) 27 billion in the fourth quarter of 2024, which will support its credit metrics. These measures will, however, cause dividend leakage to minority interests to increase to about DKK2.7 billion-DKK3.3 billion from 2025 onward. - In our view, Orsted's gross impairments, which amounted to DKK6.8 billion in 2024 (mainly relating to its U.S. operations) demonstrate that the offshore wind industry remains risky, especially during construction. - We estimate that consolidated S&P Global Ratings-adjusted funds from operations (FFO) to debt will reach 24%-26% in 2024 and, assuming continued execution of asset sales, could exceed 40% in 2025, depending on the speed of execution. - We affirmed our '###/A-2' long- and short-term ratings on Orsted, and our '##' rating on the company's junior debt obligations. - The stable outlook indicates that we expect Orsted to continue to benefit from a high share of contracted revenue and...

Research Update