Thursday, 8 August 2019

Orsted - Half-Year Results


This energy company based in Denmark is a global leader in offshore wind with around 30% of global capacity and operations in Denmark, UK, Germany and Holland. It also operates several wind farms outside of Europe in the US and also Taiwan. The company's vision is to see a world run entirely on renewable energy.

The shares were added to my portfolio in April at 495 DKK and have advanced nicely over the past few months to 630 DKK. They also now feature in some of my other holdings - Mid Wynd Trust and Baillie Gifford Positive Change.

Renewable energy is very much in the ascendancy due to concerns about our climate emergency. It is estimated the global wind energy sector will attract investment of $1 trillion over the next 10 years as the world makes the transition from fossil fuels to low-carbon clean energy.

Results

The company has today announced half year results to June 2019. Operating profits increased to DKK 8.8bn (2018 8.5bn) and expectations for the full year are well on track.

CEO and President Henrik Poulsen says:
"2019 has been a very good year for ├śrsted so far. Operating profit for the first half of the year amounted to DKK 8.8 billion, which was in line with our expectations and keeps us well on track to deliver on our full-year guidance of DKK 15.5-16.5 billion.  
We were selected as preferred bidder in the auctions in both New Jersey with our Ocean Wind project (1.1GW) and New York with the Sunrise Wind project (880MW) which we own in a JV with Eversource. Subject to final investment decisions, the wind farms are expected to be completed by 2024. We are very pleased with these awards and are well on track to reach our ambition of 15GW offshore wind capacity by 2025 as we continue to pioneer the global offshore wind industry.
In June, we officially inaugurated the Borkum Riffgrund 2 offshore wind farm in Germany and in July, we commissioned the Lockett onshore wind farm in the US well ahead of schedule.
In June, we acquired the 103MW construction-ready onshore wind project Willow Creek in South Dakota in the US. The project is expected to be commissioned by Q4 2020 and will expand our operations in the Southwest Power Pool market, covering the central US".

The share price has increased by 27% since purchase to DKK 630 and this is the second largest holding in my 'green' portfolio.

The shares yield around 1.7% based on the current price.

Share Price past 6 months

Green Transition

In the North Sea, 131 turbines have been installed and Hornsea 1 is due to be completed later this year and will become the world's largest offshore wind farm with a capacity of 1,218MW. Work has started on Hornsea 2 which is due for completion in 2022.

The company is on track to be carbon-free by 2025 and have plans for the sale of the remaining gas and fossil-based power operations which make up around 18% of the business. They have announced plans to phase out their company fleet of petrol/diesel cars and replace them will fully electric by 2025. The company has a strong commitment to the Paris Agreement and the UN Sustainable Development Goals.

The company has set ambitious targets to reduce greenhouse gas emissions in their supply chain by 50% by 2032.


So, although there are the inevitable currency considerations and the higher risks associated with single share ownership, I am happy with progress so far but it's early days.

The company is awaiting the outcome of various tenders on new projects in the US, Taiwan and Europe and news should unfold later this year. So, fingers crossed.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

7 comments:

  1. Well done. Clearly this has proved a very successful investment so far.

    Am i right to assume you hold Orsted in Danish Krone?
    If so, what kind of practical (currency-based) considerations did you find yourself having to weigh up when deciding whether or not to purchase this non-UK holding back in the Spring?

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    1. Thanks bernie, I am off to a good start...I will accept 10% per month!

      Yes, the shares are listed on the Copenhagen exchange and priced in Krone and my broker AJ Bell Youinvest keeps tabs on the daily exchange rates and shows the value of my holding in sterling. It can be a bit confusing to start with but I can always check the Orsted site for confirmation and do my own currency conversion online.

      The dividend will also be paid in local currency and then converted on receipt by my broker.

      Exchange considerations aside, the more I read up about this company, the more I feel comfortable with holding it as a stand alone share but obviously it is higher risk then the likes of iShares Global Clean Energy ETF which holds 30 similar companies.

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  2. Great investment. Having read your article I've taken a look but most of my funds are in a SIPP and ISA. These do not list shares on the Copenhagen exchange unfortunately. I'll have to look at using a taxable account which I try and avoid if possible.

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    1. I hold my Orsted shares in my ISA with AJ Bell Youinvest. They offer most of the UK listed funds and investment trusts as well as shares but I think most brokers are 'patchy' when it comes to investments listed on foreign exchanges so good luck with your efforts Grizgal.

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    2. I am using AJ Bell Youinvest but can't seem to track down the listing via the search function. Did you have to contact them directly?

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    3. Matty,
      If you log into your account and then from the normal 'buy & sell' menu enter ORSTED, it should show up (along with several fixed income options) but the equity one is listed as ORSTED A/S DKK10.

      Hope that helps but otherwise contact Youinvest.

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    4. Got it, thanks! Shows up on the app, but not the website for some reason...

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