Equinor buys $2.5 billion worth of shares in Danish wind giant Orsted

A grader acquired a $2.5 billion stake in Danish wind energy giant Orsted, combining one of the largest fossil fuel companies in the Nordic region with the largest renewable energy developer.

The deal with Equinor represents one of the most significant endorsements for the long-embattled offshore wind industry, just as falling interest rates and easing supply chain bottlenecks brighten the prospects for renewable technologies key to Europe’s climate goals. Orsted shares jumped as much as 8 percent on this news.

The deal comes at a critical time for the giant wind energy developer, as CEO Mads Nipper tries to implement a turnaround plan after the company reported billions in write-downs last year due to problems with U.S. offshore wind farms.

“The offshore wind industry currently faces a number of challenges, but we remain confident in the long-term prospects for the sector and the key role that offshore wind will play in the energy transition,” Anders Opedal, CEO of Equinor, said in a statement.

The deal gives Equinor a nearly 10 percent stake in Orsted, making it the second-largest shareholder after the Danish government, according to the statement. Equinor does not intend to further increase its stake for now, will not seek seats on the management board and says it supports Orsted’s strategy and management.

For Equinor, this is a simple way to increase its renewable energy portfolio. The company aims to achieve 12 to 16 gigawatts of green energy capacity by 2030. Shares of the gas giant fell by as much as 3%.

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“Equinor gains access to 1 gigawatt of net operating assets for $2.5 billion, equivalent to the cost of building offshore wind projects – minus the construction and delivery risks and supply chain risks” – Biraj Borkhataria, Energy Research Manager at RBC Europe.

Orsted is trying to climb the path to growth. The company’s shares have soared during the pandemic as rock-bottom interest rates and a green investment frenzy pushed the company’s market value to nearly $94 billion in early 2021, just as Nipper took over as CEO. As borrowing costs rose, the projects Orsted planned to build looked more expensive, forcing the company to write down its value and close several U.S. locations.

The company canceled two major U.S. projects and fired top executives. Investors fled, causing the company’s stock to fall so low that Orsted was at one point worth less than the sum of its operating wind farms.

In February, Nipper unveiled a turnaround plan that cut the company’s dividend, laid off workers and scaled back growth plans this decade. This year, the company has gradually regained value, although it is still worth much less than before the crisis last year. BLOOMBERG