The decision by a US federal judge to allow Ørsted A/S to resume construction of its 704-MW Revolution Wind project off the US East Coast provides short-term relief to the beleaguered Danish wind giant but is not the end of the story, analysts said Sept. 23.
Shares in Ørsted were up around 5% at 1:30 p.m. in Denmark after the US District Court for the District of Columbia granted a preliminary injunction on a stop-work order issued by the Trump administration on Aug. 22.
Revolution Wind — a 50/50 joint venture between Ørsted and Global Infrastructure Partners-backed Skyborn Renewables — was 80% complete when work was halted. All of its offshore foundations are already in the water, and about 70% of its turbines are installed.
Following the injunction, Ørsted said construction will resume "as soon as possible."
Analysts at Citi said the ruling provides "near-term relief" to Ørsted's shares, which are down more than 37% since the start of the year on the back of a spate of negative developments in the US offshore wind market. The company is undertaking a $9.4 billion rights issue to help shore up its balance sheet.
However, the ruling does not protect Revolution Wind from the ongoing legal case or from possible further actions by the US government, which could include an appeal, the Citi analysts said in a Sept. 23 note.
Ørsted filed a lawsuit Sept. 4, arguing that the stop-work order was unlawful and should be vacated.
In granting the injunction, Judge Royce Lamberth said Revolution Wind has "demonstrated likelihood of success on the merits of its underlying claims," and added that the project is "likely to suffer irreparable harm in the absence of an injunction."
"From these comments it does seem as if the judge believes Revolution Wind has a good chance of winning its case," CreditSights analysts said in a Sept. 23 note, adding that the injunction "reduces the potential costs" being incurred by Ørsted.
In the prospectus for its recent rights issue, Ørsted said the stop-work order was costing the company up to $15 million per week in additional capital expenditure relating to its 50% share, on top of another $10 million per week due to knock-on delays to its 924-MW Sunrise Wind project.
If work on Revolution Wind has not resumed by late September, the company said it risked incurring significant additional costs, as it may have been required to negotiate new supply contracts or be subject to penalties under the project's power purchase agreements.
"So, good news that the project will now continue, but that does assume that eventually the project will be completed, because if it is not then this is just good money after bad," CreditSights said.
Going forward, analysts said an enduring solution is required to overcome the stop-work order.
UBS said Sept. 23 that a negotiated settlement between Ørsted and the Bureau of Ocean Energy Management, recognizing the consents for both Revolution Wind and Sunrise Wind, is "still possible." The analysts cited Equinor ASA's successful navigation of its own stop-work order on the 810-MW Empire Wind 1 project offshore New York.
Yet, if the Trump administration loses its case against Revolution, it may be compelled to double down on a potential challenge against Sunrise, according to CreditSights.
A delay on Sunrise would be "more critical" than Revolution because it is a larger project, 100% owned by Ørsted, and construction work is at an earlier stage, which means more scope for cost increases, UBS said.
