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Ørsted to stick with bidding strategy despite French, Dutch auction losses

Ørsted A/S, the world's biggest developer of offshore wind farms, plans to stick to its bidding strategy for upcoming capacity auctions, despite losing out to two rivals in recent tenders on its European home turf.

The past few months have been a mixed bag for the Danish utility, which won two competitive auctions for large-scale offshore wind farms in New York and New Jersey but lost out in France and on a high-profile unsubsidized tender in the Netherlands.

But despite the losses at home, the company says Europe will remain a core market even while it expands internationally. Ørsted has been spearheading the offshore wind sector's push into the U.S. and Asia. In addition to a growing development pipeline in North America, the company earlier this year committed to a 900-MW project in Taiwan and is also working on a joint development in Japan.

On an Aug. 8 earnings call, CEO Henrik Poulsen said he has "no regrets" about the company's bidding strategy and emphasized that he is not looking to win projects at any price. The French auction, won by a consortium of Electricité de France SA, innogy SE and Enbridge Inc., was awarded at €44/MWh, "well below" Ørsted's bid price, he said. "That's one of the tenders where you walk away."

Poulsen said the prospect of additional planned tenders in the U.K., Germany, Denmark, the Netherlands and France, as well as upcoming auctions in several U.S. states, including Maryland and Massachusetts, over the coming years mean that there will still be plenty of opportunities for growth.

"Demand, if anything, is only accelerating globally," he said. "We try to extract as much learning as we can ... but I'm not too worried about it."

The utility currently has 5,602 MW of offshore capacity in operation and expects to increase its fleet to 9,858 MW by 2022, when new projects in the U.K., Netherlands and Taiwan are expected to be online. The company has roughly another 5,000 MW in awarded capacity.

Poulsen said Ørsted will keep pushing to build green hydrogen production alongside its wind projects, a key element of the utility's bid in the Dutch tender. He said the technology is unattractive to develop on a purely merchant basis but increases the value of a wind farm by adding built-in storage capacity.

Meanwhile, Poulsen added that the company currently has "no active plans" to acquire a European onshore wind developer to mirror its $580 million deal for U.S.-based Lincoln Clean Energy LLC last year but wouldn't rule out a similar move.

During the first half of this year, Ørsted saw higher-than-expected production disruptions, including a fire at a wind farm in Denmark and several outages at its U.K. arrays, as well as a high share of uncompensated curtailments in Germany. Together, the effects created a shortfall of roughly 350 GWh, or 400 million Danish kroner in operating profit, according to Poulsen, who said he expects the issues to persist into the third quarter.

Overall production was nonetheless higher than last year due to newly commissioned projects, driving up earnings year-over-year. Although it said the earnings increase from offshore wind will likely be lower than expected this year, Ørsted confirmed its overall earnings guidance for 2019.