Orsted has decided to discontinue the development of the Hornsea 4 project in the UK in its current form.
This decision follows a series of adverse developments since the Contract for Difference (CfD) award in September 2024. These include escalating supply chain costs, higher interest rates, and increased execution risks associated with constructing and operating a large-scale project like Hornsea 4 on the planned timeline. Collectively, these factors have undermined the project’s value proposition and heightened its overall risk profile.
In response, Orsted has opted to halt further expenditure on Hornsea 4 and terminate its existing supply chain contracts, effectively withdrawing from delivering the project under the CfD awarded in AR6. Despite this setback, Orsted retains key project rights, including seabed rights, grid connection agreements, and a Development Consent Order, and will explore future development opportunities for Hornsea 4.
Rasmus Errboe, Group President and CEO of Orsted, affirmed the company’s commitment to supporting the UK’s offshore wind ambitions but emphasized that the decision to discontinue Hornsea 4 was made in alignment with Orsted’s capital allocation strategy, which prioritizes value creation and risk mitigation. Despite significant efforts to manage project risks and capital commitments over the past nine months, macroeconomic challenges, persistent supply chain disruptions, and increased operational uncertainties significantly eroded the project’s value proposition.
Orsted continues to express confidence in the long-term potential of offshore wind in the UK and plans to retain the project rights for Hornsea 4, with the intention to revisit development under more favorable conditions. The decision to halt the project is expected to result in break-away costs of approximately DKK 3.5 to 4.5 billion in 2025. Additionally, Orsted anticipates an EBITDA impact of DKK 3.0 to 3.5 billion, including write-downs of offshore transmission assets and contract cancellation fees. Capitalized construction costs of approximately DKK 0.5 to 1.0 billion will also be written down, impacting below EBITDA.
Despite these anticipated financial implications, Orsted’s previously guided EBITDA for 2025 remains unchanged at DKK 25-28 billion, excluding new partnership agreements and cancellation fees. Likewise, the company’s gross investment guidance for 2025 remains steady at DKK 50-54 billion, reflecting Orsted’s continued focus on long-term value creation within the offshore wind sector.
GreentechLead.com News Desk