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Orsted’s gas assets offset slow winds and energy crisis

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Orsted’s ‘brown’ gas and power assets have helped shield the world’s largest offshore wind developer from a big hit to profits from its ‘green’ business in adverse weather conditions and the European energy crisis .

Annual results released on Wednesday showed that low wind speeds, high development costs and intermittent power prices had weighed on the operating profit of the Danish group’s main offshore business.

However, annual earnings before interest, tax, depreciation and amortization from Orsted’s gas business jumped 345% from a year earlier. Ebitda from its power plants, which burn wood pellets and coal to produce electricity, increased by 188%.

“We successfully met the challenges during the year,” said general manager Mads Nipper. “We expect operating profit, excluding new partnerships, to be DKr 19-21 billion [$2.9bn-$3.2bn] in 2022, positively impacted by the ramp-up of new wind and solar assets.

Net profit for the year was 35% lower than a year earlier, slightly below analysts’ expectations.

The group’s revenues increased by 48% in 2021, while Ebitda fell by 13% excluding new partnerships.

Orsted has developed in the American market, as well as in onshore wind power.

While Orsted’s assets are mainly in wind power, it also operates seven power plants, which benefited from “very high” electricity prices in the last four months of 2021.

Six of these plants burn biomass (such as wood pellets). One burns coal and is expected to close next year.

Together, Orsted’s power plants and its gas division accounted for 30% of the company’s Ebitda in 2021, excluding new partnerships, much higher than in previous years.

The combustion of wood pellets is considered a “renewable” resource according to European standards. But the practice is coming under increasing scrutiny from conservationists because of its impact on the environment.

The Ebitda of these power plants and associated services amounted to DKr 3.2 billion, while the gas unit reported an Ebitda of DKr 1.8 billion.

However, high electricity prices in Europe which have benefited Orsted’s power plants have had the opposite effect for its offshore wind assets.

Earnings from this part of the business were lower than expected due to the high cost of purchasing intermittent power to balance wind generation and hedging during such a volatile period.

Orsted’s board of directors raised the dividend by 8.7% to DKr 2.5 per share. The company’s stock price rose 3.2% in morning trading on Wednesday.

He also announced the appointment of Daniel Lerup, the company’s senior vice president, as the new chief financial officer.