Denmark-listed green energy company Orsted has enjoyed surging cash flows from operations in the first half of 2023 despite suffering from lower wind speed and gas prices during the period.
Orsted is a leading green energy company with offshore, onshore wind, and bioenergy operations. Orsted operates Hornsea 2, the world’s largest offshore windfarm located off the coast of Grimsby.
The group generated DKK 45.9 billion in revenue in the first half of 2023, a reduction of 24% compared to last year, primarily due to lower gas prices, although lower average wind speeds also dented income.
Offshore wind EBITDA stormed higher to DKK 8.4 billion in the first of the year, up from DKK 7.8 billion in the year prior. Bioenergy EBITDA was entirely wiped out and total group EBITDA fell to DKK 10.230 billion from DKK 13.044 billion. Cash from operations jumped 442% to DKK 12.5 billion.
During the period, Orsted recorded a number of milestones which will set them up for future growth.
These include receiving development approval for Hornsea 4, with a capacity of up to 2.6 GW. In addition, Orsted confirmed progress in establishing offshore operations in Ireland and the US.
Although Orsted operates in the innovative green energy space, they face the same inflationary pressures as other energy producers. Despite this, analysts at Killik & Co believe many of the constraints are priced into shares with the price-to-earnings multiple near five-year lows.
“The offshore wind industry has been in a difficult spot in recent years, with costs increasing while developers are locked into pricing that was calculated in a lower cost environment. However, the long-term picture is more positive, with strong, multi-decade growth expected in order to decarbonise electricity generation,” said Mark Nelson, Senior Equity Analyst, Killik & Co.
“We see Orsted as the world’s premier developer of offshore wind, and therefore best placed to benefit from its potential growth, though we note that short-term uncertainties remain. Orsted shares trade on 23.5x December 2024 earnings, close to the lowest they have traded in the last five years and well below the average multiple, which we believe discounts much of the near-term concerns.”