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Danish company attributes decision to high costs, logistical problems and downturn in business environment for renewable energy.
Danish company Orsted, one of the global leaders in offshore wind energy, announced on Wednesday that will not go ahead with the Hornsea 4 project, considered one of the largest projects in the sector in the United Kingdom. The decision marks a delicate moment for the renewable energy market, pressured by rising costs and economic uncertainty.
According to information released by Reuters, the cancellation is due to a combination of factors such as rising prices in the supply chain, rising interest rates and greater execution risk. These elements, according to Orsted itself, compromised the potential financial return expected for the project.
A billion-dollar setback for Orsted
Hornsea 4 had not yet reached its final investment decision, but its suspension could result in losses of up to 5,5 billion Danish kroner (about $837M monthly) in termination fees and accounting write-offs for the company.
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In an official statement, CEO Rasmus Errboe said the move was aimed at protecting the company's assets. "We believe this decision was necessary to ensure that we only offer assets that we are confident will bring the value we desire," he said.
Errboe took over the company in January 2025 with the mission of restructuring Orsted and regaining investor confidence, amid the strong market devaluation faced by the company in recent years.
Drop in market value and adverse global environment
Since its peak in 2021, Orsted has lost about 80% of its market value, reflecting the deteriorating global outlook for offshore wind projects. The downturn is not just affecting the Danish company, but an entire industry that is facing inflationary pressures, disrupted logistics and political changes, particularly in the United States.
In recent months, Orsted shares have suffered further declines after statements by US President Donald Trump, known for its opposition to wind power and preference for fossil fuels. Although projects in the United States remain ongoing, the company reported accounting losses related to tariffs on steel and aluminum — essential inputs for turbines — that directly affected its costs.
British government still hopes for recovery
Hornsea 4 was planned to be installed off the coast of Yorkshire in the north of the UK, with a capacity to generate 2,4 gigawatts. The project had won a renewable energy auction held by the UK government the previous year.
Despite the suspension, the UK’s Department for Energy Security and Net Zero expressed confidence that work would eventually resume. “We recognise the impact of high global inflation and supply chain constraints and will work with Orsted to get Hornsea 4 back on track,” a government spokesperson said.
Offshore wind energy market under pressure
The Orsted case reveals a broader reality facing the offshore wind energy sector: the difficulty of maintaining the economic viability of large projects in the face of an uncertain global environment. With high interest rates, political instability e logistics cost higher than expected, the traditional financial model of these ventures has been reviewed by several companies in the sector.
Even with signed contracts and government support, profitability margins are tighter, leading to the reassessment of investments and the postponement of projects that previously seemed viable.
Orsted Financial Results and Outlook
Despite the challenges, Orsted reported a positive financial result for the first quarter of 2025. The company recorded an operating profit (EBITDA) of 8,6 billion Danish crowns, above analysts' expectations, which estimated 7,88 billion.
The number, however, excludes the effects of the cancellation of Hornsea 4, which could change the scenario in the next financial statements. The company maintained its projection for 2025, but without considering the extraordinary costs related to the interruption of the project.
The company confirmed that two projects in the United States will continue as scheduled despite accounting losses caused by tariffs imposed on imported materials.
United Kingdom continues to invest in renewable energy
The UK is the largest offshore wind energy market outside of China and has maintained its commitment to decarbonising its energy mix. The country is betting on renewable sources as a pillar of its strategy to reduce emissions and achieve climate targets.
The suspension of Hornsea 4 is seen as a setback, but the UK government is still working to maintain investor confidence and strengthen the regulatory framework for the sector. The Yorkshire coastline, where the project was planned, remains a strategic location for future initiatives.
Discipline under new management
Market analysts see Orsted's decision as a sign of a change in stance under Rasmus Errboe's management. According to a note from the Bernstein consultancy, the cancellation is a "surprise" but demonstrates greater discipline and selectivity in the company's investments.
With its reputation shaken and the need to regain market share, Orsted seeks to demonstrate that it is focused on sustainable projects, in the financial and operational sense, even if this means giving up on ventures considered promising.
