KEY POINTS
- For $2.5 billion, Equinor purchases a 9.8 percent share in Orsted, an offshore wind developer.Â
- With this acquisition, Equinor’s renewable energy capacity increases by 1.7 GW, with a target of 12–16 GW by 2030.Â
- Equinor’s shares decreased by 3.9 percent, while Orsted’s shares increased by 5.8 percent.
Equinor of Norway made a big addition to its renewable energy portfolio when it paid $2.5 billion to acquire a 9.8 percent share in Danish offshore wind producer Orsted.
The purchase comes at a time when the offshore wind sector is dealing with growing prices and technological difficulties, but it is still Equinor’s long-term wager as it looks to advance its objectives for renewable energy.
Strengthening Renewable Energy Ambitions
Through the acquisition, Equinor’s portfolio of renewable energy now includes 1.7 gigawatts (GW) of net generation capacity. By 2030, the Norwegian corporation wants to install 12 to 16 GW, so this agreement is a significant step in the right direction.
Despite the current difficulties facing the offshore wind industry, CEO Anders Opedal voiced confidence in the decision, characterizing it as a strategic long-term investment.
Equinor has less than 1 GW of installed renewable power by the end of 2023; this acquisition moves them one step closer to their lofty goals.
According to Reuters, Opedal also emphasized the counter-cyclical nature of the acquisition, stating that this was an optimal time to invest in an attractive portfolio like Orsted’s.
Orsted’s Market Response
Orsted’s share price increased by more than 8 percent after the announcement, ultimately settling at a 5.8 percent gain.
However, Equinor’s stock experienced a fall of 3.9 percent. Equinor made it clear that it has no intention of raising its ownership of Orsted beyond ten percent and that it will not run for office on the board.
Orsted, the biggest offshore wind developer in the world, has been dealing with issues like project delays and inflation-driven increases in equipment costs.
The business is still at the top of its industry despite these challenges, and its recent alliance with Equinor shows that its long-term prospects are being recognized.
A Strategic Investment in Offshore Wind
Equinor acquired a small stake in Orsted over time by using a combination of block trades and market acquisitions.
Equinor now owns a 51 percent interest in Orsted, making it the second-largest shareholder after the Danish government.
Due to difficulties in recent years, Orsted has had to modify its investment goals and halt dividend payments.
On the other hand, analysts view Equinor’s investment as a strong endorsement. While this transaction doesn’t alter Orsted’s structural direction, Sydbank analyst Jacob Pedersen noted that it does demonstrate the long-term value of its assets.
Equinor’s move into offshore wind further strengthens its position in the energy transition, underscoring the company’s commitment to expanding its renewable energy portfolio.
As offshore wind plays an increasingly critical role in the global energy landscape, Equinor’s bet on Orsted positions it well for future growth.
