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Wind energy bubble is bursting as Orsted share price collapses

By:
on Nov 1, 2023
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  • the wind energy is going through existential risks as interest rates surge.
  • Most companies in the industry like Orsted, Siemens Energy, and Equinor have issued warnings lately.
  • Orsted stock price collapsed by more than 20% on Wednesday.

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The wind energy industry is going through a rough patch as interest rates surge raising construction and maintenance costs. Orsted share price crashed by more than 20% on Wednesday, a week after Siemens Energy stock cratered by over 30%. The stock has collapsed by more than 60% from its highest point this year. 

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Wind energy woes

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There are increasing risks that the wind and solar industries are collapsing. In September, the UK recorded what The Guardian said was the ‘biggest clean energy disaster’ in years. The country’s auction for the next wind projects saw no bids as companies warned about the rising costs.

Meanwhile, in the United States, a number of governors sent a letter to Biden, calling for the federal government to support the wind industry. The governors cited the soaring costs in the industry and supply chain disruptions.

And last week, Siemens Energy stock price collapsed after the company turned to the government for funding guarantees. The company wants over $16 billion in state guarantees as its business slows. And in China, Xinjiang Goldwind warned that its profit crashed by 98%. 

And now, Orsted, a leading company in the wind energy industry is sounding an alarm about its business. The company said that it would book a $4 billion impairment on projects in the United States. 

Therefore, there are rising risks that the company’s business will continue struggling barring any major investments by the government. In a report, the firm said that its EBITDA for the first nine months of the year was DKK 15.4 billion, a small increase from the same period in 2022.

The company’s total loss stood at DKK 19.9 billion while the Return on Capital Employed (ROCE) crashed to -14%. The CEO said:

“Therefore, as part of our ongoing review of our US offshore wind portfolio, we’ve decided to cease the development of Ocean Wind 1 and Ocean Wind 2. At the same time, we’ve taken final investment decision on the 704 MW Revolution Wind project.”

Orsted share price forecast

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Orsted share price

Orsted chart by TradingView

The weekly chart shows that the Orsted stock price has crashed hard in the past few months. Precisely, the shares have dropped by almost 80% from the highest point on record. And the situation is worsening as the stock is on track for its biggest weekly drops since August.

Orsted shares have remained below all moving averages and the important support level at DKK 540.8, the lowest level in May. Therefore, while the stock is clearly oversold, there is a likelihood that the downtrend will continue falling. If this happens, the next important level to watch will be at DKK 200.

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