Specialist
Former Director at a multinational energy company
Agenda
- Ørsted’s (CSE: ORSTED) 30GW offshore and 50GW onshore targets
- Major challenges and bottlenecks to capacity growth, citing potential Siemens Gamesa (BME: SGRE) supplier issues
- Operating environment impact on IRR for a typical project
- Ørsted’s development projects such as Sunrise Wind and Southward Revolution
Questions
1.
Siemens Gamesa recently announced EUR 1.7bn in costs related to technical issues. These are related to failure rates caused by rotor blades and bearings experiencing vibration issues and how this will impact turbines over their lifespans, and are impacting roughly 15-30% of the newer onshore models, particularly the 5.X. How are you viewing these developments from Ørsted’s perspective?
2.
When you consider how offshore turbine designs differ from onshore turbine designs in components, drive train, rotor blades, bearings, etc, what is the risk that the components issues will show in a few years in offshore turbines? Is this almost guaranteed because these are similar parts and so, given time, these issues will show? Or do you think they are significantly different in design so that they may never experience the same issues?
3.
Looking at Ørsted’s onshore projects in operation, development or pre-development and at the bid stage, are you expecting issues or significant claims to be made under warranties?
4.
How do you anticipate warranties to play out on the Gamesa side? Will it be fairly easy to calculate how much there will be in terms of warranties payable? Or could this get out of control fairly quickly as soon as the company understands the extent to which turbines are impacted in the install base?
5.
Gamesa is a primary supplier to Ørsted. Is it possible these issues will push operators such as Ørsted towards alternatives such as Vestas’s turbines?
6.
There’s a risk that the onshore technical issues in the Gamesa turbines will appear in offshore turbines. Do you think there’s a similar risk in Vestas’s offshore turbines and it might begin to see these issues in the coming years?
7.
Could you summarise the nature of the guarantees provided by Gamesa or the OEMs? Do these guarantees usually cover downtime when the turbine cannot generate power, or operating costs? Do you believe Siemens is liable for the operating profit of these faulty turbines? How will this play out?
8.
Would you say Gamesa has clear visibility on what warranty costs will be?
9.
Might future tendering include less favourable warranty terms and contracts set up for the OEMs?
10.
Ørsted’s performance has been moderately weak in 2023 to date, there has been talk of low wind speeds and availability has been slightly down. How are you viewing the company’s performance YTD [year to date]? Is this the whole picture?
11.
How do you view the recent challenges the industry has faced in terms of being a long-term setback for Ørsted’s 30GW offshore and 50GW installed capacity in total for 2030?
12.
Looking across Ørsted’s portfolio of projects in operation, development or at the bidding stage, are there any particular projects or regions you would be most concerned about?
13.
Ørsted recently filed with the NYSPSC [New York State Public Service Commission] for an inflation adjustment on the 880MW Sunrise project. The company has requested a roughly USD 20-per-megawatt-hour increase to the OREC [Offshore Wind Renewable Energy Certificate] price of USD 110. It indicated that the project may not proceed without the adjustment. What’s the resolution on why or how inflation is posing such a challenge? Why can’t contracts be indexed enough to provide security that way? What’s your outlook here?
14.
Rhode Island rejected Ørsted’s 884MW Revolution 2 project, citing unattractive cost and lack of bids. In the auction, Ørsted was the sole bidder. Secondly, the company was shut out of a 7GW auction after it elected to step out due to the high prices. Do you think auction failures will prompt governments to rethink auction structures or certain elements to the leasing and project awards?
15.
Why does Ørsted have to go back to the initial processes on lobbying? Why can the bid not be restructured going forwards and not have to go through those bureaucratic processes?
16.
Why can municipalities such as Rhode Island reject a bid when there are no other bidders? Why aren’t they incentivised to pick that project because they have no other bids and one is better than nothing?
17.
Why will Ørsted and Rhode Island not go back to the negotiation table and figure out the lower price on the project that will also bottom out the feasibility of the IRR, etc?
18.
How would you assess Ørsted’s strategy in the UK? It seems there may not be enough bidders for the entire spectrum with CFD [Contract for Difference] prices too low to be economically sensible. How does this influence the company’s capacity growth targets?
19.
Ørsted said the Hornsea Three project is at risk without government action and could be put on hold, or perhaps the company would even hand back its CFD. What are your thoughts?
20.
Do you think there was potentially a mistake around the Hornsea Three project, given the contract is indexed to inflation but clearly not enough given the current electricity prices and the cost inflation elements to other OPEX, etc? Should there really have been better indexation clauses?
21.
What is the most significant operating challenge facing a project such as the Hornsea Three? Would you point to any particular aspects within supplier issues or cost inflation on certain components, or do you think it’s largely about the volatility, product prices and inflation?
22.
What are your thoughts on the auction processes Ørsted has in the coming months, in New York, New Jersey, Connecticut, Massachusetts, Denmark and the UK? How is the company positioned for these?
23.
You’ve moved into nuclear and there’s a lot of attention on SMRs [small modular reactors]. I’m not sure if you’re on a conventional reactor or SMR. Have you voted with your feet on the net zero future? Have you left wind farms behind and now think nuclear is the answer, or what are your thoughts there?
