Orsted A/S

Thank you very much, and hello everyone, and thank you for joining our earnings call. First of all, I'm very happy to be joined today by you, Trond, our newly appointed CFO, Trond Vestli. Trond has strong competences and experience from his career as CFO in several global listed companies, such as AP Møller Mersk, Telenor, and Aager Kverna. I will leave the word to Trond for introductory remarks when I hand over for the financials. We decided to change and simplify the executive management structure at Ørsted to further sharpen the company's focus on project execution, financial discipline and value creation. As part of the new management structure, we have established a new commercial organization under the leadership of Rasmus Erbo, who is appointed deputy CEO and chief commercial officer. And a lot of you have in the past quarter met with Rasmus in his capacity as interim CFO. At the same time, Patrick Harnedt, who is heading our European Offshore Construction Portfolio and has been responsible for the construction of Horn C2, has been appointed new Executive Vice President and Chief Operating Officer. Going forward, the Ørsted Group Executive Team will consist of Asmus Erbo, Trond Vestli, Patrick Harnedt, Henriette Fenger-Ellecro as CHRO, and myself. Our annual general meeting on March 5th also led to changes with new chairmanship of our board of directors, as our previous vice chair, Lene Skole, stepped up and replaced Thomas Thuner Andersen after 10 years as chair, and our now ex-interim COO, Andrew Brown, has been appointed vice chair. We have been off to an encouraging start to 2024. On the back of our updated business plan, which we presented in the beginning of February, we have made good progress in regard to executing the plan and we have reached a number of important milestones. And let me take you through the most significant. First of all, our 924 megawatt sunrise wind project has been selected for award in New York's fourth offshore wind solicitation. I will cover the project and the path forward in detail on the next slide. We have submitted a bid into the Taiwan East Round 3.2 auction with our Greater Shangri-La 3 project. The outcome of the auction is expected during the summer. We also submitted a proposal for our 1.2 gigawatt starboard project into the solicitation in Rhode Island and Connecticut, where we expect the outcome in Q3. This week, we secured licenses to develop two large-scale offshore wind projects off the coast of Gippsland, Victoria. The licenses provide us with site exclusivity to develop the two offshore wind sites with a potential combined capacity of 4.8 gigawatt. We will progress the projects through site investigation, environmental assessments and supply chain development to be able to bid into future procurement processes with the first auction expected to start in late 2025. As part of our partnership and divestment program, we have executed on two milestones. In the US, we have divested a share of four onshore wind assets to Stone Peak, who takes on an equity ownership stake in a portfolio of 952 MW. In our European onshore business, we continue to focus on the most value-creating opportunities. In line with this focus, we have agreed to divest our onshore platform in France to Anchy and concentrate our build-out in the UK, Ireland, Germany and Spain. This transaction was signed this week and is expected to close during this quarter. Both transactions are in line with the assumptions of our business plan and will serve to recycle capital to support our execution. Let's move to project execution and the construction completion of both South Fork in the US and Chang'e 1 and 2A in Taiwan. These are huge milestones that our team can take great pride in as lots of challenges have been overcome and the projects are the first completed utility-scale offshore wind farms in each country. The final commissioning of the 130 MW South Fork project and the 900 MW Greater Shangri-La 1 and 2A is expected during this quarter. In the first quarter, we signed a memorandum of understanding with Dillinger, the largest heavy steel plate producer in Europe, to secure access to lower-emission steel plates for our future offshore wind foundations. With the agreement, we will secure supply of key raw material for our future projects, as well as executing on our ambition to use lower-emission steel to decarbonize our supply chain. Additionally, we have signed a long-term lease agreement with Cadala, securing offshore installation vessel capacity from 2027 all the way to the end of 2030. Securing long-term capacity with strategic suppliers is key to us in order to build collaboration and together manage risks and execution of our offshore wind construction program towards 2030 and beyond. Our partnership with Cadela exemplifies how we can provide suppliers with the clarity and scale that they need to invest in new technology and organizational capabilities. On the financial side, EBITDA, excluding new partnerships and cancellation fees for the first quarter, were in line with our expectations and amounted to 7.5 billion DKK, 6.6 billion higher than in Q1 of 2023. Earnings from our offshore sites amounted to 6.9 billion DKK, which was an increase of 1.1 billion compared to the same period of last year. Let's turn to slide four and a closer look at our Sunrise Wind project. At the very last day of February, our Sunrise Wind project was selected for a conditional award in New York's fourth offshore wind solicitation. And thanks to New York's continued offshore wind leadership, this was a successful and competitive accelerated procurement that allowed our project to stay on track and help New York continue to advance its decarbonization goals. Following the award, we are currently negotiating the final terms for a 25-year offshore wind renewable energy certificate with NYSERDA. We expect to conclude the negotiations and sign the new OREG during this quarter. Therefore, I am also very satisfied that the project has received its federal record of decision and that we have taken the final investment decision of the project based on a business case with a positive life cycle NPV. The project has been a 50-50 joint venture between us and Eversource. As Eversource concluded their strategic review and decided to exit offshore wind, we negotiated a commercial agreement to take over the full ownership of the project, subject to the signing of the OREC agreement, receipt of the construction and operations plan, and relevant regulatory approvals. We continue to progress the project and are advancing the onshore construction activities. The Sunrise Wind design has been reviewed and accepted by all relevant state entities, and the project has secured project labor agreements and all major supplier agreements, including turbines, where we will deploy 11 megawatt turbines from Siemens Gamesa. Final federal permits, including the Construction and Operations Plan, or COP, are expected this summer, after which we will start offshore construction with expected completion in 2026. As you might recall from the Capital Markets Update in the beginning of February, the outcome of the New York 4 round was one of the absolute key milestones for our business plan, and following the award, we reversed part of the impairment relating to sunrise wind. Let's turn to slide 5 where I'll give a status on our construction projects. We continue our strong focus on project execution and are working diligently to de-risk the continued supply chain challenges to ensure that we successfully deliver on our construction portfolio. Our current emphasis continues to be the mitigation of challenges concerning monopile manufacturing and securing additional installation vessel availability. During the first quarter of this year, we have been constructing 7.6 gigawatts of offshore wind across our three regions. And as I mentioned, we have completed the construction of Greater Shangri-La 1 and 2A and South Fork and are now finalizing the commissioning work. Moving to the German program and the Godewind 3 project, where all 23 foundations and cables have been installed. Turbine installation is ongoing, and we expect to reach first power production in the coming days or weeks, and to commission the project during summer of 2024. Borkholm Rifkon 3 continues to progress on a tight schedule, primarily due to the supply of monopiles who are experiencing continuing ramp-up issues. Key mitigations have been agreed and implemented in the installation schedule. Our focus areas remain the progress around ramp-up of monopile fabrication and potential need to secure an extension of installation vessel. The installation of turbines is expected to commence during the coming months. For Greater Shanghai 2B and 4, the final offshore construction permit application has been approved by the Energy Administration end of last year, while the offshore substation topside has reached structural completion ahead of schedule. To ensure timely delivery of the project, we are looking at numerous options to secure additional vessel capacity in the event there is a delay of the transport and installation vessel. Revolution Wind is progressing its execution. For the monopile delivery, the supplier has presented the project with a fabrication schedule that supports the current commissioning date towards the end of 2025. Our prioritization right now is the two monopiles for the offshore substations which is crucial for the power transmission. Our Sunrise Wind project has entered the construction phase after the recent FID. We continue to work closely with the project's monopile suppliers to mitigate potential further ramp-up delays. Their monopile delivery has been de-scoped and two additional suppliers have filled in the remaining capacity and they are both on track. and we have now secured installation vessels for the foundations and wind turbines, including a full replacement for the Charybdis. Lastly, in the UK, we continue to progress our 2.9 gigawatt Horn C3 project according to plan following the FID in December last year. In onshore, our four US construction projects amounting to 1.4 gigawatts show good progress. 11 Mile Solar Center, a solar and battery energy storage system in Arizona, is conducting final testing and commissioning remains on track for the summer of 2024. In Texas, the construction of our Mockingbird Solar Center is going as planned, with COD expected in the second half of this year. For the two solar projects, O300 and Sparta Solar, all the modules are now in the US and final installations have commenced. We expect COD for both projects during 2024. In Europe, we are progressing well on our approximately 200 MW construction portfolio with COD over the coming three years. We remain comfortable around our offshore and onshore construction portfolio And while it contains challenges and risks, we continue to work to manage and mitigate these risks to execute on the more than 9 gigawatt renewable construction portfolio. And with that, let me hand over the finances to you, Tornd.

Good afternoon from me as well. And thank you, Mats. I'm very excited to join Ørsted as CFO and start delivering on the updated business plan. for which we will ensure the financial discipline through a robust capital structure, the investments into value-creating renewable energy projects. I'm also looking forward to meet and engage with you over the coming months in our investors and analyst meetings. So if we then go to slide six and the EBITDA for the quarter, we are using Danish kroner, so I'm not going to state that for every number. For the group, we realized a total of EBITDA of 7.5 billion, excluding new partnerships. No cancellations fees this quarter. This was around 600 million higher than the same quarter last year, with offshore sites being the key driver for the increase. Let me walk through the main earnings development for the quarter compared to first quarter last year. For our offshore sites, earnings increased by 1.1 billion. This was driven by ramp-up generation of greater Changhua 1 and 2A and South Fork. Higher prices on our inflation index CFDs as well as strong wind speeds. On the availability side in the first quarter, we had reduced capacity on the export transmission cables at Hornsey 1. The transmission cables have experienced issues with the electrical infrastructure and therefore been curtailed for periods of times with high wind speeds. We are closely collaborating with the owner of the transmission cable, And as we are the operator of the assets, we have been able to quickly identify the root cause of the issue and been part of the work in remedial actions. as similar electrical infrastructure design has been deployed for Hornsea 2 and we have had limited curtailment of the wind farm in April and may see future curtailment until the issue is resolved. We expect that the remedial work will be fully completed and that both wind farms will operate up to full capacity again in second quarter of 24. Earnings from our existing partnerships decreased as a result of minor adjustment to construction agreements completed in previous years. Lastly, other including, and that means lastly for the offshore, including development costs, came in about last year's level mainly due to costs relating to ceasing development of ocean wind bond, with the negative effect of 157 million. Turning them to onshore, earnings were at the same level as last year, with a ramp-up generation from new assets in operation. The weather conditions in the US in January was worse than normal and resulted in a lower generation and availability during the period. Going then to bioenergy and others, earnings from our CHP plants decreased due to both lower generation and market-based spreads. Within our gas business, we saw earnings improve compared to last year, although still slightly negative contributions. Last year, we saw a temporary negative effect in revaluation of our gas storage, and this was not repeated to the same extent this year. Then turn to slide seven. To the left, our reported net profit totaled 2.6 billion, which was approximately 600 million lower than last year. Net profit benefited from higher EBITDA as well as the net impairment reversal as a result of the Sunrise OREC Award, partly offset by higher interest rates. The tax expense, was affected by the recognition of a deferred tax liability amounting to approximately 800 million, related to a tax equity contribution for our 11 mile project, while the underlying tax rate was 25%. So if we look at the net profit, excluding the impairment reversal, And out of the period tax corrections, both in the first quarter of 22 and 24, we deliver an increase in net profit of approximately 400 million, or just short of an increase of 20%. Going then to the ROSI, adjusted for impairments and cancellation fear, Our return on capital employed came in at 12.5%, which was a decrease compared to last year, driven by a higher capital employment. The decrease in the reported ROCE to a negative of 12.2% was primarily attributable to the lower EBIT as a result of the impairments as well as the cancellation fees. At the end of the quarter, our equity stood at 83 billion. The increase was driven by the comprehensive income as well as our hybrid capital issuance. The majority of the negative hedge reserve relate to hedges with delivery during 2025. Then let's turn to slide eight. At the end of the first quarter of 24, our net debt amounted to 49.9 billion, an increase of approximately 2.5 billion during the quarter. Our cash flow from operating activity was positively impacted by EBITDA and release of collateral, partly offset by cancellation fee payments of 2.4 billion related to the ocean wind one. For the quarter, our gross investment totalled 7.6 billion, driven by our investments into construction of our renewable project portfolio. The approximately 700 million in divestments comes from a customary compensation to our partners at Hornsea 1 relating to the weight loss effects from Hornsea 2. When we undertake a farm down, we normally receive proceeds from the partner based on an assumption of no weight loss effects from potentially neighboring wind farms. However, we make a provision at that point in the time of the farm down based on our estimated weight loss. Consequently, we compensate the partner at a later point in time when we have clarity about actual weight effects. As we have made the provision, this compensation has no P&L effect. During the quarter, we issued a new green hybrid capital of roughly 5.6 billion, partly offset by the buying bank of already issued hybrids that are callable later this year. Finally, net debt was affected by 1.4 billion related to exchange rate adjustment, lease obligation, as well as hybrid coupon payments. Onshore divestments that we have signed during the first quarter in the US and France were not closed during the quarter and consequently did not impact the numbers. Then going up to our credit metric, the FFO to adjusted net debt stood at 19% at the end of the first quarter. Compared to last year, the decrease is driven by higher adjusted net debt as well as lower funds from operations in the 12 months rolling period. We remain committed to our target level of around 30% in 2025 and above 30% by 26. But we highlighted at our capital markets update in February that the ratio is expected to be below 30% for 24 due to the payments of cancellation fees. And I would probably like to clarify that slightly a bit on the 19%, because when we are paying all the provisions, hopefully during the year of 24, this 19% will likely decline somewhat relative to that this number is last 12-month figure. And as a result of that, that number will come down And also as a result of that, if we assume payments within 24, the last 12 months in 25 will not come up to the level around 30% until the end of the year. Slightly complicated, but at least that's how we foresee this number to move going forward. Let's then turn to slide nine. For the first quarter of 2024, our taxonomy-aligned metrics were in line with expectations. Renewable share of energy came in at 97%, compared to 89% for the same period last year. The development was primarily driven by ramp-up generation in offshore, higher wind speeds, and larger share of generation from sustainable biomass, as well as lower coal-based generation. Our plans to phase out coal-based generation during 2024 remains on track, and in March we achieved a significant milestone as we, for the first time in Ørsted's history, did not have any coal usage at our CHP plant. On safety, we regrettably do not see a performance which is up to our expected standards. We have seen more recordable injury for both our own employees and contractors. To strengthen the safety awareness and improve on the general safety performance, safety days will be carried out at our Earth Day location during this quarter. In addition, a supplier safety day for the most critical suppliers will be hosted and a programme to improve safety leadership on all levels for the organisation is initiated. Then, going then finally to slide 10 on our guidance, where the financial development for the first quarter is in line With our expectation, we reiterate our full year EBITDA guidance of 23 to 26 billion Danish kroners for 2024, as well as our gross investment guidance of 48 to 52 billion Danish kroners. And to round this off, I'm just going to quote Matt's statement in her quarterly report and say that all in all, we are off to an encouraging start for 24 and on our way to deliver on the targets that we presented in February. So with that, we'll open up for questions. Operator, please.

Ladies and gentlemen, at this time, we will begin the question and answer session. If you would like to ask a question, you may press star and one. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. And our first question today comes from Harry Wybird from BMP. Please go ahead with your question.