Orsted A/S

Thank you very much for joining our earnings call. During the second quarter, we continued to execute on our business plan and our Q2 earnings are supporting our guidance for the year. We continue to undertake the necessary prioritizations within our business and have seen progress on several risk mitigating initiatives. Furthermore, we see that our operations perform well. Despite continued industry challenges and an unsatisfactory project-specific issue at our legacy US offshore project Revolution Wind, our long-term financial targets remain unchanged and we have a fully funded business plan. Looking at our financials for the second quarter, our underlying business continues to perform well and our operational portfolio continues to deliver strong earnings. EBITDA excluding new partnerships and cancellation fees totaled 5.3 billion DKK in Q2, an increase of 59% versus Q2 of 2023. The main driver for this increase was higher earnings from our offshore sites, driven by ramp-up from new wind farms and higher wind speeds. Earnings from offshore sites amounted to 4.4 billion, an increase of 40% compared to the same period last year. For the first half of the year, EBITDA, excluding new partnerships and cancellation fees, increased by 2.5 billion to 12.8 billion DKK. Over the past quarter, we have commissioned around 2 gigawatts of renewable capacity. The commissioning of Greater Shanghai 1 and 2A, South Fork, 11 Mile and Helena Energy Center will be providing clean energy across three different continents. This is a significant contribution to our long-term targets for renewable capacity, where we aim to reach around 35 to 38 gigawatts by 2030. In addition to our installed capacity of 17.6 gigawatts, we are currently constructing 7.6 gigawatts of renewable capacity across our offshore and onshore projects. In the second quarter, we took the final investment decision of a 300 megawatt battery storage system co-located with the onshore converter station for our Hornsea 3 offshore wind farm. We expect that the increase of renewable energy in the future will lead to increased intermittency and fluctuation of intraday power prices, which will support the value creation of the business case. Battery energy storage systems are often part of solar PV projects, but we see integrated solutions being increasingly interesting. Last week, we announced our first partnership agreement into stand-alone storage as we teamed up with Mission Clean Energy. The partnership will advance four standalone battery energy storage systems across the U.S. Midwest with a potential capacity of one gigawatt. We see this partnership as a way to complement our existing development efforts while broadening and diversifying the portfolio of technologies that we can offer to utilities and other customers. For Sunrise Wind, we signed our OREC PPA with NYSERDA, and in addition, we received the Construction and Operations Plan approval. With this final federal approval, we have officially begun the construction of the 924 megawatt project on the US East Coast, which will generate enough renewable power to nearly 600,000 New York's homes. With these milestones in place, we completed the acquisition of Eversource's 50% share of Sunrise Wind in July and now have full ownership of the project. Additionally, we have concluded the divestment of our onshore platform in France and share in four U.S. onshore projects, in line with what we announced earlier this year. From a strategic portfolio point of view, we have taken the decision to cease execution of the liquid e-fuels project flagship one and deprioritize our immediate efforts within the liquid e-fuel markets. The industrialization as well as commercial development of the off-take market of liquid e-fuels has progressed significantly slower than expected. As a result, we have not been able to make long-term off-take contracts at sustainable prices. Combined with higher project costs, this development, as well as our strategic focus on prioritizing growth options with the highest potential for value creation, have led us to take the prudent decision to discontinue the project and reprioritize our efforts in Power2X. We remain fully committed to our efforts within green hydrogen, which is closer to our strategic goal and where we currently see a higher potential for value creation. The decision to cease the execution of Flagship 1 has led to a provision for cancellation fees of 0.3 billion DKK and impairments of 1.5 billion DKK. We finalized the negotiation of several contracts related to Ocean Wind 1 and settled a claim with the State of New Jersey at better than assumed terms. These settlements of cancellation fees lead to a positive EBITDA impact of 1.6 billion DKK. At the same time, valuation indications for our ocean wind seabed have led to an impairment of 0.6 billion DKK in the quarter. The net impact of these effects amount to a net positive EBIT impact of 1.0 billion for the quarter. We maintain our full-year EBITDA guidance of 23 to 26 billion DKK, excluding earnings from new partnerships and impact from cancellation fees. We have increased our expected earnings within offshore compared to beginning of the year, while lowered our expected earnings in bioenergy and other. At the same time, we have lowered our gross investment guidance by 4 billion to 44 to 48 billion DKK driven by timing effects pushing capex spend into 2025. Let's turn to slide four where I'll give a status on our construction projects. Despite our continued focus on project execution and our dedicated work to de-risk our construction portfolio, we have seen an unsatisfactory project-specific issue leading to a delay in the construction schedule of our legacy U.S. offshore project, Revolution Wind. At Revolution Wind, we have seen encouraging progress on several of the risk mitigations we have been addressing, including monopile fabrication as well as securing availability and flexibility of installation vessels. The offshore construction activities are on track, with 44 out of the project's 67 monopiles installed as of this week. However, one of the risks we had identified as part of the risk review has materialized during the quarter as the construction of the onshore substation, which is part of the onshore scope handled by our partner Eversource, will be delayed. The cause of the delay is mitigating actions needed to address higher than anticipated level of soil contamination. While we were aware of contamination at this site given its past use as a naval disposal facility, the comprehensive analysis from Eversource as part of the early construction work have shown that the level of contamination and its impacts to the project schedule are more substantial than anticipated. As a result, an update to the site design was required, which has resulted in a delay to the onshore construction activities. Based on this development, we now expect the commissioning of Revolution went to be delayed to 2026. We will be working closely with Eversource to explore all mitigations to improve the schedule and minimize the financial impact. As a result of the delay and increased costs relating to extending the construction period, we are booking an impairment of 2.1 billion DKK, for which the majority is related to the delayed revenue profile. As we have previously indicated, the project did not satisfy our lifecycle spread-to-wag requirement at the point of the FID. But despite these developments, we do see a positive value of the project on an absolute IRR level as well as an attractive forward-looking return. And we remain committed to constructing Revolution Wind as part of our wider Northeast portfolio of projects. turning to the remainder of the portfolio, which have progressed over the past quarter. For our German program, we continue to progress towards commission of Godewind 3, where we have completed the construction of the project, reached first power of 21 out of 23 turbines, and are now undertaking the final testing to commission the wind farm within the next one to two months. As part of the installation of Godevind 3, we have successfully developed and used a first-of-its-kind noiseless monopile installation technique, which enables a further reduction of the potential impact from construction activities on the marine environment, as well as constructing in a more cost-effective way once adopted at scale. For Borkholm Riffgrund 3, we have progressed well with the monopile installation, and more than one third of the turbines are installed, While the majority of the monopiles have been installed already, the fabrication of the final ones remain on a tight schedule. Our key focus is to progress the timely ramp up of the remaining monopiles and potential mitigations. The project continues to progress on a compressed schedule and we expect to commission the project in 2025. We are progressing the construction of Greater Shangri-La 2B and 4 and expect to start the installation of foundations of turbines in the first half of 2025. In terms of vessel capacity, we encourage with regards to the vessel availability and continue to monitor the situation closely to ensure timely delivery. On Sunrise Wind, our Sunrise Wind project has entered the construction phase with the onshore construction phase progressing according to schedule. This includes good progress on the onshore converter station where the civil phase has been completed and majority of concrete foundations and key buildings are well progressed. The offshore installation work is expected to commence in 2025, but we do see an increased risk of project commissioning slipping from the end of 26 and into the first half of 27. This risk relates to equipment installation and commissioning of the first-ever U.S. offshore HVDC system and the export cable. This potential delay in commissioning does not have a material impact on the business case, as we can absorb the changes within the construction scope and our team is working on mitigation strategies to address the risk. The other key item on a critical path towards COD is the supply of monopiles. And I'm pleased to say that the production of monopiles for Sunrise has already started and progressing according to the updated schedule. The supply chain situation for foundations remains tight in the medium term due to the many new facilities, and we are following the progress slowly or closely, working with our suppliers to mitigate delay risks. In the UK, we continue to progress the 2.9 GW Horn C3 project according to plan, following the FID in December of last year. As a part of the FID, we have also submitted a portion of the project's capacity into the recent CFD allocation round in the UK and are awaiting an outcome from the UK government in early September. In onshore, the construction of our European portfolio is progressing well, with construction work ongoing in Germany and Ireland. In the US, we are currently constructing Mockingbird of 471 MW, as well as the last part of 0300. The construction of the two solar PV projects shows good progress, with commission expected in Q3 this year. And we have an attractive backlog of onshore development projects, which we expect to bring to FID towards the end of 24 and early 25 to support the continued growth in our onshore business. And with that, let me hand over the financials to you, Ton.

Thank you, Mats, and good afternoon, everyone. For the second quarter results, let me start with slide five and the EBTA for the quarter. For the presentation, all numbers are quoted in Danish kronor. For the group, we realized the total of EBITDA of 5.3 billion, excluding new partnership and cancellation fee. This was 2 billion higher than the same quarter last year, with offshore sites being the key driver for the increase. Let me walk you through the main earnings developments for the quarter. For our offshore sides, earnings increased by 1.3 billion. This was driven by ramp-up generation, higher prices on our green certificates, improved earnings from our power trading activities, as well as strong wind speeds. At our Q1 update, we flagged an issue with electrical infrastructure for the transmission cables at Hornsey 1 and 2. As expected, this has resulted in lower availability during Q2. The remedial work has been performed and the issue is repaired in line with our expectations during Q2. Earnings from our existing partnerships were limited and lower compared to the same quarter last year, where there was a benefit from adjustments of provisions towards partners. For onshore, earnings increased to around 200 million due to ramp-up generation, as well as higher wind speeds. Within bioenergy and other industries, Earnings from our Copenhagen plans increased by around 300 million as a result of higher heat generation and compensation received from Energienet for keeping three of our Danish power stations operational until August. Within our gas business, earnings improved compared to last year. Last year, we saw a temporary negative effect from revaluation of our gas at our gas storage, which was not repeated to the same extent this year. As we have announced, we have finalized negotiation with the state of New Jersey and several contracts at a better than assumed terms. leading to a reduction in our provision and an equivalent positive EBTA impact of 1.6 billion relating to the ocean wind contracts or the provisions. In addition, as a consequence of our decision to cease the execution of the Flagship 1 project, we have incurred a cancellation fee of 300 million, and as such, we have a total net provision reversal of 1.3 billion in the quarter. including changes in our estimates for cancellation fees, the quarterly EBITDA is totaling 6.6 billion of profit. Let's turn to slide six. Adjusted for cancellation fee and impairments, our net profit total 800 million, which is 1.3 billion higher than last year, primarily driven by higher underlining earnings. While the reported tax rate for the quarter is impacted by impairments not being tax deductible, the underlying tax rate for our business activities was 22% and thus in line with previous quarters. Our reported net profit was a negative 1.7 billion and adversely impacted by the impairments. As Mats mentioned on Revolution Wind, the project's delayed onshore installation schedule has resulted in an impairment. As you are aware, we have had to recognize impairments of our US offshore projects in the past. That means that the projects do not carry any headroom in the impairment analysis of our legacy US projects. Because of this, Any changes to the business case, such as delayed project schedules, increased on cost construction and interest rate movements, are likely to lead to adjustments in impairments as long as changes are not included in the remaining contingencies in each project. Adjusted for impairments and cancellation fees, our return on capital employed came in at 13.1%, which is in line with the number for second quarter 2023. The reported return on capital employed landed at a negative 12.4% and was primarily attributable to the lower EBIT as a result of the impairments and cancellation fees the last 12 months. Going then to slide seven and our net interest bearing debt and credit metric. At the end of second quarter, our net debt amounted to 49.4 billion and slight decrease of 0.5 billion during the quarter. Our cash flow from operating activities was supported by our operating income and release of collateral, partly offset by cancellation fee payments related to Ocean Wind 1. So far in 2024, we have had a cash outflow of 4.1 billion relating to cancellation fees from Ocean Wind 1, of which 1.7 billion was in second quarter. For the quarter, our gross investments total 8.3 billion, driven by our investments into the construction of our renewable project portfolio. Divestment proceeds total 3 billion in the quarter, coming from the sale of our French onshore portfolio, as well as the partial divestments of four operational US onshore assets. On a related note, we continue to see good progress within our divestment program as we have several transactions in process. This includes the Changwe 4 transaction, which we continue to expect to sign and close during this calendar year. Our key metric FFO to adjusted net debt stood at 23% at the end of the second quarter. Compared to last year, the increase is driven by higher funds from operations in the 12 months rolling period, which more than offset the increase in our adjusted net debt position, including the provision payments for ocean wind. As we highlighted in our first quarter results, The ratio is expected to be lower for the full year of 24 before starting to recover towards the targeted level, about 30% by the end of 2026 due to the payments, the likely payments of the ocean wind provision. Going then to slide eight and our non-financial metrics. For the first quarter of 2024, our taxonomy-aligned metrics were in line with our expectations. Renewable share of energy came in at 97% compared to 92% for the same period last year. The development was driven by ramp-up generation in offshore, higher wind speed, as well as lower coal-based generation. Our plan to phase out coal-based generation during 24 remains on track. By the end of August, the order from 2022 to keep three of our Danish coal and oil-fued power station units operational expires. And following this, we will initiate the phase-out towards the end of the year. Closing our coal-based generation means that from 2025, our entire energy generation will essentially be fossil free, which is a huge milestone. On safety, we are encouraged to see a reduction in the number of recordable injuries. for both our own and our contractors' employees. Throughout the second quarter, we have started carry out safety days across Ørsted location globally, and we will ensure a continued focus on improving safety leadership at all levels of the organization. And then finally on my part, let's turn to slide nine and the outlook for 24. With the financial development for the first half of the year, we reiterate our full year guidance of 23 to 26 billion for 2024. Compared to our expectation for earnings mix at the beginning of the year, We now expect higher earnings from our offshore business driven by the high wind speeds and the higher earnings from our power trading activities has delivered in the first six months of this year. At the same time, our earnings expectation for the bioenergy and other business has been lowered. Our level of gross investments for 24 is now expected in the range of 44 to 48 billion, which is a reduction compared to our expectations last quarter. This is due to timing effects across our project portfolio with costs moving into 2025. And with that, I will pass the word back to Mats for some final comments.

Thanks a lot, Trond. Yes, turning to slide 10 and a very quick summary of the first half of 2024. We have progressed with the execution of our updated business plan that we presented on February 1st or 3rd. I am pleased that our operations are performing well and in particularly that the earnings from our offshore wind farms and thus our core business have increased. In the first half of the year, we have commissioned around 2 gigawatts of renewable energy capacity, which is supporting our long-term growth ambition. At the same time, we have taken a strategic decision to deprioritize our efforts within the green fuels market due to the development of market conditions and therefore cease the execution of the Green Fuels Project Flagship 1. And while we generally see solid construction progress, it is unsatisfactory to have seen the project-specific issue that led to the delay of Revolution Wind. As we highlighted at our Capital Markets Update in February, our construction portfolio contained risks and challenges that our entire team are working diligently to manage and further de-risk. While it is unsatisfactory to incur these impairments, none of the events are changing where we plan to be by 2030, nor does it change our comfort in our path towards our credit metric improvement towards 26, as we continue to have a fully financed business plan. On the basis of a strong operational quarter, we remain focused on execution and risk mitigation. And we will continue being disciplined in our capital allocation and maintain a strong focus on value creation in support of our renewable portfolio growth, as well as our business plan. And with that, we will now open for questions. Operator, please.