Orsted A/S

Q4 2025 earnings call. For the first part of this call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. You can register for questions at any time by pressing star and one. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. Today's speakers are Group President and CEO Rasmus Erbø and CFO Trond Westley. Speakers, please begin.

Hello everyone and thank you for joining today's call. 2025 has been a defining year for Ørsted. We have taken significant steps to solidify our financial foundation and improve the robustness of our business. At the outset of the year, we stepped away from our long-term capacity ambitions and established four strategic priorities to secure a more focused and competitive Ørsted. We have sharpened our strategy to focus on maintaining our global leadership position within offshore wind, with an emphasis on our core markets in Europe and select markets in APAC, where we have a distinct competitive advantage and can leverage our unique offshore wind capabilities. As the global leader in offshore wind, we will continue working with governments, industry and investors to strengthen the conditions required to support future offshore wind development. At the recent North Sea Summit in Hamburg Monday last week, governments in our core markets demonstrated their willingness to strengthen these conditions when they signed the Joint Offshore Wind Investment Pact for the North Seas alongside the wind industry and transmission system operators. The pact will turn the North Sea into the green power plant of Europe, reaffirming 300 gigawatt of offshore wind capacity by 2050, and charging a path of more evenly distributed offshore build-out between 2031 and 2040, with up to 15 gigawatt installed capacity per year in Europe, which includes a sound investment framework for offshore renewables through mechanisms such as national and cross-border two-sided contracts for difference. This will unlock massive investments in Europe in the coming decades and is a giant leap towards powering Europe with renewables, secure and cost-competitive electricity. Further, the agreement between the Danish and German government to develop the Bornholm Energy Island will strengthen energy security and deliver enough affordable electricity to power the equivalent of more than 3 million German and Danish homes. The agreements reached at the North Sea Summit are very positive framework developments for future offshore wind opportunities in Europe, and with our focused strategy on offshore wind in Europe, we are ready to invest in the build-out. Throughout 2025, we have executed on our four strategic priorities, and these will remain our focus over the coming years. Let me go through our progress across each priority. Our first priority is to strengthen our capital structure, and we have delivered significant progress on this during 2025. A key part was the completion of the rights issue, and we are thankful for the strong support we received from our shareholders. The completion of the rights issue supports our target of a solid investment-grade rating and it has reinforced our ability to realize the full value potential of our existing portfolio and capture future value-creating offshore wind opportunities. As part of the updated targets presented in connection with the rights issue, We plan to secure more than $35 billion in proceeds through our partnership and divestment program across 2025 and 2026. The transactions signed during 2025 and early into this year amount to around $46 billion in proceeds, and we have thus exceeded our projections and finalized the program ahead of our expected timeline. Pending closing in 2026 of the transactions already signed related to Greater Changwa II and our European onshore business. This includes the closing of divestments related to stakes in Hornsea 3, West of Dutton Sands and three U.S. onshore projects. Another important element in supporting our capital structure and financial foundation is the continued performance of our operational portfolio. Despite wind speeds below the norm throughout the year, we have delivered 25.1 billion of EBITDA in line with our guidance. This is mainly driven by an increase in the availability across our offshore portfolio due to strong performance every single night and day by our generation team. Our second priority is to deliver on our 8.1 GW offshore wind construction portfolio. And we have seen significant progress across the portfolio throughout 2025. Some of the major milestones achieved include the commissioning of Godeven 3, as well as delivering first power at Borkum Rifkon 3 in Germany, and in Taiwan, we have completed the installation of turbines and delivered first power at Greater Chang'e 2B and 4. In the US, we have progressed well on several installation scopes, including completing the installation of all three offshore substations for our two projects. All of these milestones are delivered under complex and dynamic conditions and are attributable to a strong risk and execution management by our EPC organization and our project teams. I will shortly go through the continued construction progress in detail. But first, I want to touch on the lease suspension orders that our two U.S. offshore projects, Revolution Wind and Sunrise Wind, received from the U.S. Department of the Interior, BOEM, requiring the projects to suspend all ongoing activities on the outer continental shelf for the following 90 days. Those project companies pursued litigation in the U.S. District Court of the District of Columbia separately, including motions for preliminary injunctions against the orders while the lawsuits over them proceed. Revolution Wind's motion for preliminary injunction was granted on January 12th, 2026, and Sunrise Wind's motion for a preliminary injunction was granted on February 2nd, 2026. Both projects have subsequently resumed work of the halted activities while their lawsuits over the orders proceed, and we are determining how it may be possible to work with the U.S. administration to achieve an expeditious and durable solution. Our third priority is to ensure a focused and disciplined approach to capital allocation, always prioritizing value over volume, with a strategic emphasis on offshore wind opportunities in Europe and select markets in APAC. During the year, we demonstrated this disciplined approach in relation to Horn C4, which we are now reconfiguring for potential future development. The decision was taken prior to incurring significant breakaway costs, and we continue to hold the seabed lease, grid connection and key permits. In November, we secured the rights under the IRIS tender to develop the 900 megawatt fixed-bottom offshore wind farm, Tonua, alongside with our partner, ESB. As a potential final investment decision will not be until early 2030s, this is an early stage opportunity, and the project needs to be assessed and matured through our state-scale process, including meeting our value creation criteria. Finally, on our fourth priority, we have also taken steps in improving our competitiveness with the announcements of significant adjustments to our organization. Due to the sharpened strategic focus of our business going forward and the fact that we will be finalizing our large construction portfolio in the coming years, we will adjust our organization accordingly to become more efficient and flexible. Let's turn to slide 5, where we'll talk through some of the operational highlights for the full year. First, I am pleased with the operational performance, with our EBITDA excluding new partnerships and cancellation fees amounting to 25.1 billion for the full year, driven by strong availability rates within our offshore business, which stood at 93% for the full year. This ensured a material earnings contribution and is an increase of 5 percentage points compared to last year. Also, we delivered a net profit of 3.2 billion primarily driven by the solid operational performance in the year. For several years, we have had a target that renewables should consist of 99% of our generation by 2025. And I'm very pleased that we reached this ambition or this ambitious target in 2025. The increased share of renewables was driven by the closing of our last coal-fired CHP plant in the second half of 2024. Furthermore, 2025 was the year where we became the first energy company to complete a green transformation of its own energy production. We have reduced Scopes 1 and 2 emissions intensity by more than 98% since the beginning of our transformation in 2006. We will continue our decarbonization journey, focusing on reducing our upstream and downstream carbon emissions to deliver on our 2040 net zero target. Lastly, with our continued focus on safety, we reduced the total recordable injury rate to 2.5 in 2025. We reduced our total recordable injury rate and we continue to strengthen our safety commitments through targeted initiatives and sharing of best practices with suppliers, all aimed at lowering the injury rate and bringing our people home safe every day. Let's turn to slide 6 and an overview of our construction projects. I will cover the more advanced projects individually and in more details as usual on the next slides, while putting a few remarks on the remainder of the construction portfolio here. For Borgholm Ritcon 3 all offshore installation works have been completed. The grid connection has been commissioned by the transmission system operator and was announced ready for first feed in early Q4 2025. First power was achieved early December according to plan. Turbine commissioning is ongoing and progressing according to schedule, and the project is expected to be fully commissioned towards the end of Q1 2026. For Honshi 3, construction is progressing according to schedule. The onshore works at the landfall cable route and converter stations remain on track. For the offshore scope, the project will be using two HVDC offshore converter stations. The first platform is undergoing final equipment installation in Norway, which is progressing well, and the second platform arrived in Norway from the fabrication yard in Thailand in December to complete the same final works. Our turbine and foundation installation partners have taken delivery of their new-built installation vessels, and we have started offshore activities preparing the seabed for export and array cable installations. We continue to closely monitor a number of items related to the delivery of the project. This includes the schedule of the project's grid connection, where we are working closely with National Grid on our onshore grid connection works to support commissioning this year. Further, we continue to focus on manufacturing of turbine monopile foundations to ensure they are delivered according to plan, enabling us to commence installation in spring 2026. The manufacturing has started as planned, and two suppliers have started to deliver completed monopiles, the first of which have arrived in Gport, ready for mobilization. There are multiple suppliers contracted for the scope, And if relevant, we can utilize the flexibility gained from this to mitigate risks should they occur. Next steps in the project will be the commencement of the main offshore installation activities, starting with the installation of the offshore export cables, the first offshore converter station, as well as foundation installation. For Politika 2, the project is progressing on schedule as we move towards offshore construction. There has been good progress in the recent quarter and the degree of completion has increased to 25% up from 15% last quarter. This includes further progress on the manufacturing of the four offshore substations and further fabrication on the turbine foundations, with 48 of the 111 turbine foundations fabricated at this stage. The fabrication of the export cable has also commenced. For the onshore substation, majority of the equipment have been delivered to the sites and onshore export cable installation is on schedule, supporting timely grid integration milestones. The project team is focused on ensuring progress of the transmission system, fabrication of the key components and the onshore and offshore substations. Next steps are the preparation of the Seabed Ahead of Turbine Foundation installation, which is planned to start during Q2 this year. Installation of the offshore substations will also start towards the end of this year. Turning to slide 7 and an update on our Greater Chang'e 2B and 4 project in Taiwan. With the progress achieved during the quarter, the degree of completion is now at 75% up from 65% at Q3. The project achieved a major milestone during the quarter, as the installation of turbines was completed for the project. At this stage, 17 of the 66 turbines has been commissioned and are producing power, and the commissioning works of the remaining turbines is ongoing. The project remains focused on the installation and utilization of the remaining array cables. At this point, 57 out of the 66 array cables have been installed, and it is the expectation that the remaining array cables will be installed during the first quarter. Also, the project will resume works to replace the export cable for the Greater Tiangua 2B section. Onshore work related to this is ongoing, and the replacement work offshore will commence during the summer. The project remains on schedule for commissioning during Q3 2026. Turning to slide 8 and an update on our Northeast program starting with Revolution Wind. Despite offshore construction being on pause for three weeks due to the suspension order, Revolution Wind continues to make progress, and the degree of completion has increased to approximately 87%, up from 85% in Q3 2025. During the quarter, all remaining array cables were installed. The export cables, interlink cable, and both offshore substations have now been energized, At this stage, 59 of the 65 turbines have been installed. In the coming period, the project will focus on completing installation of the remaining turbines and continue ongoing commissioning activities. Third power for the project is expected within weeks. Turning to slide 9 and an update on the progress at Sunrise Wind. During the quarter, despite offshore construction being paused for six weeks due to the suspension order, the project has made progress, illustrated by the degree of completion increasing to 45% up from 40% in the third quarter. The first installation campaign of turbine foundations has been completed according to plan, with 44 of the 84 turbine foundations installed. Unsure construction and commissioning are progressing well. The unsure portion of the export cable has been installed and jointed and the nearshore section of the export cable was successfully installed. In terms of fabrication, all turbine foundations, array cables and the remaining sections of the export cable are now complete. All turbine towers and nacelles have been fabricated, and the majority of blade sets have been fabricated, with the remaining sets progressing according to plan. In the coming period, the project's focus is on resuming horticulture activities with safety as a top priority. This includes the offshore installation of the mid and far shore section of the export cable. The project is working diligently to maintain the installation schedule, which includes first power in the second half of this year and commissioning of the project in the second half of 2027. Turning to slide 10 and an outlook for our deliveries in 2026. to focus on delivering on our strategic priorities over the coming years, as this will improve our financial foundation and ensure that we can compete for a position of strength for new offshore wind opportunities in our core markets. Specifically, in 2026, we will continue to have a very significant focus on our generation and ensure that we deliver in line with our expectations. We will be commissioning more than 2.5 gigawatts offshore wind capacity across three continents. And for the remainder of our construction projects, we will continue our efforts building on the solid progress achieved during 2025. We will assess new opportunities within offshore wind across three avenues. First is on the auction and tender front. where there are several relevant opportunities for us to assess during 2025 in our core markets. And from 2027 and onwards, we are expecting a material step change in terms of the number of auctions. Second, we will continue maturing our proprietary pipeline and bring the projects forward if the value creation is there. And thirdly, we continue to assess the potential for any project-specific collaborations. Those will remain the buckets that we are looking for when we think about offshore wind growth and filling our pipeline for the back end of this decade and onwards. And we will prioritize value over volume. To support this, we will further progress on measures to improve our competitiveness. This includes the initiatives within our trading and revenue function, as well as our generation organization. In addition, we will deliver according to plan on our announced adjustments to our organization, so it will become more efficient and flexible. With this, let me hand over to you, Todd.

Thank you, Rasmus, and good afternoon from me as well, everyone. As always, unless I state otherwise, the numbers I refer to will be in Danish kroners. And then let's turn to slide 8 and the EBDA 425. For the full year, we had a solid operational performance and delivered EBITDA, excluding new partnerships and cancellation fees of 25.1 billion, as Rasmus previously said. And this is in light with our guidance for the year. Let me walk you through the main development. For our offshore business, the overall sites earnings came in 500 million higher compared to last year. This was driven by higher availability rates, ramp-up generation for Godevind 3 and compensation at Borgen Livgren 3, leading to an increase of approximately 1.5 billion. This was to a large extent offset by the lower wind speeds, lower earnings by approximately 1 billion compared to 2024. Earnings within partnership increased compared to last year, as negative effects in 24 were not repeated to the same extent in 25. For other costs in offshore, there was an increase primarily driven by changes in cost allocation methodology with no impact to the total EBITDA. In our offshore business, onshore business, sorry, earnings increased by approximately 200 million compared to last year. The increase was due to the ramp-up of generation at Sparta Solar, 11 Mile and Mockingbird, partly offset by the farm down of the same projects. Within bioenergy and other, earnings in our combined heat and power business increased by approximately 300 million, driven by the higher achieved prices and improved spreads, only partly offset by lower generation. Earnings in our gas business increased by approximately 300 million, mainly driven from our off-take contract with the Danish Underground Consortium and its ramp-up production from the Tyra field. The negative effect from other was mainly due to a provision for severance payment relating to the rightsizing of the organization initiated in the fourth quarter. The total impact of severance payment and provision amount to approximately 750 million in 2025 and covers the period of the executions in 2025 through 2028. Let's turn to slide 13 and our guidance for 26. For the full year of 26, we expect an EBITDA more than 28 billion. Let me go through the expected drivers for the different segments. In our offshore business, overall earnings are expected to be higher in 26. Our offshore site will benefit from ramp-up generation of greater Chang'e 2B and 4, and revolution wind and wind speeds in line with historical averages, whereas 2025 was below historical averages. This is expected to be offset by lower market prices, lower earnings from trading activities, and subsidies stepped down for Borken Rifgrim III, as well as Godevin I and II stepping out of subsidy, leading to expected sites earning to be in line with the 25 level. We expect earning from existing partnerships to increase compared to 25, mainly driven by construction agreement at Hornsey III. Within our offshore business, we anticipate lower expense project development cost as well as lower fixed cost. For our onshore business, we expect earnings to be in line with 25. This is driven by the ramp-up of generation from new assets, offset by divestment of European onshore business, which we expect to close during second quarter this year. For our bioenergy segment, we expect earnings to be in line with 25. The gross investments for 26 are expected to amount to 50 to 55 billion, which is in line with our previously expected investment level. Furthermore, our committed capital of approximately 145 billion for the period 2025 throughout 27 remains unchanged, as this already accounts for the planned divestments of the European onshore business. Let's turn to slide 14. In the fourth quarter of 25, our EBITDA excluding new partnership and cancellation fees amounted to 8.1 billion, which represents an increase of approximately 500 million. This was driven by the offshore business, where earnings increased compared to last year due to higher wind speeds as well as lower fixed cost levels. Our net profit for the quarter totaled a negative of 3.4 billion. This was impacted by the negative non-cash EBITDA impact from the closing of the Hornsea 3 transaction and the impairment that have been recognized following the lease suspension orders to our two projects in the US as well as the sale of our European onshore business. As part of closing the Horn C3 transaction, we have recognized a non-cash impact of 4.8 billion to reflect the accounting net present value effect of the asymmetric distribution structure. The impact was re-based upon closing as the project was slightly less advanced compared to our expectation at the time of signing. The underlying transaction structure and valuation remains the same. The lead suspension order have resulted in increased cost due to anticipated extension of contracts for both our projects, leading to an impairment of approximately 600 million in the fourth quarter of 2025. As part of the decision to divest the European onshore business, we have reassessed the book value of the segment. In previous acquisitions of the business, we have recognized goodwill in our accounts, and as part of the decision to undertake the divestment, this has been written off, leading to an impairment of 1.6 billion. Adjusted for impairments and cancellation fees, our return on capital employed, row C, came in at 8.4%, which is a decrease compared to last year, driven by an increase in capital employed. The reported row C came in at 5.4%. We had expected that 25 Rosi would be lower than the Rosi in 26 and 27. However, it has come in lower than expected, primarily driven by the impairments relating to the suspension order on Revolution Wind and Sunrise Wind and the impairment of Goodwill relating to the divestment of Ørsted's European onshore business. Our target for average ROSI for 26 and 27 is to be around 11% and above 13% for the period 28 to 30. With the expected improvement of ROSI in 26 and 27, primarily driven by increased operational earnings coming from the commissioning of the projects that we are currently constructing. Let's turn to slide 15, and our net interest-bearing debt and credit metrics. At the end of Q4-25, our net debt amounted to $19 billion, representing a decrease of approximately $64 billion during the quarter, which was primarily driven by the proceeds received from the closing of the rights issue. Cash flow from operating activities include contribution from our operational earnings as well as payments related to both the divestment of 50% stake in Horn C3, transmission assets and the construction agreement that was entered into as part of the divestment. For the divestments, this includes payment under the SPA agreement relating to Hornsea 3 divestment, as well as the divestment of a stake in Bajau Win US. Our gross investments amounted to $15.1 billion, reflecting the continued investment into our renewable construction projects. Our key credit metric, the FFO to adjusted net debt, stood approximately at 43% at the year-end, reflecting a significant increase compared to previous years. The increase is primarily driven by the proceeds of the rights issue and the closing of Hornsey 3 transaction, and is currently well above our target of 30%. And finally, let's turn to slide 6 and focus on our divestment program. With the closing of Hornsey 3 transaction as well as the signing of our Greater Changwa 2 farm down and the divestment of our European onshore business, we have successfully delivered on the partnership and divestment program which we announced as part of our second quarter 25 update. We had a target of delivering proceeds of more than 35 billion across the announced transactions and with securing proceeds of assets around 46 billion, we have now ensured strong delivery on this. In combination with the completion of the rights issue, this is a significant contribution to the strengthening of our capital structure, and it will ensure that we have a robust financial foundation throughout the coming years. Also, to pursue new value-creating opportunities while we are delivering on our construction program. Upon completion, our projects will ensure significant contribution to increasing our financial algorithm. With this, we have reduced our dependency on divestments of operational assets and will now be able to undertake a more value-accretive and flexible approach to partnerships and farm downs going forward. And with that, we will now open for questions. Operator, please.