Orsted A/S

Ladies and gentlemen, welcome to the Orsted Interim Report for the first quarter of 2026 Conference Call. I am Sergen, the Chorus Call Operator. I would like to remind you that all participants will be on listen-only mode and the conference being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and phone on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's our pleasure to hand over to Group President and CEO Rasmus Erbo and TFO Trond Vestby. Speakers, please begin.

Hello, everyone, and thank you for joining today's call. As the world enters its second energy crisis in only five years, it is clear that dependence on imported fossil fuels comes at an unacceptably high price for society. Recent events in the Middle East have increased volatility in global energy markets and led to higher energy prices threatening to affect both growth and disposable income. And even if hostilities are rapidly brought to a halt, we can expect the global energy supply and energy markets to take a long time to normalize. Energy security has become crucial to ensure the resilience and sovereignty of nations around the globe. This is particularly the case for Europe, where the vulnerability and costs associated with dependence on fossil energy imports are unsustainable. The solution is at hand. Increase electrification of industry and transport, create a coherent European energy system, and accelerate the build-out of renewable energy, not least offshore wind. Over the past years, we have advocated for strengthened investment certainty for offshore wind through supportive regulatory frameworks. We are now pleased to see positive and concrete changes to policies and regulations, both at regional and national level. With the offshore wind investment pact from January 2026, nine heads of state agreed on a coherent approach to the build-out of up to 300 gigawatts of offshore wind in the North Sea by 2040, together with industry and transmission system operators, of course. Concrete changes to regulatory frameworks have taken place at national level, including in the U.K., where the budgets for new offshore wind projects in the recent allocation round 7 were increased. In Denmark, a contract for different scheme was introduced for the upcoming auction, and we are also seeing a shift towards these so-called CFDs in other European countries, including Belgium and the Netherlands. At Ørsted, we will continue to work with governments and industry to provide solutions to enable the acceleration of renewable energy. To this end, we launched a paper titled Facts over Perception, the Real Value of Offshore Wind at the recent Wind Europe Conference in Madrid. In the paper, we outline the benefits that renewables, and in particular offshore wind, bring to Europe, and we clarify that an electricity system based on renewables is significantly more affordable than the fossil fuel-based alternatives. We show that renewables with offshore wind as a significant component can reduce annual fossil fuel imports by more than 30% of 2024 import levels. The paper also shows that offshore wind, together with other renewables, can reduce total European electricity system costs by up to 30% by 2040, as the integration costs of solar and wind are small compared to the large savings from reduced use of fossil fuels in power generation. And finally, the paper shows that an investment level into offshore wind in line with the ambitions outlined in the Offshore Wind Investment Pact can cut annual carbon emissions in Europe by approximately 20% compared to 2023 levels. In Öster, we will contribute by continuing to deliver on our business plan and become a more focused, competitive and stronger company that is ready to selectively invest in the most value-creating opportunities over the coming years to remain the global leader in offshore wind. Let's continue to slide 5 and an update on the strategic priorities and operational performance for the first quarter. We continue to progress on the four strategic priorities that we introduced in the beginning of 2025. Our first priority is to strengthen our capital structure. And with the completion of the rights issue in 2025 as well as the signing and closing of the transactions in our partnership and divestment program during 2025 and early 2026, we have delivered strong progress on this. In late April, we closed the divestment of our European onshore business, and this will be reflected in our accounts for the second quarter. Likewise, we still expect the divestment of a 55% stake in our Greater Chang'e 2 project to close in the third quarter of 2026, following the commissioning of the Greater Chang'e 2 BN4 project. Our second priority is to deliver on our 8.1 gigawatt offshore wind construction portfolio. We have achieved significant milestones during the quarter, which includes the delivery of first power at Revolution Wind, as well as the successful installation of the first turbines at Sunrise Wind. I will shortly go through the details of the construction progress across the portfolio. Our third priority is to ensure a focused and disciplined approach to capital allocation, where our focus going forward primarily will be on offshore wind in Europe and select markets in APAC. With the measures we have taken to strengthen our capital structure and financial foundation, we are in a position to pursue new value-creating opportunities within offshore wind. Our fourth priority is to improve our competitiveness, and we are progressing as planned on numerous measures. This includes the initiatives within our trading and revenue function, as well as our generation organization. In addition, we are delivering according to plan on our announced adjustments to our organization, so it will become more efficient and more flexible. Turning to the operational highlights of the first quarter, I am pleased with the operational performance. Our EBDA excluding new partnerships and cancellation fees amount to 9.5 billion for the first quarter, which is an increase of more than 10% compared to the first quarter of 2025. This was driven by ramp-up generation in offshore wind and also slightly higher than normal wind speeds. The performance was also supported by the good availability rates within our offshore business, which stood around 93% for the quarter. The renewable share of generation stood at 98%, slightly lower than the level for the first quarter of 2025, due to higher gas usage at our power stations following the colder weather conditions. When it comes to safety, while there was an increase in our total recordable injury rate of around 11% in the first quarter, we remain on track to deliver on our target for the full year. Safety remains a top priority for us and our employees, and we continue to strengthen our safety commitments through targeted initiatives and sharing of best practices with suppliers, all aimed at preventing incidents and bringing our people home safe every single day. We have consecutively reduced our total recordable injury rate over the past four years, and we will continue working towards reducing it again this year. Let's turn to slide 6 and an overview of our construction projects. I will cover the more advanced projects individually and in more detail as usual on the next slides, while putting a few remarks on the remainder of the construction portfolio here. For Borgum Rifgrum 3, we are continuing the commissioning of turbines with 80% of the turbines having produced first power. Following adverse weather conditions for commissioning works during the first quarter, combined with ongoing unplanned grid outages from the transmission system operator and grid curtailment, the commissioning and testing of the turbines have progressed slower than planned, and the full commissioning of the project is now expected in the third quarter of 2026. All foundations and turbines are installed, and with the high share of turbines that have delivered first power combined with the higher than assumed power prices, the slight commissioning delay only has a marginal financial impact. For Baltica II, the project continues to progress as planned and has, as of last week, achieved a significant milestone with the installation of the first monopile foundations. With the solid progress during the past quarter, the degree of completion has increased to 30%, up from 25% last quarter. This includes further progress in the fabrication of foundations, with all foundations for turbines and offshore substations completed, and nearly half of the turbine foundations ready for loadout at the harbour site. The manufacturing of the structures for the offshore substations is complete, tests are ongoing for electrical equipment, and all four top sites will be transported to the site for installation in the second half of this year. Fabrication of the export cables and the array cables are also progressing as planned. The onshore buildings are finalized, majority of electrical equipment are in process of being installed, and the onshore export cable installation is on schedule. In the coming period, the installation work of turbine and substation monopile foundations will continue. For HONSI III, we have made significant progress. We have commenced the installation of turbine foundations, pulled the export cable onshore to meet its onshore counterpart, and successfully installed the first of the project's two offshore converter stations. With these achievements, the project is now approximately 25% complete, up from 10% at the fourth quarter of 2025. As we have noted in the past, the project is dependent on timely connection to the transmission grid in circumstances where several renewable energy projects are currently under construction. We have collaborated closely with National Grid Electricity Transmission and also National Grid Electricity System Operator, NISO, regarding the timing of the grid connection in order to keep first power and commissioning on track. However, National Grid have informed us of a grid connection delay, which impacts our critical path by up to two months. Resulting from National Grid's enabling and reinforcement works at the Norwich main substation, where Hornsea 3 is due to connect to the UK transmission system. While we have been able to absorb the majority of the delay within the project's contingency, we now anticipate first power in Q1 2027 and commissioning in the six-month period between Q4 2027 and Q1 2028. We will continue to work with National Grid as they work to minimize the delay and mitigate any further delays from occurring and impacting the schedule. We expect minor financial implications as it is primarily a shift of ramp-up generation and slightly higher project costs that are absorbed within the typical variance of project budgets during the construction phase. Remaining construction work continues to progress, both onshore and offshore, with other key milestones on schedule. Turning to slide 7 and an update on our Greater Tiangua 2B and 4 project in Taiwan. With the progress achieved during the quarter, the degree of completion is now at 80% up from 75% in Q4-25. The project ensured further progress during the quarter, as the installation of array cables has been completed and the cables have been terminated. At this stage, 38 of the 66 turbines have been commissioned and are producing power, and the commissioning work of the remaining turbines is ongoing. The project remains focused on the installation and utilization of the export cable, which will resume works to replace the export cable for the Greater Tiangua 2B section. Onshore works related to this is ongoing, and the replacement work offshore will commence later this quarter. 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. During the first quarter, the project continued to progress and achieved a significant milestone as the project achieved first power in March. The project has currently installed 60 of the 65 turbines, and we intend to install the remaining five turbines. The project is assessing all available options to complete turbine installation safely and efficiently. With the progress achieved during the quarter, the degree of completion has now increased to 94%, up from 87% in January 26. At this stage, the project continues to focus on progressing commissioning activities towards full commercial operations in the second half of 2026. Turning now to slide 9 and an update on the progress at Sunrise Wind. During the quarter, the project has continued to make progress and achieved an important milestone as the first turbines have successfully been installed. Of the 84 positions, a total of five turbines have been installed. In addition, the installation of the export cable is nearing completion, and the far shore section of the export cable was pulled into the offshore converter station and joined to the mid-shore section after completing near-shore installation in the fourth quarter last year. With the progress achieved during the quarter, the degree of completion has increased to 47%, up from 45% in January 2026. In terms of fabrication progress, all turbine foundations remaining to be installed have now been fabricated and are either loaded onto installation vessels or transported to storage ahead of installation. All nacelles, all towers and all blade sets have also been fabricated, with only a low number of blade sets awaiting final painting, which will be completed later this year. On the onshore substation, the second of the two circuits have been energized, and the commissioning continues to progress according to schedule. In the coming period, the project will continue to progress the installation of turbines and finalize the burial of the offshore export cables. In addition, installation of turbine foundations will continue as the time of year restrictions lift, and the installation of array cables is planned to start during the quarter as well. The project is expected to start commissioning of turbines later this year. With this, let me hand over the word to you, Trond.

Thank you, Rasmus, and good afternoon, everyone. Let's start from my side on slide 11 and the EBTA for the first quarter of 26. And as always, unless I state otherwise, the numbers I refer to will be in Danish kroners. In the quarter, we had a strong operational performance and delivered EBTA excluding new partnerships and cancellation fees of 9.5 billion, which is an increase of more than 10% compared to the same quarter last year. Let me walk you through the main developments. For our offshore business, the overall site earnings came in 700 million higher compared to last year. The wind speeds in the quarter were slightly higher than the norm and significantly higher than the first quarter of 25. In addition, our earnings benefited from higher power and ROC prices. These effects were partly offset by trading results that, despite a good performance over the quarter, were lower than last year, as well as step-downs in subsidies at Godwin 1 and 2 and Borken Rifgren 2. Earnings within existing partnership increased compared to last year, mainly related to construction agreements at Borken Rifgren 3 and Hornsey 3. The other costs within offshore improved, mainly from lower fixed costs. In our onshore business, Earnings increased by approximately 200 million compared to last year. The increase was primarily due to sale of an early-stage development project in the U.S. onshore and sale and leaseback of land at three operational projects located in the U.S. Most of our US onshore projects are built on land leased from third-party landowners, and this transaction is viewed as an optimization of the US onshore portfolio. With our existing partners, we will continue to own and operate the projects. Within bioenergy and other, earnings in our combined heat and power business decreased by approximately 300 million, driven by lower earnings from ancillary services. As a result of increased market entries and auction changes for ancillary services, we see higher competition, which is driving prices downward and lowered, the volumes we have sold. This change also means that the contribution within the segment will expectedly be lower going forward. Let's turn to slide 12. In the first quarter of 26, we incurred a non-cash impairment loss of 1.4 billion across our US offshore and onshore assets. driven by increase in the long-dated US interest rates. On our net profit, the quarter total, 2.6 billion. While we had a higher EBITDA, the net profit was impacted by two non-cash accounting impacts, being the impairment loss that I just described, as well as the tax effect. The main tax effects are a deferred tax equity liability at Revolution Wind and all 300 BES as we received initial tax equity contributions during the quarter. The tax effect of that totaling just short of 900 million. We expect to monetize the majority of the tax credits for the Revolution Wind project via the transferability market and will therefore not see further impacts on our tax from the Revolution Wind tax credit monetization. On the tax elements for more detail, I refer you to note 10 in our quarterly report for more details. Adjusted for impairments and cancellation fees, our return on capital employed came in at 8.6%, a decrease compared to last year due to a higher capital employed. The reported ROC came in at 4.6%. Turning to slide 13 and our net interest-bearing debt and credit metrics. At the end of Q1, our net debt amounted to 21.3 billion, representing an increase of 2 billion during the quarter. Cash flow from operating activities include contribution from our operational earnings as well as taxes paid and changes in other working capitals. This also includes a tax equity contribution related to Revolution Wind as we enter into a tax equity structure with a partner for a portion of the project's tax credits. Divestments include the sale of a development project in the U.S. onshore and sale and leaseback of land in the U.S. as mentioned before. Our gross investments amounted to 8.2 billion, reflecting the continued investment into our renewable construction projects. Our credit metric, FFO, to adjusted net debt, stood approximately at 42% at the end of the first quarter, which is well in line with our target of more than 30%. The increase is driven by an increase in funds from operation over the last 12 months, the proceeds from the rights issue, and closing the Hornsey 3 transaction. At the end of the quarter, we had a total liquidity reserve of more than $115 billion. Finally, let's turn to slide 14 and our outlook for 2016. With the strong operational performance in a quarter, we maintain our full-year EBTA guidance, excluding new partnership and cancellation fees of more than $28 billion. We still expect the offshore business to come in higher than last year, the onshore and bioenergy earnings in line with 2025. On CapEx, we also maintain our gross investment guidance for 26 of 50 to 55 billion. And with that, we will now open for questions. Operator, please.