Ørsted Credit Analysis Post Approval of the Rights Issue

Background:

• • Ørsted A/S, global offshore wind developer/operator headquartered in Fredericia, Denmark; LTM 2024 EBITDA DKK 31.959bn; Total Net Leverage (company-reported interest‑bearing net debt/EBITDA) 1.82x at 31 Dec 2024; Current public ratings: Moody’s Baa2 (stable, Feb 2025) and S&P BBB− (Sep 2025)
• • Ørsted develops, owns and operates offshore wind farms (core), selective onshore wind/solar and storage, and Danish bioenergy/CHP; it also originates/trades power and green certificates
• • 2024 EBITDA DKK 31.959bn, +71% yoy; underlying EBITDA (excl. farm‑down gains and cancellation fees) DKK 24.751bn, +3% yoy; EBITDA margin 45.0% on revenue DKK 71.034bn; Clean EBITDA margin 34.8%
• • Management: CEO Rasmus Errboe (from Jan 2025), CFO Trond Westlie (from 2024), COO Patrick Harnett (from 2024), CHRO Henriette Fenger Ellekrog; leadership changed materially in 2024–2025 amid strategy reset
• • Segmental breakdown:
• • Offshore: 2024 revenue DKK 53.808bn; EBITDA DKK 26.470bn; by far the profit engine; assets across DK/DE/UK/TW/US; revenue mix dominated by inflation‑linked CfDs/PPAs and some merchant exposure
• • Onshore: 2024 revenue DKK 2.720bn; EBITDA DKK 3.863bn; relatively small and under strategic review in Europe and being granted more autonomy in the US
• • Bioenergy & Other: 2024 revenue DKK 15.105bn; EBITDA DKK 1.082bn; district heating/CHP in Denmark and trading activities; earnings volatile due to hedging and green certificate pricing
• • Geographic breakdown:
• • Material exposure to Denmark, UK, Germany, Taiwan and the US; EBITDA concentration in European offshore wind (DK/DE/UK) with growing APAC contribution (TW); US exposure is strategically important but currently a drag due to execution and policy risk
• • Revenue model and contractual structure:
• • Price/volume via a portfolio of long‑dated CfDs (many inflation‑indexed), utility/corporate PPAs and limited merchant; typical tenors 10–20 years for CfDs and 10–15+ years for PPAs; trading revenues linked to hedging outcomes
• • Inflation protection is above average: European CfDs generally CPI‑linked; US PPAs are typically fixed-to‑escalator with less formal CPI pass‑through; merchant tail and balancing/curtailment risks remain
• • KPIs worth noting: offshore availability mid‑90s%, load factors vary by site and wind regimes; EBITDA heavily driven by commissioning ramps and realized power prices despite hedging
• • Cost structure:
• • COGS DKK 35.963bn and operating expenses DKK 58.079bn in 2024; cost base is mixed: sizeable fixed O&M, leases and network fees at assets; variable elements include maintenance campaigns, vessel logistics and consumables; personnel costs are meaningful given 8k+ workforce but not disclosed as a precise share here
• • Shareholders and valuation:
• • Danish State (Ministry of Finance) 50.12% voting and ownership at 31 Dec 2024; free float and institutional investors hold the balance; as of 5 Sep 2025, market capitalization c.DKK 83.6bn and enterprise value c.DKK 159.1bn; the stock trades on Nasdaq Copenhagen
• • Given depressed equity and elevated capex, EV/EBITDA on a trailing basis is high single‑digit to low double‑digit depending on whether you use reported or Clean EBITDA; equity has been volatile ahead of a DKK 60bn rights issue approved on 5 Sep 2025
• • Strategy:
• • Near‑term: complete 8.1 GW under construction by 2027; preserve investment‑grade ratings; rightsizing of organization in 2025–2026; prioritize inflation‑linked revenue, use fixed‑rate debt/hedges to reduce interest risk, and recommit to disciplined farm‑downs
• • Portfolio: scale back green hydrogen and non‑core; explore full divestment of European onshore and grant strategic autonomy to US onshore; exit or pause projects that fail to meet return thresholds (e.g., discontinued Hornsea 4 in current form)
• • Competitive landscape:
• • Offshore wind peers include RWE, SSE Renewables, Iberdrola/ScottishPower, Equinor/BP, Vattenfall and EDF Renewables; market share is fragmenting as procurement and supply‑chain stress favor developers with balance sheet capacity and execution track record; Ørsted remains a top‑tier operator but ceded strategic ground in the US
• • Corporate actions:
• • 2024: impairments of DKK 15.563bn (primarily US portfolio) and cancellation fees DKK 7.335bn; farm‑downs included 12.45% of certain UK offshore assets; continued non‑core disposals in US onshore/solar
• • 2025: DKK 60bn rights issue approved to shore up capital structure, with state and strategic holders indicating support; cessation of Hornsea 4 in current form; ongoing litigation over US federal decisions affecting Revolution Wind; continued farm‑down attempts for Sunrise Wind
• • Current trading:
• • Q1 2025: solid operational results driven by offshore ramp‑ups (Greater Changhua 1&2a, South Fork, Gode Wind 3) and higher inflation‑linked revenue; safety incidents highlight execution risks
• • Q2 2025: EBITDA DKK 6.6bn (+1% yoy); EBITDA excl. new partnerships and cancellation fees c.DKK 5.3bn; positive from commissioning and indexation, offset by low wind speeds and persistent US uncertainty

Risks and mitigants:

• • Customer concentration: diversified off‑taker base across European regulators, utilities and corporates; nevertheless, regulatory concentration risk exists in core CfD regimes (UK, DK, DE) and in individual US state procurement
• • Large EBITDA adjustments:
• • 2024 reported EBITDA DKK 31.959bn includes DKK 7.335bn cancellation fees (positive to EBITDA) and DKK −0.127bn from new partnerships; frequent reliance on these adjustments and on farm‑down gains historically inflates “headline” EBITDA
• • Clean EBITDA definition and logic: Clean EBITDA 2024 = Reported EBITDA (DKK 31.959bn) − Cancellation fees (DKK 7.335bn) + New partnerships (DKK 0.127bn) = DKK 24.751bn; this removes non‑recurring cancellation fee effects and asset sale/farm‑down noise to approximate true operating cash generation
• • Clean EBITDA represented 77% of reported EBITDA in 2024; reliance on adjustments has declined vs 2023 but remains notable; investors should monitor whether cancellation fees or farm‑down gains recur in 2025–2026
• • Cyclicality: power price and wind resource volatility impact earnings despite hedging; policy cycles and auction frameworks introduce non‑economic risks; 2023–2024 demonstrated sensitivity to interest rates and supply‑chain inflation; mitigants include inflation‑linked CfDs and staggered commissioning
• • Litigation/provisions: material impairments and potential disputes in US projects; decommissioning obligations DKK 13.844bn and other provisions DKK 6.691bn at 31 Dec 2024 are significant
• • FCF/leverage sustainability:
• • 2024 CFO DKK 18.356bn; gross investments DKK 42.808bn; divestments DKK 15.680bn; resulting FCF DKK −8.772bn; negative FCF likely persists through 2027 given the build‑out unless farm‑downs accelerate and capex is flexed
• • FFO/adjusted net debt fell to 13.2% in 2024 from 28.6% in 2023; this is weak for the rating category, driving downgrade risk and the large rights issue
• • Regulation/legislation: adverse US federal/state actions have already delayed or halted projects; UK and EU frameworks are improving with inflation compensation and CfD adjustments, but auction design risk remains; Taiwan permitting delays are another tail risk
• • Geopolitical/tariff risk: US policy reversal is now a live risk; supply chain concentrated in Asia/Europe creates tariff/execution exposure
• • Accounting/fraud: clean audit opinions; however, heavy use of fair‑value models (hedging, PPAs, seabeds) requires judgment; transparency on hedge reserves and impairment assumptions is critical
• • Prior distress/restructuring: none in recent history; however, 2023–2025 credit metrics weakened markedly, prompting ratings downgrades and emergency equity raise
• • Other significant risks: execution of 8.1 GW pipeline (vessels, cables, turbines); capacity/failure risk in supply chain; cyber risk to operational assets

Capital structure:

• • Total gross debt and composition:
• • Long‑term debt DKK 91.683bn; short‑term debt DKK 4.935bn at 31 Dec 2024; additional hybrid capital outstanding (50% equity credit in company’s adjusted net debt metric); IFRS‑16 lease liabilities included in reported debt/EBITDA
• • Interest‑bearing net debt DKK 58.027bn at 31 Dec 2024; Adjusted interest‑bearing net debt DKK 81.169bn at 31 Mar 2025; note that hybrids and certain receivables add‑backs drive differences between simple “gross minus cash” and the company’s adjusted metric
• • Leverage (two views, both IFRS‑16 consistent):
• • Reported EBITDA basis: TNL = interest‑bearing net debt (DKK 58.027bn) / reported EBITDA (DKK 31.959bn) = 1.82x
• • Clean EBITDA basis: Clean TNL = interest‑bearing net debt (DKK 58.027bn) / Clean EBITDA (DKK 24.751bn) = 2.35x; this better reflects core cash generation and is the metric we prioritize for rating mapping
• • Interest coverage:
• • Using Clean EBITDA to net interest expense: DKK 24.751bn / DKK 3.591bn ≈ 6.9x; reported EBITDA/interest ≈ 8.9x; coverage is acceptable but trending down as interest costs rise and hedges roll
• • WACD:
• • Not explicitly disclosed here; observable net financial expense DKK 3.591bn versus average net debt suggests higher effective rates year‑on‑year; a pivot to fixed‑rate project debt is underway, but the blended cost is up vs 2022
• • Maturities:
• • Short‑term debt DKK 4.935bn due within 12 months at 31 Dec 2024; refinancing planned via committed lines, project finance, farm‑downs and the DKK 60bn rights issue
• • Contingent liabilities/provisions:
• • Decommissioning obligations DKK 13.844bn; other provisions DKK 6.691bn; tax uncertainties are under discussion with authorities; these are material relative to EBITDA and equity
• • Supply‑chain finance:
• • The company operates supply‑chain finance and KYC programs; quantum not disclosed here, but users should monitor any build‑up given sector stress
• • Total liquidity:
• • Cash and equivalents DKK 23.124bn at 31 Dec 2024; undrawn committed facilities are substantial per management but not quantified here; rights issue (DKK 60bn) approved 5 Sep 2025 will materially augment liquidity once executed

Shareholders and valuation (public market snapshot as of 5 Sep 2025, DKK terms):

• • Ownership: Danish State 50.12%; others include Equinor and institutional investors; free float remains meaningful
• • Market capitalization c.DKK 83.6bn; enterprise value c.DKK 159.1bn; EV split roughly 46% net debt and 54% equity at current levels; the approved rights issue implies further re‑equitization and EV mix shift toward equity

Conclusion:

• • FCF outlook:
• • Expect negative FCF through 2026–2027 given DKK ~145bn gross investments 2025–2027 and modest divestment momentum; FCF should inflect positively post‑2027 as 8.1 GW commission, inflation‑linked revenue scales and opex stabilizes; risk lies in US projects and permitting delays (US and Taiwan)
• • Valuation (EV) and capital mix:
• • EV c.DKK 159bn with net debt c.DKK 74bn by market sources vs company net debt DKK 58bn at YE 2024; after the DKK 60bn rights issue, leverage should decline mechanically, but dilution will be heavy; EV will be increasingly supported by equity if the raise completes as planned
• • Capital structure sustainability:
• • Without equity, FFO/net debt at 13.2% and Clean TNL ~2.35x would have continued to drift toward sub‑IG metrics; the approved equity raise is necessary to preserve BBB−/Baa2; sustainability hinges on executing farm‑downs, commissioning on time, and avoiding further US impairments
• • Rating mapping based on “Clean” metrics and Moody’s/S&P grids:
• • Debt/EBITDA (Clean 2.35x) maps around Baa1/Baa2; EBITDA/interest (≈6.9x) maps around Baa2/Baa3; RCF/Net debt (13.2%) maps Ba1/Ba2; business profile is strong but currently under execution/policy strain
• • Our blended view aligns with Moody’s Baa2 and S&P BBB− today; upside to BBB/Baa1 requires FFO/net debt sustainably >20–25%, Clean TNL ≤2.0x, and visible farm‑down/cash conversion; downside risk to BB+/Ba1 would stem from failed equity raise, extended US disruptions, or cost inflation eroding coverage

What to monitor:

• • Execution on DKK 60bn equity raise and the terms/discount
• • Farm‑downs (especially Sunrise Wind) and use of project finance to reduce balance‑sheet capex
• • FFO/net debt trend versus 20%+ target, measured quarterly, and Clean EBITDA growth versus capex outlays
• • US policy/legal outcomes for Revolution Wind/Sunrise Wind and Taiwan permitting cadence
• • Hedge book and mark‑to‑market on PPAs/CfDs in a lower wind/higher rate backdrop