DNNGY - Ørsted A/S (DNNGY) Q4 2023 Earnings Call Transcript

2024-02-07 21:16:10 ET

Ørsted A/S (DNNGY)

Q4 2023 Results Conference Call

February 07, 2024 07:00 AM ET

Company Participants

Rasmus Haervig - Investor Relations

Mads Nipper - Group President and CEO

Rasmus Errboe - CFO

Conference Call Participants

Kristian Tornøe - SEB

Harry Wyburd - BNB Paribas Exane

Lars Heindorff - Nordea

Deepa Venkateswaran - Bernstein

Rob Pulleyn - Morgan Stanley

Alberto Gandolfi - Goldman Sachs

Peter Bisztyga - Bank of America

Mark Freshney - UBS

Jenny Ping - Citi

James Brand - Deutsche Bank

Marc Ip - Berenberg

Ahmed Farman - Jefferies

Klaus Kehl - Nykredit

David Paz - Wolfe Research

Martin Tessier - Stifel

Presentation

Rasmus Haervig

Hello, everyone, and welcome to Ørsted's presentation of our Full Year 2023 Results and our Capital Markets Update. My name is Rasmus Haervig, and I'm heading the Ørsted IR team, and we've been very much looking forward to giving you this update. Today, our CEO, Mads Nipper, will give an update on our business plan, followed by our interim CFO, Rasmus Errboe, who will go through our financial plan. That will take roughly an hour, and afterwards, we have an hour allocated for Q&A, where both the people who joined us here get after today, but also those following online can pose questions.

So with that, over to you, Mads, for the presentation. Thank you.

Mads Nipper

Thank you very much, Rasmus, and a warm welcome to those of you here and also for all of those who are following us online. We appreciate you dialing in on this. As Rasmus said, it's a very busy earnings day, and therefore, great to have you here in the room. As Rasmus said, on top of naturally presenting our 2023 results, we will also -- in light of a very challenging 2023, we will also present our updated plan. And we are very aware that '23 was a significantly challenged year, not just for us, but for all stakeholders, including investors, due to the developments in our U.S.

offshore business and not least the very difficult but economically rational decision to cease development of Ocean Wind 1 and 2 for that matter.

That led to significant cancellation fees on top of impairments that we had to realize is mostly also for that project. But with that, let me start on the business update, including the outline of both what we have learned and also what is going to happen from here. So if we take a look at the summary of what Rasmus and myself will be presenting. There are essentially four components. One is on the 2023 results where the underlying business results were actually approximately DKK1 billion above the top end of our guided range, something we were obviously satisfied with.

We did see some significant strategic milestones. And also we were within what we had already announced at Q3 in terms of both impairments and the expected cancellation fees for Ocean Wind 1.

We are very aware that none of that takes top priority with our investors, but nonetheless, an important backdrop to also share with you in a much briefer than normal format. What we have done also, and we have worked intensely on that in the last weeks and months is to ensure that we review very carefully what were the events that led up to the situation we had in our U.S. business and also especially that led to the very dramatic developments on Ocean Wind 1, leading to terminating and ceasing development of that project.

We have analyzed that and we have taken learnings that are already implemented or under implementation. We have also done a significant risk review of all of our offshore wind projects not taking any assumptions that something is under control but doing a systematic and structured review of what has happened in our portfolio and implementing key learnings from that to further derisk those projects. We will do that in some detail today. And then we have conducted a portfolio review leading to a slimmer, but most importantly, a more focused portfolio with a higher value creation and risk balance.

We will also share with you the backbone of the updated plan that we have, which is a robust business plan that delivers on what we had set it out to do. The core elements of that robustness and also to ensure that we protect a solid investment-grade rating with a strong balance sheet is that we are reducing and further phasing our CapEx. We have an accelerated and expanded partnerships and farm-down program, and we've decided to have a three-year dividend holiday.

And then also, we are reducing our both development, but also our fixed costs. And let me dwell on that for a second. This has also led to us today announcing that we are removing during this year 600 to 800 positions in the Company and today also announcing that 250 colleagues will leave Ørsted. We are obviously committed to do that in a respectful and fair manner, but it is an important part of our program to ensure that we further strengthen our competitiveness. All of this will lead to an estimated DKK1 billion saving in '26 compared to '23 on a like-for-like basis.

All of this leads to, and you will hear us say that again that the updated guidance is an unchanged 150 to 300 basis points spread to WACC. This is industry-leading, as I'm sure you're aware, and fully loaded so that it is fully cost loaded with our fixed cost as well. An unchanged average 14% return on capital employed. A 35-to 38-gigawatt of estimated installed capacity by 2030. And that is a reduction, but it is also one that leads to an investment program, which on a like-for-like basis is approximately 1/3.

So comparing the DKK475 billion to -- announced at the Capital Markets Day to approximately DKK270 billion now is on a like-for-like basis reducing for what we spent last year, a 1/3 reduction. And that leads to DKK39 billion to DKK43 billion EBITDA by 2030, excluding new partnerships. That is around 8% average growth. And I will mention that this would -- this number would have been around 10% had we ended in the middle of our guided range for '23. So the CAGR towards 2030 is naturally mathematically lowered because of the higher-than-expected performance of the underlying business in '23....

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