XLE - Orsted A/S: Breezing Past Challenges

2024-05-06 11:33:18 ET

Summary

• Renewable energy investors have experienced a roller-coaster ride, with the sector facing headwinds and a massive correction.
• Ørsted A/S, a global leader in offshore wind, has seen its stock price decline due to write-downs on its U.S. projects.
• Despite setbacks, Ørsted delivered solid Q1 2024 results, with higher offshore earnings and progress on projects under construction.

Saying that renewable energy investors have had quite a roller-coaster experience is an understatement. The zero interest rate environment and strong government support made the sector surge after the Covid pandemic, but higher interest rates, supply chain issues, and other headwinds have resulted in a massive correction. After roughly tripling in price, the iShares Global Clean Energy ETF ( ICLN ) is now showing a total return of approximately 41% over the past five years. This is less than half compared to the Energy Select Sector SPDR ETF ( XLE ), which focuses on oil and gas companies. Ørsted A/S ( DNNGY )( DOGEF ), which is arguably the global leader in offshore wind, is actually trading at a lower price compared to five years ago. This is in part the result of massive write-downs it was forced to take related to some of its U.S. projects, where higher interest rates, inflation, and supply issues made the economics of the projects no longer viable....

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