LONDON • Orsted A/S’ announcement that it will sell its Danish power distribution business is the company’s latest signal that it’s thinking global, not on its home market.
Once it’s sold, the former national utility of Denmark will conclude divestment plans that have also included the oil and gas division, according to CEO Henrik Poulsen.
“What we announced, that gets us to the point where we have the platform that we want to build on for longer term,” Poulsen said in a phone interview. “We have transformed from a local Danish black energy company to what is today a European offshore wind company. The next part of the journey will be to move to a global renewables company.”
The 46-year old energy business has roots in fossil fuels and was previously known as Danish Oil and Natural Gas, or Dong Energy AS.
It changed its name to Orsted last year, borrowing the name of a scientist that discovered electromagnetism in the 1800s. Orsted is already the biggest developer of offshore wind farms. It plans to have installed 7.5GW of turbines in the sea by 2020, a little more than six average-sized nuclear reactors can produce. Most of those will be in Europe. It also will spend the next year thinking about how to move into solar, onshore wind and storage, Poulsen said.
Spurred by rising evidence of climate change, the energy industry is going through a period of flux as the global economy tries to wean itself off fossil fuels. The largest companies in the space, from oil majors to utilities, are having to try to figure out how they have to change to remain profitable when the world is transitioning toward using cleaner forms of energy.
Orsted’s strategy is reminiscent of the recent restructuring of the German energy industry, where Innogy SE was carved up by RWE AG and EON SE.
The two German utilities took opposite bets on the future of energy, with RWE taking Innogy’s generation assets and EON scooping up its networks and distribution businesses. Orsted’s divestment signals an agreement with RWE’s views, that the money will be in generating power rather than transmitting it.
Distribution “doesn’t have similar strategic importance as something that for the longer time could support our global green expansion simply because it is a purely domestic Danish operation”, Poulsen said. “It also wouldn’t really be within our strategy to go out and start buying power grids outside of Denmark.”
The funds raised from the sale, which may be as much as US$3.7 billion (RM14.95 billion), will be spent on “value-creating renewable energy projects” or may also be paid out to shareholders, Poulsen said.
The developer won the right to build 920MW of offshore wind in Taiwan in an auction last week.
Potential buyers could be energy companies in Denmark or in a neighbouring nation, pension funds or infrastructure funds, Poulsen said. He doesn’t expect the government, Orsted’s majority shareholder, to block the transaction. –Bloomberg