Equinor has successfully acquired a 9.8% minority stake in Ørsted, a leading Danish renewable energy company, demonstrating confidence in the long-term prospects of the offshore wind industry despite current challenges. This strategic investment, announced on Monday, involved the acquisition of 41,197,344 Ørsted shares through a combination of market purchases and a block trade, totaling an impressive value of $2.5 billion at the closing price on October 4.
With this acquisition, Equinor becomes the second-largest shareholder in Ørsted, which has set ambitious goals to achieve a gross installed renewable capacity ranging from 35 to 38 gigawatts by 2030, following the Danish government, which holds the largest controlling stake. Equinor, primarily known for its offshore wind project developments, has opted not to seek representation on Ørsted's board of directors, instead positioning itself as a "supportive owner." The company views this stake as a counter-cyclical investment in a prominent developer endowed with a premier portfolio of operational offshore wind assets, aligning with its strategic expansion into renewable sectors.
Currently, Ørsted boasts a net renewable generation capacity of 10.4 GW, along with 7 GW worth of offshore wind projects underway. The investment opens doors for Equinor to access a net 1 GW in operational assets. Financial analysts at RBC Capital Markets have pointed out that without this investment, Equinor may have faced the necessity of investing a similar amount, valued at $2.5 billion, to commence its own offshore wind project, accompanied by risks associated with construction, delivery, and supply chain challenges. Anders Opedal, Chief Executive Officer of Equinor, acknowledges the array of challenges presently confronting the offshore wind sector but remains optimistic about "the crucial role offshore wind will play in the energy transition." In line with Equinor's long-term outlook, the company has expressed intentions to increase its stake in Ørsted to 10%, with no plans to surpass this threshold.
However, RBC analysts remain cautious about the sustainability of this stance. The ongoing discussion surrounds the "buy vs build" dilemma, emphasizing Equinor’s historical willingness to acquire public entities, as seen in previous investments like Scatec in the solar segment and Lundin within its core operations.
For instance, Equinor acquired a 12% stake in Lundin in January 2016, only to later boost its ownership to 20%. Given this pattern, analysts suggest this could reflect positively for Ørsted, notwithstanding Equinor's current declaration of no intentions to augment its stake. Interestingly, when Lundin was initially approached in 2016, no plans were disclosed regarding increasing stakes at the time. The successful execution of this transaction is contingent upon receiving necessary approvals in compliance with foreign direct investment regulations.
Following the investment announcement, Equinor's shares experienced a decline of over 3% in Oslo, while Ørsted witnessed an uptick of 6% in its Copenhagen market trade..