Morgan Stanley | PR concludes after last week’s Utilities conference that the Investor sentiment in renewables has hit rock bottom after the impairment published by Orsted in its American portfolio… and it is improving. In this sense…has identified THREE CATALYSTS in the remainder of the year that would justify the purchase of Renewables even having exposure to the offshore wind industry in the USA:
- US aid for offshore wind: Rob increasingly trusts that the American government will intervene to help in form of:
- A 30% increase in Strike Price at the Sunrise Wind project in NY.
- A possible intervention by the White House to help the Revolution and Ocean Wind projects. This could be announced in October/November… and the Confirmation of any of this aid could be a boost for Orsted and other Renewables.
- NY Offshore Wind Auction: In the upcoming auction for new projects in the USA…bidders are likely offering higher prices to reflect greater uncertainty or supply chain issues…higher financing costs and CAPEX. Therefore…if this auction continues, Strike Prices could
- Translate into very positive returns for the promoters.
- Reassure the market about the entire concept of value creation in the offshore wind sector. It will most likely be announced in December.
- If you throw them they go down… long duration stocks would benefit… and my rate strategists see the 10Y BUND IRR at 1.60% as of June 2024. In fact, Rob highlights that the Half of Orsted’s performance so far this year can be attributed to the impact of rates. With respect to European renewable market …Rob highlights that the value creation remains intact … given the absence of market risk like that of Offshore Wind in the USA … and ones higher energy prices that allow offset higher CAPEX and cost of capital.
Their main European bets are EDPR and Orsted.