Time for Equinor to snap up the rest of Orsted

Oersted A/S

25/11/2025 09:43

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Yawen Chen

LONDON, Nov 25 (Reuters Breakingviews) - Offshore wind’s slump has left Orsted ORSTED.CO fragile, and Equinor EQNR.OL frustrated. Despite recent running repairs to its balance sheet, the $26 billion Danish group has a strategy reliant on a troubled part of the energy transition. A share-based tie-up with its $58 billion Norwegian rival is moving from far-fetched to feasible.

Cost inflation, supply bottlenecks and a U.S. administration that has cut subsidies and halted projects mid-construction have battered the offshore wind sector. Orsted’s Sunrise Wind project prompted the company’s 60 billion Danish crown ($9 billion) rights issue in October. Denmark, which still owns 50.1%, and Equinor, the next-largest shareholder with 10%, were obliged to cough up.

Equinor is a big oil and gas player, and recently reined in low-carbon spending while trimming its 2030 renewables ambition. But it still targets 10 to 12 gigawatts of capacity. Gaining control of Orsted would give it a joint 12 GW fleet of operating and under-construction projects on a pro forma basis, per Bernstein.

It could also stack up financially. Paying a 30% equity premium and assuming $3 billion of net debt would give Orsted an enterprise value of around $37 billion. With $3.4 billion of net operating profit after tax likely in 2028, based on analyst forecasts compiled by Visible Alpha, Equinor could get a 7% return on invested capital, above Orsted’s roughly 6% cost of capital as estimated by Citi analysts. Given the companies operate side-by-side in the UK’s North Sea, the U.S. East Coast and Poland, synergies via pooling procurement, development and financing costs could juice this return.

The main stumbling block has always been politics. Less than five years ago Orsted’s market capitalisation exceeded $90 billion, so Denmark’s government would stand accused of selling the family silver. But the cheap capital and generous policies that helped inflate that valuation have vanished, and Danes may no longer find spending taxpayer cash propping up a fallen star the wisest option.

A tie-up would involve a political tussle over the size of the premium paid, and whether any cash should change hands. But it would deliver greater balance-sheet security and a firmer footing in the U.S. As wind turbine build-outs spread globally the assets are not seen locally as a national prize to be hoarded, or a security risk if ownership changes. Copenhagen, meanwhile, may be more comfortable with a Nordic partner that is over 70% owned by the Norwegian government than with rivals such as Germany’s RWE RWEG.DE or the United Arab Emirates’ ADNOC.

Orsted investors have been alive to an Equinor-Orsted tie-up for some time. They even jokingly call the prospect that the former might come to the latter’s rescue the “Equinor put”. It may be time to exercise that option.

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CONTEXT NEWS

Danish offshore wind giant Orsted said on November 5 that it had no plans to take over the renewables business of Equinor, its second biggest shareholder, which has proposed closer ties between the companies.

Norwegian oil, gas and renewables group Equinor, which took a 10% stake in Orsted in 2024 and injected close to $1 billion in an October share issue, said in October the offshore wind industry needed consolidation.

Equinor Chair Jon Erik Reinhardsen told Reuters on the sidelines of an energy conference in September the company has “open minds in terms of what it leads to” when asked if Equinor may raise its stake in Orsted.

Equinor said in September it planned to nominate a candidate to the Danish company’s board.

Orsted’s valuation has plunged from a 2021 peak https://www.reuters.com/graphics/BRV-BRV/lbpgmbddgpq/chart.png

(Editing by George Hay; Production by Oliver Taslic)

((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))