Equinor backs Orsted rights issue seeking 'closer strategic collaboration'
Equinor also to nominate candidate for board of directors at embattled Danish offshore wind champion
The Norwegian oil & gas giant said that following dialogue with the company, it will support “the proposal to strengthen Orsted’s balance sheet in response to the current industry challenges”, maintaining its 10% ownership share in the utility.
Equinor, ahead of the next annual general meeting, will also nominate a candidate to Orsted’s board of directors. If elected, it would boost the oil firm’s position in the world’s leading offshore wind developer.
The Norwegian backing for Orsted is likely to be welcomed by investors, as a vote of confidence by the second most important shareholder after the Danish State.
Orsted shares rose 2.56% to DKr198.10 per share after the opening on the Copenhagen stock exchange Monday, while Equinor was down 0.32% at NKr247.00 ($24.62) in Oslo.
"Equinor’s backing is an important endorsement of Orsted’s business and reflects a belief in the company’s future. It is an important signal from a professional player in the industry like Equinor," Sydbank chief stocks analyst Jacob Pedersen said.
"Without Equinor’s backing, Orsted would have faced a more difficult task in convincing other owners and potential investors to invest new money in the company."
But Pedersen also noted that Equinor isn't "going all in" by trying to use the rights issue as an opportunity to widen its ownership stake in Orsted.
Such as step would have been an "offensive signal" that would have met with some resistance from Equinor’s shareholder base, which has already suffered a considerable loss on its investment in Orsted, the analyst explained.
“In response to the challenges facing offshore wind, the industry will see consolidation and new business models. Equinor believes that a closer industrial and strategic collaboration between Orsted and Equinor can create value for all shareholders in both companies,” Equinor said.
The oil company added that it is closely following recent developments around the US offshore wind industry and will remain in dialogue with Orsted as the situation evolves.
As Trump has an issue with Denmark due to his claim on Greenland, an autonomous Danish territory, a renewed Norwegian intervention for US offshore wind would likely be welcomed by Orsted.
Subject to the final terms of the rights Issue, Equinor said it would subscribe for new shares at a consideration of up to DKr6bn, or around $939m, based on a USD/DKK exchange rate of 6.39.
Equinor’s own offshore wind portfolio consists of 0.4GW of net installed capacity, and another 3GW under development.