'Danish prestige' | Would an Orsted takeover by RWE make sense?

RWE CEO Markus Krebber doesn’t seem willing to take no for an answer, at least not in the long run, German media reported, after it emerged that the energy giant last year held talks over a possible takeover of Danish global offshore wind champion Orsted.

But would a takeover make any sense for either side?

“It makes sense for RWE, which is also a very big player and wants to expand its presence in offshore and green technologies even more, to take a look at Orsted.

“With the capabilities of RWE, the company would have said: 'We know how much Orsted's pipeline and the assets in production are worth and we can clean up the mess in the US. And with our balance sheet, we don't need to go out and ask the market for more funds or to decrease our investment plan’.”

Would make RWE offshore number-one

Marc Hamer, founder of German renewables consultancy Greentech Partners, stressed that a takeover would turn RWE into the global number-one in offshore wind at once, and allow it to reach or even exceed its own targets.

The company aims at almost doubling its green power capacity to more than 65GW by 2030 from 35GW last year, boosting its offshore wind fleet to more than 10GW by then from 3.3GW now. Orsted currently has stakes in 12GW of offshore wind in operation and under construction, and has a massive pipeline of 76GW.

Asked whether RWE wouldn’t overstretch itself through such a mega-takeover, Hamer added that he perceives the German giant as very analytical, strategic and solidly managed.

“The information they publish is top-notch. I definitely have the impression that they thought it through and looked at it carefully.”

Politics and climate goals

But the very attractiveness of Orsted may just be the ultimate problem for any such deal.

Denmark’s government also seems unlikely to surrender its offshore wind champion.

“Denmark has been a front-runner in both onshore and offshore sectors and has recently been in green hydrogen/PtX as well. They will continue to lead the technology innovation in these sectors. Divesting stakes in Orsted will make it difficult for them to realise the decarbonisation goals.”

Last year’s setback in the US “was a bump on this road”, Barla reckoned, but this would not deter the Danish state’s confidence in the company’s future prospects, adding that offshore wind globally – excluding China – is expected to grow by tenfold from 6-7GW currently to more than 60-70GW annually in the next ten years.

“Orsted is certainly well positioned to capitalise on this growth, consequently enabling its largest shareholder, the Danish state, to reap the benefits.

“Though there would be synergies if a large group like RWE acquired an offshore wind pioneer like Orsted, the respective companies' strategies are different in terms of markets, financial allocation and expectations, and supply chain sourcing.

“Most importantly, it would dilute the Danish government's future clean energy ambitions.”

Next to possible future gains and climate policy considerations, politics and prestige also may play a role, said Sydbank’s Pedersen, who doesn’t think Danish politicians will agree to sell their offshore crown jewels.

“Orsted is a very important political project in Denmark. A product of prestige,” he reckoned.

“Danish politicians have a huge positive impact from governments around the world talking about this huge offshore wind player that is a Danish company and owned by the Danish state.”