S&P downgraded Danish wind power giant Orsted to BBB on Wednesday, citing higher leverage on its balance sheet and major U.S. impairments in 2023 due to supply chain delays and higher costs.
S&P said Orsted's business risk profile has weakened from last year, but was still satisfactory. It expects the world's biggest offshore wind farm developer would be able to successfully manage the substantial industry risks it faces.
The offshore wind industry has been struggling with rising inflation, interest rate hikes and supply chain delays, which have endangered plans by U.S. President Joe Biden and several states to replace fossil fuels with offshore wind to fight climate change.
The ratings agency maintained a stable outlook on Orsted, saying it expected improvements in the company's adjusted funds from operations (FFO) to debt and EBITDA over 2025.
Orsted said in an emailed statement the downgrade would not have any implications on its business plans or its associated funding strategy.
Earlier on Wednesday, the company trimmed its investment and capacity targets, as well as paused dividend payouts as part of a major review.
S&P said it expects these moves to restore credit metrics for the firm over 2024 and 2025.
Orsted has been battling to restore investor confidence after halting the development of two U.S. offshore wind projects in November last year, with related impairments surging above $5 billion.
(Reuters - Reporting by Kanjyik Ghosh and Angela Christy in Bengaluru; Editing by Shinjini Ganguli)