Drop in operating profits for Dong Energy in Q1

By Grimsby Telegraph | Posted: 27 Apr 2017

DONG Energy has seen a drop in like-for-like earnings in the first quarter of 2017, as weaker winter winds blew through the accounts of the world-leader.

While describing the operating profit of DKK 3.3 billion (£375 million) as a "good start to 2017," it was £204 million lower than the same period in 2016.

Although income was up from operating wind farms by 21 per cent, the company has divested large stakes to investors as it pursues a strategy of releasing capital to fund its future project pipeline. This also included a 50 per cent stake in Burbo Bank Extension off the west coast of the UK.

The company, which is making Grimsby its East Coast Hub for the operations and maintenance of several wind farms, building on the operational Westermost Rough with Race Bank and Hornsea, said this 19 per cent decrease was as a result of higher income from wind power partnerships in 2016.

Income is anticipated later in 2017, and is expected to exceed 2016, it said, with 50 per cent of the Walney extension, again on the west coast, to be sold off, and the construction of Race Bank, out of Grimsby, looming. 

The return on capital employed was up 2 per cent year-on-year to 17 per cent, with investments totalling DKK 2.5 billion (£284m), of which approximately 80 per cent was invested in the continued expansion of offshore wind - including Race Bank and the Hornsea projects off the Humber approaches.

Both were reported to be on track and on budget for commissioning in 2018 and 2020 respectively. 

From the beginning of the year until the end of 2017, net debt increased by DKK 3.1 billion (£352m) to DKK 6.5 billion (£735m).

Commenting on the interim financial report, Henrik Poulsen, chief executive and president, pictured above, said: "Q1 EBITDA in line with expectations gives us a good start to 2017. We maintain our financial guidance for 2017, with EBITDA expected to amount to DKK 15-17 billion (£1.7b to £1.9b), which is equal to a growth of 4-18 per cent in the underlying operating profit, and gross investments expected to total DKK 18-20 billion (£2b to £2.2b) for the year.

"Operations in Wind Power were in line with expectations in Q1. Following a January with weak winds, both February and March were close to a normal wind year. In addition, wind farm availability was satisfactory. Overall, earnings from commissioned wind farms were up by 21 per cent compared to Q1 2016.

"In April, we completed Burbo Bank Extension located off the UK's west coast, making us the first company in the world to deploy 8MW wind turbines. In addition, we have five large offshore wind farms under construction, which are all progressing according to plan.

"The development of our portfolio of offshore wind projects for construction after 2020 is progressing steadily, both in terms of business development in new markets, including the USA and Taiwan, and in terms of participation in auctions in Europe."

Earlier this month Dong was awarded the right to build three offshore wind projects in the German part of the North Sea with a total capacity of 590MW. For two of these projects, OWP West and Borkum Riffgrund West 2, it submitted bids with zero subsidies on top of the wholesale power price. The third project, Gode Wind 3, was awarded based on a bid price of EUR 60 per MWh.

"The zero subsidy projects represent a historical breakthrough for offshore wind," Mr Poulsen said. "We are seeing significant momentum in the offshore wind industry, with innovation and notably reduced costs creating new market opportunities and an ever-stronger value chain. Competitive intensity is escalating as more strategic operators have entered the scene, which also helps to further accelerate the development of offshore wind. We remain very well-positioned to take part in this significant potential for long-term, profitable growth."

The sell-off of oil and gas interests is "progressing according to plan", with a transaction expected to be closed this year. 

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