Brokers have rallied behind the offshore wind power sector, suggesting cost problems flagged in a warning about its US operations by Orsted last week were largely company-specific.
JP Morgan said the impairments announced by Orsted underline: 1) why pressures in the offshore supply change vary by country and by the project; 2) the approach towards bonus tax credits in US renewables; and 3) why a portion of the impairments announced by Orsted are linked to interest rates.
Putting these through its mixer, JP Morgan concludes the share price reaction of some stocks was overdone.
In the UK, this means SSE in particular.
Citi adds that Orsted's US offshore wind issues have driven “what we see as unjustified contagion in the wider renewables sector”.
“Renewable peers again traded as a pack, all heading downwards in sympathy with little fundamental differentiation between their asset base, in terms of its technology and geography.”
In its view, says Citi, Orsted's difficulties are idiosyncratic, and there is limited read-across to other offshore developers under coverage.
“The bottom line is that impairment risk is concentrated in projects with a secured, non-indexed power supply contract and an advanced state of development short of FID.
“The majority of projects in this category within our coverage overwhelmingly belong to Orsted.”
Share price reactions elsewhere are a buying opportunity, says the US bank.