Ørsted A/S (ORSTED) Earnings Call Transcript & Summary

Hello, and welcome to the Orsted Investor Call. My name is Alex and I'll be hosting the call today. [Operator Instructions] I'll now hand it over to your host, Mads Nipper, CEO, to begin. Please go ahead.

Good morning, everyone, and thank you for joining this call. Yesterday evening, we announced the anticipation of an impairment to part of our U.S. portfolio on the back of a pre-FID review of our near-term U.S. offshore development projects. As part of this review, we have assessed the aggregate adverse impacts relating to our supply chain developments, net of favorable progress on our ITC guidance and interest rates increasing. Let me walk you through each of the respective developments. On the supply chain challenges, we have seen several impacts by a handful of supplier delays materializing over the recent weeks which relates to our Ocean Wind 1, Sunrise and Revolution Wind projects. As there is an inherent risk associated with our [indiscernible] schedules, we constantly monitor these risks across all our projects and ensure that we take the most impactful steps in mitigating those. In recent weeks, we have seen an increase in probability that some risks will materialize, leading us to reflect this in our business cases. Specifically, the adverse impacts related to our foundation supplier for Ocean Wind 1, EDW that is experiencing challenges in the production of foundation. This means that we now expect a COD early 2026 of Oceanwind 1. For our Northeast [indiscernible] Sunrise Wind and Revolution Wind, the project foundation supplier [indiscernible] is also experiencing ramp-up and transportation challenges. And finally, we have seen an increase in likelihood of risks materializing around the timing of our terrific vessel as well as greater visibility on the costs to make [indiscernible]. It remains our expectation is that we will utilize the [indiscernible] facility for the part of the installation of our Northeastern projects. While working on several mitigating actions, we have concluded that there is a continuously increased risk in the suppliers' ability to deliver on their commitments and contract schedules. This creates -- could create knock-on effects requiring future remobilizations to finish installation as well as potential delayed revenue, extra costs and other business case implications. Our current assessment is that the impact from these developments can lead to impairments of up to DKK 5 billion. However, we continue to work on all mitigating actions that should reduce these impacts. In addition, our continued discussions with senior federal stakeholders about additional ITC qualifications for Ocean Wind 1 and [indiscernible] progressing as we had previously expected. We continue to engage in discussions with federal stakeholders to qualify for additional tax credits beyond 30%. If these efforts prove unsuccessful, it could lead to impairment of up to DKK 6 billion. The level of a possible impairment will be decided based on a probability weighted assessment of the likelihood of obtaining the additional ITCs. Finally, the U.S. long-dated interest rates have increased which affects our U.S. offshore projects and certain onshore projects. If the interest rates remain at the current level by the end of third quarter, it will cause an impairment of approximately DKK 5 billion. The above factors cause deterioration of the business cases, which is, of course, very unsatisfactory. As we previously communicated, the near-term U.S. offshore development projects do not meet our value creation target on a life cycle basis. However, we maintain convinced -- we remain convinced that as additional investments that we will be deploying into the portfolio would be within our 150 to 300 basis points spread to WACC target on a forward-looking basis. We will continue to mature the projects while working on all levers that can contribute to the value creation. And pending boundary conditions such as tax, credit clarity and local wallets. We will work towards the final investment decision for the projects, either by the end of the year or early next year. Let me be clear that we will continue to carefully assess all of our options related to our all U.S. projects to ensure that we make the most financial responsible decisions. As we communicated earlier, we are willing to walk away from projects if we do not see value creation that meet our criteria. To ensure that we will not end up in a similar situation, we really ensure that we have significantly improved project visibility, which, amongst others, will be enabled by the development of our first wave of projects. This is already reflected in our approach towards the remainder of our U.S. order portfolio, where we have decided to reconfigure our [indiscernible] and Ocean Wind 2 projects as they currently do not meet our value creation criteria. Similarly, our recent and future bids in the U.S. ensure that we can mitigate some of the risks that our awarded portfolio have encountered in terms of cost inflation as this will be adjusted through inflation adjusting mechanisms in the offtake price. Adjusted for the anticipated impairments, our average ROCE for the period 2023 through 2030 will remain around 14%. Other ambitions and financial targets remain unchanged. And with this, let's open up to questions from myself, our Group CFO, Daniel Lerup, and the CEO of our Region Americas, David Hardy. Operator, please.

[Operator Instructions] Our first question for today comes from Harry Wyburd of BNP Paribas. Go ahead.

I'll stick to the usual one question [indiscernible] many others. And can I just start by asking which of your CMB financial targets for the long term [indiscernible] 2030 remain valued and which ones are effectively being modified by this announcement? And specifically, on the ROCE guidance, if I understand correctly, you reflected the write-down in lower capital employed. So presumably that implies a long-term EBIT downgrade and I wondered if you could quantify that a bit downgrade? And also help us understand whether it's just driven by the EBIT impact of lower ITC assumptions because I understand that [indiscernible] EBIT, or if there's something else implying other impacts as well?

Yes. Thank you for the question, Harry. So it is only our long-term ROCE target that will be impacted by the impairment. And as we also outlined in the company announcement, there is a positive uncertainty as to how that impairment will turn out specifically very much due to the ITC where there's still uncertainty whether we'll get 30% or 40% on Ocean Wind 1 and Sunrise. So of course, the ROCE will depend on the size of the impairment. But are we in a scenario where, let's say, we do not get the ITC -- so it's roughly DKK 10 billion impairment that plays out. The long-term ROCE, so the average up until 2030 will be impacted by roughly 1 percentage point. So that's [indiscernible] around 14% to 13%. So we are still committed to delivering on those roughly 14% ROCE however, adjusted for the amount of the [indiscernible]. And you are correct that the ITCs will be going through the EBITDA and EBIT.

Okay. Sorry, just to clarify, so the 1% difference you mentioned the 14% to 13%, is that saying on the current level of capital employed free impairment, we're looking at 14% to 13% decline and therefore, you can sort of apply that roughly to EBIT as the delta? I understood that right?

No. So it's basically just the impact of the impairment this year. The size of that impacting the average ROCE is roughly the 1 percentage point impact.

Our next question comes from Alberto Gandolfi from Goldman Sachs. Please go ahead.

I'll also speak to the one rule. It's a question of 2 parts. What has changed in the past couple of months since the CMD? Why do you see now things worth saying that you couldn't have seen back then. And at the CMD, you said those projects in the U.S. are not particularly -- well, do not create value, they're [indiscernible] used as a terminology. But you also said from now on, given the CapEx we have already spent, we set to continue and go ahead because they have NPV positive if we look at what is left to spend. Now given the picture you just painted on supply chain, on delays, on cost and interest rates. I guess the question is, but if you don't mind, I would love you to touch on the points I made. Why don't you just walk away if things are getting worse? Why don't you just walk away if you don't get an incremental 10 percentage points. Your stock is not pricing in future growth. We continue to have negative news on the offshore industry. Why not playing a bit more hardball with the policymakers if you don't get the 10% ITC. So I guess the big question, why not walking away?

Yes. Thanks, Alberto. Let me take the sort of the 2 in 1 question. So what is it that actually has changed the [indiscernible] because we actually said that there was sort of -- there were no costs in our contract, which is actually still true. So the implication -- the adverse implications you see are not to -- I mean, they are about the delays and the impacts of those delays. So essentially not something that was outstanding to negotiate at the point of time where we had the CMD. And we are still in a situation where the forward-looking is still -- for the portfolio within our DKK 150 million to DKK 300 million guiding range on a forward-looking basis. And this is where -- yes, it is tempting to say, could we just walk away. But as we already shared at the point of time of the CMD, our -- the level of [indiscernible] cost just means that it is the financial rationale of the system to sustain these projects when you said, it is exception to the rule. These traffics that are already suffered from significant delays from the previous administration in the U.S., we said they are going to be positive one-off within the guided range on a forward-looking basis, still the case. And even with the current assumptions after we mentioned in terms of potential impairments, that is still the case. But we will -- we are putting maximum pressure on the unfavorable stakeholders to ensure that we get the support needed to avoid some of these impairments. So walking away, would not -- still not be the best and most responsible ways to our shareholders' money.

Our next question comes from Deepa Venkateswaran of Bernstein.

I have a similar question on what's changed, which is on the negotiations with the federal agencies. So we know that at the CMD, there was a drop and you were confident of moving it along in the right direction. So can you tell us what happened in the meantime in your negotiations? And secondly, I know you've also separately applied for a PPAG negotiation for Sunrise Wind in New York, is there any assessment of that is going? Is there any quantification of that, that's included? I think not. If not, could you also highlight if you were not to get that I think almost 27% or 29% escalation, then what's the additional impairment we could be looking at.

Thanks for the question. This is David. Yes, just to follow up on your question. At the time of the PMV, we highlighted a handful of things that were in our assumptions. One was the pass back in New Jersey, which thankfully we successfully achieved. The other one was the renegotiation with the State of New York for Sunrise which you mentioned, I would say that, that process is still in motion. We're hoping to get resolution on that in October, November time frame. But based on a lot of comments, the comment period is closed for feedback from stakeholders just this week. And based on those comments, it seems like we have a lot of support for getting some support there. So we include in our current assumptions, a fairly high probability that, that we'll still be able to get that correct adjustment on the Sunrise Wind project. Obviously, there's some risk that, that could -- might not happen, and then that would change our assessment. But as it stands today, we still feel very confident about that one. Then the part that maybe it's hard to explain is at the time, we said that we assumed 40% ITC across our portfolio of those 3 projects, near-term projects. Right now, we have high confidence that Revolution will achieve 40% for Sunrise and Ocean Wind 1, I guess there hasn't been a strong catalyst per se that's giving us less doubt, but there's not enough progress to give us more confidence. And as these supply chain issues became a catalyst for us wanting to be more transparent with you about challenges on our projects. We also took the opportunity to highlight the most recent interest rate changes and the lack of progress on the ITC. But as Matt said, we are still exerting a lot of pressure. We're still highlighting to federal stakeholders and others the need for better guidance that supports these projects in the industry overall. And I would say that just the lack of progress has caused us to slightly decrease our confidence in getting the ITC, then we just showed the full range in this company announcement. But it depends on how things play out over the next months, how -- if we actually take that impairment or not.

Just a follow-up. So the $6 billion is the maximum for ITC, what you might end up taking will be a probability weighted adjustment a few things that the -- so is DKK 6 billion the maximum or DKK 6 billion what you're more likely to take?

Yes, it's a maximum. That is if we do not get anything beyond the current 30% of Revolution and Ocean [indiscernible]. So -- so if we get for 1 of them, it would be a lower number. And if we get for both of these, it would be significant.

And just one more comment. We're obviously trying to influence both the different options, the 2 different 10% adders, both energy communities and domestic content. So there's a parallel path to see if we can find a way to get at least 40% on all 3 of these projects.

Our next question comes from Kristian Johansen of SEB.

Yes. So just getting back to the renegotiation on the [indiscernible] the state of New York. So as I recall it, you obviously did the impairment on Sunrise Wind earlier -- so as I recall it, if you actually were able to get this renegotiation, you have to reverse that impairment. So can you just talk through the percentage of financial indication if you get it? And if you don't, what will it trigger in terms of reversals or impairments?

Yes. So this is an ongoing guide with this [indiscernible] also. So we can't be too specific on the numbers here. But we are in our impairment assessments [indiscernible] a probability-weighted assumptions into us making [indiscernible] and over adjustment. So both an upside and a downside in the impairment on Sunrise depending on how the final adjustment will do.

Okay. That makes sense. And then just a second question here on Revolution Wind. Why are you so confident that you can get the 40% ITC for the Revolution Wind for [indiscernible]

Yes. This is David again. Remember, there's 2 different ways you can qualify for extra 10%. One is domestic content, which has the current guidance, is written no short-term, near-term projects [indiscernible] anyone else's will qualify. That's why we are in discussion with the administrators and federal stakeholders to try to explain that they want to develop [indiscernible] wind industry in the offshore significant supply chain. You can't put requirements that no one can meet, but the second way to qualify is through this concept called an energy community, and there's preliminary guidance around what the definition of the energy community is. And basically, Revolution Wind qualifies based on that preliminary definition. So we have high confidence that when the final definition of energy communities comes out, it's not significantly different than what it is today, we would qualify. But we are trying to expand the definition of [indiscernible] to potentially help other projects qualify.

Our next question comes from Dominic Nash of Barclays.

Question from me, how much invested capital do you have in the U.S. both before and after this write-down? And secondly, could you give us some sensitivity to changes in the interest rate on the write-down impairment level, please?

Yes. Thank you for the question. So we have invested roughly USD 4 billion into the U.S. offshore portfolio. And then it is that base, we will be making the impairment on. When it comes to interest rate sensitivity, what we are indicating now with the common announcement is that if rate stays at the current level, it will impact with roughly DKK 5 billion and that is based on a roughly 50 bps increase in U.S. rates, long-term rates since the end of Q2. So I think that gives you an indication of the rate sensitivity.

Our next question comes from Lars Heindorff of Nordea.

This is regarding the delays in the supply chain. Just a question on are there any dimensions to the foundation and also the supply vessel? Are there any issues related to the [indiscernible] manufacturers? That's the first one. And secondly also, which onshore projects that are affected by these delays as well.

Thank you, Lars. I can take the first one. No, there are no issues related to the supply. It is by far majority, it is an implication and the potential delay implications of the foundation manufacturers and then the mitigation costs that we are now clear on -- of the delays in the installation vessel.

Yes. So on the onshore side, it's spread across a number of assets, and it's only driven by the interest rate changes that we've seen. And it's a handful of onshore wind assets that are being impacted to the tune of roughly DKK 1 billion out of the DKK 5 billion that we indicated on the rate impact.

Our next question comes from Ahmed Farman of Jefferies.

Yes. Can I just actually come back to the longer-term EBIT target. So could you just sort of talk us through again, how does this sort of the announcement impacts the longer-term EBITDA [indiscernible] 2030 EBITDA targets? And give us some sense to maybe if you're unable to get the additional ITC credits what would be the sensitivity around the longer-term EBITDA targets.

Yes. So -- our expectation is that despite the fact that you will potentially see a lower earnings in the EBITDA longer term, from lower assumptions on the ITCs, we will still be able to, you will say, capture that uncertainty within our guided EBITDA growth towards 2030, so the 13% to 14% growth.

Our next question comes from Jenny Ping of Citi.

So just to understand what we're expecting to see at the 3Q results. So effectively, you're saying the supply chain issue DKK 5 billion, that's pretty much going to be charged in 3Q, DKK 6 billion ITCs may be a bit lower depending on how the negotiations go. And then the further DKK 5 billion is also going to go through. Is that the correct understanding?

Yes, what we put out is essentially the up to -- and I think the -- we're [indiscernible] up to DKK 5 billion on supply chain issues. And that is where, of course, we are mobilizing everything we can to mitigate and lower those impacts. But with our current knowledge, that is the maximum number that we're looking at, so we are flagging that up to range. In terms of interest rates, it's more mechanical. So if they stay at the current level, that's the rough impact of the DKK 5 billion. The biggest uncertainty and also where we will -- some likelihood bet at a lower number, is on the ITC indications where we're just flagging the range and we can get nothing in this time and have 0% outlook of that happening when we come to end of Q3. Then this could be up to DKK 6 billion. But in reality, as we also rightly talked in announcement, this will be probability weighted if we don't have an outcome on that. And therefore, it's very likely that it will be a different and lower number than that. That's how you should look at.

Okay. And just to follow up on rates, I guess, as you say, is mechanical, they presumably would work the other way if we, for whatever reason, continue to see rates go up, there's risk of further impairments just on that basis?

Yes, that's correctly understood. And for impairment purposes, we are using spot rates. So it's going to be quarter-to-quarter for the assets that are impaired more mark-to-market approach on the interest rates.

Would you be able to share some sort of sensitivity around the rate impact on how you test?

Yes. So what you see -- the pattern that we are talking about now from the rates, the DKK 5 billion that is basically driven by the fact that we've seen long-traded U.S. rates to go out with 50 bps since the end of Q2. So that gives you a good indication of the sensitivity that should range go up further 50 bps. We will roughly be in that DKK 5 billion [indiscernible]. If it goes 50 bps down, we will be able to not take that DKK 5 billion balance.

Okay. That's really clear. And sorry, one last one. What bond yield are you using? Is it the 10-year or the 30-year?

And we don't want to specify [indiscernible] what yield we use because it's a sensitive target what we put into our WACC, which is of course, a key driver going to auction and centers. But it is a long-dated U.S. government deal that we assume [indiscernible] interest rate.

Our next question comes from Dan Togo of Carnegie.

Just a question on what are the possibilities for you to cover any of this through your suppliers in the supply chain or through merchants elements when you finally to through selling the power at a later stage. So what are the possibilities of recover some of this at a later stage?

Yes. So I want to assure that I understand the second part of your question. But on the first part, we, of course, do have contracts that put us in place to get some compensation from suppliers. But that is typically something that is kept at around the contract value. And unfortunately, if there is a delay like we see right now, the [indiscernible] of implications on the total project economics are greater than that. And that's also why we are -- we will, of course, pursue those opportunities -- but the total project impact are regressively significantly greater than the liability that also [indiscernible] would have. And if there was a second part of that question that I didn't answer, please repeat.

Yes, just if any of these offtake contracts or you can sell some power at a later stage through a merchant opportunity that could impact the return. Is there a possibility there at some point?

Yes. I think this one I said that is already assumed to [indiscernible] the case and -- so that would be -- that would not be one of the big upside. I think because, obviously, right now, this is an unsatisfactory situation. So I think it is -- it is quite important also to mention that there are still upside levers such as also -- and David can elaborate cheap loan opportunities for federal channels that we can [indiscernible] still get a [indiscernible] project economics could improve. We are still in process with that. As mentioned on the ITCs, we have [indiscernible] given offset to the level that we have right now. But our new overall sort of fundamental traffic economics, it would mainly be within mitigating the impact of the supply chain plus the already ongoing negotiations on [indiscernible] and ITC, that would be the upside compared to the picture we have right now.

Understood. Then just a small follow-up. Can you give us some sort of comfort in whether this is contained to the U.S.? I mean, [indiscernible] with interest rates and supply chain, I guess, other places in the world. So can I be facing similar issues elsewhere in the portfolio?

No, the overall picture is that this is a U.S. issue. Of course, there are rate increases in other parts of the world, but we have -- I mean, we've also been assessing those on an ongoing basis. But we are not at a level where this is something that leads us to impairment unless something further happens towards the end of Q3. But it is primarily a U.S. issue. And for example, supply chain issues, they are always in offshore. There are supply chain challenges that we are generally very good at fighting, but the magnitude of what we are seeing in the U.S. because it's a completely new market, is just significantly bigger than anywhere else.

Our next question comes from Sam Arie from UBS.

I think -- I just wanted to -- just put it together some of the earlier questions. I think you said you had about $4 billion invested in the U.S.? I'm thinking about your sort of 16 billion impairment case, which looks like a little bit more than half of that value. My question is, could you talk to us about what could be the remaining downside case? I suppose in the scenario where the [indiscernible] get worse, you have further delays as readdress. How would that work because on the one hand, you might think you have to write everything down. On the other hand, you might say, well, even if you walk away from these projects, you're still going to have the possibility to [indiscernible] in future under different terms and so there would still be some value left. So can you just -- can you just help us think through what is the worst case scenario if things were to get worse from here focusing on the U.S. [indiscernible] effective world.

Yes. I mean, obviously, we wouldn't be having this call if we hadn't done a whole lot of work to really take our best guess at what we think is the actual situation that we're in. And within all these numbers, we've got -- we still carry a lot of contingency. We've got probability weighting that could lead to both upside and downside, et cetera. And so I just think it's not super valuable for us to kind of speculate like how much worse it could be. There's so many things that could go right and there's obviously things that could continue to go wrong. So this is our best assessment of where things stand today. And we're working all the channels that we have, both on the project mitigation channels to try to minimize the downside, not use all our contingencies so that inherently creates an upside and the levers Mads already spoke about around [indiscernible] price negotiation and other things. So I don't think we can give you more clarity on what -- how work did it go? I think we've been clear that we will only move forward if we have positive forward-looking value creation, and we haven't taken FID on these projects yet. So as we continue through the next 4 to 6 months, in that continue to understand these risks better and mitigate them and control the upside potential that we can, and we'll just try to be as transparent as we can to our shareholders and analysts, et cetera.

Okay. And I understand it's difficult to sort of give me another scenario. But maybe I could just one quick follow-up. Could you just help us understand in a scenario, which I think Alberto asked about earlier where you did decide at some point, you just have to walk away from some of these projects. Directionally, are there additional sort of negative unwind costs that you would have to incur if you walked away from the project? Or would you see some sort of floor value that you would still retain in those potential projects assuming if you walked away from the current contracts, you might be able to build them in the future with other contracts.

Yes. Again, as we look at the project and we take prudent business decisions. That's obviously one of the scenarios we look at every time is what's the unwind cost, what kind of recovery could we get in our termination cost, how could we reuse equipment? What commercial negotiations can we have with suppliers, et cetera? Is there inherent value that we could apply to a different offpeak scenario, et cetera. So we really try to do a full thorough analysis of all the potential options for the project. And we really do look at all these different scenarios. And as it stands today, we believe the best position or the best direction is to continue to invest in these projects as unfortunate as it is that we have to announce potential impairment. It still is the better choice than walking away today.

Understood. Just as a comment, still a bit unclear how far away we are in today's announcement from the walkaway value. But I guess what you're saying is you can't disclose that. So I appreciate the comment that you did give. Thank you for that.

Our next question comes from Martin Tessier of Stifel.

Reading at this press release, cost inflation is not mentioned that instead, you mentioned project delays due to a tight supply chain, higher interest rates and successful discussions regarding ITC. So I was just wondering if we could see further impairments in the short, medium term due to cost inflation because you already placed DKK 2.5 billion in February for Sunrise Wind. The announcement from this morning mentioned other projects where you have not placed any impairment regarding presentation yet. So can we have more clarity on this, please?

Yes, happy to comment on that Martin. As we already said, the CMD that the cost of our fee topics in terms of the contracts, we are -- we have very high visibility too. And that also means that the likelihood of direct inflation-driven downside is low because this is where we have already and these are advanced projects. We have uncovered these issues as part of our pre-FID work which is very thorough. And we have actually essentially confirmed that cost annotation picture as part of that work. And the impact we see here are too far the largest part of this up to DKK 5 billion is driven only by the [indiscernible] of the delays. So we would say that the risk of a patient-driven and huge impairments [indiscernible] negative impact is low.

Our next question comes from Klaus Kehl of Nykredit Realkredit.

Yes. Related to this impairment of DKK 0.5 billion related to the rising interest rates. What happens with this impairment if, let's say -- well, let's say that the interest rates stay at the current level throughout this year. And then in '24, let's just assume that interest rates drop 100 bps. Will you then start to make reversal of the impairments? Or is that, yes, impossible from an accounting point of view?

No, that's correct. So we will -- every time we do impairments based on the updated spread at the point of impairment. And if we see rates go down, we will reverse the impairment if the totality of the project as a higher forward-looking value with that specific program.

So just to be that you will be able to reverse any impairments if rates start to reverse.

Yes, if rates go down correct answer.

Our final question for today is a follow-up question from Jenny Ping of Citi.

Just on the interest rate point. I'm not sure I quite understand. I haven't come across any other long-dated assets companies sort of doing write-up write-downs on interest rate alone. So I just want to understand that point. And also, I guess, the other question related to it is, what about the rest of your asset book? Interest rates have gone up across the globe. So have you been looking at? Or is there a risk of the rest of your asset book on this interest rate point?

Yes. So basically, we need to do following accounting rules and assessment based on the spot interest rates. So we will be seeing that when a project has moved into a talent territory, it is going to be very sensitive to the development in the long-dated interest rates. And that means that headroom will be going out when the rates go up and increase when the rates go down. And when you have impaired already a project due to the rates, then if the rates go down we are able to reverse that impairment in our books. But that is the accounting standard.

And the impact for the rest of the asset book?

So we have done the assessment of the rest of our assets, and there is no impairment outside of the U.S. But of course, as I said, when rates go up, [indiscernible] will become smaller and smaller as we take a forward spot rate on impairments.

Our next question comes from David Paz of Wolfe Research.

Just had a clarifying question [indiscernible] question. Is the EBITDA growth rate that you [indiscernible] and 2030, are those intact [indiscernible] I heard you say yes, they will be lowered, can you clarify?

Yes, they are on track.

Okay. And then just on the U.S. portfolio in general. You said 1 billion was on onshore, 1 billion duplicate was on the onshore and [indiscernible] onshore projects. Did I hear that correct -- correctly? And is that just related to the inflation -- sorry, interest rate potential impairment? Or was that was from the interest rate?

Yes, that's correct, driven by the interest rate increase, roughly DKK 1 billion, but further crossed a handful of US onshore projects.

Got it. No incremental delays on the onshore businesses from your Q3 [indiscernible]

Our next question comes from Richard Alderman of BTIG.

I was just wondering, given the comments you said around the outlook for the balance sheet at the Capital Markets Day. If all of what you said today comes towards a worst-case scenario, we have higher rates and possibly even a higher than 16 billion impairment. Does it change your view on the need for equity for the business in the next 2 or 3 years in relation to what you said at the Capital Markets Day?

No, it does not, Richard. We carefully assessed that, and it is still even with these adverse impacts a self-funded plan.

Okay. And one last question. Just in relation to the comments around rates and the onshore impairment of around DKK 1 billion. How do you think about that with the rest of your onshore business elsewhere in the world? Is there any further risk that we could see impairments there based on rate moves?

The size of the onshore portfolio outside of the U.S. is at a level where it's not anything meaningful we should expect cost from that. But for in principle, you could see an effect from rising interest rates also on the European onshore portfolio, but that would be to a very low amount.

Our next question comes from Peter Bisztyga from Bank of America.

Apologies, I missed the beginning of the call, so you probably already answered this, but have you given an updated potential time line for Sunrise Wind and Revolution Wind because you mentioned Ocean Wind is now 2026. And if you don't get the 40% ITC, I presume that means Sunrise Wind and Ocean Winds can't make FID. Is that correct? So a clarification, the stuff I might have missed. And then just very quickly going back to the sort of interest rate thing. Are we now to -- given the volatility in U.S. rates, so we now expect to see every quarter write-downs or write-ups of your offshore portfolio value? Or is there a certain threshold beyond which you'll do it? So do we need to see a 50 basis point move or literally now? Is there a retain or 15 basis points that we're going to see these changes?

Yes. So there is a high likelihood that you will from quarter-to-quarter see an issue on the impairment depending on how big the changes are in the interest rate. But remember that this is a portfolio purchase that we are now looking at. So we might be moving in different directions every time we do the full impairment assessment. But in principle, it is very much a mechanical adjustment that we will do it as long as the [indiscernible] impairment territory based on what the stock rate is at the specific [indiscernible].

Yes, this is David. I can take the first 2 questions. The first one, I understood it was the time line for COD for Revolution and Sunrise. It's our expectation that we can still maintain the current project schedules. As we talked about the [indiscernible] vessel and the [indiscernible] could have an impact on both of those 2 projects. But as we see it today, it's more -- we're basically on track from a project schedule standpoint. It's just creating increased costs to try to maintain the project schedule. And we're compressing some of our float in our execution schedule. And so we wouldn't necessarily change the time line, could be minor impacts, which flow through from a time value of money of the start of revenue, but in general, not significant news. And then on FID, I think it's a really good question. Obviously, we take the FID decision when we take it. And so going into those FID decisions, I think it will be what the current cases look like, especially in these cases from a forward IRR standpoint, what do the risks look like? And all the other factors that we take when we take an FID. We have taken FID on these 3 projects yet. So that will be still to come, but it's still our expectation, and we're still trying to achieve taking FID on these 3 projects by the end of this year or early next year.

Thank you. Due to time, we'll take no further questions. So I'll hand back to Mads Nipper for any further remarks.

Yes. And I just want to thank you for your questions and [indiscernible] situation. But thanks a lot for the dial-up and have a safe day.

Thank you for joining today's call. You may now disconnect your lines.