Wind power giant Ørsted "cuts off its arm to survive": sells half of the shares of the "world's largest offshore wind farm" to PE giant Apollo for $6.5 billion

To cope with the increasing costs and political pressure, Ørsted, the world's largest offshore wind developer, officially announced on Monday that it has agreed to sell a 50% stake in its flagship project, the Hornsea 3 offshore wind farm located in the UK, to private equity giant Apollo Global Management for $6.5 billion. According to the agreement, Apollo will acquire a 50% stake in the Hornsea 3 project, located near the UK coast. This move aims to raise urgently needed funds for Ørsted's other projects and is a core part of Ørsted's key asset divestiture plan. Ørsted's Chief Financial Officer Trond Westlie stated that this sale is "an important milestone" for the company and added that Apollo will bring "infrastructure expertise and scalable capital." For investors, this transaction clearly indicates Ørsted's strategic contraction to stabilize its financial position, even though it means relinquishing partial ownership of one of its most premium assets. In fact, this deal comes after Ørsted has faced several years of difficulties. The company has recently been under immense pressure due to rising interest rates and political uncertainty, particularly in the U.S. market, where Trump's hostility towards offshore wind has directly impacted its business, forcing the company to seek new financing avenues. Apollo Doubles Down on European Infrastructure For Apollo, this transaction is the latest in a series of high-profile investments in the European energy infrastructure sector. The private equity firm is rapidly becoming a key capital provider in the energy transition space in Europe. Leslie Mapondera, Apollo's partner and head of European credit, stated that Apollo aims to be a "provider of long-term, flexible capital solutions." So far this year, Apollo has completed a record $17 billion in transactions in the European energy infrastructure sector. In addition to co-investing in the German grid with RWE, Apollo also led a £4.5 billion financing for EDF's Hinkley Point C nuclear power station being developed in the UK. Strategic Contraction Under Political and Cost Pressure This asset sale highlights the severe challenges Ørsted is facing. As a global industry leader, the company, which is 50% owned by the Danish government, has found itself in trouble due to changes in the macro environment of the industry over the past few years. The most significant pressure comes from the U.S. In August 2023, Ørsted abandoned two major projects in the U.S. due to skyrocketing project costs driven by rising interest rates. Recently, President Trump’s hostile stance towards offshore wind has further complicated the company's situation. Trump's attempts to block another developer's project have raised market concerns about the policy risks facing the entire offshore wind industry in the U.S., leading to panic among investors that spread to Ørsted, which was forced to raise $9 billion through a rights issue last month. Additionally, the Trump administration had previously issued a stop-work order on Ørsted's Revolution Wind project off the northeastern coast of the U.S., although the company later persuaded a judge to lift that order. Against this backdrop, selling a stake in the flagship asset Hornsea 3 has become a necessary move to raise funds and maintain the operation of other projects A Key Component of the UK's Decarbonization Plan Despite Ørsted selling half of its shares, the Hornsea 3 project itself is crucial to the UK's energy strategy. This project is an important part of the UK government's goal to decarbonize the electricity system by 2030. Hornsea 3 is planned to have an installed capacity of 2.9 gigawatts (GW) and, once completed, will become the largest offshore wind farm in the world. It is expected that its annual electricity generation will be sufficient to meet the electricity needs of approximately 3 million households. Apollo's investment also provides financial support to ensure the smooth progress of this key infrastructure project