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Investing.com -- Berenberg has upgraded its rating on Ørsted A/S to “buy” from “hold,” lowering its price target to DKK225 from DKK250.
The brokerage said the DKK60 billion rights issue announced on Aug. 11 strengthens the company’s balance sheet and provides funding capacity for capital expenditures through 2027.
The analysts said the capital increase, which is underwritten, adds about DKK60 billion to Ørsted’s finances, allowing it to cover investment needs until 2028 even in a worst-case scenario.
That modeling includes cancellations of both the Sunrise Wind and Revolution Wind projects in the United States, along with a failure to complete planned disposals.
Berenberg acknowledged the risks tied to the U.S. portfolio, including the Aug. 22 halt order on the 704MW Revolution Wind project and the inability to secure financing or a partner for Sunrise Wind.
The brokerage estimated a downside valuation of DKK172 per share if both projects are canceled, which it described as a valuation floor.
The report also noted that the rights issue improves Ørsted’s key credit metric, though pressure on credit ratings could emerge if farm-downs and disposals fail.
The analysts said a 1% increase in the weighted average cost of capital could reduce valuations to current levels or below.
Ørsted’s funding strategy relies on partial sales of its Hornsea 3 project in the U.K. and Greater Changhua 2 project in Taiwan, along with the disposal of its European onshore portfolio, expected to raise about DKK35 billion.
“More likely, in our view, is that confirmation of the farm-downs/disposals will provide positive catalysts over the next 6-12 months,” Berenberg said.