Dong Energy has issued a "small" profit warning, forecasting full-year EBITDA to go down by about 10% on 2011. However, its wind energy division achieved sharp increases in profit and revenue during the first six months (H1) of the year.
Further growth of Dong’s wind business is expected soon, thanks to new UK and Danish offshore capacity coming online during H2.
Acting chief executive, Carsten Krogsgaard Thomsen, said: "We are not satisfied with our H1 results". Dong’s group-wide EBITDA was down 27%, while net debt increased to push the company’s debt-to-EBITDA ratio to 2.8, above its target of 2.5. The company insists that next year’s profit will be "significantly" above that of 2011 and 2012.
Increase in wind generation
As the world’s leading offshore wind developer, Dong should be pleased by the strong results posted by its wind power division, which accounted for almost 23% of group EBITDA in H1 – DKK1.5bn (€202m) out of group-wide DKK6.6bn.
Additional wind energy output was delivered by UK offshore wind farm, Walney 1, which reached "full production" during H1. Walney 2 also began to come online. These two projects, combined with additional onshore wind capacity in Denmark and Poland, pushed Dong’s H1 hydro and wind electricity up to 2.3TWh. This represented an increase of 9.5% on the same period last year.
Indeed, more than a quarter (27%) of the company’s H1 electricity generation was delivered by wind projects, although this was largely due to a significant fall in gas-fired output.
Wind power revenue reached DKK3.5bn, an almost 95% jump on H1 2011. Profit – as EBITDA – grew at almost the same rate, increasing by 87.5% to DKK1.5. While higher wind-related electricity output contributed to the division’s strong performance, so did Dong’s construction activities at the Anholt and Borkum Riffgrund offshore projects, for which it received payment from its co-investors.
UK cable supply concerns
Looking ahead, Dong highlights its recently announced deal with Siemens to deploy the manufacturer’s new 6MW turbine at upcoming UK projects. "We will be the first operators to use this new generation technology," notes the company.
Dong emphasises that larger turbines, such as Siemens’, will help it lower the cost of offshore wind power. This will be achieved by increasing energy generation per offshore project, while reducing installation costs, since fewer foundations will be needed. Operations and maintenance costs are also expected to be lower due to the installation of fewer machines and the use of Siemens’ direct-drive technology.
The developer is generally pleased with progress of its UK offshore wind pipeline, with electricity generation from two new projects due to boost H2 performance – Lincs and London Array 1. The Anholt project in Danish waters will also contribute to H2 results.
Further ahead, Dong is concerned about a potential shortage of cable suppliers for its Round 3 developments. The company has partnered with Centrica to develop the Celtic Array series of projects within the Irish Sea zone, and with Mainstream and Siemens to develop Hornsea.
Speaking with Windpower Offshore, senior vice president Morten Hultberg Buchgreitz explained that Dong is "seeing very few suppliers for export cables and that is having an impact".
On a more positive note about grid connection work, the company told analysts today that it "does not foresee any significant issues with the grid connection schedule" for its German project, Borkum Riffgrund 1.