Tracing its history back to the 1970s as a state-owned Dansk Naturgas, the company is relatively new to the stock market, listed on the Copenhagen Stock Exchange in 2016. Shares have risen more than 200% since then, reaching a record high from 1,351 Danish krone per share (£ 153) in early January 2021 before falling back to around DKr 913 at the end of October. This is pretty much where Morningstar analysts place the fair value of stocks, making Orsted a 3-star stock. They recently reiterated the fair value estimate of DKK 920 for Orsted shares.

The pioneer advantage and technical expertise strengthen the company’s competitive advantage. “Orsted has been the pioneer of the offshore wind sector and has solid know-how and experience in this sector, which we expect to increase eightfold in the 2020s thanks to the drop in costs induced by wind turbine technology. improvements and key advantages over other renewable sources, “says Morningstar analyst Tancrede Fulop. With around 85% of its pre-tax profits coming from offshore wind farms,” ​​Orsted has a unique business mix among utilities Europeans, ”he adds.

Orsted has a narrow economic divide, in large part due to the generous subsidies available to the wind industry across Europe, particularly the UK, Germany and Denmark, as well as Taiwan and the US . Europe is the most advanced offshore wind market in the world, but this market is maturing as subsidies begin to be phased out. Where else is the business targeting? The United States is a fastest growing market for offshore wind, and it will account for over 40% of planned installed capacity by 2025. Overall, installed offshore wind capacity is expected to reach just under 10 GW in 2025 and Morningstar analysts predict an additional 8 GW of capacity will be commissioned between 2025 and 2030. The targets are everything these days, especially in renewables, where companies and governments keep redefining the lines. parameters of what is expected for the years to come. “As competitive pressure increases in offshore wind, Orsted dramatically increased its onshore wind and solar ambitions in June 2021, targeting 7.5 GW of gross capacity in 2030 and 13.1 GW on a net basis which we believe to be at your fingertips, ”Fulop said.

There are risks associated with the industry, he adds, and Orsted himself has a “medium” risk rating. There is a currency risk, as Orsted generates profits in the UK and the Eurozone but reports in Danish krone (the pound has weakened since the Brexit vote against the krone). There is also a construction risk, as the company bears the cost of building the wind farms – and the returns from these projects are also uncertain. The weather is also unpredictable, as are electricity prices, as European consumers recently discovered. Fulop assumes the subsidies have a 15-year lifespan, but they are declining across Europe as the industry matures. Rivals will also emerge, Fulop adds. “Growing competition increases uncertainties about the returns of future projects and the amount of capacity additions going forward,” he said.

In terms of fund owners, Orsted represents nearly 4% of the neutral Baillie Gifford Positive Change fund, according to Morningstar Direct data.