Ørsted Annual report 2019 Ørsted Annual report 2019 Contents Our vision Let’s create a world that runs entirely on green energy We’re ranked the most sustainable company in the world in the Corporate Knights 2020 Global 100 index Ørsted Annual report 2019 Contents Management’s review Financial statements Contents Overview 4 Consolidated financial statements 66 Chairman’s statement 5 Income statement 67 CEO’s review 6 Statement of comprehensive income 68 Performance highlights 10 Balance sheet 69 Statement of changes in equity 70 Financial outlook 12 Statement of cash flows 71 Financial outlook 2020 13 Notes 72 Financial estimates and policies 15 Consolidated ESG statements Our business 16 (additional information) 158 The green transformation 17 Basis of reporting 159 Our strategic aspiration and growth platform 19 Environment 160 Our markets and strategy 20 Social 162 Our capital allocation and funding 24 Governance 163 Our strategic enablers 25 Our business model 26 Parent company financial statements 166 Our strategic targets 27 Income statement 167 Our global footprint 29 Balance sheet 167 Statement of changes in equity 168 Results 32 Notes 169 Results 33 Five-year summary 37 Management statement, Fourth quarter 38 auditors’ reports and glossary 176 Quarterly summary, 2018-2019 40 Statement by the Executive Board and the Board of Directors 177 Business units 41 Independent Auditors’ report 178 Our business units 42 Limited Assurance Report on the consolidated Offshore 43 ESG statements 181 Onshore 47 Glossary 182 Markets & Bioenergy 49 Governance 52 Letter from the Chairman 53 Board of Directors 54 Group Executive Management 56 Corporate governance 57 Risk and risk management 60 Shareholder information 64 3 / 183 Ørsted Annual report 2019 Contents Overview 5 Chairman’s statement 6 CEO’s review 10 Performance highlights Burbo Bank Extension is the first project in the world to use MHI-Vestas V164 8.0MW wind turbines. The number of wind turbines have been more than doubled compared to the original offshore wind farm Burbo Bank, but the power output has nearly quadrupled, now powering over 230,000 UK homes with sustainable energy each year. Ørsted Annual report 2019 Management’s review Overview Contents Chairman’s statement Leading the green were named the most sustainable company large infrastructure projects as well as new EBITDA for the year amounted to DKK 17.5 transformation in the world. We are proud of this recognition, approaches and innovative solutions that billion and thereby exceeded our expec- and it encourages us to further intensify our can help decarbonise societies. Recently, we tations and resulted in a ROCE of 10.6%. Climate change is the defining challenge of efforts to deploy green energy at scale and to have set up a hydrogen team to explore how Profit for the year amounted to DKK 6.1 our century. By 2030, global greenhouse gas contribute to the profound transformation of to transform renewable power from offshore billion. The Board of Directors recommends emissions need to be halved compared to the energy system required to keep the planet wind into hydrogen and other green fuels to paying a dividend of DKK 10.5 per share, current levels if we are to stay below a global habitable. In continuation of this, we have be used in the chemicals industry and as green corresponding to DKK 4.4 billion. temperature increase of 1.5°C above pre- decided to become carbon neutral in our own fuels in hard-to-abate sectors, such as heavy industrial levels. This is the threshold set by operations by 2025 and in our total carbon transport and logistics. On behalf of the Board of Directors, I would science to limit the risk of irreversible tipping footprint by 2040. like to thank the employees and management points in our global ecosystems. As energy We also further strengthened our strategic of Ørsted for leading the way towards a world accounts for 73% of global greenhouse gas In 2019, we achieved a global breakthrough profile as an upstream renewable energy that runs entirely on green energy. We are emissions, we clearly need to change the way outside Europe by initiating construction of company by signing an agreement to divest more committed than ever to demonstrating we power the world – and shift from fossil our first large-scale offshore wind project in our power distribution, residential customer to all stakeholders that the urgently required fuel-based to renewable energy. Taiwan, by winning two large scale projects and city light businesses. Long-term, Ørsted is energy transformation is in fact possible, and and expanding our portfolio in the US, and by not the best owner of these businesses. The that we have the cost-effective solutions to At Ørsted, our vision is a world that runs taking the decision to fully integrate Lincoln capital released from the divestment will be power the world in a sustainable way. entirely on green energy. Just a decade ago, Clean Energy into Ørsted. Our deployment deployed in our global renewable energy build- our core business was based on fossil fuels, of renewable energy now spans markets out plan. Deep and heartfelt thanks go to all of but we decided to change, and we have on three continents. We bring more than our skilled colleagues in these businesses who changed to green energy faster than any 25 years of experience in renewable energy have provided a good service to our customers other energy company. In January 2020, we and on-time and on-budget delivery of over the years and ensured one of the highest levels of reliability of supply in the world. Our talented people are the most important assets in Ørsted, and we will need a lot of In January 2020, we were named the talent world-wide, as we continue to grow our “ business in the years to come. most sustainable company in the world. Safety is equally important for us, and we take We are proud of this recognition, and it every measure to ensure that Ørsted is a safe workplace. In May, an employee of one of our encourages us to further intensify our contractors died after a serious accident at the Avedøre Power Station. We have been – and Thomas Thune Andersen efforts to deploy green energy at scale. still are – deeply affected by this accident. Chairman 5 / 183 Ørsted Annual report 2019 Management’s review Overview Contents CEO’s review Strong year with continued strategic progress, Financial results Offshore global expansion and very satisfactory financials. In 2019, we achieved a strong operating profit In 2019, we commissioned Hornsea 1, with the (EBITDA) which exceeded our expectations at last turbines being installed in early October. the beginning of the year. The entire wind farm is now operational. Hornsea 1 is the world’s largest offshore wind EBITDA (excluding new partnerships) increased farm with a capacity of 1,218MW and will Highlights 2019 by 17% to DKK 17.5 billion. supply more than 1.1 million British homes with green energy. In November, we passed — Operating profit (EBITDA), excluding — Divestment of 50% of selected offshore Earnings from our offshore wind farms in another milestone when we inaugurated the new partnerships, increased by 17% to activities in New England to our partner operation increased by 22%, driven by ramp- second phase of Taiwan’s first-ever offshore DKK 17.5 billion. Eversource Energy. up of green power generation from Borkum wind farm Formosa 1. — EBITDA from offshore and onshore wind — Decision to construct the onshore wind Riffgrund 2, Walney Extension and Hornsea 1. farms in operation increased by 30% to farms Sage Draw in Texas and Plum Creek Curtailments and various operational issues In April, we took final investment decision on DKK 14.8 billion. in Nebraska as well as the combined had a larger than normal adverse impact on our 900MW Taiwanese Greater Changhua 1 — ROCE was 10.6% in line with our target. solar and storage project Permian Energy our offshore generation in 2019. & 2a project after obtaining establishment — Green share of heat and power generation Center in Texas and acquisition of the permit, approval of the supply chain plan increased from 75% to 86%. construction-ready wind project Willow The inclusion of our onshore wind business and and signing of the power purchase agree- — Award of the 1.1GW Ocean Wind project Creek in South Dakota. high earnings from our trading activities also ment with Taipower. in New Jersey. — Lockett Onshore Wind Farm commissioned, contributed positively to our performance. — Award of the 880MW offshore Sunrise ahead of schedule. Our three offshore wind farms under Wind (JV) project in New York. — The newly bioconverted Asnæs Power These positive effects were partly offset construction are all progressing according — Decision to construct our first large-scale Station reached 100% green heat and by higher project development costs in to plan. Borssele 1 & 2 (752MW) in the Taiwanese offshore wind project Greater power generation in December 2019. Offshore, an increase in provisions related Netherlands is expected to be completed Changhua 1 & 2a. — Agreement signed to divest our power to our LNG activities and a temporarily end Q4 2020. In 2022, we expect to complete — Hornsea 1, the world’s largest offshore distribution, B2C and city light businesses negative effect from gas at storage due Hornsea 2 (1,386MW) in the UK and Greater wind farm, was commissioned. to the Danish energy company SEAS-NVE. to the substantial drop in gas prices during Changhua 1 & 2a in Taiwan. Furthermore, the — Signing of a non-binding term sheet with — Agreement signed to divest our 2019. Further, in 2018, we had a positive Virginia Offshore Wind project, which we will Polska Grupa Energetyczna (PGE) regarding LNG activities.