The transition of Orsted, the once Danish state-owned utility, from being one of the most coal-intensive utilities in Europe to a global leader in offshore wind energy provides interesting insights and learning for Indian utilities.
A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) charts Orsted’s energy transition journey. “During Orsted’s transition journey of more than a decade, it has created immense shareholder wealth, as its market capitalisation zoomed by 314 per cent since its listing in 2016,” said the report’s author, IEEFA Energy Finance Analyst, Shantanu Srivastava.
“This feat can be attributed to its successfully planned transition strategy, along with transparent sustainability-related disclosures. This is an example where an enterprise has been able to fulfil its goal of dramatic shareholder wealth creation while radically transforming its business model, something which many energy companies around the world are trying to emulate,” he said.
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The Indian government has embarked upon one of the most extensive clean energy drives in the world, with commitments to have 450 gigawatts (GW) of renewable energy capacity by the end of this decade. “The Indian public utility sector, along with its private counterparts, will have a huge role to play in realising this massive goal,” said Srivastava.
“Major utilities such as NTPC and Tata Power have already committed to a green transition, evident in their capital expenditure plans and strategic roadmaps. Pure-play renewable energy companies like Adani Green Energy Limited and ReNew Power present examples of the private sector realising the potential of this sector and its ability to create enormous returns for its shareholders,” he added.
“Into the future, the ability of Indian companies to walk the talk and undertake a profitable transition or growth journey will be paramount to attract capital and grow shareholder wealth,” he said.
Orsted, which has already championed the green energy transition journey, provides valuable lessons for Indian companies, which may face several of the same challenges and opportunities. Orsted’s journey to becoming one of the leading renewable companies in the world can be attributed to both internal and external factors.
It’s journey to becoming one of the leading renewable companies in the world can be attributed to major strategic decisions including commitment to energy transition through long-term strategy realignment by the addition of renewable energy and phasing out thermal power and using non-conventional sources of funding through the farm down model, divestment of non-core assets and hybrid capital.
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“Energy markets around the globe are undergoing an unprecedented transformation, with renewable energy making inroads as the energy source of the future, and climate action gaining more steam to wade out fossil-fuel based generation,” said Srivastava.
“This renewed focus on advancing clean energy technologies has clouded the future of conventional utilities, which have no option but to transition or face the wrath of financial markets and regulators.”
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