Oersted A/S

SWB:D2G

Earnings Call Analysis

Orsted Posts Strong Results; Adjusts Strategy

Orsted reported a robust operational performance in 2023 with adjusted EBITDA surpassing guidance and achieving key milestones. They've nearly completed major offshore wind projects and took strategic final investment decisions (FIDs) across different regions. Despite setbacks in the U.S., they decided on the 704 MW Revolution Wind and ensured offshore wind industry leadership with a series of completed projects and FIDs. Orsted anticipates their 2024 operating profit to range between DKK 23 billion and DKK 26 billion.

Orsted Overcomes Challenges with Strong Underlying Progress

In 2023, Orsted faced substantial challenges like much of the industry, including specific setbacks with their U.S. offshore projects that led to financial impairments. However, the company still performed strongly, operating with profits above guidance. Orsted learned from these difficulties and made strategic changes to their operating model to reduce risks associated with project development and execution. These adjustments aimed to introduce stronger contingency planning, better monitoring of suppliers, inflation protection, and greater flexibility in project timelines, improving their ability to weather future challenges.

Financial Resilience and Cost Reduction Strategies

The company took a calculated approach to their finances by conducting a portfolio review, which will reduce capital expenditures by approximately DKK 35 billion from 2024 to 2026 and lower development expenditure by approximately $3 billion in the same period. In a move to ensure financial stability, dividends will be paused from 2023 to 2025, and a divestment program will be intensified. Orsted has also committed to cutting DKK 1 billion in fixed costs by 2026, including a reduction of 600 to 800 positions globally.

Ambitious Growth and Investment Plans on the Horizon

Orsted's future looks bright with their eyes set on becoming the world leader in offshore wind. In the near term, they expect an operating profit (excluding new partnerships and cancellation fees) to range from DKK 23 billion to DKK 26 billion in 2024. Looking ahead, Orsted plans to ramp up their operating profit EBITDA to approximately DKK 39 billion to DKK 43 billion by 2030. They also maintain a return on capital employed target of 14% on average leading up to 2030. The company's growth is supported by an ambitious DKK 270 billion investment program aimed at expanding their installed renewable capacity from 15.7 gigawatts to 35-38 gigawatts by 2030, cementing their status as a renewable industry leader. The financial strategy is robust and does not require additional equity, relying instead on operating cash flow, partnerships, divestments, tax equity, and debt and hybrid issuance.

Operational Successes and Industry Leadership

Orsted's adjustment EBITDA in 2023 showed a positive increase of DKK 3 billion from the previous year, indicating a powerful operational performance. The company's project milestones, such as nearing the completion of Greater Changhua 1a and 2a and South Fork Wind, and their decision to invest in Hornsea 3, testify to their commitment to expand and maintain industry leadership. Orsted's strategy not only reinforces their offshore wind sector presence but also extends a hand to innovative projects like carbon capture and storage, signifying a holistic approach to renewable energy solutions.

Earnings Call Transcript 2023-Q4

[Operator]

Hello, and welcome to the Orsted annual report conference call for the media. My name is Alex. I'll be coordinating the call today. [Operator Instructions] Please note that this call is the media briefing. And there will be a separate call for analysts and investors later today.I'll now hand it over to your host, Mads Nipper, CEO, to begin. Please go ahead.

[Mads Nipper, executive]

Thank you very much, and good morning, everyone, and welcome to this press briefing. My name is Mads Nipper, the CEO of Orsted. And with me today is our Interim CFO, Rasmus Errboe. Yesterday, we announced our Capital Markets update and our annual results for 2023. Let me introduce the news and then we'll be happy to take any questions from you. As with the rest of the industry, we have felt the impact of market challenges over the past 2 years. And 2023 marked a year with substantial challenges for Orsted, despite strong underlying progress and operating profit above our guidance. Our annual results are adversely affected by the impairment we took on our U.S. offshore projects in Q3. And the provision for cancellation fees related to season the offshore product with Ocean Wind 1 in New Jersey. We've learned from these challenges. And we've already implemented significant changes and have decided additional changes to be implemented.We are implementing the learnings from our U.S. offshore projects into our operating model to reduce risk and development and execution of projects with a particular focus on additional contingency planning, monitoring our suppliers, inflation protection, scrutiny of our pre-final investment decision commitments, greater flexibility on project timelines and commissioning dates and updated project governance and reviews.Also, we have conducted an extensive portfolio review to prioritize. And we will be reducing our capital expenditure and project development costs. Project cancellations and phasing of capital expenditure across our portfolio will result in approximately DKK 35 billion of capital expenditure relief in the period '24 to '26 compared to the numbers presented at Capital Markets Day in June 2023. And the portfolio changes will result in approximately $3 billion of development expenditure reductions in '24 to '26 compared to the numbers previously presented.Furthermore, we have decided to pause dividends for the financial years '23 to '25 and we will accelerate our divestment program. We will also look at measures to become a leaner and more efficient organization and have set a target to reduce our fixed cost by DKK 1 billion by 2026 compared to 2023 on a like-for-like basis. This will include a reduction of 600 to 800 positions globally. Not all will result in redundancies, but there will be redundancies throughout 2024. And today, we are announcing that approximately 250 colleagues globally will be made redundant and divested within the coming months. We are, of course, committed to carrying this out in a fair and respectful manner.It is important to underline that Orsted's fundamental strategy is the same, including our choices of technologies and regions. We aim to reach the world leader on offshore and a strong regional player in onshore and [ Power-to-X ] in Europe and in the U.S. Our renewable build-out continues to grow. And in 2024, we will have significantly more also in capacity under construction than ever before in Orsted's history and far more than any other marketplace. Today, we present a robust business plan with ambition and financial targets that confirm that we will deliver strong returns and growth towards 2030. We maintain our target of an unlevered fully loaded lifecycle IRR at 150 to 300 basis points spread to WACC when we bid on tenders or take final investment decisions.Our operating profit EBITDA, excluding new partnerships, is to increase to approximately DKK 39 billion to DKK 43 billion in 2030. We maintain our return on capital employed target of 14% on average towards 2030. We are committed to a solid investment-grade rating with an FFO to net interest-bearing debt ratio above 30%. We plan a DKK 270 billion investment program in the period '24 through 2030. And we target 35 to 38 gigawatt of installed renewable capacity by 2030, which is well over adopting of our current installed capacity of 15.7 gigawatts. The business plan is fully financed without any need for raising new equity. It is finally through a combination of operating cash flow, partnerships and divestments, tax equity as well as debt and hybrid issuance.If we look at the 2023 results, we delivered strong operational results in the year with adjusted EBITDA above guidance and the several important milestones achieved. The industry-leading strategic milestones we achieved last year give us reason to believe that Orsted can continue to lead the industry going forward.We have near complete construction of Greater Changhua 1a and 2a of 900 megawatts and South Fork of 130 megawatts. We took final investment decision on Hornsea 3, which is at nearly 2.9 gigawatts, the world's single largest offshore wind farm. In the U.S., despite the challenges, we took final investment decision on the 704-megawatt Revolution Wind together with our partner Eversource. In Taiwan, we took final investment decision of the 920-megawatt Changhua 2b and 4, completing the circle of 3 large FIDs across 3 continents.We also saw first power of South Fork Wind. And we completed the successful farm down of London Array and Gode Wind 3; all the testimony for assets offshore wind leadership. And outside of offshore, we took FID on the 471-megawatt Mockingbird and solar and Wind Texas. We did partner with Breakthrough Energy Catalyst, a European Commission and the European Investment Bank on our flagship 1 powertrain extracted. And we are awarded and started construction of our first carbon capture and storage project in Denmark.And thus, our EBITDA, excluding new partnership and cancellation fees amounted to DKK 24 billion, which is an increase of DKK 3 billion compared to 2022 and above the top end of our guided range of DKK 20 billion to DKK 23 billion. In '24, our operating profit, excluding new partnership agreements and cancellation fees is expected to be DKK 23 billion to DKK 26 billion. Finally, we remain optimistic about the future of the renewable industry. And we are confident that we can continue to be a key contributor in accelerating the renewable build-out in the years to come with strong returns and growth towards 2030.And with this, we are happy to take your questions.

[Operator]

[Operator Instructions] Our first question for today comes from Jacob Pedersen of Reuters.

[Jacob Pedersen, analyst]

I have two questions. So you're rebidding for some U.S. projects where you've already taken big write-downs but I'd like to know then what? I mean, will you again book billions of dollars of potential future profits or tax credits that can again come in jeopardy. And my second question is that if you win some of these projects, what will happen -- what happens to the suppliers that you already put all that money into? Is that money gone or can you potentially rebook some of that later?

[Mads Nipper, executive]

Yes, I assume, Jacob that you're referencing the projects that we have left Ocean Wind 1 and 2 and also what we said handed back the offtake agreement with our Maryland-based Skipjack project. The write-downs that we did and also the provisions for cancellation fees was our Ocean Wind 1 project. This was the very mature project where we had a very high level of capital commitments. And due to the surprises that hit the project, we took the economically rational but obviously a very painful decision to cease development on the project. For both Ocean Wind 2 and Skipjack, so the other two projects, we have not had any impairments or provisions for write-downs. And that is because there were much newer projects. And we already were in a process where we were committing significantly less capital. So the answer to your first question is no. None of the decisions taken that are expected to have neither cancellation fees nor big impairments.And on the second question, again, I -- correct me, if I misunderstand it. But I'll take so that the money that we have made provision for, so a total of DKK 15 billion to DKK 18 billion cash impact for leaving Ocean Wind 1, that comes because we had already with a mature project, made so big supplier commitments that realistically, we have to compensate our suppliers for a significant share of those supply contracts. And for reference there, there were 270 contracts where we have now already terminated by far the majority and we are still working intensely on potential reuse of that. And I can share that one thing we have done is that the export cable is now planned to be reused into another coming offshore project. And we continue to work on if there are others, which obviously will -- is something that we all want to do because we don't have to terminate.

[Jacob Pedersen, analyst]

Okay. So part of that can potentially be rebooked at a later stage if you win some of these projects?

[Mads Nipper, executive]

Win some of the projects, I'm not sure I understand that. So if we win future projects in the U.S., for example. What you need to consider is that for many of these things, just storing highly advanced equipment is not only very expensive, it also means that there's a limit to how long it can actually store it. So therefore, we cannot just produce everything and leave it also because they are a new generation of the technology and so on. So it is something that needs to have some of a meaningful horizon and where there are no technical barriers to implement this. So it is quite complex to reuse equipment that were dedicated to a specific project, but we have examples of that already confirmed and we continue to work on reusing as much as possible.

[Operator]

Our next question comes from Gareth Chetwynd of Recharge News.

[Gareth Chetwynd, analyst]

My question goes to the project cancellations. I just like generally for a bit more information on sort of criteria for that but particularly, I'm interested. You've talked about a leaner approach to floating wind. There are a few markets to mentioned Norway, Portugal and Spain, where you'll be withdrawing. I'd just like to understand what's leading you to stay in one market for floating wind and leave another, so basically more about the criteria for pulling out of some of these areas and cancellations of these projects.

[Mads Nipper, executive]

Yes, our approach to making priorities is that we are convinced that over time, all countries with potential and all technologies will contribute to the green transformation and present significant opportunities for growth. What we are reflecting both with our downscaled ambitions for Power-to-X and also for a leaner approach to floating. It's not because we don't believe in those technologies, but it is simply because the technologies are developing slower and because the potential in bottom fix is so significant that we are reprioritizing in the plan. So the criteria would be to say how many markets should we be in? How do we evaluate the value creation and potential in those markets? How do we evaluate the risk profile of potentially going into new projects? So therefore, it does not mean that it won't be important. But we are slimming it and focusing it to fewer markets and also a leaner spent on development. So it's not a strategic choice not to do it, but to be much more focused based on the criteria I just mentioned.

[Gareth Chetwynd, analyst]

Okay. I'd really appreciate applying those criteria. Just comment or give me a little bit of color on the Norway, Portugal, Spain decisions in applying those factors.

[Mads Nipper, executive]

Yes. No, happy to. I mean, for Norway, it was an example where there were a few delays on the solicitations. There were some un-clarities and also some uncertainty about what the value creation potential was. We had a highly appreciated partnership with local partners. But when we compared it to other opportunities in our portfolio, we chose not to go there. And for -- and likewise, for Spain, which was less mature in terms of the knowledge we had about the market at the time. We had very appreciated partnership with our partner, Repsol. And in light of the overall prioritization, that this does not set the list of priority countries that we want to focus on. So it's an outcome for a portfolio review rather than saying that this country or this partner of this project makes no sense.

[Operator]

Our next question comes from Alex Blackburne of S&P Global.

[Alex Blackburne, analyst]

I've got two, please. Just on the market challenges that you mentioned and talked a lot about in the last few calls. You've obviously said that these have felt most acutely by those projects that have been awarded tariffs and not yet taken FID. And obviously, that in some cases, you've had to cancel those projects. But for those projects that are kind of beyond -- that have not been awarded a tariff yet, so Hornsea 4, there's, I think, a project in Taiwan and then any others that you may get awarded this year and next. What do you see is the -- what kind of dynamics are you seeing in the development environment when it comes to supply chain costs and all those kind of transportation problems that you've talked about? Have things improved for those projects that have not economically under strain. That's the first question.And then, just secondly, when you look back, I guess, over the last few years, is there anything that you could have -- you think you could have done differently to be in a better position today. I know that's kind of the benefits of hindsight and all that, but do you feel a lot of the issues were external and actually out of your control?

[Mads Nipper, executive]

Alex, to the first point, you're right. We talked a lot about the pre-FID projects. But if we look at the pre-award project, so Hornsea 4, Changhua 3, what may come. The good thing about those is that there, we can go what is the cost and the risk of building those projects versus what is then the price we should expect. So these are the things where it really becomes painful is if we had locked in an offtake agreement and then get hit by adverse impacts like raising interest rates or significant CapEx inflation. So therefore, we are firmly committed. We have done that always and we are recommitting that in the plan we launched today that any project that we bid into or any project we take FID on, we are within the value creation range of 150 to 300 basis points on top of our cost of capital.And that is something when we bid into, for example, potentially once into a future allocation round, we will make a project where we will not do that unless it creates value. So therefore, we are not concerned about those. It may mean that some of them will be later. It may mean that we will forego some auctions. But that's why we created a plan that we are comfortable we can deliver where all projects will deliver within that guided range.And to your second question about what could we do differently? Yes, we are clearly not saying this is only due to the sort of the vision of a circumstance of highly challenging market development, where most notably, of course, increasing interest rates and capital penetration have hit those old contracts very hard and especially the contracts that had no inflation index, meaning in principle, no protection against what happened.But we are also taking full accountability that over the last years and also recently, we, despite also permitting delays in the U.S., we continue to mature these projects with the aim to keep the completion dates. And with the knowledge we have today, have we known that inflation will explore and interest rates would go up, we should not have taken any decision in those contracts. Had we known what would happen, we should not have continued to mature and commit capital. And those are some of the core components opportunities we are making to our operating model of how we do projects is not to have anything near the capital committed that you have seen in the U.S. market.

[Operator]

Our next question comes from Will Mathis of Bloomberg.

[William Mathis, analyst]

Two questions. I just wondered; you talked about project cancellations and phasing that are going to result in DKK 35 billion reduction. Could you just give details on like what is being canceled and what's being, phase differently? And also, this year is supposed to be -- has the biggest volume of auctions for new projects across the U.S., including the Northeast, where you've said you're still focusing, but also Germany, the Netherlands. Are you planning to bid for new capacity? And where are you going to focus those efforts?

[Mads Nipper, executive]

I'll let Rasmus answer the first question.

[Rasmus Errboe, executive]

Will, Rasmus here. So specifically on the DKK 35 billion that we are reducing relative to what we put out at the Capital Markets Day will -- you can see there are three buckets in that one. It is project cancellations. An example of that is obviously Ocean Wind 1. And then it is reprioritizations. Mads mentioned some examples of that before in terms of markets. And then there is the phasing part that you asked specifically about. I will not give you -- you can say specifically which projects have removed COD, expected CODs on. But basically, overall say that our fundamental view on our very large offshore wind portfolio is that at the end of the day, it is not a critical cost whether certain projects, CODs in, let's say, '28 or '29.The only thing that really matters for us truly is the value of that project. So therefore, we have quite a bit of flexibility in our portfolio in order to decide when exactly do we assume that we spend CapEx on these very big projects. But of course, if you do look at our portfolio, the projects where we have the biggest flexibility to phase would, of course, be the ones that are not yet in execution.

[Mads Nipper, executive]

And to your second question, Will, where do we plan to be? You're absolutely right. There's a significant volume of expected auctions coming out across, not only across Europe and U.S., but also, for example, in Taiwan, where we have around 3/2. And I'm not going to tell you where exactly we'll be because it is -- this is the benefit of our plan. It's a bit what we need to secure. We will diligently bid in where we see the value creation being the highest. We will, of course, still have areas where we will bid and not win. But we will be very, focused as to whether is the sort of the conditions of the contracts that we'll be awarded. Will that be inflation indexing, which would be a very clear priority for us, especially where we have a long time between award and FID.So we are highly unlikely to bid on this. There's some kind of inflation protection. And also, where is it that it is not purely who will bid with the lowest price and win with the lowest price, because this is -- this is where there is a much greater than it would be struck being very vulnerable to any unfavorable developments. So I'm not going to give you any specific countries, but you know where we are, where we are active. And we will obviously be diligently evaluating that in our portfolio as to where do we develop and where do we bid.

[William Mathis, analyst]

Do you plan to bid into the CFD -- the upcoming CFD auction in the U.K. with Hornsea 4?

[Mads Nipper, executive]

That is an active consideration.

[Operator]

Our next question comes from Nora Buli of Thomson Reuters.

[Nora Buli, analyst]

Maybe just more following up from others about. But could you explain a bit more, you plan to divest quite a few projects or farm them down you said to a value of DKK 70 million to DKK 80 billion in the next 2 years. Could you provide some details on where or what assets you are looking to bring to the market? Are these projects in planning stages or are these projects of wind farms that are up and running already? And do you expect an interest on that? And if I could have a second question as well. There's been speculation that you might be an object for an M&A or someone else to take a stake in at that RWE has said they made some inroads on that. Have you been approached by anybody else other than RWE?

[Mads Nipper, executive]

Let me take -- I'll let Rasmus answer the first question. But let me take the second point because it's various. We don't comment on market rumors in any way. And we are strong believers that a lot are launching their right plan for our company and our shareholders today.

[Rasmus Errboe, executive]

And on the -- specifically on the divestment program, you are right that we are today announcing that we expect to farm down offshore wind farms with an onshore with proceeds of DKK 70 billion to DKK 80 billion in this first period between '24 and '26. I think an important point here to make is that this is a side acceleration compared to what we assumed at the Capital Markets Day was DKK 50 billion. But overall, the size of our overall farm-down program is, you can say, significantly smaller than what we assumed at the Capital Markets Day.We are -- farm-down to have been an integrated part of the way we do business in us over the last decade. And we are very confident in our ability to assess the opportunities we have and also to go to market in the most effective way. And we certainly do believe that there is still a very high degree of interest for, you can say, prime renewable assets in the market which are out there.You asked about specific examples. So as an example, we talked about the Hornsea. So Hornsea 3, our asset in the U.K. where we have taken FID is an example of an asset that we expect to fund down using our, you can say, normal model of a 50% farm down going forward. Hornsea 3 is one of the, you can say, assets offshore wind in the world with the lowest LTE. It's a prime asset. So therefore, we are quite convinced in our ability to fund that down in a good way. We have talked on Hornsea. We have done it on Hornsea 1. That is one example. And then, there are, of course, other examples as well throughout our portfolio.

[Operator]

Our next question comes from Michael Nielsen from Fredericia Dagblad.

[Michael Nielsen, analyst]

I just want to -- hope you could say a bit more about the 600 to 800 layoffs and redundancies. If you could be more specific about like is it going to be a drizzle a sprinkle of redundancies and across about some of these going to be concentrated in, for example, Denmark?

[Mads Nipper, executive]

Yes, first and foremost, it is always a difficult decision for us. But the right decision for the company and our stakeholders to make reductions like this. And we are -- the 600 to 800 or the number of positions that we are planning to reduce with during this year. Given that we have around half of our employees in Denmark; it will be a quite significant share that will actually impact Denmark. We are announcing 250 redundancies today, of which around 60% will be in Denmark. And if you take sort of that same range, it will probably not be too far off, we expect a normal position. But please be mindful that reducing a position does not automatically mean redundancies because there can be of natural attrition and so on, that can mean that the number will be lower in terms of actual redundancies.

[Michael Nielsen, analyst]

Of course, I'll have that in mind. Now we're talking 250 redundancy 60% in Denmark. I don't know if you can be more specific because I'm sitting in front of where you have yes, a certain presence. Can you say something --

[Mads Nipper, executive]

Unfortunately, we can't make -- sorry to interrupt you. But I unfortunately can't be more specific at this time because there are market consultation needs that we need to respect.

[Operator]

[Operator Instructions] Our next question comes from Victor Christensen of [ Finance ].

[Unknown Analyst]

I would like to ask exit. When you decided to exit developing markets such as Norway, Spain and Portugal, how Orsted will aim to maintain the position as a leading global offshore developer. And I also have a second question where Moody and Standard and Poor have put us the negative outlook. I would like to ask how it would impact us the strategic goals towards 2030 if they decide to downgrade as this credit rating.

[Mads Nipper, executive]

We are the only developer we're currently active in the number of countries that we have. And therefore, also, we don't see any decisions around down prioritizing given markets as something that a tool compromises our global offshore leadership. As I mentioned in the beginning, I mean, we have 6.7 gigawatts of offshore capacity under construction as we speak, which is -- I don't have the exact numbers, probably twice as much as anybody else. So we are convinced of our ability to uphold a strong position of offshore leadership globally as well. That does not mean we'll be active in every – in any market.But please bear in mind that on top of strengthening our sales in core markets like the U.K., we've taken final investment decision on Hornsea 3. We also got the electricity business license for 1.6 gigawatt greater Incheon project in Korea. So we continue to manage our portfolio of markets where we believe there's a strong risk return profile and where we believe that the value-creating opportunities are the best for the company.And I ask Rasmus, you comment on the credit rating.

[Rasmus Errboe, executive]

Absolutely, Mads. Just one very quick, remark, on Spain or just of course -- be mindful that it is only the offshore part actually. So we, of course, continue to be very active in Spain on onshore, just to be clear. On the Moody's, S&P, question. First of all, it is, of course, not for me to speculate today on whether or not we will be downgraded. But of course, looking at a credit watch and negative outlook, respectively, is of course something that we have taken into consideration. The plan that we are putting forward today, we have done 2 things. We have increased our FFO to net debt metric to above 30% relative to our CMD; so therefore, a more robust capital structure going forward. And then, secondly, we are committing to a solid investment-grade rating. That would, of course, also mean that in this scenario that we should be downgraded with one notch, we would still very much be in line with that updated ambition. And the reason we have that ambition target for our credit rating is because we do believe that it does not, in any way, you can say, impact our ability to do business and compete effectively should we get a 1-notch downgrade, which is why we have decided to come forward with this updated target.

[Operator]

Our next question comes from Stanley Reed of New York Times.

[Stanley Reed, analyst]

Two questions. How much does all the turmoil that's happened in the U.S. in recent months, kind of diminished the U.S. as an attractive investment center for offshore wind?

[Mads Nipper, executive]

Stanley, I'll happily answer that. So no doubt that the portfolio of awarded projects had been a challenge for us with the developments we have seen in the market. But as you can also see, we have rebid into New York with our Sunrise projects. And also that we continue development of our seabed, so not least leased area of 500, with up to 4 gigawatts potential. We are encouraged by what we have seen in New York 3 with an average awarded price of $145 per megawatt hour, which is an indication that there's a preparedness to pay realistic prices for what it takes to roll out offshore wind. And therefore, given what has been learned and also future solicitations, both in New York but also expectedly in future solicitations will offer inflation protection. That means that we are encouraged by how -- especially in the Northeast states have adapted to the new conditions and offered conditions that seemed to still be offer potential opportunities for the developers. So we are -- we still see the U.S. as an attractive offshore market. But we will do that in a focused approach where we do not run the risk of coming in the similar situation.

[Operator]

Our next question comes from Cecily [indiscernible].

[Unknown Analyst]

The biggest fear or one of the biggest fears among your investors seems to be, if you're actually able to -- if you're actually going to be able to secure an attractive return on your project in the future? Also, when we look at the, competition in the market and also the higher costs in the market right now, is there a risk that you will not be able to deliver the returns you have from?

[Mads Nipper, executive]

No, we are very confident with you asked this competitiveness. And as you can also see, we are taking measures to even further strengthen that. I think a very good example of this, as Rasmus had referenced before. Hornsea 3, we have very little doubt that the levelized cost of electricity for any offshore projects that is under development or construction today. This is the lowest per megawatt hour. We're doing. We've done benchmark studies that show that our competitiveness is clearly there. Yes, we have industry-leading return requirements, because we believe that is the right thing to do. And I can also say that with the exception of the awarded U.S. projects that we know are challenge, but attractive on a forward-looking value-creation basis. The portfolio across Europe and Taiwan that we are constructing is within the guided range. So and also the plan of 35 to 38 should give our investors' confidence that our preparedness to make priorities to ensure that where we go, we do create value is something that we should have high comfort. We are simply not going to take the systems where we don't have a high comfort in the value creation that we are promising our investors.

[Unknown Analyst]

And also a question problems in the U.S. and also the impairments last year. How will you avoid ending up in a similar situation in the future?

[Mads Nipper, executive]

Yes. The single most important learning for that is never again to be in a situation where we commit so much capital with a project that has -- that we find out has outstanding risks like we have seen. And this is especially a challenge in a market like the U.S., where there's a very long time between award and actually getting the final approvals for the site. So this is several years, whereas an example in the U.K., when we go in with the Hornsea 3, that site is fully consented. So there are no outstanding permits. So the time from awards to final investment decision is so short that the risk of something dramatic happening is very low. We will present quite extensively in the investor and analyst brief this afternoon, what more specifically we are doing. But the most important thing is to ensure that our pre-FID financial commitments are significantly lower than what we have done in the first U.S. projects.And by the way, as I referenced a previous question, you could see Skipjack and Hornsea and/or Ocean Wind 2 were already at a level where we have made much, much, much lower commitments than we did in, for example, Ocean Wind 1.

[Operator]

Our next question comes from Soren [ Lin Ding ] of JP Finance.

[Unknown Analyst]

I have two questions. The first question is regarding your auction or bidding strategy moving forward on the offshore wind projects. Looking at your targets for 2030 and compare that with the installed capacity and decided and awarded. It doesn't seem that it's -- there's that much room for getting any more projects onboard at least not this side of 2030 ambition. What would happen if you -- as you mentioned, strengthen your competitive edge, you are only moving for value-creating projects. What happens if you are awarded and you win more projects and more gigawatts than you have anticipated? That's the first question.

[Mads Nipper, executive]

Yes. Bear in mind Soren that the total -- we don't consider something where we haven't taken a final investment decision. It's something that we will definitely do. And for example, Baltica 3 is one that is where we've been also open saying that is under reconfiguration. So like we say expectedly, we would want to secure sort of 1 to 3, potentially a bit more of additional capacity for pre-2030 construction. So in total, you could say that there's, 5 to 7 gigawatts that is not already FIDs that we actually still have to secure. And we will go for those opportunities that are most attractive. I think the situation that you described is unlikely to happen, because these -- we wouldn't bid in 5 times and suddenly find out that we have 5 awards at the same time. And the plan that we have is exactly the plan that we are confident will be the one where we can ensure that we will generate value. And we have a clear principle of value over growth. And bear in mind, 2030, does not stop at -- it's not when the world stops. So this is very clear. We will continue to develop and mature opportunities also on the other side. And then -- and our plan is what we feel comfortable with.

[Unknown Analyst]

And then, my second question is regarding you, and your leadership role for the moment. Actually, you are without I know we due respect to the role -- the Interim role of Rasmus and Andrew. You are without a CFO and COO. And right now, the Chair is stepping down at the upcoming AGM. So you are going to have a new Chair as well. Could you put some flavors to what kind of support that you need in this critical phase of the development of Orsted?

[Mads Nipper, executive]

Yes, I get lots of support. The plan that we have made is fully backed by the entire leadership team and by the Board of Directors. And I would say that I'm only backed up by our Interim CFO and COO is a highly experienced, highly capable people. And by the way, the recruitment process is going fully to plan. So I don't feel in any way uncomfortable with the backup that I or the rest of the existing leadership team.

[Operator]

Our next question comes from Michael [indiscernible].

[Unknown Analyst]

I was just wondering if you could provide a bit more information about the timeline on your exits from the countries you mentioned, whether there's, any assets that needs about to be divested or anything else like that.

[Mads Nipper, executive]

No. There are no assets as Rasmus correctly said before, in Spain, it is offshore. And we do not have any offshore assets in neither, Norway, Portugal or Spain. So there is no particular time like for that. We obviously have informed our partners in those markets about our decision. So it's a relatively simple process of not getting in rather than having to lease up.

[Operator]

Our next question comes from Will Mathis of Bloomberg.

[William Mathis, analyst]

Yes, this actually follows up on the question before is for Rasmus. I wonder -- would you like to stay on in the CFO role? Is that something that you have offered to do in a veteran?

[Rasmus Errboe, executive]

Will, it is not something I have offered to do. My role is interim and that is an agreement that I have made from the very beginning.

[Mads Nipper, executive]

Yes. Thank you very much and thanks a lot for joining the call, and have a good and safe day.

[Operator]

Thank you for joining today's call. You may now disconnect your lines.