On Monday, Ørsted’s stock received a strong boost from Bank of America, which upgraded its rating on the otherwise struggling Danish stock to “Buy” and raised its price target from DKK 155 to 180.
The bank’s analysis sent Ørsted to the top of the C25 index on Monday with a 7.0% gain to DKK 153.
According to Bank of America, the reason for the more optimistic view of Danish energy equities is that the war in the Middle East has shifted the outlook “significantly” in a “positive direction,” writes Recharge News.
Since the US and Israel attacked Iran in late February, global oil prices have risen by more than 50%, and on Monday, the price of oil in the US closed above USD 100 per barrel for the first time since July 2022.
The EU already has plans to wean itself off oil and gas from Russia, and the major bank suggests that the recent oil shock will only further accelerate efforts toward energy independence in Europe.
“We see offshore wind in particular as a potential beneficiary, because the technology can deliver large volumes of electricity with relatively high capacity factors,” the analysis states.
Even the US market, which has otherwise plagued Ørsted with record-breaking impairments in its Danish bookkeeping, now looks more promising, the investment bank deems.
In this regard, the bank points out that US authorities’ opportunity to appeal Ørsted’s previous victories in lawsuits regarding construction halts for both Revolution Wind and Sunrise – major offshore wind projects on the US East Coast – has either passed or is about to pass.
Furthermore, the recent agreement between Total Energies and the US government, under which the oil giant will receive nearly USD 1bn in support for oil and gas projects in exchange for shutting down an offshore wind project, is also good news. Even though Ørsted cannot choose to increase its investments in fossil fuels in the US.
“We think this can be interpreted as a sign that the US government recognizes it cannot arbitrarily revoke lease agreements.”
Bank of America also expects Ørsted to resume investments in onshore wind and solar in the US to fill the gap in its pipeline following the cancellation of other major offshore wind projects.
“A number of Ørsted’s industry peers are increasing investments in onshore facilities in the US, driven by high demand for new electricity generation and an attractive return environment, and we are now factoring in 1GW per year of new onshore installations in the US from 2028 onward,” the bank stated, according to Recharge News.
70% of that capacity is expected to be built in the form of solar panels, while 30% will come from onshore wind.