S&P Global Ratings has cut Danish wind giant Ørsted’s credit rating, pointing to a faltering “farm-down” funding model as U.S. project setbacks and broader industry troubles mount.

Ørsted’s stocks dropped nearly 30% to an all-time low August 11 after it announced a rights issue—where a company invites existing shareholders to purchase more shares—to raise US$9.4 billion in funding for its Sunrise Wind project in New York, after a partial sale of the project fell through.

“Ørsted and our industry are in an extraordinary situation with the adverse market development in the U.S. on top of the past years’ macroeconomic and supply chain challenges,” said CEO Rasmus Errboe.

Errboe blamed the wind-averse Donald Trump, describing the political risk and regulatory and tax credit changes during his administration as unexpected developments outside the company’s control.

But longstanding industry challenges also played a role. Even under the supportive Joe Biden administration, Ørsted faced soaring costs, supply chain disruptions, and financing challenges.

The company—which rapidly transitioned from a state-owned oil and gas utility to a global leader in offshore wind—typically follows a ‘farm-down’ model, selling off parts of its projects to fund further development or operations. When Ørsted’s planned partial divestment from Sunrise failed, its funding capacity was hampered. That became a key part of S&P’s decision to downgrade its rating to BBB-, the lowest rating that is still considered worthy of investment. S&P also based the rating change on the company’s inability to carry out project refinancing, reports Bloomberg.

If the rights issue succeeds, roughly two-thirds of the funds will be used to fund Sunrise’s construction costs.

Update: On August 22, the U.S. Bureau of Ocean Energy Management issued a stop-work order for the Revolution Wind project, a $1.5-billion development off Rhode Island that is 80% complete. “The project has finished installing foundations and 45 of the 65 planned turbines,” The Financial Times reports. “It was due to begin operations next year and supply enough power for 350,000 homes in Rhode Island and Connecticut under 20-year contracts.” The BOEM order cited the need “to address concerns related to the protection of national security interests,” the Times says, but didn’t elaborate.

“The farm-down strategy has been a key pillar of Ørsted’s business strategy, but this business model now pertains higher risk,” S&P said. “Previously we viewed Ørsted’s track record on execution as predictable. However, the cancellation of the disposals of Sunrise Wind severely and directly hinders credit metric performance.”

Two other major credit rating agencies maintain their long-term ratings for the company; Moody’s Ratings lists Ørsted as Baa2 with a stable outlook, while Fitch Ratings’ BBB is listed with a negative outlook. A poor rating from two of these three firms would usually make investors wary, Bloomberg says.

A lower credit rating could also mean the company will face higher borrowing costs, which would in turn risk driving up capital costs and making the company’s problems worse. Jacob Pedersen, head of equity research at Sydbank, said a company’s investment-grade rating is a “prerequisite for ensuring a financially sound future.”

“The company is in really bad shape. A capital increase was the last resort,” Pedersen said. “It was not just the right decision, it was the only option they had left in their toolbox.”

Pedersen added that the downgrade by S&P was “a surprise”. Sydbank expects the capital from the rights issue will “strengthen Ørsted’s finances to a degree, so that the company’s credit rating should be well away from junk.”

But Sydbank also told investors that Ørsted’s rating dropping lower would affect parts of the company’s existing debt, “which will mature and thereby derail the investment program and future value creation in Ørsted,” says ReCharge News.

Bloomberg reports that a separate statement from Ørsted shows the company’s earnings before interest, tax, depreciation and amortization—excluding new partnerships and cancellation fees—rising 9% in the first half of 2025 compared to the year before.