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The New Jersey Board of Public Utilities (NJBPU) has selected Ocean Wind, an offshore wind energy project with support from Public Service Enterprise Group (PSEG), to negotiate a 20-year offshore wind renewable energy credit (OREC) for an offshore wind farm with a capacity of 1,100MW.

The project will be managed by Danish offshore wind specialist Orsted and is the biggest procurement by a US state for offshore wind energy to date. It is also notable that European specialists like Orsted are able to compete effectively for this type of project.

Orsted shares have more than doubled since 2017

Shares in Orsted, which is listed on the Copenhagen stock exchange, rose from DKK 532 on 4 June to trade at DKK 580 at time of writing. The shares are trading at close to a five year high. Orsted shares could have been bought for as little as DKK 252 in Q1 of 2017.

Located off the coast of Atlantic City, Ocean Wind will be New Jersey’s first large-scale offshore wind farm. Subject to Orsted’s final investment decision, the wind farm is expected to be completed by 2024.

PSEG, which serves 2.2 million electricity customers in New Jersey, will provide energy management services and potential lease of land for use in the project development and execution phase and has an option to become an equity investor in the project. The project will supply more than half a million New Jersey homes with clean power.

Orsted controls a 2GW offshore wind portfolio

With the announcement, Orsted has now secured a US offshore wind build-out portfolio with a total capacity of c.2GW to be completed between 2022 and 2024. NJBPU said that Orsted’s Ocean Wind project offered a first year OREC price of $98.10.

This is a positive development for Orsted, according to analysts at UK stockbroker Killik & Co.

“Our investment case is dependent on the company’s continuing success in auctions for offshore and, to a lesser extent, onshore wind projects,” Killik stated today. “The process is becoming more competitive with the entry of ‘big oil’ companies into the space, however, the excellence of the management team, and the company’s experience and long-term track record provides us with confidence that it can continue to win new projects as evidenced by this most recent success, beating rival bids from Equinor and Shell / EDF.”

Orsted shares trade on a price to FY2020 earnings ratio of 20.1x and offer a prospective dividend yield of 1.8%.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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