Dong profit soars on offshore and gas grid divestment

Profit at Danish utility Dong Energy soared more than six-fold in the third quarter of 2016, boosted by offshore wind generation and construction, as well as a gain from the divestment of the gas distribution grid in Denmark.

Revenue in the third quarter fell 16% to DKr14.48bn ($2.15bn) from the year-earlier period due to lower oil and gas prices and lower gas sales, an effect that was only partially offset by higher activity from construction contracts in wind power.

Nevertheless, earnings before interest, taxes, depreciation and amortisation (Ebitda) rose 7% to DKr4.8bn in the period due to a 19% Ebidta increase in wind power to DKr1.64bn, and a positive effect from a lump sum payment received in connection with the renegotiation of a gas purchase contract.

Wind Ebitda went up thanks to profit from the construction contracts for the 258MW Burbo Bank Extension project off the UK and the 582MW Gode Wind 1&2 project off Germany, which was partially offset by a decrease in Ebitda from wind farms, O&M and PPA despite the ramp-up from new wind farms.

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Profit in the third quarter of 2016 for all of Dong jumped to DKr3.33bn from DKr458m in the same period in 2015, helped by a DKr1.3bn gain from the divestment of the gas distribution grid to

Wind is well under way to become Dong’s dominant source of income, in line with the expressed goal to transform itself from a mixed renewables and fossil utility in terms of generation to one solely based on green energies.

“We have decided to initiate a process with the aim of ultimately exiting from our oil and gas business,” chief executive Henrik Poulsen says.

“This should be seen in the context of Dong Energy’s strategic transformation towards becoming a global leader in renewables and a wish to ensure the best possible long-term development opportunities for our oil and gas business.”

Poulsen added, however, that there can be no assurance as to the outcome or the timing of the completion of this process.

Dong currently has seven large offshore arrays under construction that combined will have a capacity of 4.4GW.

The utility is currently in the process of farming down its 573MW Race Bank and its 659MW Walney Extension projects off the UK, which are slated to be completed in 2017 and 2018 respectively.

Dong’s strategy of selling large stakes in its offshore projects to other investors allows it to rapidly boost and diversify its offshore wind portfolio.

The utility has already expressed interest to participate in upcoming offshore wind tenders, among them a 1.55GW interim tender in Germany next year for already licensed offshore zones.

Still this year, Dong awaits the results of the 680MW Borssele 3&4 auction in the Netherlands and the 600MW Kriegers Flak tender in Denmark.