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Environmental finance: From Dong to Ørsted – a story worth repeating

Environmental and political writer George Monbiot recently made the salient point that while Shell launched a $300 million fund in April to invest in natural ecosystems, it also invested $25 billion into oil and gas in 2018, including exploration for new fossil fuel reserves. 

When I am reminded of how little the large energy companies are doing regarding transitioning to a low-carbon economy and of the excuses given, I think about the story of how Dong Energy became Ørsted. 

A little over 10 years ago, when Ørsted was Dong Energy, it had only a few wind projects. The main part of the company’s business was drilling for oil and gas in the North Sea, selling and distributing power and gas to end-customers in Denmark and operating combined heat and power stations. 

The stations were based on coal, oil and natural gas; Ørsted alone was responsible for half of Denmark’s CO₂ emissions. 

In 2018, by comparison, 75% of the firm’s total energy generation came from renewable sources – by 2025 that will be 99%. The carbon intensity of its energy generation was 72% lower than 2006 levels – its target is 98% by 2025. And coal consumption has been reduced by 81% since 2006 – within four years the firm will have exited coal completely (Denmark still uses coal, although it has greatly reduced its dependency. Last year, 68% of the Danish electricity supply was from renewables.)

What I love about the Ørsted story is that when we’re told transition will take decades, it proves that it is not so 

Dong’s vision of moving from black to green began in 2008. That was partly due to the growing public focus on climate as well as the launch of the EU 2020 energy policy goals that put pressure on energy companies to change to a more sustainable way of producing heat and power. 

But Dong’s move was also because it made sense commercially. Like most European power producers, the company came under intense financial pressure from challenges in the global gas markets.

So the business make-up shifted. Firstly, Dong steered 90% of all new investment towards offshore wind and upstream oil and gas. The remaining 10% was invested in conventional power stations in Denmark and distribution grids. Non-core businesses such as gas storage facilities, electric vehicles, hydro, liquefied natural gas and waste-fired power plants were divested, raising $3.5 billion. 

Operating costs shrank by more than 20% and a further $2 billion was raised through an equity injection, providing the financial foundation for a continued expansion into renewable energy.


In 2016, the company went public with the largest-ever IPO in Denmark and the second largest in the world that year. And in 2017 it sold its upstream oil and gas business, concluding its strategic transformation. In just 10 years an entirely new firm had been born, and in November 2017 it changed its name from Dong (Danish Oil and Natural Gas) to Ørsted (after Danish physicist Hans Christian Ørsted). 

And how has Ørsted fared? At the end of 2018, Ørsted had achieved an all-time high ebitda of DKr30 billion ($4.59 billion) for the year. Why? Because, it says, the business case for transitioning to renewables “has proved strong”. 

Green energy is becoming much cheaper than conventional fossil fuel power stations. Since 2012 the levelized cost of electricity from offshore wind has fallen by 63% and it is now cheaper to build and operate offshore wind farms in Europe than new-built power stations running on coal, gas or nuclear fuel. 

Those costs are also likely to decline further as the global rate of building offshore wind accelerates.

It’s not a perfect story. Ineos bought Dong’s upstream oil and gas business. It’s the world’s fifth largest chemical firm, whose own chief executive, Jim Ratcliffe, (the UK’s richest man) has lobbied for fracking and moved to Monaco, apparently to save paying £4 billion in taxes. 

That’s the trouble with divestments, we never quite get rid of assets. 

But what I love about the Ørsted story is that when we’re told transition will take decades, it proves that it is not so. And if ever we are told the markets or investors are unsupportive of transition, again the case of Ørsted proves this wrong – green finance has supported its continued growth. 

It launched its first green bond in 2017, while in May this year it has been looking at other green financing instruments, such as loans and credit facilities. 

According to the firm, that green financing has not only helped them get the story out to investors, it has also made Ørsted even stricter about its green ambitions. 

It is a story of which we need a constant reminder. Transitions can be made. They can be made swiftly and they can be made profitably. 

The financial markets are instrumental in getting them done. 

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