Orsted Hybrids Lose Safety Net on Recovery Ledge: 2026 Midyear Credit Outlook

Orsted's recovery plan is progressing after it delivered a rights issue, exceeded its divestment target and continues to execute a project pipeline that's been disrupted by legal challenges associated with the US administration's opposition to offshore wind. If Orsted can deliver the two US projects on schedule, credit quality could settle at the BBB/Baa2 level and its bond and hybrid spreads could tighten toward peers. If the projects face appeals or new legal challenges that lead to their cancellation -- which is becoming less likely as construction progresses -- the exit costs and lost income would weaken credit ratios and threaten Orsted's high grade credit status. Dropping the S&P rating has reduced liquidity risk and increased hybrid issuance capacity, but leaves investors more exposed to extension risk.