Summary:

This paper examines if Equinor can achieve a similar success as Ørsted did when it became
the world’s first energy company to transform its energy output from fossil-based to
renewables-based. This assessment is done through identifying the critical factors that enabled
Ørsted’s success and discussing whether these same critical factors still carry the
characteristics demonstrated throughout Ørsted’s transformation in Equinor’s impending
transformation. The disclosing of the critical factors that enabled Ørsted’s success is conducted
through a project-by-project analysis of the company’s offshore-wind projects relevant to its
transformation. Here, we calculate the weighted average lifecycle IRR (LCIRR) of Ørsted’s
entire offshore-wind portfolio to use as a foundation to seek out the drivers behind all aspects
of IRR, i.e., revenue, costs, and investments, that contributed to the company’s success. Our
analysis reveals that the root cause of Ørsted’s success was its first-mover advantage in
offshore wind, as this permitted it to leverage the critical factors of strong governmental
support to secure high and stable revenues, early-on know-how to reduce costs and an effective
funding strategy to accelerate the growth of the company’s offshore-wind portfolio. By
calculating the LCIRR of Equinor’s offshore-wind portfolio and analysing the characteristics
of each critical success factor, we reveal that Equinor’s transformation will not achieve a
similar success to Ørsted’s. A key finding is that the LCIRR of the relevant projects to
Equinor’s transformation will be lower than that achieved by Ørsted. Consequently, in
suggesting what Equinor may do to exploit the full potential of the company’s expansion in
offshore wind, we look to the required returns. In this context, we find that Equinor currently
does not benefit from the ESG investor sentiment and suggest that the company should do a
spin-off to fully capitalise on its transformation from black to green.