Swedish government rejects two of Hexicon’s projects

Hexicon has announced that the Swedish government has rejected the applications for two of its projects, Cirrus and Dyning, which together represent approximately 29% of its net portfolio. Given the significant size of these projects and the fact that our estimates include the assumption that the projects will be approved and progress positively towards Final Investment Decision (FID), we will revise our estimates, valuation and recommendation no later than in connection with the upcoming Q3'24 report on November 29.

The Swedish government recently rejected 13 applications for offshore wind farms in the Baltic Sea, south of the Åland Sea, which includes Hexicon’s Cirrus and Dyning projects. As a result, Hexicon’s joint venture company, Freja Offshore, will discontinue work on these two projects. The government has stated that the primary reason for the rejection is that offshore wind farms in these locations would pose challenges to Sweden’s defense operations. It also appears that the decision is final and cannot be appealed.

Negative impact on Hexicon's project portfolio

The Cirrus and Dyning projects represented approximately 2,250 MW of Hexicon’s active project portfolio, or around 29% of its net capacity. In addition to Cirrus and Dyning, Hexicon has another major project in the Swedish market, Mareld, located off the west coast of Sweden. In June, the County Administrative Board of Västra Götaland County issued a recommendation for the Mareld project, and it is currently under review by the Swedish government. Our initial assessment is that the recent decision should not affect the Mareld project, as it is situated outside the sensitive areas identified by the Ministry of Defense. Nevertheless, our previous estimates assumed that all these three early-stage projects would continue to progress positively and eventually be divested before reaching FID. Therefore, based on the current information, we initially view the news as negative for Hexicon and will update our current estimates and valuation.