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One could have said the same thing 2 or 3 years ago about companies active in the renewable energy space like Orsted. I mean, they were one of the biggest prod

One could have said the same thing 2 or 3 years ago about companies active in the renewable energy space like Orsted. I mean, they were one of the biggest producers of wind-turbines, what was there not to like in this ESG-focused investment environment? Until the numbers suddenly stopped making sense for them a few weeks ago [1]. Which is to say that the investment numbers may look "right" for a good few years until they suddenly don't and the reality catches up with all those involved. [1] https://archive.is/w8VCk https://archive.is/w8VCk

epistasis 3y ago
It wasn't a "reality" check from having inaccurate estimates, it was rising interest rates that put a huge damper on the cost of projects where all the expense is front-loaded.
- paganel 3y ago
  Higher interest rates are part of the game, or of reality, if you want to put it that way. So, yes, it was a reality check and it has proved that that company could only be viable under very particular economic circumstances (i.e. interest rates being close to zero)
  - epistasis 3y ago
    Whoa, their viability as a company is not under question. The only thing under question is whether future long-term agreements will include inflation protection. When interest rates rise tremendously, long term investment gets pulled way back. That's the entire point of hiking interest rates, to make companies like Orsted slash their growth rates. It does not put Orsted at risk for collapse.
    - paganel 3y ago
      They've had a ~70% share price fall since the height of 2021, 40% lower compared to the summer of last year, of course that their future (at least as an independent company) is under threat, saying otherwise is just wishful thinking. > That's the entire point of hiking interest rates, to make companies like Orsted slash their growth rates. I highly doubt that that's the discussion being held at the meetings where the rates are being set, i.e. I've never heard the likes of the US Fed or of the ECB saying "we want to slow our most dynamic sector of the economy by increasing interest rates", but I could be wrong on that.

epistasis 3y ago

It wasn't a "reality" check from having inaccurate estimates, it was rising interest rates that put a huge damper on the cost of projects where all the expense is front-loaded.

paganel 3y ago
Higher interest rates are part of the game, or of reality, if you want to put it that way. So, yes, it was a reality check and it has proved that that company could only be viable under very particular economic circumstances (i.e. interest rates being close to zero)
- epistasis 3y ago
  Whoa, their viability as a company is not under question. The only thing under question is whether future long-term agreements will include inflation protection. When interest rates rise tremendously, long term investment gets pulled way back. That's the entire point of hiking interest rates, to make companies like Orsted slash their growth rates. It does not put Orsted at risk for collapse.
  - paganel 3y ago
    They've had a ~70% share price fall since the height of 2021, 40% lower compared to the summer of last year, of course that their future (at least as an independent company) is under threat, saying otherwise is just wishful thinking. > That's the entire point of hiking interest rates, to make companies like Orsted slash their growth rates. I highly doubt that that's the discussion being held at the meetings where the rates are being set, i.e. I've never heard the likes of the US Fed or of the ECB saying "we want to slow our most dynamic sector of the economy by increasing interest rates", but I could be wrong on that.