WIND STILL BOOMING

Vestas Says Wind-Project Demand Is on Rise; Turbine Maker Sticks to Revenue Forecast, But Earnings Decline
Selina Williams, August 19, 2009 (Wall Street Journal)

"In a surprise…the world's biggest wind-turbine supplier, Vestas Wind Systems A/S, said it still expects its revenue to increase by nearly 20% this year as order flow has begun to pick up -- a sign the sector could be starting to unfreeze.

"Analysts had expected Denmark-based Vestas to lower its full-year revenue target of €7.2 billion ($10.14 billion) because tight credit markets have hit funding for the multibillion-dollar wind-power industry…Vestas Chief Executive Ditlev Engel said the company sees signs of renewed interest in wind projects from financial institutions as government stimulus plans, particularly in the U.S. and U.K., are kicking in…"

Emerging Energy Research detailed the factors in the 2008-09 downturn. (click to enlarge)

"The wind-power industry, which has boomed in the past 10 years -- growing almost 30% from 2007 to 2008, for example -- has been in the doldrums for most of 2009. Some investment banks that were big lenders to renewables projects, such as Lehman Brothers, have collapsed, while others have severely restricted lending…Vestas, which had ridden the boom, has felt the impact of the downturn…[I]ts second-quarter net profit decreased to €43 million from €65 million a year earlier, partly because of higher costs and reduced gross margins. Revenue rose 11% to €1.21 billion from €1.09 billion.

"The company is coping with the slowdown by cutting costs…Citing weaker demand in northern Europe, one of the regions hardest hit by the credit crisis, Vestas said it was shifting its geographical focus to China and the U.S. China is expected to become the largest market for new installed wind turbines this year, ahead of the U.S…Vestas said it is encouraged by signs the market could be turning."

Emerging Energy Research brilliantly predicted the return to productivity factors. (click to enlarge)

"Although it had a tough first half, the company said it had received orders of €700 million since the end of the second quarter. The company's corporate review board is also set to evaluate several new contracts, valued at more than €4.4 billion in total…[and] Vestas's recent 165-megawatt turbine order for the Bligh Bank offshore wind farm off the coast of Zeebrugge in Belgium [is] another indicator the market is again opening up. Bligh Bank…is the first offshore transaction to receive project finance since the financial crisis started.

"Lower steel and energy prices this year, improving technology, and good wind-power prices due to national subsidies and stimulus money could also help get the sector moving again. Binding European Union targets on renewable energy use are also supporting the sector…[S]ome analysts said there were still risks that could derail the turnaround…"