c Nordic Capital Goods 08 June 2004
Sector Update
Sector view: Wind Gauge NEUTRAL
Growth will come – what about profitability?
We have made only minor revisions to our market forecasts – we now expect growth of 2% in 2004 and 31% in 2005 (assuming the extension of the PTC).
We remain confident about the long-term growth prospects, with several projects under development in new markets such as Mexico, Taiwan, the Czech Republic, Bulgaria, Hungary and South Korea.
The tough competitive landscape is not set to improve – Gamesa and GE VESTAS Wind are moving rapidly into new markets – and it could be further UNDERPERFORM aggravated by a new round of industry consolidation (Bonus and HIGH RISK DKK88 Repower are up for sale).
Peter Rothausen +45 32 88 03 20 We expect Vestas’s sales(04) to come in at the low end of the guidance [email protected]
range (EUR2.7bn), but see it falling short of its 5% EBITA guidance (Carnegie: 4%). There is downside to our numbers if US sales do not materialise.
We keep the UNDERPERFORM rating. There is huge uncertainty about Vestas’s future profitability and short-term earnings capabilities; there is also a high risk relating to the integration of NEG Micon. The premium valuation (19–20% on 2005e earnings) to the Engineering peer group is unjustified.
Please see disclosures at the back of this report
Carnegie Securities Research
Sector Update Wind Gauge
Valuation
Change (%) in valuation since 21 January 2004 (last wind gauge)
Ch. in EV/EBITA (%) Ch. in Adj. P/E (%) 2003 2004e 2005e 2003 2004e 2005e Vestas n.m. 3% 37% n.m. 1% 32% Gamesa *) 39% 35% 20% 30% 26% 18% Nordex n.m. n.m. n.m. n.m. n.m. n.m. Repower *) 187% 126% 87% 106% 47% 17%
Ch. in EBITA (%) Ch. in Adj. EPS (%) Price ch. 2003 2004e 2005e 2003 2004e 2005e Vestas n.m. -7% -24% n.m. -16% -36% -6% Gamesa *) -4% 0% 13% 6% 9% 17% 37% Nordex n.m. n.m. n.m. n.m. n.m. n.m. 0% Repower *) -48% -35% -21% -55% -37% -22% -8%
Current multiples (x) EV/EBITA(x) Adjusted P/E(x) PEG EPS CAGR 2003 2004e 2005e 2003 2004e 2005e 2003e (2003-05e)
Vestas 59.2 13.4 10.9 Neg. 20.5 15.4 n.m. n.m. Gamesa *) 14.6 11.8 10.2 13.8 11.8 11.0 1.12 12% Nordex n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. Repower *) 9.9 7.9 5.7 14.5 10.3 7.5 0.37 39% Average (simple) 27.9 11.0 9.0 14.1 14.2 11.3 0.75 26%
Relative to Vestas Vestas 1.00 1.00 1.00 n.m. 1.00 1.00 n.m. n.m. Gamesa 0.25 0.88 0.94 n.m. 0.58 0.71 n.m. n.m. Nordex n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m. Repower 0.17 0.59 0.53 n.m. 0.51 0.49 n.m. n.m.
Consensus valuation Vestas 32.8 16.8 10.5 38.3 25.3 13.5 0.56 69%
Carnegie relative to consensus Vestas n.m. 0.80 1.04 n.m. 0.81 1.14 n.m. n.m. Nordex n.m. n.m. n.m. n.m. n.m. n.m. n.m. n.m.
*) consensus estimates from JCF Quant. Source: Carnegie Research and JCF Quant
Stock performance (%) Stock performance (%) Price Curr. 21-Jan -1W -1M -3M -6M -12M YTD
Vestas * 87.0 DKK -6% 6% 10% -15% 14% 32% 0% Gamesa 12.9 EUR 37% 5% 12% 14% 56% 102% 48% Nordex 0.95 EUR 0% 10% 13% -18% 19% -12% 42% Repower 18.5 EUR -8% 2% 3% 6% -4% -11% -3% Developers Energiekontor 1.64 EUR -25% 2% 1% -31% -34% -84% -29% P&T Technology 0.30 EUR -33% -3% -33% -45% -12% -96% -30% Plambeck Neue 2.32 EUR 4% 17% 5% -16% -28% -76% 5% Umweltkontor 0.94 EUR 3% 45% 38% -7% -30% -67% 4%
Average (simple) -3% 10% 6% -14% -2% -26% 5% DJ Euro Stoxx 250.5 -1% 2% 1% -4% 18% -35% 3% * Correction factor 0.90 Source: Carnegie Research and JCF Quant
08 June 2004
2 Carnegie Securities Research
Sector Update Wind Gauge
Peer group: Engineering P/E (x) EV/EBIT (x) PEG (03) EPS gr. 2003 2004e 2005e 2006e 2003 2004e 2005e 2006e CAGR 03-05e
Assa Abloy 27.913.912.711.440.515.913.111.50.5848% Atlas Copco 15.7 13.6 12.1 11.6 11.3 10.3 8.7 7.9 1.15 14% Gamesa 14.9 12.6 11.6 10.2 11.6 12.4 10.6 8.7 1.13 13% Linde AG 21.6 13.3 11.9 11.0 14.3 12.6 9.6 8.5 0.62 35% Man AG 21.4 15.7 11.8 10.7 8.4 8.3 6.4 5.7 0.62 35% Rolls Royce Group 19.4 17.6 15.3 12.4 9.1 11.0 9.8 8.5 1.24 16% Schneider Electric 20.0 16.0 13.7 13.5 11.5 10.4 9.0 8.5 0.95 21% Siemens 21.8 17.1 14.3 12.7 19.5 12.4 9.5 8.2 0.93 24% SKF 14.4 12.0 10.3 9.8 10.3 8.3 6.9 6.2 0.82 17% ABB n.m. 22.2 13.2 11.8 19.4 11.7 7.9 6.6 n.m. n.m. Ingersoll Rand Co 20.5 15.1 12.7 n.a. 15.6 12.3 10.1 n.a. 0.73 28% Emerson Electric Co 23.5 21.3 18.7 n.a. 16.3 13.1 11.6 n.a. 1.79 13% Sandvik 17.8 14.8 13.6 12.7 15.3 11.4 10.0 8.7 1.25 14% United Technologies 18.6 16.6 14.8 13.5 12.6 10.9 9.5 n.a. n.m. n.m. Peers (median) 20.0 15.4 13.0 11.7 13.4 11.5 9.6 8.5 0.94 19% Peers (simple average) 19.8 15.9 13.3 11.8 15.4 11.5 9.5 8.1 0.98 23%
Vestas (DKK87) n.m. 20.5 15.4 11.1 n.m. 14.3 11.5 8.0 n.m. n.m. Vestas Rel (median) n.m. 1.33 1.19 0.95 n.m. 1.24 1.20 0.95 n.m. n.m.
Source: JCF Quant and Carnegie Research
Vestas sensitivities Carnegie Vestas' Scenarios (changes to base case) Base - case guidance 1) 2) 3) 4) 5) 6) 7) scenario WACC 9.9% 9.9% 9.9% 9.9% 9.9% 9.9% 10.6% 10.6% 9.9% Asset beta 1.25 1.25 1.25 1.25 1.25 1.25 1.40 1.40 1.25 Equity beta 1.39 1.39 1.39 1.39 1.39 1.39 1.56 1.56 1.39
Sales growth 02 12% 12% 12% 12% 12% 12% 12% 12% 12% Sales growth 03 6% 6% 6% 6% 6% 6% 6% 6% 6% Sales growth 04e 14% 14% 14% 14% 14% 15% 14% 14% 14% Sales growth 05e 13% 13% 13% 13% 13% 15% 13% 13% 13% Sales CAGR 06-10e 13% 15% 13% 13% 13% 15% 13% 13% 13% Sales growth TP 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
EBITA margin 02 5.2% 5.4% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% EBITA margin 03 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% EBITA margin 04e 6.5% 7.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% EBITA margin 05e 6.9% 10.0% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% 6.9% EBITA-margin 06-10e 8.6% 10.0% 8.0% 7.5% 8.6% 8.6% 8.6% 8.0% 8.0% EBITA margin TP 8.6% 10.0% 8.0% 7.5% 8.6% 8.6% 8.6% 8.0% 8.0%
NWC/Sales 02 42.6% 42.6% 42.6% 42.6% 42.6% 42.6% 42.6% 42.6% 42.6% NWC/Sales 03 35.1% 35.0% 35.1% 35.1% 35.1% 35.1% 35.1% 35.1% 35.1% NWC/Sales 04e 35.3% 35.3% 35.3% 35.3% 35.3% 35.3% 35.3% 35.3% 35.0% NWC/Sales 05e 31.6% 25.0% 31.6% 31.6% 35.0% 31.6% 31.6% 31.6% 35.0% NWC/Sales 06-10e 30.1% 25.0% 30.1% 30.1% 35.0% 30.1% 30.1% 30.1% 35.0% NWC/Sales TP 30.1% 25.0% 30.1% 30.1% 35.0% 30.1% 30.1% 30.1% 35.0%
DCF value per share (DKK) 99.6 153 87 77 84 104 86 76 73 Change in DCF value - 54%-13%-23%-16%5%-14%-24%-27% Potential (current price: DKK87) 14% 76% 0% -11% -3% 20% -1% -13% -16% Source: Carnegie Research
08 June 2004
Carnegie Securities Research 3
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Investment highlights
Vestas (NewCo) Nordex Gamesa Repower Investment Vestas is being squeezed by hot Restructuring case (NOT The most profitable turbine No competitive advantages case & steel prices, tough competition, RATED). We question manufacturer (NOT to make Repower (NOT valuation flat markets, weak USD and whether Nordex will succeed RATED). ROIC is likely to RATED) an international powerful customers in achieving satisfactory ROIC come under pressure success longer-term when internationalisation strategy Premium valuation to the H1(03/04) report indicated takes shape (increased Engineering peer group is not that restructuring is well costs and low prices to justified in our view given the under way – the cost base penetrate markets) huge uncertainty about Vestas’s has been lowered markedly profitability levels. The premium is 20% on EV/EBIT(05e). EBITA Gamesa is experiencing We doubt Nordex is a margin sensitivity calculations some success outside its takeover candidate, although (7.5–8.0%) point to a fair value home market (China, Japan, Gamesa could be interested of DKK77–87 India, Italy, Portugal, US) by (market access as well as using its key competitive product access, primarily the advantage – low prices Long-term, the shares could N90 2.3MW offshore mill) offer upside to DKK99 (EBITA margin of 8.6%) – assuming successful integration. Management’s scenario points to a value o f DKK153
Top line Germany will be key (in terms of Germany is the single most Spain is the most important Almost all sales in 2003 in importance) in 2004, while important market, accounting market, comprising 75% of Germany, but set for Oceania is key to growth for 40% of sales(04) sales(04e) marked international growth in 2004
EBITA Achieving cost synergies is of The company expects to Will come under pressure Will come under pressure margin utmost importance for our return to the black in as business becomes more as business becomes more projected EBITA margin FY(04/05). We disagree – international international expansion (from 6.5% in 2004 to despite its restructuring 8.6% in 2006). We are more programme and cost-cutting In the short term (2004– conservative on cost synergies – as we expect Nordex to 2005), Gamesa’s solid (DKK425m) than management lose market share in 2005 order book in Spain, Italy (DKK500m). Vestas’s 2005 and Portugal will secure earnings will be hurt by high efficient production and steel prices (cost price rise of high capacity utilisation 6%) and high EUR cost base
Long-term, we forecast an EBIT margin of 8.6% vs. Vestas’s forecast of 10%
NWC/Sales We assume 35% for 2004 Set to improve in 2003/2004 Likely to worsen, as n.a. (Vestas: 30–35%) falling to 32% to 30% (40% in 2003) business becomes more in 2005 and 30% from 2006 international onwards (Vestas: 25–30%)
Source: Carnegie Research
08 June 2004
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Sector Update Wind Gauge
Pros and cons analysis for Vestas
Pro-Con analysis for Vestas (NewCo)
Pro Con Undisputed market leader - share of more than 35% (2004) compared to some New product program and new organisation is now place - but no clear strategy about inhouse development (GREP) and 18% for no. two. Economies of scale in R&D, sourcing and production. rotor blade production (degree of vertical integration). There is risk of market share loss during the integration process.
Best position in the offshore and onshore market as well as in new markets The top-line driven management needs to change focus on improved profitability - improving the cost ratio (securing synergies) and NWC/Sales. Svend Sigaard and Torben Bjerre have no (solid) merger experience.
Competitive and updated product programme: V52 850kW; NM 82 1.65; V90 1.8- There is (limited) client overlap - (FPL (US); NUON (NL); AMEC (UK), SIIF/EdF (Fra), Elsam (Den) 2.0MW; V90 3.0MW; NM110 4.2MW
High liquidity Sourcing needs to be improved - Vestas' EUR cost base is very high. NEG Micon's production base in the UK and India could help to improve this. US and/or Canadian production is being considered.
Trigger: Potential Production Tax Credit extension in the US in Q2-Q3(04) USD rate (DKK6.1 per USD) is a problem for the European turbine vendors as US turbine deliveries are hardly profitable
Trigger: Order flow - offshore (Belgium, Netherlands, UK, Germany) as well as The cost price of a wind turbine is set to increase by some 6% - ceteris paribus - as the steel price has risen by some 60%. Given the onshore tough mar ket envir onment, we doubt t hat Vestas can pass all of t hat incr ease onto customer s.
Profitability is being eroded with ROIC (pre-tax) below 10% in 2002-2003 (albeit rising to 14% in 2005 - due to expectation of improved NWC/Sales and EBIT margins).
New management team needs to restore market confidence again - after profit warnings - and improve communication.
Valuation: Vestas is trading with a 19-20% premium and 5% discount to the Engineering Peer group on 2005-06e earnings, respectively. Given the uncertainty about future profitability (ROIC), Vestas should not trade with a premium. We expect a profit warning for 2004.
Key share price driver is news about the integration process - that can support Vestas's cost synergies. Appears to be on track but the adverse steel price development and Vestas' high EUR cost base hurts earnings and eliminates part of the synergies (2005)
Source: Carnegie Research
08 June 2004
Carnegie Securities Research 5
Sector Update Wind Gauge
Carnegie versus the consensus
Estimates comparison: Carnegie versus consensus, and change since 21 January (last wind gauge)
Vestas (DKKm) * Vestas (EURm) * Carnegie Consensus Car./cons. Carnegie Consensus Car./cons. 21 Jan 08-Jun Change 21 Jan 08-Jun Change 08-Jun 21 Jan 08-Jun Change 21 Jan 08-Jun Change 08-Jun
Sales 2004 20,063 20,061 0% 12,571 19,637 56% 2% 2,693 2,693 0% 1,687 2,638 56% 2% Sales 2005 23,361 22,669 -3% 13,417 21,254 58% 7% 3,136 3,043 -3% 1,801 2,855 59% 7% Sales 2006 24,763 24,165 -2% n.a. 25,675 n.m. -6% 3,324 3,244 -2% n.a. 3,449 n.m. -6%
EBITA 2004 869 809 -7% 640 1,045 63% -23% 117 109 -7% 86 140 63% -23% EBITA 2005 2,067 1,569 -24% 1,135 1,642 45% -4% 277 211 -24% 152 221 45% -5% EBITA 2006 2,367 2,068 -13% n.a. 2,259 n.m. -8% 318 278 -13% n.a. 304 n.m. -9%
EBITA margin 04 4.3% 4.0% n.m. 5.1% 5.3% n.m. n.m. 4.3% 4.0% n.m. 5.1% 5.3% n.m. n.m. EBITA margin 05 8.8% 6.9% n.m. 8.5% 7.7% n.m. n.m. 8.8% 6.9% n.m. 8.5% 7.7% n.m. n.m. EBITA margin 05 9.6% 8.6% n.m. n.a. 8.8% n.m. n.m. 9.6% 8.6% n.m. n.a. 8.8% n.m. n.m.
PTP 2004 566 487 -14% 918 697 -24% -30% 76 65 -14% 123 94 -24% -30% PTP 2005 1,916 1,353 -29% 1,231 1,364 11% -1% 257 182 -29% 165 183 11% -1% PTP 2006 2,243 1,918 -15% n.a. 2,024 n.m. -5% 301 257 -15% n.a. 272 n.m. -5%
Net profit 2004 378 325 -14% 646 432 -33% -25% 51 44 -14% 87 58 -33% -25% Net profit 2005 1,284 906 -29% 833 958 15% -5% 172 122 -29% 112 129 15% -5% Net profit 2006 1,537 1,285 -16% n.a. 1,357 n.m. -5% 206 172 -16% n.a. 182 n.m. -5%
Adj. EPS 04 FD 5.1 4.2 -16% 6.2 3.4 -45% 24% 0.7 0.6 -16% 0.8 0.5 -45% 24% Adj. EPS 05 FD 8.8 5.7 -36% 7.9 6.5 -18% -13% 1.2 0.8 -36% 1.1 0.9 -18% -13% Adj. EPS 06 FD 10.1 7.8 -23% n.a. n.a. n.m. n.m. 1.4 1.0 -23% n.a. n.a. n.m. n.m.
Nordex (EURm) Gamesa (EURm) Repower (EURm) Consensus Consensus Consensus 21 Jan 08-Jun Change 21 Jan 08-Jun Change 21 Jan 08-Jun Change
Sales 2003 231 196 -15% 1,413 1,603 13% 291 286 -2% Sales 2004 251 250 -1% 1,752 1,946 11% 310 301 -3% Sales 2005 438 283 -35% 1,863 2,175 17% 398 330 -17%
EBITA 2003 -70 -70 0% 279 269 -4% 25 13 -48% EBITA 2004 -34 -35 3% 319 321 0% 26 17 -35% EBITA 2005 -1 -1 50% 316 356 13% 30 23 -21%
EBITA margin 03 -30.1% -35.5% n.m. 19.8% 16.8% n.m. 8.6% 4.6% n.m. EBITA margin 04 -13.4% -13.8% n.m. 18.2% 16.5% n.m. 8.4% 5.6% n.m. EBITA margin 05 -0.2% -0.4% n.m. 17.0% 16.4% n.m. 7.4% 7.1% n.m.
PTP 2003 -118 -147 25% 224 207 -8% 25 13 -49% PTP 2004 -34 -37 9% 268 256 -4% 26 17 -34% PTP 2005 -4 -6 66% 269 282 5% 28 23 -16%
Net profit 2003 -87 -154 78% 197 202 2% 15 6 -58% Net profit 2004 -27 n.a. n.m. 220 232 5% 15 7 -50% Net profit 2005 -10 n.a. n.m. 216 270 25% 16 11 -33%
Adj. EPS 03 -0.77 -1.21 58% 0.88 0.93 6% 2.9 1.3 -55% Adj. EPS 04 -0.49 -0.53 9% 1.00 1.09 9% 2.9 1.8 -37% Adj. EPS 05 0.01 -0.06 -558% 1.01 1.17 17% 3.2 2.5 -22%
* Carnegie forecasts on Vestas reflects the merged company (NewCo), after EUR67m restructuring costs Source: Carnegie Research and JCF Quant. 1 Euro = DKK7.44
08 June 2004
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Sector Update Wind Gauge
Wind power news Latest e-mails (available on Carnegie EDGE) 4 June: PTC on the move again… The House Corporate Tax bill has begun to move in the House – a vote is scheduled for 14 June.
3 June: 19% market decline in Germany in April (down 6% YTD) Vestas’ market share is 20% year-to-date compared with 30% last year and its installations are down by 38% year-to-date. Enercon’s sales are up 40% year-to-date and its market share is 57% YTD.
1 June: PTC standstill Prospects for the US PTC are still uncertain – the House Corporate tax bill has been delayed as there are discussions between the House Leadership and those attempting to secure enough votes to get the bill passed.
21 May: EUR70m order from Italy Vestas has announced a EUR70m turnkey order for the delivery of 35 V80 2MW turbines in 2004–2005 to EDF (and Fri-El GreenPower) in Italy. Our forecast of 175MW for 2004 is now more than covered by firm orders.
19 May: trading ex-rights Vestas will be traded ex-rights. The value of one right is calculated at DKK9. We do not believe the current valuation of Vestas points to upside in the short term and we stick to our UNDERPERFORM rating.
13 May: AWEA see lower US market – potential remains high The quarterly update from AWEA does not prompt changes to our market forecasts; we expect a low US market in 2004 and growth in 2005.
11 May: rights issue details and new estimates Vestas has disclosed the terms for the rights issue: issuing 43.7m new shares at DKK50. The dilutive effect is thus more severe than we had forecast, prompting us to lower our adjusted EPS(04–06e) by 3.2%. We reiterate our UNDERPERFORM rating for Vestas.
10 May: Nordex confirms cost effect from high steel prices Nordex’s H1(03/04) results did not prompt any changes to our view that market prospects are flattish for 2004 and that Vestas is being hurt by the high steel prices.
9 May: corporate tax legislation and the PTC moving slowly The US Senate is moving towards completing its version of the corporate tax legislation (by end-May). Action would then likely follow in the House of Representatives. If the Senate and the House can reach a compromise, the bill could become law by late June.
6 May: 6–8% negative cost price impact from high steel prices (GE) The cost price of a wind turbine has increased by 6–8%, according to GE Wind. Zwolinski (CEO) believes it will be tough to pass that onto the customers in the short- term, confirming our scenario. Vestas’s 6–13% premium valuation should disappear.
08 June 2004
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Sector Update Wind Gauge
2 May: no change in views following EUR70m German order It is important that Vestas has signed a contract for this new mill, but it does not change our view that the company’s EBITA margins are being squeezed by the tough market conditions. We thus stick to our UNDERPERFORM rating.
30 April: no change in views following EUR70m German order WKN (Germany) has placed an order (EUR70m for 62MW) for the new V90 2MW turbine, comprising 31 mills. Strategically, the order for the V90 is important. It does not change our forecasts or view though.
29 April: now also being squeezed by hot steel prices We have downgraded Vestas from Neutral to UNDERPERFORM. We estimate that the cost price of a wind turbine has increased by 6% due to rising steel prices – up 60% since Q4(04) and we doubt Vestas can pass all of the increase onto its customers as competition is tough, markets are flat, and the customers powerful.
22 April: flat German market in Q1 Y/Y The Q1(04) German market figures (350MW) did not prompt changes to our fundamental views or investment case – we do not recommend that investors buy the shares at current levels.
13 April: three year PTC extension on the move again A three-year PTC extension is on the move again and could be extended as early as June, according to the American Wind Energy Association. Our estimates reflect that an extension will happen this year; they are unchanged.
5 April: Windpower conference; profit warning still expected The Global Windpower conference in Chicago confirmed our view that the tough competition landscape is not likely to improve in the short term. We believe that Vestas will have to issue a profit warning later this year; investors should wait before buying into the shares.
25 March: Gamesa intensifies US competitive environment Gamesa’s plans to establish US production in 2005 does not prompt changes to our Vestas scenario as we recently lowered our forecasts (US). The move from Gamesa underlines our view that the current tough competition environment will not change in the short term.
23 March: PTC extension approved (Senate only) The US Senate voted to renew 27 expiring tax breaks including a 1.8 cent per kWh tax credit for producing energy from alternative sourcing. We believe that the extension is for one year only, which would be the least attractive solution for Vestas.
19 March: BTM’s market forecasts add to the short-term uncertainty The global market forecast from BTM Consult for 2004 points to a 4% decline in the market. The forecast is a downgrade of 14% compared with its forecast from March 2003. The BTM report adds to the short-term uncertainty, which is negative for Vestas.
08 June 2004
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18 March: no share price support from 2003 report PTP(03) of EUR54m was 18% below our forecast for Vestas. There was nothing in the report to support the company’s scenario of significant EBITA(04) margin expansion and no news on integration.
17 March: NEG Micon – no share price support from 2003 report PTP(03) was a loss of DKK497m – adjusted for ‘special items’ of DKK58m, PTP(03) was a loss of DKK438m compared with our forecast of a loss of DKK425m.
17 March: DKK275m order in Australia The new (conditional) order to Vestas does not change our forecasts but the risk in our forecast in Australia is limited.
14 March: we are less optimistic than the consensus on 2004 outlook We believe that Vestas will reiterate its 2004 guidance when it reports on Wednesday 17 March, but that it will lower its guidance later. We expect an EBIT(04) margin of 6.5% (before restructuring costs); Vestas expects more than 7% and the consensus is 7.7%.
11 March: LM Glasfiber’s report for 2003 – PTC worries intact LM Glasfiber’s report for 2003 did not change the stock market’s worries about the PTC, and our view on Vestas’s earnings prospects for 2005 could be at risk.
11 March: Vestas – PTC scenario – EBIT(05) downgrade of 15%? According to Børsen daily, a vote on US Energy has been postponed (autumn at the earliest (not confirmed)). If a one-year PTC extension is passed this year, it will be negative for Vestas; our EBIT(05e) could be downgraded by 15%.
9 March: 90MW (DKK550m) order in Australia (NEG Micon) NEG Micon is set to supply 54 1.65MW turbines (90MW) to Alinta Limited in 2005. According to local media, the total value of the project is some DKK900m (AUS$200m). This sounds high to us and we believe that the order will total DKK550m–600m.
7 March: one-year PTC extension in March A one-year PTC extension (to 31 December 2004) is likely to be passed in the Senate in late March. In our view, a one-year extension is the least attractive alternative for Vestas as it postpones US production facilities.
3 March: US energy bill vote coming up A vote on the US Energy, containing a three-year PTC extension to 2006, could be taken by the end of March. Expectations about a PTC extension are likely to underscore the positive momentum in Vestas and we recommend investors to play the PTC game.
29 February: Nordex Q1(03/04) – still deeply in the red Nordex’s revenues in Q1(03/04) (EUR67m) were higher than in the previous two quarters, despite stricter accounting procedures. For 2004/2005, Nordex expects to return to profit – we expect it still to be in the red.
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26 February: our view on Vestas and market more positive than BWEA According to BWEA, Vestas and NEG Micon together hold orders for 142MW planned for 2004 installation in the UK. We expect Vestas and NEG Micon to install 230MW in the UK in 2004.
26 February: Gamesa expansion continues – the US is next Gamesa reported net profits of EUR202m, in line with its forecast and it reiterated its 2004 guidance for net profit of EUR230m. International expansion continues – e.g. with plans in US. It will, however, be gradual as the company does not want to make mistakes.
23 February: merger approval by competition authorities Vestas has received approval from all competition authorities – including the US – in which notification of the combination is required. Integration can now start. More than 92% of the shareholders in NEG Micon have approved Vestas’s share exchange offer.
22 February: still no approval from competition authorities Competition approval delayed; the integration process is postponed which is slightly negative. We do not expect problems with the approval.
17 February: PTC back on the table, but low USD a concern for 2005 A PTC extension will underscore the current positive momentum in Vestas but will not change the fundamentals and could be an exit point. We see an increased risk of earnings downgrades for 2005 due to the continued weak USD.
5 February: takeover offer accepted by NEG Micon’s shareholders The acceptance of the share exchange offer by some 70% of NEG Micon’s shareholders was as expected and does not change our short-term valuation. Final approval of the deal by the competition authorities is expected on 19 February. Wind power research from Carnegie in 2004 8 June: Wind Gauge
29 Apr: Now also being hit by hot steel prices (16p update note)
6 April: Too early to invest (16p e-update)
19 Mar: No share price support from 2003 report (15p e-update)
11 Mar: What to look out for in the 2003 report (preview)
21 Jan: Wind Gauge
08 June 2004
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Sector Update Wind Gauge
Industry and project news Africa Tunisia’s Ministry of Industry has started a bidding process for 300MW of wind power capacity to be installed by 2011, the first 100MW in 2006. In Morocco, talks have started again about the 140MW Tangiers wind project, planned to go into operation by the end of 2005. A condition is that the utility in charge, ONE, can secure financing. In our last Wind Gauge we reported that Gamesa had won an order in Egypt from the Ministry of Electricity (NREA) to supply 100 850kW turbines to the Zafarana wind farm, starting in August 2004. Short term, our estimates reflect only modest progress in Africa (0MW in 2004; 85MW in 2005). In Egypt, New Renewable Energy Authority is planning to issue a 120MW tender later this year for the extension of its Zafarane wind farm.
Australia International Power and Wind Prospects will install 23 2MW Vestas turbines for the Canunda project set to be operational in early 2005. Western Power’s 80MW Emu downs wind farm in Western Australia has been given the final go-ahead and is set to become operational in 2005. Babcock & Brown’s Lake Bonney farm’s phase two of 140MW will start construction in Q1(05), be commissioned at YE(05), and consist of Vestas V90 turbines (2MW probably). Pacific Hydro has gained approval for two wind farms – the 58MW Clements Gap and 59MW Shea Oak Flat farm (total 117MW). Construction is planned to start mid-2004 and by the end of 2004. Commissioning is set for 2005 (most likely using NEG Micon 1.65MW mills).
Turbine producer Repower (Germany) is to join forces with local companies to establish full-scale production facilities in Victoria (rotor blades, towers, assembly) – and will thus be competing against Vestas’s planned production plant in that area. Repower will join forces with wind operation Wind Power Pty, wind tower manufacturers Elliott Engineering, and a blade manufacturer (Bolwell Corporations – probably a partner of LM Glasfiber). The plan is to use the facilities for the export market also and the network intends to have 300 employees within two years. On 28 May, an agreement was announced confirming the new facilities and that the consortium will be involved in the 104MW Bald Hill’s wind farm being planned by Wind Power (not approved).
According to Windpower Monthly, Vestas’s first priority is to establish rotor blade production in Australia – among several other locations under discussion (Brazil, Canada and the US). Deputy CEO Torben Bjerre Madsen responded to speculation by saying that Vestas intended to keep its promises regarding rotor blade facilities in Australia. Pacific Hydro said it had a contract in place with Vestas and it expected to make an announcement soon about the start of the Portland wind energy project (180MW by 2006). Vestas and Hydro Tasmania have discussed the possibility of a blade plant there. It will take 12 months before a rotor blade facility can start production.
Austria The national wind lobby IG Windkraft expects to see 160–250MW installed in 2004. The market was positively affected in 2003 (276MW) by a tax benefit introduced in 2002 and originally due to expire at FY(03), creating a rush in installations. The tax benefit was extended to the end of 2004, but according to IG it came so late that developers could not react. Furthermore, some 120MW of projects have been put on hold according to IG due to the renewable energy levy component for network usage costs.
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Sector Update Wind Gauge
Belgium The market is likely to see growth in 2004 despite problems getting permits remaining a key issue. SPE is working on its Zeebrugge site (14 2MW turbines – most likely Vestas mills), and Nuon is starting with its Antwerp project – 4MW out of 90MW. The 38 turbine wind farm is set to be installed by 2006. Electrabel is installing some 20MW at three sites, which are likely to use Vestas mills. This indicates that Vestas will install 50MW in Belgium in 2004. Developer MESA has been granted approval for its 42MW project in Walloon on three sites (Mettet, Anhee and Fosses-la-Ville). The developer is negotiating with Gamesa and Vestas for turbine supplies. The government has set aside a 167 square kilometres area (Thornton Banks) for offshore development. The target is that some 2,000MW of offshore wind energy can be developed, which should help to reach the EC renewable energy targets. In mid-March, the Belgian government issued an environmental and operating permit for C-Power’s 216MW wind farm (60 x 3.6MW GE Wind turbines) on the Thornton Bank in the North Sea.
Brazil/Latin America 1,100MW is underway for installation in Brazil after the nation’s Renewable Energy support programme, Proinfo, was signed in March. The state-owned power company Electrobras will offer power purchase agreements to developers in the USD0.0619– 0.072/kWh range. The price appears to be good, according to industry views. Electrobras will add a surcharge to the electricity bills in order to finance the development (including 2200MW of other renewable sources). The federal development bank, BNDES, is offering to finance up to 70% of the total investments. The developers likely to make inroads in Brazil are Siif-Energies/EDF (2,000MW planned), Enerbrazil with permits for some 1150MW, and Gamesa with 550–700MW in planning. Of the turbine producers, German Enercon is in a very strong position to gain orders as it has two production outlets in Brazil. Proinfa requires 60% of the total costs of a wind plant to be sourced locally, which should also enhance its competitive position. Vestas’s previous plans to establish production in Brazil has been put on hold, according to Windpower Monthly.
The Government of the north eastern Brazilian state of Maranhao and Brazilian and German companies have signed a protocol of intent to develop wind power projects in the city of Tutoia. The project will require investments of USD240m, which will come from the consortium EdRB, made up of Brazilian and German companies. According to the head of the Infrastructure projects department of the consortium, Joao Candido Dominici, two wind turbines with a capacity of 1.2MW each will be imported from Germany and will be installed in Tutoia (the turbine producer is probably Enercon).
Canada Vestas has orders in hand of more than 200MW, primarily for 2004 installation (3Ci and Vision Quest). Recently it was awarded another order from 3Ci of 54MW (1.8MW mills) for its Mount Millar wind farm.
Canadian Hydro Development and Ontario’s Canadian Renewable Energy Corporation (CREC) have joined forced and plan to develop two projects in Ontario – the 300MW Wolfe Island wind project (five stages of 60MW each) and the 240MW Melancthon/Grey Highlands wind project (four stages of 60MW each). They plan to submit bids to the Ontario Government’s upcoming Request For Proposal. The Ontario government has issued a request for proposal for 300MW renewable energy projects to come online “as soon as possible”. It plans another round of RFP for up to 2,500MW set to be in place no later than 2007. The fast track move is to address short-term supply gaps in the province. Utility New Brunswick has requested proposals for 20MW of wind power (2006) and expects to install some 100MW from renewable projects up to 2010.
08 June 2004
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Sector Update Wind Gauge
China The market could see a steep rise in 2004, according to Shi Pengfei of China Hydropower Engineering Consulting Group Company (CHECGC), as some 240MW is forecast for delivery in 2004. In 2003, 98MW was installed.
Two 100MW projects were approved by the State Development and Reform Commission in the autumn and some 2,000MW is expected to be followed. According to a report carried by the People’s Daily, around 675MW of wind turbine capacity is planned in the Shanghai area and neighbouring provinces of Zhejiang and Jiangsu. The main project is a 500MW complex on the coast in Rudong county (Jiangsu). The first phase of 100MW (70 turbines) is scheduled for completion by the end of 2004.
Gamesa is set to supply 36 850kW turbines for the third and forth extensions of the Ningxia-Helanshan plant in NE China, starting in July. In Fujian, state-owned Longyuan Power Group has started construction of the 100MW wind farm in Pingtan county (Fujian); no turbine vendor or timeframe has been announced. A huge 5,000MW wind farm is on the move in Inner Mongolia on the edge of the Tengger Desert as the initial 300MW phase has received approval and entered the construction phase (source: Renewable Energy World). The country’s first offshore project – a 20MW farm being developed by German InfraVest and planned for installation in 2006 – has been approved. Canadian power company, Avalon has signed a letter of intent with the city of Erlianhaote (Inner Mongolia) to build a USD1.2bn wind farm of some 1,000MW. The plan is to make contributions to Beijing’s 2008 “Green Olympics”. This is also a driving force behind the State Development and Reform Commission approval of several 100MW wind farms. China’s officials are preparing to draft its first law on the promotion of renewable energy.
Denmark The Danish Government has reached political agreement for a new energy strategy targeting the installation of 750MW wind power during the next five years, 350MW repowering onshore and 400MW offshore. The change in politics is that a higher fixed price rate can be achieved (0.04EUR/kWh plus the electricity market price). Based on talks with Danish developers, we expect the bulk of the installations to occur in the last period up to 2008. This underlined by the authorities needing time until 1 October to designate new areas for wind development. We expect modest activity in Denmark in 2005–2006 (75–100MW). Vestas and NEG Micon control 75–80% of the market.
France Edf (Siif-Energies) has commissioned its 8.3MW Oupiua wind farm (NEG Micon 900kW) and has a 4MW (900kW NEG Micon) farm in Riols under way; in St Simon 4 2.75MW (NEG Micon) mills are being installed. Only 24MW have been installed year-to-date (70MW in H1(03)). In our last Wind Gauge, we said that GE Wind would install 45MW in 2004 and Nordex 55MW in 2004. Boralex will start constructing its Nibas wind farm – comprising six 2MW turbines (no vendor announced) – and have it grid connected in November 2004. Some 1,000MW could come on line up to 2007 onshore as the government has issued a call for tenders (onshore); it has also issued a tender for 500MW offshore.
08 June 2004
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Sector Update Wind Gauge
Germany The first major German offshore wind farm, Buidendiek – 80 V90 3MW turbines from Vestas – has been delayed and final commissioning is now targeted for 2006. Construction could start in 2005 (foundations). Bilfinger Berger AG has signed a letter of intent worth roughly EUR80m to build the foundations for Buidendiek. Plambeck Neue Energien has construction approval for the 277MW offshore wind farm Borkum Riffgrund. Energiekontor has had approval for its 80 turbines (400MW) Borkum Riffgrund wind farm.
Environment minister Juergen Tritten (Green Party) has said Germany is targeting 3,000MW offshore by 2010 and by 2030, some 25,000–30,000MW. The government plans to increase renewable power production from 8% now to 12.5% in 2010 and to 20% in 2020 and further to 50% in 2050.
Greece Despite approval of 1,500MW wind energy projects, progress is slow and will continue to be so until new grids are erected. Bonus is set to install some 40MW in 2004.
Ireland The Irish Wind Energy Association believes that more than 90MW will be installed in 2004, but the market is not likely to exceed 150MW, according to the association’s Tim Cowhig. A moratorium on new wind energy connection to the national grid was imposed in December 2003 and extended to March – this has slowed the development. According to Re News, the 60MW Derrybrien – using Vestas mills – has been delayed again and is now scheduled for installation in summer 2005. The developer expects to restart work on the project in the near future.
Italy The Italian market should take off as the long awaited renewable energy decree came into force 15 February. It simplifies the permit system and reduces the number of permits from 20–30 to just one piece of paper. The Renewable Energy target will also increase in annual increments of 0.35% from 2004 to 2006 to 3% (previous target 2%). There could be obstacles in the transition period, though. According to renewable energy consultant, Paolo Montanari, at least 200MW will be installed this year and new players are emerging, including German developer Energy-Consult Projektgesellschaft, which claim to have 98MW in the pipeline for installation in 2004–2005. Our market input points to 600MW being in the construction phase set for 2004 and 2005 installation and several more are in the permission phase. Danish company Greentech Energy Systems (DK) has secured project finance for its 21MW (Nordex) wind farm in Sardinia. Construction is due to start shortly with installation in Q1(05). Among projects in construction are two farms using Gamesa turbines: the 32MW Pietrafitta plant in Abruzzo and 14MW (2MW turbines) in Campania. Furthermore, Gamesa clinched a contract with Vestas’s key client in Italy, IVPC, and Gamesa will deliver 28 850kW turbines.
Vestas should enjoy strong growth in installations in 2004 and we believe it could have orders in hand of 350MW for 2004–2005 installation, including the 165MW order from IVPC (December 2003), 70MW for EdF/Si-Friel (May 2004), and several minor orders from ENEL Green Power, ICQ, Edens, Edison and FRIEL.
08 June 2004
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Sector Update Wind Gauge
Japan Mitsubishi will supply 84 1MW turbines to Eurus (57MW), Electric Power Development (15MW), and Oita Prefecture (11MW). We believe the turbines will be installed in 2005. Vestas will supply 51MW to Electric Power Development for three sites in February and December 2005 – Kumamoto, Kyushu and Hokkaido. Kawasaki Heavy Industries and Penta-Ocean Construction Co. have installed Japan’s first offshore wind power generation system off the northernmost prefecture of Hokkaido (we believe it is a Vestas mill).
Japan will hang on to nuclear power as a main energy source, while trying to expand other energy sources to diversify risk, according to an annual report on national energy policy. The renewable energy law was signed in April 2003 and targets 1.35% of consumption to come from renewable sources by 2010.
The Netherlands Vestas is expected to build around 90MW in the Netherlands in 2004, according to Ard de Poot, head of marketing at Vestas-Nederland – a decline compared with 114MW in 2003 (144MW for the combined group). As of 18 May, Vestas had installed 28MW and NEG Micon 22MW. The decline is due mainly to the introduction of the new ‘MEP subsidy’ system, and particularly the full capacity hour regulation.
A 70–90MW wind farm has been approved after a high court ruling. It is the Delfzilj Zuid wind farm being developed by Siemens/Essent/Koop Duurzuname Energie. Construction is set to start in 2004 and the turbines will be in the 2MW to 2.5MW range (decision in Q2(04)). E-connection’s 120MW (Vestas 2MW turbines) Q7 offshore wind farm has been given “VAMIL” tax breaks and now only one formality remains – subsidy for environmentally friendly power – before construction can begin. The plan is to start in autumn 2004 with turbine installations planned for 2005. Is it unknown whether the near shore offshore project being developed by Noun/Shell will be installed as planned in 2005 – the consortium has picked NEG Micon’s 2.75MW mill for the project, but the new product programme in Vestas does not include that turbine.
Poland The Polish government holds the key to unlocking the market potential. Several projects are under development but the legislative framework is still missing and there is no strict penalty system for failing to achieve renewable energy targets (target of 7.5% in 2010 compared with 2.6% in 2003). When Poland entered the EU it had to comply with the EU renewable energy targets. German WKN is one of over 20 developers active and it will probably use Vestas’s V80-2MW turbines for its first 62MW. MVV Energie has secured power purchase agreements for 300MW with Danzig-based utility Energa.
Portugal 460MW is currently under construction in Portugal, compared with 299MW installed at YE(03). The strong increase reflects political support for renewable energy introduced in 2002. The 460MW is part of 900MW approved prior to legislation in 2002 and is expected to be installed during the next three years, according to Antonio Sa da Costa of APREN (renewable group). About 2,100MW has been granted grid licences as a result of the new renewable law and more could come as the government is planning to issue a tender for 500–1,000MW in 2004. Licensing is likely to include conditions for local manufacturing – similar to the ‘Spanish model’. Portugal is on course to reach its 3,300MW target by 2010. Recently the government approved another 245MW.
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Sector Update Wind Gauge
Gamesa has clinched a deal with Tecneira to supply nine 2MW mills for two projects (Amaral and Caldas). It aims to capture 36% of the Portuguese market, according to Windpower Monthly (below 10% in 2003). Besides its 1,000MW development pipeline it wants to attract other developers by improving turbine warranty and availability. Nordex will supply nine 2.3MW mills to Carreco and Generg is negotiating three more mills from Nordex.
Rest of Europe Vestas will install seven 850kW mills at Adrian Wind Croatian wind farm. The developer’s target is to have more than 100MW installed within a few years. In Estonia, Nordex will supply eight 2.3MW turbines to Vardar’s (NO) wind park at Paldiski to be commissioned in early 2005. A wind farm will be constructed in the Bulgarian coastal town of Kavarana. A total of 20 2MW turbines (turbine vendor unknown) will be built by the Bulgarian- German joint venture Universum Energy. It will become operational by the end of 2004. Bewag – an Austrian regional power utility – plans to invest EUR100m in new wind parks in its neighbouring countries starting in 2005 (Slovakia, Hungary, etc.). The major obstacle is the volatile currency rates. The legal framework and funding conditions are not seen as a problem, as they are expected to be fixed by 2005. Ventureal (Austria) wants to build a 30- turbine wind farm in the Hustopece region in 2005, also in the Czech Republic. In previous editions of the Wind Gauge we have written about Proventi’s 325MW plans for expansion in the Czech Republic, planned for installation in 2004–06. In Rest of Europe we expect only modest progress of 50-100MW in 2004-2006.
Rest of Americas Mexico’s energy regulator CRE has accepted that wind power developer Fuerza Eólica has delayed the start of operations of a planned 150MW project (100 1.5MW GE Wind mills). Operations of the 51MW first phase are now scheduled to start by December 2004 instead of September 2003, while the 99MW second phase is scheduled for December 2005 instead of September 2004.
Spain Gamesa has been awarded ‘an order’ from the Andalusian government to build 11 wind parks totalling 300MW. In total 25 parks are to be constructed. In Asturias, the government has approved 21 wind projects totalling 474MW. Environmental approval and municipal licensing still need to be obtained. The government plans to reach 595MW wind installations by 2006, compared with 121MW at YE(03). In Galicia, the government has approved wind power projects totalling 595MW.
Local turbine producer Ecotechnia has 800MW orders in hand to be installed over the next three years, almost entirely in Spain and mainly for its 1.65MW turbine. According to Windpower Monthly, at least 1,200MW will be installed in Castile-La Mancha within 2–3 years in the provinces of Cuenca and Albacete (Iberdrola is behind many of them).
According to InfoPower, 1,450MW is under construction scheduled for 2004 installation. On top of this is 500MW installed in January–April (primarily GE Wind). Vestas had installed 35MW as of April 2004 and had a further 270MW under construction for 2004 installation. All of these use NEG Micon mills. We believe that some of these mills have already been booked in the P&L in the 2003 accounts as ‘orders under construction’. We expect the old NEG Micon to install 275MW in 2004 and the old Vestas to install 48MW – the latter remains rather uncertain as no news about orders has emerged.
08 June 2004
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Sector Update Wind Gauge
Sweden Eurowind has gained approval for its 96–120MW offshore project at Lillgrund, set to be completed by 2006. Other projects in the pipeline – without approval yet – are Airicole’s 90MW Utgrunden 2 (extension) and Vindkompagniet’s 44MW Klarsården (probably NEG Micon). Nordex and Göteborg Energi have a 100–140MW project under development off the cost of Varberg.
The UK The British Wind Energy Association has said that at least 325MW will be commissioned in 2004. According to BWEA, at least three offshore projects are scheduled for installation in 2005: 1) Kentish Flats (NEG Micon: 83MW); 2) Gunfleet Sands (GE Wind: 108MW) and 3) Barrow. We have strong indications that Vestas has been selected as turbine supplier for the Barrow project, which could comprise 30 V90-3MW turbines. The 60- turbine Robin Rigg (Solway) plant will be installed in 2006 (previously: 2005). According to Renewable Energy News (Re News), rising costs – most notably for steel – have cast doubt not only on the timetable for construction of UK wind farms but also on the viability of the whole sector. The original tender for Solway (2002) indicated bids of GBP200m–230m but the price suggestion is now GBP250m–300m, according to Re News. Vestas/KBR and GE Wind/CBI/John Brown are the two consortia that responded to the tender (19 May).
Renewable Development Company will install 39 1.5MW GE Wind turbines for its Cenf Croes Wind project in Wales in 2004. Your Energy has had approval for its 10-turbine Burton Wold wind farm – set to be installed in 2005.
The US Vestas will supply 15 1.8MW (27MW) turbines to Invenergy at the Buffalo Mountain Wind Energy Center, Tennessee, with planned operation in Q4(04). Zilkha has planned a huge 432MW wind farm – comprising 267 1.65MW mills (probably NEG Micon) – for its Arrowsmith Wind Farm. The project is planned for 2005–06 installation.
The 79MW Green Field wind farm – developed by Navitas – has cleared the way to move forward after a court ruling. Gamesa will supply 44 G80 1.8MW turbines to the project (contingent on the PTC extension). Alliant Energy wants bids for its 100MW solicitation by end-May (Wisconsin) and it wants to issue another solicitation later for 130MW wind in Iowa. PacifiCorp (owned by Scottish Power) issued a solicitation to bring 1,100MW wind power online by 2010. PacifiCorp is factoring in environmental costs, the volatility of gas prices, and the potential of climate change regulation when assigning resources. As a result it refers to wind as both cheap and reliable, according to Windpower Monthly. LIPA has chosen FPL Energy to develop the offshore project on the East Coast – FPL’s application contains permits for 36 3.6MW GE Wind turbines. FPL Energy is expanding its activities outside the US and sees Europe – probably southern Europe – as a target area. Nebraska Public Power District has seen its 60MW wind farm clearing the hurdles, and its wind facility south of Ainsworth should become operational in the autumn of 2005. Xcel Energy (Minneapolis) will increase its wind power capacity from 500MW to 1,200MW by 2010, as part of the state’s renewable mandates. According to Wayne Brunette, chairman and CEO of Xcel, a condition though is that the Production Tax Credit for wind power is extended. An 80MW wind farm in New Mexico being developed by Cielo Wind Power is also conditional on the PTC. Western Wind Energy is moving ahead with its planned 400MW wind farm in Arizona.
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Sector Update Wind Gauge
Competitor news Bonus Bonus has received an order from Scottish Power (Vestas’s key client in the UK) for its 143MW Black Law wind farm – set to be completed in 2005. It was once again the 2.3MW mill that was successful. In our most recent Wind Gauge (21 January), we wrote about Bonus orders for the 2.3MW mill for delivery in 2004–05 in Norway (165MW) and several UK orders of some 250MW (National Wind Power and Fred Olsen).
There have been consistent market rumours pointing to Bonus Energy being up for sale. The first indications of this emerged early in the year with the news that French nuclear group Areva (www.areva.com) had made a bid for the company (EUR350m).
Enercon Enercon will start production of components for wind turbines in Valencia, eastern Spain. The project will be part of the Valencia Wind Power Plan. Enercon will establish a plant for the production of turbine components in the Parc Sagunt industrial area in Valencia which will cover 225,000 sq m. Enercon expects to create 1,000 jobs in Parc Sagunt by 2008. The company will provide full training to its employees, including training courses in its plant in Germany. Elecnor was awarded 608MW under the Industrial Plan in Valencia and it selected Enercon as a supplier for the projects.
Gamesa Gamesa has said that it is considering establishing production facilities in Asia – China and India being the most obvious targets. “The normal situation would be that we start with a retail base, with a services base, and when we see that we have a stable market, we would create an industrial production base,” Chief Executive Juan Ignacio Lopez Gandasegui told reporters. In India, Gamesa has entered into an alliance with Pioneer Asia Wind Turbines (PAWT) to launch 658–850 kilowatts wind turbines in India. PAWT is a division of Pioneer Asia Industries Pvt Ltd at Sivakasi in Tamil Nadu. PAWT will assemble the first seven generators in its factory at Pondicherry, which will be commissioned in May 2004. The factory has been upgraded through the investment of INR60m (EUR1.1m) for the Gamesa assembly line. In the US, Gamesa intends to open a number of plants to manufacture power shovels and wind-driven generators. The reasons mentioned for this move – besides achieving a strong market presence and market perspective – are the long distance from Spain and the exchange rate. Furthermore, Gamesa has bought Spanish power electronics firm Enertron in order to improve the reliability and quality of the wind energy its turbines deliver to the grid and to improve the technical integration of wind power into power systems (WPM).
Gamesa has received a turnkey order to supply 85MW to the New Renewable Energy Authority (NREA) in Egypt, with construction scheduled to start in August 2004. In Spain, it has received several orders, including 124MW (EUR77m) from Sinae (Albacete) and 38 2MW mills from Corporacion Eolica Cesa. In Germany, Gamesa is set to supply 12 G52 850kW mills (Sowitec Projekt). In Taiwan, Gamesa will deliver six 2MW mills to Taiwan Power Corporation’s wind farm near Shinchu City (2005). In Japan, Gamesa will deliver 31 G80 2MW mills to Eurus (2006).
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Sector Update Wind Gauge
GE Wind GE Wind is aiming for revenues of USD1.3bn in 2004 and profits of USD100m. It will open its Global Research-Europe Center in Munich, Germany, this summer – one of the central missions will be developing technology to further increase the reliability and performance of wind turbines. GE has installed its first prototype of its 2.X series of onshore mills at the Wieringermeer station in the north of the Netherlands.
GE Energy completed its acquisition of AstroPower (US business assets) in April 2004 and now also has a presence within the renewable energy segment of solar energy.
GE Wind will ship 18 1.5MW (27MW) turbines to India by the end of 2004, marking its first wind turbine project in the country. The order was placed by Nuziveedu Seeds Limited.
Mitsubishi Mitsubishi is planning to construct a one-stop wind turbine factory on the premises of its shipyard Nagasaki Prefecture and consolidate its wind turbine production there this autumn with a monthly capacity of 40 units.
Repower Repower is shipping six of its MD77 wind turbines for a wind farm project located on the west coast of Japan.
According to a report by German paper Handelsblatt, Repower is open to mergers. The chairman, Fritz Vahrenholt, recently stated that he was “basically open” to a merger, especially now following the merger of Denmark’s Vestas and NEG Micon. Furthermore, in an interview with the paper, major Repower shareholder Hugo Denker stated that he was looking for a buyer for his 15% stake in the company.
Vestas Vestas will supply 26MW to the Philippines for the ILocos Norte project (2004).
In connection with the full-year report, the company announced that 500 employees would be asked to leave the company. In the UK, some 120 people are being hired for NEG Micon’s rotor blade plant on the Isle of Wight.
CEO Svend Sigaard spoke about the Horns Reef (offshore) problems in an interview in May with the Danish magazine, “Ingeniøren” (Engineering magazine): “We have witnessed that all of the 80 transformers will have to be replaced as the isolation can not cope with the saline environment. As the generators also need to be repaired, this indicates that Vestas can better utilise the weather window if all the mills (80) are taken down and the problems are fixed onshore”. According to Windpower monthly, the direct cost of replacing the transformers is DKK0.400m–0.750m per transformer or DKK32m–60m (EUR4m–8m). No information was available about costs of fixing the generator problems. As Vestas has guarantied a certain level of production (five years), it will have to compensate the owner, Elsam, if it experiences losses. Vestas stated in connection with the rights issue in May that its 2004 financial guidance would not be hurt by the Horns Reef problems. In Re News, Sigaard said that the company had made provisions for expected extra costs in its 2003 statement (no amounts were mentioned).
Sources: Wind Power Monthly, Neue Energie, American Wind Energy Association, Renewable Energy World, Renewable Energy News, company announcements and various news clippings.
08 June 2004
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Sector Update Wind Gauge
Carnegie market estimates
Carnegie market estimates, MW (change since 21 January Wind Gauge)
New Ch. Y/Y New Ch. Y/Y New Ch. Y/Y Country 2003 2004e 2004e (%) (%) 2005e 2005e (%) (%) 2006e 2006e (%) (%)
Americas 1,818 625 656 5% -64% 2,275 2,350 3% 258% 2,750 2,800 2% 19% Argentina 2 0 0 n.m. n.m. 0 0 n.m. n.m. 0 0 n.m. n.m. Brazil 5 0 0 n.m. n.m. 25 25 n.m. n.m. 50 50 0% 100% Canada 81 180 205 14% 153% 200 250 25% 22% 350 350 0% 40% USA 1,687 400 400 0% -76% 2,000 2,000 0% 400% 2,300 2,300 0% 15% Rest of Americas 43 45 51 n.m. 19% 50 75 50% 47% 50 100 100% 33%
Europe 5,549 6,755 6,235 -8% 12% 7,090 6,925 -2% 11% 7,540 7,475 -1% 8% Austria 285 250 225 -10% -21% 250 225 -10% 0% 225 225 0% 0% Belgium 33 75 75 0% 127% 125 125 0% 67% 125 125 0% 0% Denmark 218 15 15 0% -93% 15 75 400% 400% 15 100 567% 33% France 91 250 200 -20% 120% 400 250 -38% 25% 500 350 -30% 40% Germany 2,674 2,400 2,400 0% -10% 2,200 2,200 0% -8% 2,200 2,200 0% 0% Greece 76 150 100 -33% 32% 175 150 -14% 50% 200 200 0% 33% Ireland 63 150 100 -33% 59% 150 150 0% 50% 150 150 0% 0% Italy 116 300 350 17% 202% 500 500 0% 43% 550 550 0% 10% Netherlands 233 250 200 -20% -14% 250 250 0% 25% 250 250 0% 0% Norway 4 90 60 n.m. 1400% 150 150 0% 150% 150 150 0% 0% Poland 1 75 0 n.m. -100% 100 50 -50% n.m. 125 75 -40% 50% Portugal 107 300 260 -13% 143% 275 275 0% 6% 275 275 0% 0% Spain 1,377 1,750 1,750 0% 27% 1,600 1,600 0% -9% 1,600 1,600 0% 0% Sweden 56 50 50 0% -11% 50 50 0% 0% 100 100 0% 100% Turkey 1 0 0 n.m. -100% 0 0 n.m. n.m. 25 25 n.m. n.m. UK 195 600 400 -33% 105% 800 800 0% 100% 1,000 1,000 0% 25% Rest of Europe 19 50 50 0% 169% 50 75 50% 50% 50 100 100% 33%
Asia 805 1,000 1,176 18% 46% 1,050 1,250 19% 6% 1,200 1,375 15% 10% China 98 100 200 100% 104% 100 225 125% 13% 150 250 67% 11% India 423 650 650 0% 54% 650 650 0% 0% 700 700 0% 8% Japan 275 225 275 22% 0% 250 275 10% 0% 300 300 0% 9% Rest of Asia 9 25 51 n.m. 467% 50 100 100% 96% 50 125 150% 25%
Oceania 70 440 440 0% 529% 500 500 0% 14% 550 550 0% 10% Australia 50 350 350 0% 600% 500 500 0% 43% 500 500 0% 0% Rest of Oceania 20 90 90 n.m. 350% 0 0 n.m. n.m. 50 50 n.m. n.m.
Africa 63 0 0 n.m. n.m. 85 85 0% n.m. 100 100 0% 18%
ROW 41 25 25 0% -39% 25 25 0% 0% 80 25 -69% 0%
World market 8,345 8,845 8,532 -4% 2% 11,025 11,135 1% 31% 12,220 12,325 1% 11%
Growth Y/Y 15% 4% 2% 25% 31% 11% 11%
Source: Carnegie research (estimates) and BTM Consult
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Market statistics
Germany: Market statistics (MW) and seasonality
MW installed Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FY 2000 61 59 71 58 98 181 84 174 201 68 261 352 1668 2001 70 88 139 72 201 250 135 171 272 300 497 463 2659 2002 149 139 169 142 184 305 197 225 377 385 456 519 3247 2003 126 95 136 122 116 240 200 188 191 252 333 645 2644 2004 n.a. n.a. n.a. 99 2400
Growth Y/Y Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FY 2000 16% 15% -17% -37% 50% 17% -19% 14% 53% -57% 27% 11% 6% 2001 15% 50% 97% 24% 104% 38% 61% -2% 35% 341% 90% 32% 59% 2002 111% 57% 22% 97% -8% 22% 46% 32% 39% 28% -8% 12% 22% 2003 -15% -32% -20% -14% -37% -21% 2% -16% -49% -35% -27% 24% -19% 2004 n.m. n.m. n.m. -19%
Growth YTD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FY YTD 2000 16% 15% 1% -12% 0% 5% 1% 4% 11% 1% 5% 6% 6% YTD 2001 15% 32% 56% 49% 64% 55% 56% 43% 42% 61% 67% 59% 59% YTD 2002 111% 81% 53% 62% 37% 33% 34% 34% 35% 34% 24% 22% 22% YTD 2003 -15% -23% -22% -20% -24% -23% -19% -19% -25% -27% -27% -19% -19% YTD 2004 n.a. n.a. -2% -6%
Seasonality (MW) Q1 Q2 Q3 Q4 H1 9M H2 FY 2000 191 337 459 681 528 987 1140 1668 2001 298 523 578 1260 821 1399 1838 2659 2002 457 631 799 1360 1088 1887 2159 3247 2003 357 478 579 1230 835 1414 1809 2644 2004 350
Seasonality (%)Q1Q2Q3Q4H19MH2FY 2000 11% 20% 28% 41% 32% 59% 68% 100% 2001 11% 20% 22% 47% 31% 53% 69% 100% 2002 14% 19% 25% 42% 34% 58% 66% 100% 2003 14% 18% 22% 47% 32% 53% 68% 100% 2004 15%
Growth Y/Y (%)Q1Q2Q3Q4H19MH2FY 2000 1% 8% 18% 0% 5% 11% 7% 6% 2001 56% 55% 26% 85% 55% 42% 61% 59% 2002 53% 21% 38% 8% 33% 35% 17% 22% 2003 -22% -24% -28% -10% -23% -25% -16% -19% 2004 -2%
Source: Carnegie Research and BWE/IWT
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UK offshore wind farm Consortium name Developer/Owner/Power Purchaser Site Timeframe Capacity Manufacturer Status (tenders) (MW)
Solway Offshore Ltd. TXU/Babcock Brown => Sold to PowerGen Solway Firth 2005 => 2006 180 GE WInd/Vestas Approved 18-03-03
Warwick Energy Ltd Warwick Energy Ltd =>Sold to Centrica JV Barrow 2004 => 2005 90 Vestas (GE Wind) Approved 14-03-03
Shell WindEnergy Aegir Ltd Shell WindEnergy Shell Flat 2005 (-2006) 90 Not chosen Problems with Defence
Elsam A/S Elsam Shell Flat 2005 (-2006) 90 Not chosen Problems with Defence
CeltPower Ltd Scottish Power/Tomen Power Corp. Shell Flat 2005 (-2006) 90 Not chosen Problems with Defence
EnergieKontor UK Offshore Ltd Energiekontor Southport Cancelled Cancelled Cancelled Problems with Defence
SeaScape Energy Ltd SIIF/enXco/Wind Prospects Burbo 2005 90 Not chosen Approved 12-July 2003
NWP Offshore Ltd National Wind Power North Hoyle 2003 60 Vestas Approved
Celtic Offshore Wind Ltd (COWL) National Wind Power Rhyl Flats (2004)=> 2006 90 Not chosen Approved
Hyder Industrial Ltd United Utilities Scarweather Sands 2005 (or 2006) 90 Not chosen Tender procedure coming up
NEG Micon NEG Micon Kentish Flats 2005 (confirmed) 83 NEG Micon Approved 14-03-03
Enron Wind Gunfleet Ltd GE Wind Energy Gunfleet Sands 2004 => 2005 108 GE Wind Approved 22-10-03
Powergen Renewables Offshore Wind Ltd PowerGen Scroby Sands 2004 (confirmed) 60 Vestas Approved
Beaufort Consortium London Power Company/Enertrag Cromer 2004=> 2005 (?) 90 Not chosen Approved 22-10-03
AMEC Offshore Wind Power Ltd Amec BorderWind Lynn 2004=> 2005 (?) 90 Not chosen Approved 22-10-03
Offshore Wind Power (Site No.1) Ltd Renewable Energy Systems Inner Dowsing (2004-) 2005 90 Not chosen Approved 22-10-03
Northern Offshore Wind Ltd London Power Company Teesside 2005 90 Not chosen Tender out 30 Oct.
2003: Total planned offshore projects (MW) 60
2004: Total planned offshore projects (MW) 60
2005: Total planned offshore projects (MW) 821
Total offshore projects 2003-2005 * 941 * Round 2 award of offshore seabed leases points to a further 5,400-7,200MW offshore projects (between 2006-2010) Source: BWEA and Carnegie Research
Netherlands: 67MW installed YTD as at 2 June 2004
80 66.9 70 60 49.9 50 40 30
20 12.0 10 3.0 2.0 0.0 0 Vestas Nordex GE Wind Enercon Bonus Total market
2/6-04
Source: Carnegie Research
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Renewable energy targets
Targets for Wind Power (and Renewable energy in total) in largest countries Acc. Cap. (Wind) Target Time RPS Target Country Y/E 2002 Wind (MW) Frame (Renewable Energy)
Argentina 23 3000 2010 Australia 194 3000 2008-2010 At least 2% in 2010 (9,500 GWh) (higher target being discussed) Austria 135 n.a. n.a. 4% in 2007 Belgium 45 n.a. n.a. 3% in 2004 / 6% in 2011 Brazil 20 1000 2005 Proeolica states 1,050MW wind by 2003 Canada 269 n.a. n.a. CanWea target=10,000MW wind China 430 4000 2010 20,000MW of RE by 2020 Denmark 2986 5500 2030 Egypt 63 3500 2010 10,000MW (wind+sun) in 2010 Finland 40 500/1000/2000 2005/2010/2020 500MW wind in 2005 France 184 10000 2010 Germany 11981 22000 2010 10% in 2010/ 50% in 2050 Germany 11981 3000/25000-30000 2010/2030 Offshore wind energy alone Greece 462 2500 2010 2500MW wind in 2010 India 1690 7000 2012 RE Target: 10% by 2012 Iran 0 500 2010 100MW by 2005, 500MW by 2010 (wind only) Ireland 168 500/1150 2005/2010 1150MW wind in 2010 / 13.5% from RE Italy 806 720/2500 2002/2010 At least 2% in 2010 Japan 498 3000 2010 1.35% from RE in 2010 Netherlands 744 1500/6000 2010 onshore/offshore 2020 5% in 2010, 10% in 2020 all RE Norway 97 900-1100 2010 Wind Power: 3 TWh (2.4% of electricity consumption) Poland 58 n.a. n.a. 7.5% in 2010/15% in 2020 from all RE sources Portugal 205 3000 2010 3000MW wind in 2010 Slovenia 0 300 / 600 2010 / 2020 300MW by 2010 South Africa 5 n.a. n.a. 5% in 2010 from all renewables Spain 5043 13000 2010 12% in 2010 Sweden 373 n.a. n.a. 0.5 TWh in 2002/10TWh in 2008 Taiwan n.a. n.a. 2020 15% in 2020 or some 6,500MW Turkey 19 2500/(10000) 2005/(2010) 2% in 2005 UK 587 6000 2010 RE target: 10% in 2010 (6% from wind) / 15% in 2015 USA 4694 100000 2020 6% in 2020 (AWEA) Europe (EWEA) 23991 75000/150000 2010 / 2020
Source: AWEA, BWEA, BWE, EWEA, WPM and Carnegie research
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Vestas (NewCo): top-line model
Vestas (NewCo): sales breakdown (MW) - change since our last wind gauge 21 January * Sales (MW) Market share (%) Sales breakdown (%) Old New Ch. Old New Ch. New 2003 2004e 2004e % 2005e 2005e % 2006e 2003 2004e 2005e 2006e 2003 2004e 2005e 2006e Americas 562 315 315 0% 813 694 -15% 930 31% 48% 30% 33% 21% 10% 18% 22% Argentina 2 0 0 n.m. 0 0 n.m. 0 100% 0% 0% 30% 0% 0% 0% 0% Brazil 0 0 0 n.m. 0 0 n.m. 15 0% 0% 0% 30% 0% 0% 0% 0% Canada 46 150 175 17% 100 175 75% 175 57% 85% 70% 50% 2% 5% 5% 4% USA 493 140 140 0% 700 500 -29% 690 29% 35% 25% 30% 18% 4% 13% 17% Rest of Americas 21 25 0 -100% 13 19 44% 50 49% 0% 25% 50% 1% 0% 0% 1%
Europe 1,612 2,225 2,056 -8% 2,452 2,308 -6% 2,472 29% 33% 33% 33% 60% 64% 60% 59% Austria 96 127 100 -21% 130 100 -23% 100 34% 44% 44% 44% 4% 3% 3% 2% Belgium 14 50 50 0% 50 50 0% 50 42% 67% 40% 40% 1% 2% 1% 1% Denmark 38 15 15 0% 15 53 250% 70 17% 100% 70% 70% 1% 0% 1% 2% France 9 60 40 -33% 70 50 -29% 70 10% 20% 20% 20% 0% 1% 1% 2% Germany 831 765 765 0% 700 700 0% 700 31% 32% 32% 32% 31% 24% 18% 17% Greece 8 68 30 -56% 70 45 -36% 60 11% 30% 30% 30% 0% 1% 1% 1% Ireland 25 75 35 -53% 53 53 -1% 53 40% 35% 35% 35% 1% 1% 1% 1% Italy 51 175 250 43% 225 225 0% 248 44% 71% 45% 45% 2% 8% 6% 6% Netherlands 144 150 120 -20% 190 190 0% 170 62% 60% 76% 68% 5% 4% 5% 4% Norway 0 0 0 n.m. 0 0 n.m. 0 0% 0% 0% 0% 0% 0% 0% 0% Poland 1 60 0 -100% 60 40 -33% 53 100% 0% 80% 70% 0% 0% 1% 1% Portugal 32 60 75 25% 60 69 15% 69 30% 29% 25% 25% 1% 2% 2% 2% Spain 200 323 323 0% 330 330 0% 336 15% 18% 21% 21% 8% 10% 9% 8% Sweden 46 40 40 0% 43 43 -1% 40 82% 80% 85% 40% 2% 1% 1% 1% Turkey 0 0 0n.m.0 0n.m.0 0%0%0%0%0%0%0%0% UK 113 230 185 -20% 430 320 -26% 400 58% 46% 40% 40% 4% 6% 8% 10% Rest of Europe 4 28 28 -2% 28 41 47% 55 22% 55% 55% 55% 0% 1% 1% 1%
Asia 335 357 432 21% 393 466 18% 425 42% 37% 37% 31% 13% 13% 12% 10% China 59 28 56 100% 35 63 80% 70 60% 28% 28% 28% 2% 2% 2% 2% India 171 250 250 0% 270 270 0% 280 40% 38% 42% 40% 6% 8% 7% 7% Japan 97 79 96 22% 88 83 -6% 75 35% 35% 30% 25% 4% 3% 2% 2% Rest of Asia 8 0 30n.m.0 50n.m.0 89%59%50%0%0%1%1%0%
Oceania 65 415 415 0% 350 350 0% 325 93% 94% 70% 59% 2% 13% 9% 8% Australia 45 325 325 0% 350 350 0% 325 91% 93% 70% 65% 2% 10% 9% 8% Rest of Oceania 20 90 90 0% 0 0 n.m. 0 100% 100% 0% 0% 1% 3% 0% 0%
Africa 54 0 0 n.m. 00n.m. 0 86% 0% 0% 0% 2% 0% 0% 0%
ROW 39 10 10 0% 10 10 0% 9 96% 40% 40% 35% 1% 0% 0% 0%
Total 2,668 3,322 3,228 -3% 4,017 3,827 -5% 4,161 32.0% 37.8% 34.4% 33.8% 100% 100% 100% 100% MW growth 21.0% 18.6% 8.7%
* We downgraded our sales(05) expectations in connection with the FY(03) report in March (primarily due to weaker US expectations) Source: Carnegie Research
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Vestas: Topline model (NewCo) 2004e 2005e 2006e
Our overall sales forecasts Sales (MW) * 3,228 3,827 4,161 are unchanged... Nordic Countries 55 95 110 Europe, other 2001 2213 2362 ...but it is crucial that Vestas America 315 694 930 obtains US sales in order to Asia (ex Vestas' RBB India) 352 366 320 reach its sales(04) guidance of Oceania 415 350 325 EUR2.7bn–2.8bn. We forecast Africa 0 0 0 EUR85m (or 140MW) from the RoW 10 10 9 US; the uncertainty about this Vestas RBB (associate) * 80 100 105 market is high given that the Growth 21% 19% 9% PTC has not yet been extended. In addition, there is uncertainty Average price per MW (DKKm/MW) 6.1 5.9 5.8 about our forecast for Spain – Nordic Countries 5.8 5.7 5.7 we have included 48MW for the Europe, other 6.5 6.5 6.3 old Vestas, but no orders have Americas 4.5 4.5 5.0 yet been obtained Asia (ex Vestas RBB India) 5.4 5.2 5.0 Oceania 6.0 6.0 5.8 The average sales price has been raised (reflecting specific orders) Africa 6.1 5.9 5.7 and this offsets the reduction in RoW 5.8 5.7 5.5 our MW forecast Sales, DKKm * 19,179 22,099 23,709 Nordic Countries 321 538 622 We expect a high level of Europe, other 13,003 14,381 14,882 work-in-progress year-end 2004 with adverse impact on NWC Americas 1,418 3,122 4,650 (we forecast NWC/Sales ratio of Asia (ex Vestas RBB India) 1,890 1,902 1,615 35% YE 2004) Oceania 2,490 2,100 1,892 Africa 0 0 0 RoW 58 57 48 Work-in-progress, DKKm 898 552 474 Group sales DKKm 20,077 22,652 24,183 Group sales EURm 2,697 3,043 3,249 Carnegie current topline forecast, EURm 2,695 3,045 3,246 * Vestas' sales in India (RBB India joint venture) is consolidated as one-line under associates Source: Carnegie Research
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Financial statements Vestas: P&L and Balance Sheet, (Proforma 2001-2003) EURm P&L 2001 2002 2003 2004e 2005e 2006e Vestas Sales 2,000 2,237 2,361 2,695 3,045 3,246 Production costs 1,726 2,006 2,199 2,390 2,696 2,820
Gross profit 273 230 163 305 350 427 Sales & Distribution costs 435967707580 Administration costs 456068707580
EBITA 190 116 33 176 211 278 EBITA margins 9.5% 5.2% 1.4% 6.5% 6.9% 8.6%
EBIT 185 112 28 165 200 267 EBIT margins 9.3% 5.0% 1.2% 6.1% 6.6% 8.2%
Net financial items -20 -24 -43 -36 -23 -15 Associates 21 1 1 4 5 6 Restructing costs 0 0 0 67 0 0 Pre Tax profit 429 89 -13 65 182 258 Tax 612218226085 Net profit 368 67 -31 44 122 173
Balance Sheet: proforma Assets 2001 2002 2003 2004e 2005e 2006e Goodwill * 18 14 21 211 200 189 Other intangibles, including R&D 192 234 86 133 163 188 Intangible fixed assets, total 211 248 107 344 363 377 Tangible fixed assets 282 404 469 525 589 592 Financial fixed assets 8 7 9 16 21 27
Total fixed assets 352 500 609 913 1,004 1,029
Stocks 314 404 447 459 459 490 Receivables 877 1,149 1,117 1,071 1,157 1,183 Liquid assets 39 59 43 64 45 102 Total current assets 1,230 1,612 1,608 1,594 1,661 1,775 Total assets 1,583 2,112 2,216 2,507 2,665 2,804
Liabilities Shareholders equity * 771 883 830 1,236 1,393 1,577 Deferred taxes 365053597495 Total provisions 162 203 228 320 320 331
Long term debt 115 180 241 156 82 82 Other IB debt 91 272 217 217 217 117
Prepayments 30 49 108 63 71 76 Trade creditors 266 348 402 349 394 420 Other non-ib creditors 148 177 192 166 188 200 Total short term debt 535 846 918 795 870 813 Total liabilities 1,583 2,112 2,216 2,507 2,665 2,804
* Goodwill arising from the acquisition of NEG Micon has increased by EUR80m to EUR211m as the share price was higher when the transaction closed. Sh. Equity has been raised accordingly.
Cash Flow Analysis (DKKm) 2002 2003 2004e 2005e 2006e Pre-Tax profit (after restructuring costs) 89 -13 65 182 258 + Depreciation 95 110 137 154 165 - Paid Taxes -22 -18 -16 -45 -64 - asscociates 11456 +/- other adjustments 36 6 40 26 15 +/- other adjusments 0-1000 Gross Cash Flow 197 84 222 311 368
Change in NWC 215 -125 124 10 14
Operating Cash Flow -18 209 99 301 354
Capital Expenditure: Tangible assets 156 135 145 160 110 Intangible assets (R&D) 47 61 67 74 74
Net Cash Flow -221 13 -113 67 171
- Dividend Paid 21 13 0 35 47 + proceeds from issues 0 0 282 0 0 + sale of companies 0 -13 0 0 0 + EO Items 00000 Total Cash Flow -244 -13 169 32 124 Source: Carnegie Research
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Manufacturers’ market shares 2004 Top 25 markets: MW installed and market shares (Top 7 WTG) in 2004e
Market Vestas Bonus GE Wind Gamesa * Nordex Enercon Total Sales Share Sales Share Sales Share Sales Share Sales Share Sales Share
2004 - MW sold (MW) (MW) (%) (MW) (%) (MW) (%) (MW) (%) (MW) (%) (MW) (%)
Americas 656 315 48% 0 0% 261 40% 50 8% 20 3% 0 0% Argentina 0 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. Brazil 0 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. Canada 205 175 85% 0 0% 30 15% 0 0% 0 0% 0 0% USA 400 140 35% 0 0% 200 50% 50 13% 0 0% 0 0% Rest of America 51 0 0% 0 0% 31 61% 0 0% 20 39% 0 0%
Europe 6235 2056 33% 527 8% 712 11% 1442 23% 282 5% 1061 17% Austria 225 100 44% 0 0% 0 0% 0 0% 0 0% 100 44% Belgium 75 50 67% 0 0% 10 13% 0 0% 0 0% 15 20% Denmark 15 15 100% 0 0% 0 0% 0 0% 0 0% 0 0% France 200 40 20% 30 15% 50 25% 20 10% 60 30% 0 0% Germany 2400 765 32% 144 6% 264 11% 72 3% 132 6% 840 35% Greece 100 30 30% 40 40% 0 0% 25 25% 0 0% 3 3% Ireland 100 35 35% 20 20% 20 20% 0 0% 10 10% 15 15% Italy 350 250 71% 0 0% 0 0% 100 29% 0 0% 0 0% Netherlands 200 120 60% 0 0% 40 20% 0 0% 25 13% 10 5% Norway 600 0%5592%00%00%00%00% Poland 0 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. Portugal 260 75 29% 40 15% 40 15% 50 19% 55 21% 25 10% Spain 1750 323 18% 88 5% 200 11% 1175 67% 0 0% 25 1% Sweden 50 40 80% 0 0% 8 15% 0 0% 0 0% 3 5% Turkey 0 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. UK 400 185 46% 110 28% 80 20% 0 0% 0 0% 10 3% Rest of Europe 50 28 55% 0 0% 0 0% 0 0% 0 0% 15 30%
Asia 1176 432 37% 28 2% 116 10% 50 4% 29 2% 124 11% China 200 56 28% 0 0% 20 10% 40 20% 15 8% 0 0% India 650 250 38% 0 0% 30 5% 10 2% 0 0% 110 17% Japan 275 96 35% 28 10% 41 15% 0 0% 14 5% 14 5% Rest of Asia 51 30 59% 0 0% 25 49% 0 0% 0 0% 0 0%
Oceania 440 415 94% 0 0% 0 0% 0 0% 0 0% 25 6% Australia 350 325 93% 0 0% 0 0% 0 0% 0 0% 25 7% Rest of Oceania9090n.m.0n.m.0n.m.0n.m.0n.m.0n.m.
Africa 0 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m. 0 n.m.
ROW 25 10 40% 3 10% 6 25% 3 10% 0 0% 4 15%
Total World (MW) 8,532 3,228 557 1,095 1,545 331 1,213
Market share (%) 37.8% 6.5% 12.8% 18.1% 3.9% 14.2%
Change in est. since 21 January (Wind Gauge) Previous est. (MW) 8,845 3,322 691 1,088 1,500 303 1,206 Ch. in est. -4% -3% -19% 1% 3% 9% 1% Previous share est. 37.6% 7.8% 12.3% 17.0% 3.4% 13.6%
* Including MADE Source: Carnegie Research (estimates)
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Events Calendar
Financial calendar 13 Aug 2004 Repower Q2(04) 18 August 2004 Vestas Q2(04) 19 August 2004 LM Glasfiber Q2(04) 26 August 2004 Nordex Q3(04) 30 August 2004 Gamesa Q2(04)
12 November 2004 Repower Q3(04) 12 November 2004 LM Glasfiber Q3(04) 15 November 2004 Gamesa Q3(04) 26 November 2004 Vestas Q3(04) trading statement
Market information 12-15 July 2004 Q2 market figures Germany
Wind Events calendar
Source: WPM, BWE and Carnegie Research
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Disclosures and disclaimers
The Carnegie Group Carnegie is an independent Nordic investment bank operating in Securities, Investment Banking and Asset Management & Private Banking. Carnegie provides a wide array of financial products and services to Nordic and international clients from offices in seven countries: Sweden, Denmark, Norway, Finland, Luxembourg, the UK and the US. Carnegie Investment Banking is the leading independent corporate finance advisor in the Nordic countries. Carnegie Asset Management and Private Banking provide financial services including asset management for selected institutions and private investors. The Carnegie Group was listed on the Stockholm Bourse on 1 June 2001.
Rating and risk assessment structure Current rating system (as of 10 June 2003) Stock ratings Carnegie stock ratings are relative to Carnegie’s coverage universe on a Nordic sector basis. OP=Outperform The stock is expected to outperform the return on the Carnegie coverage universe of the Nordic Sector over the next 6 months. N=Neutral The stock is expected to perform in line with the return on the Carnegie coverage universe of the Nordic Sector over the next 6 months. U=Underperform The stock is expected to underperform the return on the Carnegie coverage universe of the Nordic Sector over the next 6 months. Sector view: Carnegie’s coverage universe on a Nordic sector basis is rated relative to the total Nordic market. Carnegie’s strategists, in co-operation with the sector heads, set the sector recommendations. Positive The sector is expected to outperform the return on the total Nordic market over the next 6 months. Neutral The sector is expected to perform in line with the return on the total Nordic market over the next 6 months. Negative The sector is expected to underperform the return on the total Nordic market over the next 6 months. Other ratings: NR=Not rated The investment rating, if any, has been suspended temporarily. UR=Under review The investment rating, if any, has been suspended temporarily. UB=Under Bid The investment rating, if any, has been suspended temporarily. Risk assessment: The risk assessment is based on the analyst’s evaluation of the company’s equity beta based on the business risk (asset beta) and financial risk (gearing). Low risk Estimated equity beta <0.75 Medium risk Estimated equity beta 0.75 to 1.25 High risk Estimated equity beta >1.25 Previous rating system: SB=Strong Buy The stock is expected to provide a return of greater than 20% over the next 6 months. B=Buy The stock is expected to provide a return of between 10% and 20% over the next 6 months. Acc=Accumulate The stock is expected to provide a return of between 5% and 10% over the next 6 months. R=Reduce The stock is expected to provide a return of between 0% and 5% over the next 6 months. S=Sell The stock is expected to provide a return of less than 0% over the next 6 months.
Analyst certification
The research analyst or analysts responsible for the content of this report certify that, not withstanding the existence of any such potential conflicts of interests referred to herein, the views expressed in this report accurately reflect our personal views about the companies and securities covered. We further certify that we have not been, nor are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report.
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Potential conflict of interest As of 1 February 2003, Carnegie analysts and any connected persons are not ordinarily permitted to hold securities in the companies they cover.
As an integrated Nordic investment bank and asset management firm, Carnegie is a leading broker of Nordic stocks and has investment banking and other business relationships with a large number of the companies covered by its research department. Carnegie is constantly soliciting investment banking assignments. Therefore, any reader of this research report should assume that Carnegie is seeking or will seek investment banking or other business from the company or companies to which it refers. Thus, investors should assume that Carnegie expects to receive or intends to seek compensation from any company mentioned in this report within the next 3 months.
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This research report is prepared for general circulation and general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Past performance is not necessarily a guide to future performance. Carnegie and its associated companies accept no liability whatsoever for any direct or consequential loss arising from the use of this report or its contents. Investors in the US should be aware that investing in non-US securities entails certain risks. The securities of non-US issuers may not be registered with, nor be subject to, the current informational reporting and audit standards of the US Securities and Exchange Commission.
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