The Hindu Business Line : Vestas does not see any cancellation of orders

Aarhus, Denmark, Nov. 21 Vestas, the leading wind turbine manufacturer, has not seen any cancellation of orders for its wind turbines due to financial crisis in the US and the West.

On the contrary, it expects its 2009 revenues to grow nearly 25 per cent to €7.2 billion, from the estimated 2008 revenues of €5.7 billion.

The company does not plan to lay-off any employees but has put a temporary freeze on recruitment, which it hopes to remove once the investment climate improves.

NO CANCELLATION

Making this point firmly in an interaction with financial analysts during Vestas’ capital markets day at Aarhus, on Thursday and later in an interaction with Indian journalists on a visit to Denmark sponsored by Vestas, Mr Ditlev Engel, President and Chief Executive Officer , Vestas Wind Systems, emphatically said, “none at all” when asked whether there had been cancellation of orders.

However, some customers who had booked orders had called up to say their banks were pulling out of financing due to the crisis they were facing. Vestas viewed this opportunity to prove its technology capability – it hoped to work with its customers to convince lending agencies that the reliability of its turbines and the superiority of its technology would ensure a guaranteed cash flow for the investment.

Mr Engel said Vestas had employed over 5,000 people in the last 12 months. This was part of its efforts to double its production capacity from 5,000 MW in 2007 to 10,000 MW by 2010. “We have trained and educated them. It makes no sense to let them go,” he said.

However, due to the lower than planned rate of utilisation of its production facilities in 2009, the company had postponed a number of new employments. Mr Engel said “even though we expect to grow by 25 per cent next year, we have a cost base now that is 15 per cent higher for a 25 per cent growth.”

Announcing its third quarter results for 2008 earlier this month, the company has projected revenues of €5.7 billion this year and 2009 revenues of €7.2 billion. In 2007, the company recorded revenues of €4.8 billion. He said the company’s planned capital expenditure of €1.2 billion for 2009 stood.

NEW FACILITIES

Vestas was setting up a blade and a nacelle manufacturing facility in Colorado, US, both of which would go on stream by the second half of 2010. It was also setting up a new plant in Inner Mongolia, China, where it would make totally indigenous kilowatt-class wind turbines (turbines with capacity of less than 1 MW), to take on the competition from a number of Chinese manufacturers.

Despite the financial meltdown in the US and across much of Europe, Mr Engel felt that the energy challenges were much more daunting now than they were a year ago. He also felt that the political environment for the renewable energy sector, especially with climate change issues increasingly getting into sharper focus, had never been more positive than what it was now.

The President-elect of the US, Mr Barack Obama, had come out positively in favour of renewable energy, while Chinese leaders and the EU too had clearly emphasised the need to tackle the problem of climate change.

“All energy is politically driven and politically regulated. I have never seen such a positive environment in the last three-and-a-half years I have been CEO of Vestas,” Mr Engel said.

Pointing out that energy was still managed on a day-to-day basis when it was a long-term issue, Mr Engel said Vestas strongly believed that wind energy had a major role to play, irrespective of the price of crude. The company had invested in technology and continued to do so, as it believed that its superior technology would help it remain market leader.

“Vestas is in the best shape like never before. It is no longer the case of the turbines controlling our destiny but us controlling the turbines,” he said referring to the technology innovation and the investment in R&D and control systems that enabled the company to continuously monitor the performance of its turbines.

Asked specifically about the Indian wind energy scenario, Mr Engel said the sector in the country was all set to take off a few years back. However, that did not happen mainly because of regulatory issues. It was still a case of individual investors putting up a single wind turbine when it should really be investments in wind parks.

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Vestas does not see any cancellation of orders