Energy Week Ahead: Vestas May Offer Plan for Colorado Job Cuts

Source: By Alex Morales and Jim Efstathiou Jr,, Business Week • Posted: Monday, August 20, 2012

Vestas Wind Systems A/S (VWS), the world’s biggest wind-turbine maker, is likely to give details this week of its plan to cut as many as 1,600 jobs mainly in Colorado amid a standoff in Congress over a tax break for the industry.

Chief Executive Officer Ditlev Engel said in January that U.S. jobs would be scrapped “for sure” unless Congress extends the production tax credit, or PTC, which expires at the end of 2012. He may provide more details Wednesday when the Aarhus, Denmark-based company reports earnings for the first half of 2012. Gamesa Corp. (GAM) Tecnologica SA and other manufacturers in the industry also have announced layoffs.

Some Republicans in Congress such as Representative Mike Pompeo of Kansas are blocking President Barack Obama’s effort to extend the program, saying the companies can prosper without the PTC. He favors ending all energy tax credits. As many as 37,000 U.S. jobs could be lost if the credit isn’t renewed, according to the Washington-based American Wind Energy Association.

“It certainly should be a wakeup call to the folks who’ve been holding the production tax credit as a political hostage,” Franz Matzner, associate director of government affairs for the Natural Resources Defense Council, said in an interview. “The reality on the ground is showing just how dangerous that kind of fact-free politicization can be.”

The incentive is worth 2.2 cents a kilowatt-hour for wind power and helps make the technology profitable in the U.S. The wind industry employs about 75,000 nationwide. Turbine orders are forecast to plunge 56 percent next year without the incentive, according to Bloomberg New Energy Finance.

While slack demand in 2013 means Vestas will require fewer workers, it’s faced a surge this year as wind-park developers rush projects to completion before the credit expires.

“We’re getting close to the end of the year, and those layoffs are starting to happen,” Rob Witherell, a spokesman for the United Steelworkers union, said in an interview. “I would expect in the next month or so to hear more stories of these layoffs. There just aren’t going to be any orders for the U.S. The companies that are still making turbines are making them for export.”

Vestas spent more than $1 billion on four factories in Colorado and has more than 3,000 employees across the U.S. It also has a sales office in Portland, Oregon, and research and development centers in Texas and Massachusetts. In January, Engel said it would be “wrong” to say Vestas will close its U.S. plants, suggesting a reduction in the workforce and turbine output was more likely.

Obama says the tax credit should be renewed and campaigned in Oskaloosa, Iowa, on Aug. 14 noting that 20 percent of the state’s power comes from wind. Republican contender Mitt Romney appeared at an Ohio coal mine that day joking that “you can’t drive a car with a windmill on it.” Romney would allow the credit to expire to “create a level playing field on which all sources of energy can compete on their merits,” his spokesman, Ryan Williams, said last week in an e-mail.

Republicans such as Senator Charles Grassley of Iowa and Representative Roscoe Bartlett of Maryland support the credit. Senate Finance Committee Chairman Max Baucus, a Montana Democrat, included a one-year extension in a $205.1 billion tax bill approved Aug. 2 by the panel on a 19-5 bipartisan vote.

“These are critical jobs for a lot of communities, many of which have been turned around by wind manufacturing,” said Robert Gramlich, senior vice president of public policy at the wind association. “Every company is telling us privately that layoffs are possible and may be coming.”

Congress last allowed the credit to lapse in 2003. Annual wind installations declined to 397 megawatts in 2004 from 1,670 megawatts the previous year, according to the wind association.

Vestas already announced 182 U.S. job cuts as part of 2,335 positions eliminated worldwide this year. The Denver Post last week reported that the company said it would cut about 20 percent of the 450 jobs at its factory in Pueblo, Colorado.