Vestas begins laying off U.S. workers in absence of tax credit renewal

Source: Special to E&E • Posted: Thursday, August 16, 2012

Vestas, the world’s largest wind turbine manufacturer, has begun laying off American workers, as it had threatened to do, because Congress has not yet extended the renewable production tax credit.

Vestas cut about 100 jobs out of 450 at its Pueblo, Colo., tower factory, the Danish company said in a statement.

Vestas has invested $1.2 billion in four plants in Colorado, where it employs about 1,700 blue-collar workers as part of its strategy to manufacture wind turbines close to the markets where they are sold. In addition to Pueblo, it also has plants in Windsor and Brighton. About 3,300 other people are employed in the wind industry in Colorado, working for companies that supply components to Vestas.

The company said the layoffs represent about 3 percent of Vestas’ workforce in North America. Vestas employed 3,493 workers in the Americas at the end of last year. It already eliminated 182 U.S. jobs earlier this year as part of a plan to cut 2,335 jobs worldwide and save $185 million per year.

“Uncertainty over whether Congress will extend the production tax credit is leading to a general market slowdown for wind power manufacturers and developers throughout the U.S.,” Vestas said. “In response to this market slowdown and in accordance with its business needs, Vestas Towers America in Pueblo today adjusted its manufacturing workforce.”

The tax credit is worth about $22 per megawatt-hour, and it goes to the owners of wind farms, not to turbine makers. Vestas has said several times it would cut 1,600 American jobs if the U.S. government doesn’t renew the tax credit. It has said it would make a decision in the third quarter.

The American Wind Energy Association has said 37,000 jobs could be lost if the tax credit isn’t extended beyond its Dec. 31 expiration date. That’s nearly 50 percent of people employed in the wind industry. In 2004, the last time the tax credit expired, the U.S. wind market shrank to 397 megawatts of new turbine installations, compared with 1,670 MW the previous year, according to AWEA data.

Vestas is cutting the jobs just as it returned to profitability. It said July 31 that it made €40 million ($49 million) before interest, tax payments and other special items in the second quarter, compared with a loss of €204 million in the first quarter. It produced and shipped turbines totaling 2,160 MW, compared with 931 MW in the first quarter.

Still, it said it continued to be affected by “disappointing results” it recorded in the second half of last year and first quarter of 2012, caused by cost overruns in the introduction of new technologies for bigger and better turbines.

Vestas also said its creditors agreed to defer testing of the terms of its credit lines and would continue to allow the company to draw on the loan facilities as needed. The company implied it didn’t meet the “financial covenants” now but called it a temporary issue and vowed to solve the problem in the near future.