Vestas fires CEO, remains upbeat about U.S. wind prospects

Source: Special to E&E • Posted: Friday, August 23, 2013

Danish wind turbine maker Vestas Wind Systems A/S fired its CEO yesterday even as it said it would no longer sell one of its Colorado plants because it had become more hopeful about its prospects in the United States.

Vestas, which competes with General Electric Co. to be the world’s biggest maker of wind turbines, said it decided not to sell its tower factory in Pueblo, Colo., because it expected an acceleration in market growth in the United States that would lead to significant orders in the second half of this year.

“Vestas expects to see deliveries, revenue and earnings peak in the fourth quarter of the year,” the company said in a statement. “Based on the current delivery plan, margins on the delivered projects are expected to be higher in the fourth quarter than in the third quarter.”

The U.S. market is rebounding after coming to a near standstill amid uncertainty over whether the production tax credit would be renewed at the end of last year. The credit, which pays power plant operators 2.2 cents per kilowatt-hour of renewable electricity, was renewed for another year at the last minute at the end of 2012 after considerable Republican opposition.

Despite the improved outlook, Vestas still said it would go ahead with plans to cut its worldwide workforce to 16,000 by the end of the year from 22,700 at the end of 2011. The company is adding 100 jobs at the tower plant in Pueblo but is laying off people at two blade factories elsewhere in Colorado. It said it was still looking to sell its machining and casting units in the United States and was negotiating with potential buyers.

“Vestas is ideally positioned to benefit from global wind demand growth,” said Sean McLoughlin, an analyst at HSBC Bank in London. “Demand for wind turbines will outstrip demand for conventional turbines from 2013 to 2015.”

McLoughlin said wind turbine order momentum should pick up in the second half of the year in the United States, as developers push to get projects approved and construction started before the end of the year to qualify for the credit. “The tide has turned again in wind,” he said.

CEO becomes ‘redundant’

But just as the future of Vestas is starting to look brighter, the company’s board decided to fire CEO Ditlev Engel and replace him with Anders Runevad, a former high-level executive at Swedish telecommunications network equipment maker Ericsson.

Engel, who had led Vestas since 2005, was the architect of the company’s turnaround plan, but was also at the helm as the Danish firm lost €963 million ($1.29 billion) last year and €166 million in 2011. The company’s stock price lost more than 90 percent of its value from 2007 until the end of last year, before rebounding 250 percent year to date.

Engel presided over an expansion in the company’s global footprint, opening manufacturing plants in several countries, including China and the United States. But this came at a huge investment cost — in 2011 alone, the company spent €761 million on new factories. The new CEO will not invest in any new plants, so the company will only spend €150 million this year on equipment and property.

“We took the decision to replace Ditlev a while ago, and he was informed yesterday that he was made redundant,” Vestas’ chairman of the board, Bert Nordberg, said in a conference call with analysts. “The new CEO will focus on return to profitability and on our service business. Now is the moment to get new leadership as we are looking to realize our growth potential and become a very stable long-term company.”

Vestas hopes its recent efforts to expand its service business will make it a more stable company so it can better ride out any future demand slump for its wind turbine manufacturing business

The value of the maintenance and service market for wind turbines is poised to grow more than sixfold, from $3 billion in 2008 to $19 billion by 2020, according to a new study by research and consulting firm GlobalData. Currently, the United States is the largest wind service market in the world, but GlobalData expects that China will surpass it to become the leader, with a 24.7 percent share of the market by 2020.