Vestas Joins With Mitsubishi for Offshore Turbines

Source: By MARK SCOTT and STANLEY REED, New York Times • Posted: Monday, September 30, 2013

LONDON — The Danish wind turbine manufacturer Vestas received a financial lift on Friday as it announced a joint venture with Mitsubishi Heavy Industry of Japan to develop offshore wind energy.

While Vestas is the world’s largest maker of wind turbines, along with General Electric, it has been slow to move into the market for offshore turbines. That has allowed Siemens in Europe to gain an expanding share of the small but fast-growing sector.

The Vestas joint venture with Mitsubishi will develop the Danish company’s 8-megawatt offshore turbines, each of which can power roughly 8,000 households. The two companies had been in discussions about a deal for over a year.

Under the terms of the deal, Mitsubishi will invest an initial 100 million euros ($135 million) in the venture, and a further 200 million euros if undisclosed financial targets are met. Vestas and Mitsubishi will initially own equal stakes in the business, but Mitsubishi will have the right to increase its stake to 51 percent beginning in 2016.

Vestas has faced a series of financial difficulties in recent years as it grappled with heightened competition from low-cost Asian rivals and reduced government subsidies for onshore wind power.

The company ousted Ditlev Engel as chief executive last month after reporting annual losses since 2011 despite a restructuring plan that includes a 30 percent cut in its work force, to around 16,000 people, and a reduction of annual costs by around 400 million euros ($540 million).

“I am very happy with the deal,” said Lars Heindorff, an analyst at ABG Sundal Collier, a brokerage firm in Copenhagen. “Having Mitsubishi on board will significantly lower capital expenditure going forward.”

Shares in Vestas rose 4.5 percent in Copenhagen on Friday.

The alliance with Mitsubishi was the first major announcement from Vestas’s new chief executive, Anders Runevad, a former senior executive at the Swedish technology giant Ericsson. He has pledged to expand Vestas’s international and offshore businesses.

The market for offshore wind equipment is dominated by a few suppliers and is less competitive and more profitable than that for onshore turbines, analysts say. The offshore wind projects now under construction are enormous and expensive. For instance, the recently opened London Array, built by Siemens, cost nearly $3 billion.