Vestas Wind Systems A/S

[JayJay]

I initially thought about starting a general thread for wind power, but I believe Vestas deserves its own thread.

Vestas was founded in 1945, and in its early days, it dabbled in household appliances, including food processors and kitchen scales. Between its founding and the production of its first wind turbine (1978-79), the company manufactured coolers, cranes, and so on.

In 1978, they began designing their first wind turbine, and by 1979, the first one, the Vestas HVK10, was completed and installed. As its name suggests, it had a rotor diameter of 10 meters and a nominal power output of 30 kW. Today, the most powerful onshore wind turbine manufactured by Vestas has a power output of 6000 kW and a rotor diameter of 162m. Even larger turbines are available for offshore installations.

Currently, Vestas has over 132 GW of installed capacity and over 113 GW under service agreements. Globally, the installed capacity is approximately 650 GW, meaning Vestas accounts for 17% of the installed capacity. Vestas is currently the market leader in onshore installations and the second-largest in offshore installations.

On February 21, 2021, the 2020 report was published, which can be found here (pdf).

I don’t want to include too many images in the opening post, but the report clearly shows that onshore installations and service agreements are well-distributed globally, while offshore installations are still concentrated in a “small” area near Denmark. However, offshore installations have already been ordered: 95 MW for Changfang Phase 1, Taiwan; 464 MW for Changfang Phase 2, Taiwan; 139 MW for Japan; and 1075 MW for the UK.

Are there any owners on the forum, and do you have faith in this company? The stock price reached 1560 DKK at the beginning of January, from which it has now melted down by approximately 25%. At the time of writing, March 4, 2021, the price is 1085 DKK.

[Omena05]

I have strong faith in Vestas. According to IRENA (International Renewable Energy Agency) estimates, wind power will account for about 35% of the world’s energy production, which is about 6000GW, or about 10 times the current level. With wind farms now being profitable for companies, even after the EU removed wind tariffs, it’s hard to see investments doing anything but increasing. It’s good to be with a market leader in a growing sector. Maintenance contracts also make it easier to predict earnings. Of course, the valuation is quite high, but it has melted nicely recently… possibly a buying opportunity?

[JayJay]

True. Vestas also used these images in their annual report. We are indeed just at the beginning stages of this, and there is a lot of work to be done.

The valuation is high, but I think it should be. I’m currently on the lookout for the next buying opportunity. Technical analysis (TA) isn’t my strong suit, so I’m going with my gut feeling.

[Jeremy]

Great opening! I’ve owned Vestas for years with good results, a satisfied shareholder here. Now, in the last year, the stock price rocketed to pretty high levels, closer to 1600 DKK, due to the green hype. That was a pretty sharp rise compared to the company’s growth rate, and the valuation figures were really high. So, this drop in the stock price is probably quite “deserved” now that air has been let out of growth and hype companies lately.

But I still believe in the company itself. Democrats have come to power in the US and will invest in renewable energy. Similarly, China implemented a very aggressive green energy strategy. And the company is still growing strongly all the time, so I’m certainly not worried about the company. My strategy is to own high-quality, growing companies, and I see Vestas as one of them. I believe this is in such a strongly growing industry that there’s room for many players. And Vestas also has really good technology and is a market leader.

So, if the investment horizon is 5-10 years, I believe this is still a good investment.

[Hapakka]

Revenue has apparently grown at a nice 20% rate for the past couple of years, but at the same time, the operating margin has fallen from 9.3% → 5.0%. Can someone who has followed the company longer explain what’s behind this? Is it just significant growth investments, or is intensifying competition eroding margins, etc.?

[JayJay]

The guidance was 5-7%, so we just barely hit it. The report offers things like this:

EBIT has been decreasing due to a highly competitive market as well as other external factors, putting pressure on profitability in the market.

For 2021, the guidance has been slightly raised:

Outlook 2021
Revenue (bnEUR) 16-17
EBIT margin (%) before special items 6-8
Total investments¹) (mEUR) approx. 1,000

And also these long-term plans:

Long-term financial ambitions
Revenue: Grow faster than the market and be market leader in revenue
EBIT margin: At least 10 percent
Free cash flow: Positive each year
ROCE: Minimum 20 percent over the cycle

You’ve probably already read these, but unfortunately, I can’t offer any information other than what they state.

[Jeremy]

This is a good question and I started looking into it myself when I became interested. JayJay already answered it above. I read a relatively recent analysis report on Vestas, which also delved into this topic. In short, their view is roughly this:

Increased competition has put pressure on margins. The average selling price per Megawatt has decreased, meaning lower margins. In addition, there were extraordinary warranty costs of EUR 175 million due to severe lightning strikes. The CEO said that these would be one-off and would not occur again in the future. These analysts expect that the decline in margins would be here. Sales prices would now stabilize, fixed costs would come down somewhat, and margins would improve going forward. In addition, they believe that the good momentum of the service business will continue. This maintenance business has good margins, 27.4% margins. So, the growing installed base, thanks to a large sales backlog, will continue to increase the larger installed base, the service business will grow and thereby increase margins.

Overall, they are positive about this case.

[Mats_Bedo]

A wind power company striving for growth—is it ecologically and socially sustainable? There are already too many goddamn windmills in some places, and wind power companies are just looking for new sites for wind turbine parks. Growth targets must be met, and profits made. If the targeted growth goals are met, then maps will fill with windmills, year after year. It reminds me of tobacco companies in the old days. The company’s top line profit was increased by finding new smokers, entering new continents and countries when growth couldn’t be found in Europe and North America. Thanks to tobacco companies’ growth targets, for example, the whole of China is a smoke-filled country now.

Huge hectares of forest are cleared for windmills, and in addition, power lines for the mills must be built incredibly wide, which also takes up forest area. New roads must be built for the mills, which also consume hectares. Valuable natural sites are lost due to these, and birdlife, in particular, suffers from wind power parks. Often, such a forest area is subject to a logging ban in terms of forestry because there are valuable habitats, forest law sites, endangered species, and logging would not meet certifications, etc. But when a wind power park is built, the area can be cleared.

Offshore wind power parks are more sensible.

But no thanks, and thanks no to such an investment target Private investors can choose the most sustainable methods and companies among energy forms. Solar power, biogas, geothermal heating, and geothermal energy production to be honored! Natural gas and nuclear power are also better options when transitioning to other forms. Even energy produced with peat is a more sensible solution in Finland from the perspective of the natural state. I am concerned about forest nature due to inland wind turbines.

[jaska7]

Now that post sounded like a gut feeling, really off the mark.

I recommend reading about wind power, especially the upcoming offshore segment, from the IEA or IRENA websites. The trend is strongly moving offshore because it’s simply a better location with significantly more potential surface area.

https://www.iea.org/reports/renewables-2020/wind

I do agree with your statement regarding optimizing the locations of wind farms, and their placement should be avoided in areas like old-growth forests, for example.

[Metta_Simo]

A couple of questions;
-How is peat production in any way reasonable from a natural state perspective?
-How does solar power save Finland’s forests more than wind power (well okay, maybe because no sensible person builds a solar power plant in Finland)?
-Geothermal power seems to be specifically heat? It seems to need electricity alongside.

I agree that forests must be considered when erecting wind turbines, and that’s precisely why offshore placement is the future. However, I wouldn’t strongly oppose wind power in the current situation.

[sillinkutoja]

VESTAS: THE BOARD OF DIRECTORS INTENDS TO IMPLEMENT SPLIT 1: 5 FIRST HALF YEAR

STOCKHOLM (Nyhetsbyrån Direkt) During the first half of 2021, the Danish wind power company Vestas intends to carry out a split so that each existing share is divided into five. This is stated in the notice prior to the Annual General Meeting, which was announced on Friday morning. At the time of writing, the Vestas share is trading at around DKK 1,069. The share went strong for most of 2020, but has recently fallen back from the top levels just after the turn of the year, which was over 1,500 Danish kroner. Johan Lind +46 8 5191 7954 Nyhetsbyrån Direkt

[JayJay]

I was just about to link the same thing, you were faster. From the same page, the target price was lowered, but the buy recommendation was reiterated.

UPDATE ## Offshore and Service play a larger role
We reiterate the Buy recommendation and lower the target price to DKK 1,455 (1,475)

[NEA]

Alright now. Let’s put a lid on this and revisit on Monday.
AND to at least add something relevant here, you might want to Google “establishing a wind turbine,” and you’ll find a few basic articles that show you, for example, the permit process and other requirements needed in Finland alone, and from there you can also see what requirements and so on there are.

edit. and it’s not that big a deal, that was just a rant on an opinion forum, but I don’t think it belongs here. If you’re fundamentally opposed to the whole thing on principle, you should go to a forum like Greenpeace.fi instead.

edit. you can also try opening up carefully here without the defiance phase symptoms. Vastuullinen sijoittaminen - Sijoittaminen - Inderes forum

and by the way, not many of them are located inland:

[JayJay]

The Global Wind Energy Council yesterday released its report on installed and grid-connected wind power in 2020.

Vestas is now the largest wind turbine manufacturer for the fifth consecutive year.

#1 Vestas 16 GW

#2 GE, moving up two places on the list: 14 GW, of which 10 GW domestically in the United States.

#3 Goldwind: 13.6 GW, of which over 12 GW was installed in China.

#4 Envision 10.7 GW

#5 Siemens Gamesa dropped from second to fifth place with 8.6 GW of installations.

https://gwec.net/gwec-releases-global-wind-turbine-supplier-ranking-for-2020/

[NEA]

@JayJay

Vestas is now the largest wind turbine manufacturer for the fifth consecutive year.

Wind turbine manufacturer.

edit. or did it come to light there (I didn’t have time to read that yet) that it’s specifically about the developer and the construction of complete wind power plants? Or was it specifically about turbine power and the number of installed turbines? In principle, anyone can build a plant and use Vestas turbines there.

[JayJay]

I don’t bother publishing every single project here, but today there were so many announcements that I’ll put them here as one package. These also come with good service agreements.

https://twitter.com/Vestas/status/1377300326034903043?ref_src=twsrc^tfw|twcamp^tweetembed|twterm^1377300326034903043|twgr^|twcon^s1_c10%26ref_url=https%3A%2F%2Fpublish.twitter.com%2F%3Fquery%3Dhttps3A2F2Ftwitter.com2FVestas2Fstatus2F1377300326034903043widget%3DTweet

https://twitter.com/Vestas/status/1377253220842663943

https://twitter.com/Vestas/status/1377193020240637954

https://twitter.com/Vestas/status/1377170896700338184

https://twitter.com/Vestas/status/1377276496478371841

https://twitter.com/Vestas/status/1377183507189952519

[JayJay]

This has been awaited! The guess was correct. 69 turbines for Mutkalampi.

“Vestas will supply six V150-4.2 MW turbines running in a 4.3 MW operating mode, as well as 63 V162-6.0 MW turbines from its EnVentus stable. Once commissioned, Mutkalampi will be one of the largest onshore wind projects in the Nordic region.”

https://twitter.com/Vestas/status/1389563216674660352?s=19

[Elastomer]

As long as they get enough resin to make the wings. There is quite a shortage of raw materials on the market. The V162 is at an awkward stage, as new wings should be constantly produced, but delays keep occurring.

[CantwellNCFC]

Neither Danish wind power company had a great quarter. Vestas’ stock, in particular, is taking a real beating, down -16% as I write this.

https://www.reuters.com/business/cop/vestas-q3-below-expectations-lowers-fy-profit-guidance-2021-11-03/

https://www.reuters.com/business/cop/orsteds-q3-profit-lags-lower-wind-speeds-bite-2021-11-03/

[JayJay]

The supply chain instability and cost inflation caused by the pandemic is continuing to impact the wind power industry.

Based on these circumstances, and the impact these are expected to have for the remainder of the year, Vestas is updating its full-year guidance on EBIT margin before special items, which is now expected to be around 4 percent (previously 5-7 percent). Vestas still expects revenue of EUR 15.5-16.5bn, including Service, and total investments) below EUR 1,000m in 2021.

The revenue forecasts were already slightly lowered earlier.

https://www.bloomberg.com/news/articles/2021-08-11/vestas-cuts-revenue-outlook-as-commodities-cost-surge-bites

The company now expects full-year revenue of 15.5 billion euros ($18.2 billion) to 16.5 billion euros ($19.3 billion), down from previous forecast of 16 billion euros to 17 billion euros, it said in an earnings statement Wednesday.

I still need to read through that more carefully later.

Here’s a link to the report:

211103_18_Company_Announcement.pdf