What would you do with $1 billion? That’s the question now being asked of Denmark’s Vestas, the world’s largest wind-turbine manufacturer, after the company pocketed $1 billion this week by issuing 18.5 million new shares. The capital raising came a day after Vestas announced a 70% jump in its first quarter net profits and the layoff of roughly 9% of its global workforce.
When I interviewed Vestas Chief Executive Ditlev Engel on Apr. 28, he was characteristically cagey about how the new funds would be spent. Yet with the company pushing aggressively into the U.S. and Chinese markets, analysts reckon the money could be used to snap up undervalued assets, particularly cash-strapped technology companies that could strengthen Vestas’ own wind-turbine machines.
Vestas’ capital raising shows investors still are willing to stump up cash for top-tier green energy companies. But Citigroup analyst Mark Fielding, in an Apr. 29 research note, highlighted an important caveat to the Danish company’s rush to tap the market for more funds. “This is the third capital increase by Vestas in six years,” he wrote. “And [is] a reminder of the group’s poor cash generation history.”
That may cause problems for Vestas’ ambitious — and capital-intensive — expansion plans for new markets, particularly the U.S. and China.