Falling Prices, Margins Threaten Small Wind Companies, BNEF Says

Declining prices for wind turbines and slim margins over the next few years may make it harder for smaller, pure-play wind companies to compete, according to Bloomberg New Energy Finance.

Average turbine prices fell 4 percent last year to 910,000 euros ($1.2 million) a megawatt from 2010, and will fall another 2 percent this year and in 2013, according to the research company’s biannual Wind Turbine Price Index, which surveyed 38 manufacturers, developers, utilities and investors. Margins will range from 2 percent to 4 percent through 2015.

A global supply glut and increased production in China are making it tougher for companies that only offer wind-power equipment such as Nordex SE (NDXY) and Repower Systems SE (REPP), both based in Hamburg, to compete against larger rivals and those that are part of large manufacturing conglomerates, said Eduardo Tabbush, a BNEF wind analyst.

“They’re two good companies, but they have a very local reach,” Tabbush said by telephone from London. “They have good technology, good products, but they don’t have scale. Those would be ones that could potentially be acquired.”

Buying one of the top turbine companies, such as Aarhus, Denmark-based Vestas Wind Systems A/S (VFS), the world’s largest, or Zamudio, Spain-based Gamesa Corp. Tecnologica SA (GAM), Europe’s second largest, “wouldn’t be easy, but it wouldn’t be unthinkable,” Tabbush said.

“If you’re a wind player and turbine prices have decreased by 25 percent the last three years, your costs have not decreased and you have Chinese competitors putting in a bid for 20 percent lower than your price, your margins are going to be affected,” Tabbush said. “If you don’t have global reach, you might not survive the downturn.”

To contact the reporter on this story: Justin Doom in New York at jdoom1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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