“Wind markets in Spain, Portugal, Greece, Italy are slowing down,” Chief Sales Officer Juan Araluce said today in Aarhus, Denmark. New turbine installations in the U.S. may drop to 2 gigawatts next year if the government doesn’t renew a tax credit, he said. That compares with forecast installations of 10.8 gigawatts in 2012, Bloomberg New Energy Finance data show.
Vestas, along with General Electric Co. and Siemens AG (SIE), has faced increased competition from Chinese rivals just as European and U.S. governments rein in support for renewable energy. The Danish company, also hurt by higher-than-expected costs to develop its V112 turbine, announced two rounds of job cuts this year totaling a sixth of its workforce.
The manufacturer is reviewing its capital structure and options for refinancing, Chief Financial Officer Dag Andresen said today in an interview in Aarhus, where the company held a capital markets day. Vestas, which had to reach an agreement with lenders in July to defer a test of financial covenants, has outstanding loans and bonds totaling 2.2 billion euros ($2.8 billion), according to data compiled by Bloomberg.
The company is studying selling shares to current investors, two people with knowledge of the plan said last month. Andresen declined to comment on a possible rights issue today.
Today’s investor presentations shed only “limited” light on the company’s problems, said Rupesh Madlani, an analyst at Barclays Plc’s investment-banking unit. “We do not expect to see consensus upgrades for 2013 until management provides more specifics around their business model and cost reduction.”
Vestas reported a loss last year for the first time since 2005 and continued to lose money in the first two quarters of 2012 as turbine prices were squeezed by a supply glut and a new factory suffered production delays.
The company retains guidance for positive free cash flow this year, according to Andresen, who said Vestas has always had “volatility” in cash flow. “We have a lot of cash tied up in inventories. All of these turbines are on their way out as we speak.”
Vestas slumped 5.2 percent in Copenhagen trading, the most in almost three weeks, to close at 37.90 kroner.
The company may cut more jobs and partially idle some U.S. plants, Chief Operating Officer Jean-Marc Lechene said today. Its strategy in the U.S. depends on an extension of the so- called Production Tax Credit, which gives an incentive of 2.2 cents a kilowatt-hour of wind power.
Bloomberg New Energy Finance forecasts 4.8 gigawatts of new U.S. turbine installations next year. It sees 6.8 gigawatts of onshore turbines in the 27-nation EU, down from from 9.3 gigawatts this year.
The capital markets day comes a day after Vestas said former CFO Henrik Norremark was involved in two unauthorized deals in India that may cost the company 18 million euros. The shares have dropped 16 percent in the past week.
The stock may also be weighed down by Vestas’s failure to conclude talks on what it describes as a possible “strategic cooperation” with Mitsubishi Heavy Industries Ltd. (7011), according to Barclays’s Madlani. Analysts at Nordea Bank AB and Sydbank A/S (SYDB) said in August the talks probably extend to offshore wind turbines.
Vestas said late yesterday it’s increasing the capacity of its planned V164 offshore turbine to 8 megawatts from 7 megawatts, making it the company’s biggest model. Vestas has repeatedly said it’s seeking a partner to develop the machine, with a prototype due for installation in 2014.
“There is some disappointment that the company continues to progress its V164 turbine without concluding any of the strategic discussions it announced,” Madlani said.
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