Vestas Bond Yield Drops as U.S. Orders Return: Copenhagen Mover

The yield on Vestas Wind Systems A/S (VWS)’s bond fell to the lowest in more than two years in Copenhagen trading on speculation the Danish turbine maker will return to profit as contracts in the U.S. pick up.

The yield on Vestas’ 600 million-euro ($810 million) 4.625 percent bond due 2015 dropped 17 basis points to 5.06 percent today, the lowest since July 18, 2011, according to Composite Bloomberg Bond Trader prices. Vestas’s stock rose as much as 1.3 percent.

“The company has reduced structural costs by more than 30 percent, resulting in higher customer confidence,” Kasper Larsen, a credit analyst at Danske Bank A/S (DANSKE), said. “Consequently new order inflow has improved markedly.”

Vestas has struggled with overcapacity and falling wind turbine prices as lower government subsidies have reduced investor interest in green energy. The Aarhus, Denmark-based company reported today its second U.S. contract in a week. That prompted Jacob Pedersen, an analyst at Sydbank A/S (SYDB), to almost double his U.S. order estimates for the next two years.

“The order secures a high level of activity in the U.S. in 2014 and 2015 and that’s very good news for Vestas’s capacity utilization and profitability,” the Aabenraa, Denmark-based analyst said in a note. He raised his combined U.S. order estimate to “almost” 2,000 megawatts from “at least” 1,000 megawatts. That compares with estimates for U.S. orders of as low as 140 megawatts this year, the analyst said.

Order Wins

Vestas said today it won an order to supply turbine equipment with a capacity of 60 megawatts to Renewable Energy Systems Americas Inc. in a deal that could grow to as much as 610 megawatts in 2014 and 2015. On Sept. 13 Vestas said it won a 80-megawatt order as part of an master supply agreement with EDF Renewable Energy Inc. in the U.S. that could expand to as much as 750 megawatts in 2014 and 2015.

“We find it likely that both these large framework contracts at EDF and RES will be more or less fully exercised,” said Sydbank’s Pedersen, who has a buy recommendation on the Vestas stock.

The yield on Vestas’s bond was at a record-low 3.72 percent in May 2010, two months after it was issued. The yield jumped to a record 26.1 percent in May 2012.

“Given the financial development in the company, we expect Vestas will be able to both extend its revolving credit facility and refinance its 2015 Eurobond,” Larsen said in an e-mail. The bond’s earlier high yield levels “was a reflection of real investor concerns at that time that the company would not be able to refinance the bond.”

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net

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