Vestas, Gamesa Rise After U.S. Extends Wind-Power Tax Break
Vestas Wind Systems A/S (VWS), the biggest wind-turbine maker, and Gamesa Corp. Tecnologica SA (GAM) led gains among European peers as the U.S. Congress approved a law extending a tax credit for the industry.
Shares of Aarhus, Denmark-based Vestas surged 6.7 percent, the most in five weeks, to close at 34 kroner in Copenhagen. Gamesa rose 9.5 percent, the most since August, to 1.817 euros in Madrid, while Nordex SE (NDX1) climbed 4 percent in Frankfurt.
The U.S. House late yesterday passed a bill averting spending cuts and tax rises that had threatened an economic recovery. The law, already approved by the Senate, includes an extension of the Production Tax Credit, which pays wind-farm owners 2.2 cents for every kilowatt-hour of power they produce.
“It’s really good news for Vestas, because the American market and how it develops is extremely important,” Chief Marketing Officer Morten Albaek said today in a phone interview. “It’s a good way of starting the new year.”
The U.S. Energy Information Administration said Dec. 19 that wind-farm installations in the country would top 12 gigawatts in 2012 as developers rushed to complete projects before the scheduled Dec. 31 expiry of the tax credit, known as the PTC. That would exceed the record 10 gigawatts in 2009, according to data compiled by Bloomberg.
Without an extension to the credit, installations were forecast to plunge to 1.5 gigawatts this year, researcher Bloomberg New Energy Finance said Nov. 13. Even with the extension, Vestas said today that the “late timing” of the announcement would lead to a “significant reduction” in installations relative to previous years.
The PTC decision will boost orders for Vestas in the U.S. in 2013, Albaek said, declining to estimate a figure. The company maintains its forecast for global shipments of 5 gigawatts this year, he said.
The tax break was extended until the end of 2013, a move that the American Wind Energy Association said may save as many as 37,000 jobs. The last time the credit was allowed to lapse, at the end of 2003, U.S. annual wind installations slumped 76 percent, according to AWEA data.
“Now we can continue to provide America with more clean, affordable, home-grown energy, and keep growing a new manufacturing sector that’s now making nearly 70 percent of our wind turbines in the U.S.,” Rob Gramlich, interim chief executive officer of the AWEA, said in an e-mailed statement.
Vestas had already started preparing its U.S. factories for a slowdown in production as the expiry of the tax credit loomed, cutting working hours at plants in Colorado and forecasting a decline in global shipments.
The extension will provide more job security for Vestas’s U.S. employees, including the 1,100 who work at four Colorado factories, Albaek said. It’s too early to say whether staff on reduced hours will have their working week increased again, he said.
Vestas last year cut its workforce in the U.S. and Canada to about 2,500 from 3,400 amid plans to reduce the payroll to about 16,000 by the end of 2013 from 22,721 in 2011.
“Wind-energy workers have been living under threat of the PTC’s expiration for over a year and layoffs had already begun, as companies idled factories because of a lack of orders for 2013,” the AWEA said. “Uncertain federal policies have caused a boom-bust cycle in U.S. wind-energy development for over a decade.”
Gamesa, which has two factories in Pennsylvania, said that even with the extension, the recovery in the U.S. market will be slow because wind farms take 12 to 18 months to develop.
“It will still be nearly two years before the industry sees significant recovery, as developers recall teams to restart dormant projects,” the Zamudio, Spain-based company said in an e-mail.
Nordex, a Hamburg-based turbine developer, had no growth in U.S. orders last year and is unsure what the extension will mean for business, Ralf Peters, a company spokesman, said by telephone, citing competition from cheap shale gas.
“It remains to be seen in which direction the pendulum will swing in 2013,” Peters said. “What’s clear is that the tax-credit extension adds weight to wind.”
Nordex in 2010 opened a plant in Jonesboro, Arkansas. It has a production capacity of about 200 megawatts a year, which could be extended to 750 megawatts if the company were to hire more people, Peters said. It has about 200 employees in the U.S.
The AWEA said the deal agreed on last night by Congress will protect all projects that begin construction in 2013, even if they’re not completed until later.
“Companies that manufacture wind turbines and install them sought that definition to allow for the 18 to 24 months it takes to develop a new wind farm,” the association said. That provision is “really positive,” according to Albaek.
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