Nordex Sees Wind Installs Climbing Even as State Aid Is Cut
Nordex SE (NDX1), the best performer among Germany’s biggest stocks in 2013, expects its wind-turbine installations in the country to gain as much as 30 percent this year as developers rush to beat a reduction in state subsidies.
Nordex, which almost tripled German installations in 2013, is benefiting from an increase in orders by customers seeking to lock in aid levels before the cuts take hold, Chief Executive Officer Juergen Zeschky said in a Jan. 31 interview at the company’s headquarters in Hamburg. The shares rose.
Germany, which added a record 2,998 megawatts of onshore turbines last year, plans to reduce aid by as much as 20 percent in 2015 from 2013. While the first cuts could take effect this year, onshore developers may be able to claim the current amount if they secure a construction permit by Aug. 1, instead of Jan. 22, after state premiers negotiated a delay, Zeschky said.
“Some clients in Germany are bringing forward orders as government plans to cut aid for renewables have caused uncertainty among investors about the profitability of wind farms in the future,” Zeschky said.
Nordex’s Rostock plant is ramping up production of nacelles, which house the generator, gearbox and drivetrain, from about 550 units a year and could double output if demand increased further, Zeschky said.
Nordex expects installations in Germany to climb 20 percent to 30 percent from last year’s 251 megawatts, he said.
That compares with estimates by Germany’s BWE wind lobby for installations in 2014 to remain stable at about 3 gigawatts or drop to 2.5 gigawatts.
Nordex is among European wind-turbine makers including Siemens AG (SIE) and Vestas Wind Systems A/S trying to increase sales and lower production costs after companies cut prices to compete with their Asian peers as governments trim subsidies.
While a “moderate” reduction for locations with strong winds is understandable, “it would be unfortunate if the German government, after all the progress that has been made and the targets it has set, were to choke this development,” he said.
Modern turbines such as the company’s N117 model will still be viable in weak wind locations in southern Germany if aid cuts are “modest,” the CEO said.
“While some Nordex clients may bring forward orders as they fear the planned aid cuts and it may have a positive impact in the short term, there are still concerns in the market about what might happen thereafter,” said Sebastian Growe, an analyst at Commerzbank AG with a hold rating on the shares.
The sale of 7.35 million new shares, equivalent to 10 percent of Nordex’s stock, on Nov. 27 to more than 40 investors from 10 countries has helped talks with banks to refinance debt, Zeschky said.
“The capital increase in November was maybe the most important element for us to ensure financing until 2016-2017,” Zeschky said. Nordex is in the “final phase” of the discussions with its creditors and expects an agreement “soon,” the CEO said.
Vestas, the biggest wind-turbine maker, late yesterday said it was seeking to raise capital after a two-year turnaround program dragged the company out of debt and resulted in its first quarterly profit since mid-2011.
Nordex also collected 150 million euros from investors in a bond sale in 2011. The bonds have a coupon rate of 6.38 percent and mature in April 2016. “We have a clear solution on how we pay back our bond, so banks now offer us loans under more favorable conditions,” Zeschky said.
The company is “very confident” it can achieve its targets of a 5-percent earnings before interest and tax margin, 1.5 billion euros ($2 billion) in sales and a 15 percent reduction in production costs over 2012 levels in 2015, Zeschky said. Sale prices will probably decline 2 percent to 4 percent a year, he said.
The company, which is scheduled to report 2013 figures on March 24, in November raised its order intake forecast to as much as 1.4 billion euros, from as much as 1.3 billion euros previously. While the company will pay a dividend once its “free cash flow is large enough,” there’s none planned for 2014 or 2015, Zeschky said.
Nordex services about 3,200 windmills for clients. It seeks to increase the number of such contracts about 15 percent in 2014, matching growth of recent years, he said.
Zeschky said while wind-company executives regularly talk to each other about possible combinations and partnership, the industry may consolidate through cooperation agreements rather than “big mergers or takeovers.”
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