Vestas-Mitsubishi Talks Focus on Biggest Ocean Turbine

November 27, 2012 by  
Filed under Green Energy News

Vestas Wind Systems A/S (VWS) is in talks
with Mitsubishi Heavy Industries Ltd. (7011) to build the biggest
offshore turbine for the $81 billion wind-energy industry,
bolstered by securing financing yesterday through 2015.

Vestas Chief Financial Officer Dag Andresen said the
Aarhus-based company was talking with Japan’s largest heavy-
machinery maker about developing an 8-megawatt machine, about 30
percent more powerful than the current record-holder. It was the
first comment on the nature of the talks announced in August.

Hours earlier Vestas, the world’s largest maker of wind
turbines, said it received 900 million euros ($1.2 billion) in
financing, driving up its shares by 21 percent yesterday.

“The revised loan means Vestas is now in a better position
to negotiate with Mitsubishi,” Haakon Levy, an analyst at DNB
Markets, said by phone from Oslo. “A joint venture would make
sense. Mitsubishi can contribute industrial expertise, a strong
balance sheet and access to the Japanese market, and Vestas its
technology and experience in the sector.”

Germany, Denmark and the U.K. are among nations increasing
investment in sea-based wind plants to replace fossil-fuel and
nuclear generators as clean energy becomes cheaper. Vestas’s
rival Siemens AG (SIE) has won the bulk of offshore turbine orders.

Siemens is testing a 6-megawatt machine as project
developers study using bigger windmills to produce more power
and reduce then money spent on installation and maintenance. The
German manufacturer is considering developing a 10-megawatt
turbine, Eva-Maria Baumann, a spokeswoman, said by telephone.

Japanese Market

Andresen said it’s “too early to give an indication on
timing” for the completion of the talks.

Vestas previously said it’s studying Japan, Mitsubishi’s
home market, where last year’s Fukushima disaster prompted the
government to cut reliance on nuclear energy in favor of natural
gas and renewable sources. Japanese industrial machinery Maker
Hitachi Zosen Corp. is leading a group including Toshiba Corp.
and JFE Holdings Inc. that plans to build 120 billion yen ($1.5
billion) of offshore wind farms in the country.

Siemens turbines will make up about 58 percent of Europe’s
4,738 megawatts of offshore wind capacity by the end of the
year, New Energy Finance analyst Sophia von Waldow said today.
That compares with 30 percent for Vestas.

The rest is split among makers such as Indian manufacturer
Suzlon Energy Ltd. (SUEL)’s RePower unit and Areva SA (AREVA) of France.

Wind-energy projects received $81 billion in investment
last year, down from $94 billion in 2010, according to data
compiled by Bloomberg Industries.

Default Risk

Vestas’s negotiating power is “slightly improved” because
of its credit deal, said Janne Vincent Kjaer, an analyst at
Jyske Bank A/S. “It doesn’t increase the financial flexibility
of Vestas, but it removes the short-term default risk.”

The Danish manufacturer, struggling to return to profit as
overcapacity in the industry hurts margins, announced 3,000 job
cuts this month. It’s seeking an investor to help it weather
falling turbine prices, Andresen said at the time.

Vestas said it replaced a 1.3 billion-euro ($1.7 billion)
syndicated facility with 900 million euros of revised credit
with nine banks. That’s made up of a 250 million-euro amortizing
term loan and 650 million euro revolving credit facility.

The premium on its 2015 bonds compared with a benchmark of
similar maturity shrank to 1,686 basis points from 2,035 points
yesterday, according to trading data compiled by Bloomberg. The
price jumped 5 to 78, the biggest increase since late August.

Customer Relationship

“This will be very important to us going forward regarding
the orders for 2013 and strengthening the customer
relationship,” Andresen said in a phone interview after the
company released the details of the revised facility.

Vestas, which last year lost money for the first time since
2005, is under pressure to cut its prices as the company gets
pummeled by competition from China, where production is cheaper.
While the revised loan has increased the company’s credibility,
Vestas still faces medium-term market challenges, Levy said.

“The situation in the U.S. is difficult and demand in
Europe is slowing,” he said. “Vestas still needs to implement
drastic restructuring in 2013 and prove it can execute in all
this.”

To contact the reporters on this story:
Stefan Nicola in Berlin at
snicola2@bloomberg.net;
Gelu Sulugiuc in Copenhagen at
gsulugiuc@bloomberg.net

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

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