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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--After two difficult years, a financial turnaround appears to be complete at Vestas Wind Systems A/S (Aarhus, Denmark). The manufacturer recently reported improved third-quarter 2014 results, and its North American unit, Vestas Americas, has inked about 1,800 megawatts (MW) of deals to date in 2014.
Vestas North America announced these new orders over the last six months:
The South Plains, Los Vientos III, Pleasant Valley, Border Winds and Oakfield projects are under construction. The other announced projects are scheduled to kick off in the next few months. All are scheduled to be operating by late 2015 or mid-2016, to take advantage of the federal Production Tax Credit (PTC), which provides up to 10 years of tax credits that are valued at $23 per megawatt-hour of electricity produced.
"Vestas has really come back from the dead, not only in North America but also around the world," said Brock Ramey, Industrial Info's research manager for the North American Power Industry. "A few years back, they slashed global payroll by about 33% and went through two difficult, unprofitable years. But now, the order backlog is up, revenue is up, and they're profitable once again."
In its third-quarter earnings release earlier this month, Vestas reported:
Staffing at the company's four Colorado manufacturing sites is rising sharply to meet the new orders. The Denver Business Journal reported Vestas plans to add about 850 new employees at those sites by year-end 2014, boosting the company's total employment in Colorado to more than 2,000, a new record. In early 2013, staffing was down to 1,000, a 44% plunge from late 2011, the news publication reported.
"We are going to be extremely busy making blades, nacelles and towers this year through at least 2015," said Chris Brown, Vestas' North American president for sales and service, earlier this year when announcing the staff additions at its Colorado facilities.
"For now, wind needs the PTC, but we're going to continue to chase the cost of energy down and make wind more economic," Brown said. That means continuing research and development to improve the operational performance of wind systems, to lessen Vestas' reliance on the PTC and make their projects more competitive against low-cost, gas-fired generation.
Two opposing trends continue to shape U.S. demand for wind power. Several states, including California and Colorado, that have enacted a renewable portfolio standard (RPS) are getting close to the required percentage of electricity that must come from renewable energy. As those states hit their respective milestones, demand for renewable energy can be expected to slow. About half of the states have RPS mandates.
But the Obama administration's pending rule to reduce carbon dioxide (CO2) emissions from operating power plants, coupled with other regulations on power-plant emissions of sulfur dioxide (SO2), mercury, particulates and oxides of nitrogen (NOx), are expected to boost demand for non-emitting resources like wind power. The new Republican majority in the U.S. Congress has vowed to do everything it can to impede the pending CO2 regulation, largely through its budgetary and investigatory powers.
"We, as an industry, have come out of (our) teenage years," Brown said. "We need to be focused on longevity, and that means staying in shape, coming to practice every day, and performing every day for our customer and shareholders."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Vestas North America announced these new orders over the last six months:
- A 200-MW order from First Wind for its South Plains project in Texas. That order is in addition to the 718-MW master supply agreement announced in December 2013.
- A 110-MW order from a unit of Duke Energy (NYSE:DUK) (Charlotte, North Carolina) for the Los Vientos V project in Texas. That order follows 400 MW of orders for the Los Vientos III and Los Vientos IV projects.
- A 450-MW order from EDF Renewable Energy, a unit of EDF, which will be split between the 300-MW Roosevelt Windfarm in New Mexico and the 150-MW Slate Creek Windfarm project in Kansas.
- A 166-MW order from Renewable Energy Systems Americas Incorporated (RES Americas), for use at its Pleasant Valley Wind Project in Minnesota.
- A second order from RES Americas, for 124 MW of turbines for the Border Winds Project in North Dakota.
- A 148-MW order from First Wind for its Oakfield Windfarm in Maine.
The South Plains, Los Vientos III, Pleasant Valley, Border Winds and Oakfield projects are under construction. The other announced projects are scheduled to kick off in the next few months. All are scheduled to be operating by late 2015 or mid-2016, to take advantage of the federal Production Tax Credit (PTC), which provides up to 10 years of tax credits that are valued at $23 per megawatt-hour of electricity produced.
"Vestas has really come back from the dead, not only in North America but also around the world," said Brock Ramey, Industrial Info's research manager for the North American Power Industry. "A few years back, they slashed global payroll by about 33% and went through two difficult, unprofitable years. But now, the order backlog is up, revenue is up, and they're profitable once again."
In its third-quarter earnings release earlier this month, Vestas reported:
- Revenue of about $2.3 billion, up 26% over the comparable year-earlier quarter
- Earnings before interest, taxes and on-recurring items had increased 70%, to about $204 million, up from approximately $84 million in the third quarter of 2013
- Net income had risen to $127 million, from a loss of $109 million in the comparable year-earlier quarter
- An increase to $16.75 billion in the value of wind turbine backlog and associated service agreements
Staffing at the company's four Colorado manufacturing sites is rising sharply to meet the new orders. The Denver Business Journal reported Vestas plans to add about 850 new employees at those sites by year-end 2014, boosting the company's total employment in Colorado to more than 2,000, a new record. In early 2013, staffing was down to 1,000, a 44% plunge from late 2011, the news publication reported.
"We are going to be extremely busy making blades, nacelles and towers this year through at least 2015," said Chris Brown, Vestas' North American president for sales and service, earlier this year when announcing the staff additions at its Colorado facilities.
"For now, wind needs the PTC, but we're going to continue to chase the cost of energy down and make wind more economic," Brown said. That means continuing research and development to improve the operational performance of wind systems, to lessen Vestas' reliance on the PTC and make their projects more competitive against low-cost, gas-fired generation.
Two opposing trends continue to shape U.S. demand for wind power. Several states, including California and Colorado, that have enacted a renewable portfolio standard (RPS) are getting close to the required percentage of electricity that must come from renewable energy. As those states hit their respective milestones, demand for renewable energy can be expected to slow. About half of the states have RPS mandates.
But the Obama administration's pending rule to reduce carbon dioxide (CO2) emissions from operating power plants, coupled with other regulations on power-plant emissions of sulfur dioxide (SO2), mercury, particulates and oxides of nitrogen (NOx), are expected to boost demand for non-emitting resources like wind power. The new Republican majority in the U.S. Congress has vowed to do everything it can to impede the pending CO2 regulation, largely through its budgetary and investigatory powers.
"We, as an industry, have come out of (our) teenage years," Brown said. "We need to be focused on longevity, and that means staying in shape, coming to practice every day, and performing every day for our customer and shareholders."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
