Vestas' main current worry is the Nordic winter

Even though most of the turbine maker's focus is directed at the key US market, the company sees both favorable features and short-term risks in its home region.
Photo: Vattenfall
Photo: Vattenfall

To use a tattered meteorological metaphor, Vestas' third quarter interim report shows a high-pressure forecast with clear skies. Order intake radiated brighter than expected, the service unit sustains its huge profit margin, and with the delivery of wind turbines totaling 4,150 MW, the Danish wind turbine maker seems truly set to realize its announced annual executions for 2019 which, after the first nine months, tally to around 7.8 GW.

This, however, is not to say dark clouds are absent on the horizon – also quite literally. At the moment, significant snowfalls are impacting larger areas in Europe's northernmost reaches, including central Sweden and further toward the Arctic, where the snow cover in Lapland is reportedly 35 centimeters deep – a historical level seen only once in every 30 years so early in the season.

That these two instances are related is tied to the fact that Vestas is also looking forward to a busy end of the year. Here, the company's focus has been mainly aimed at the bustling activity in the US market, where turbines with a combined double-digit GW capacity must be installed ahead to the end of next year. That has resulted in, among other things, full plates for logistics operators cable of transporting the massive machines out to project sites.

Delays cost money

But OEMs are not only supplying equipment to the US. In recent years, Vestas has received many orders from Norway, Sweden and Finland and manages both delivery and installation for many contracts in the Nordic region.

"Our biggest worry at the moment is whether the weather will hold, and, particularly, if we'll be able to execute [projects] in the northern part of Europe, where we have a lot of activity. This is probably demanding more of out attention than the US at the moment," says Vestas Chief Financial Officer Marika Fredriksson and continues:

"If the weather causes delays of 5-6 days, it'll not be without added related costs. So, our primary focus is to bring things in order before the weather collapses."

The CFO declines to specify the volume Vestas has agreed to deliver before the end of the year. But a look glance at this last year's collection of announced orders shows the producer will deliver and/or install projects totaling 705 MW in Q3 and Q4 of 2019. Exactly how much of this volume is already installed is unknown. Furthermore, additional, announced orders might be entailed in the pool of prior quarters.

Historically many hidden orders

The largest surprise in the company's third quarter report was indeed unannounced contracts. The quarterly undisclosed order pot, which for whatever reason is withheld from the public, fluctuates widely from quarter to quarter and has, of course, grown in recent times in step with the surge in general order intake. However, Q3's 2,655 MW was a record-high volume of orders kept on the sly.

"It's big relative to what we have seen before. Absolutely. But quarterly fluctuations do occur, and things go up and down," Fredriksson said, downplaying the many small orders that at first glance appear as a sort of positive surprise for the market, and which both she and the rest of Vestas' executive management have presented many times in interim statements.

This was, of course, not hidden in the form of a surprise full-year guidance upgrade, but there were other positive things to be found between the accounting lines – and most certainly tucked away with the unannounced orders. Even though the US – import tariff-marred – market continues to play lead violin in the Danish turbine maker's accounts, the ensemble was also more diverse than its normal composition.

Solely in the EMEA region, which includes Europe, Africa and the Middle East, orders arrived form 20 different counties. Whereas MEA is normally most of all a slightly lagging suffix to Europe, this autumn's 415 MW in Saudi orders boosted the regional contract intake past 2 GW, while Vestas also sees favorable signs of resuscitation in the South African market, which has been severely challenged for many years.

"Order are coming in from practically everywhere, and the breath in order intake is extremely positive – not only for us but for the wind energy industry as a whole," Fredriksson said.

English Edit: Daniel Frank Christensen

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