Senior analyst: Vestas' Sowitec stake purchase exciting but risky

Senior Equity Analyst Jacob Pedersen from Danish bank Sydbank sees both opportunities and challenges in Vestas' minority stake purchase in German wind developer Sowitec. 
Photo: MHI Vestas
Photo: MHI Vestas

Vestas made a deal with German wind developer Sowitec to buy a 25.1 percent stake in the company, thereby placing the wind turbine manufacturer in potential competition with its own customers.

"This is exciting and new, but it is certainly not without risk. Vestas will to some extent or another enter direct competition with its own customers. This is not necessarily a problem, but it will be a balancing act," says Sydbank Senior Equity Analyst Jakob Pedersen.

Even though Vestas has only initially purchased a minority stake in Sowitec, the agreement provides the Danish company with an option to buy the developer's remaining shares during the next three years.

Sowitec has around 60 onshore wind and solar projects with a combined capacity of more than 2,600 MW around the world.

The German developer installs wind turbines and solar panels in many new markets and is active in parts of East Asia and Latin America – markets with very high growth potentials.

"There is no doubt that, as Vestas secures firm wind turbine delivery contracts from its order pipeline – which it hopefully will – Vestas will end up with a very strong project portfolio to which it can deliver wind turbines," Pedersen says, adding:

"There will be challenges related to both Sowitec's ability to win projects and whether other companies that win projects avoid Vestas due to its involvement with Sowitec."

Not an impossible tight-rope walk

Pedersen points out that this is not the first instance of renewable power operators finding themselves in a complicated competitive situation.

Two years ago, for instance, GE purchased Danish developer LM Wind, which produces wind turbine blades and currently supplies other players.

"It is not an impossible tight-rope walk, but Vestas must possess clear insights on this company and its customers' ability to make a lot of money. Perhaps they did for some time, but I am not convinced that customers will end up making a lot of money from these projects, as they have been involved in squeezing Vestas' prices," Pedersen says.

Vestas in project development

Vestas also recently mentioned that the company will henceforth play a larger role in wind farm development, which the manufacturer informed during its April annual general meeting this year, according to Sydbank.

The purchase deal between Vestas and Sowitec is expected to be finalized in the second quarter of this year following approval from anti-trust authorities, informs Vestas and Sowitec Group in separate press statements Thursday evening.

English Edit. Daniel Frank Christensen

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