Vestas

Vestas has been going through a torrid time in the last 4-5 years, as the Chinese competition has destroyed the business model of the leading wind turbine players such as Suzlon and Gamesa. Vestas has been posting large losses in the last few years as prices for its main products have declined substantially due to Chinese competition. These WTG players used to trade for lofty valuations as their products were supply constrained and the entry barriers were high. But the entry of the Chinese companies has completely changed the fundamentals of the wind energy industry. Not only have these companies managed to capture the massive Chinese wind turbine market, but are also putting pressure on the global wind turbine prices.

Vestas, Gamesa have suffered hugely as both their revenues and margins have come under pressure. Suzlon is on the verge of bankruptcy (already defaulted on bonds), while some of the smaller wind turbine makers like Winwin have gone out of business leading to huge losses for both the equity and debt owners. Even the Chinese WTG companies are suffering from the stiff competition. They are being forced to lower prices and running in losses. Some of the largest players like Sinovel are in the danger of shutting down due to the stressed financials.

Vestas reported higher FCF guidance as the company sharply cut down its working capital and employees. The company has fired thousands of workers and closed lots of factories, but it is still making losses. Its revenue for the quarter came lower than expected even though it raised its EBIT guidance to 2% from 1%. Despite the massive restructuring, the margins are clearly not sustainable. There have been rumours that the large western players may be bought by well capitalized Asian companies. However, nothing has come out of these rumours as of now. These companies continue to face heavy head winds.

Also read on GWI List of Wind Energy Companies in India.