Spain - Gamesa consolidates improvements in its margins

Gamesa Corporación Tecnológica consolidated improvements in its margins as of end third quarter 2009, improving the wind turbine activity’s EBITDA by three-tenths of a point (13.7%) as compared to the same period in 2008. The management strategy aimed at controlling working capital by synchronizing manufacturing and customers' delivery needs, along with the cost-cutting programs implemented, took the EBIT/sales margin for the wind turbine activity to 7.2%, better than forecasts made for the year, which ranged from 6% to 7%.

This was achieved despite the slowdown in activity that impacted the sector throughout the first nine months of the year, particularly in the third quarter – due to delays in implementing Spain’s pre-registry – situating the company's wind turbine sales at € 2.274 billion, 13% below the record figures reached last year.

Consequently, the Wind Turbine activity’s gross operating result (EBITDA) stood at € 311 million (-11%) and EBIT at € 164 (-17%), taking the group's net consolidated profit to € 86 million. The comparative year-on-year group figure is still affected by the extraordinary profit generated as a result of the sale of the Solar activity (capital gain on the divestment boosted the figure to € 288 million in 2008).

Guidelines set for 2009 were likewise met. The level of working capital to sales was situated at 18%, better than the 2009 reference figure of around 20% set for Gamesa’s outlook. Finally, the group's Net Financial Debt, including the wind farm promotions activity, totaled € 716 million, or 1.6 times EBITDA. The debt linked to the Wind Turbine activities amounted to € 254 million, or 0.6 times the division's EBITDA.

Overcoming a weak economic environment:
The year has been marked by delays in project approval in Spain and the slowdown in the US market’s recovery. Gamesa responded to these circumstances by adapting production to deliveries.

Reduced demand, especially in the Spanish market, has demonstrated the appropriateness of Gamesa's international strategy. Thanks to this strategy, international markets accounted for 71% of Gamesa's wind turbine sales through end third quarter. European sales (excluding Spain) were ranked first with 31% of the total figure, followed by Spain (29%), the United States (17%), China (14%) and the rest of the world (9%).

Additionally, although the financial crisis has also had an impact on the wind energy sector, other trends show that society and public administrations continue to increase their commitment to wind energy. Thus, the sector is beginning to react to regulatory support in leading markets, which received significant incentives in September.

In Spain, some uncertainties surrounding the Pre-Assignment Register have been clarified with the approval of the first wind energy projects (767 MW) on September 23. To this, an additional 1,633 MW approved to date should be added.

Likewise, the awarding of Treasury Grants in the USA has begun. One billion dollars in Treasury Grants have already been granted in only two months since September 1. These grants are aimed at supporting wind energy development, with the consequent injection of liquidity for operators.
Lastly, regional wind energy tariffs have been set in China, thereby facilitating private investment in keeping with the stated goal that the country's target for installations should increase to reach 150 GW by 2020.

The Corporation ended September with a total 2,275 MWe sold, a 20% year-on-year decrease. Nonetheless, wind turbine sales coverage reached 90% of the forecast for the year as of end September, evidencing an upturn in activity for the last quarter, which Gamesa is ready to face as a result of maintaining its efficiency and productivity ratios.

Reactivation of wind farms sales in Europe:
Approaching the last quarter of the year, Gamesa holds a wind farm portfolio around the world amounting to almost 23,000 MW with the dual competitive edge of creating value as is the promotions' ultimate objective but also as a driving force for demand in the Wind Turbine division.

With this criterion of creating value in mind, Gamesa delivered 162 MW of wind farms during the third quarter. Furthermore, the corporation continued to have almost 700 MW in the final development stages on September 30, 2009. Of these, 494 MW were under construction, 25% more than a year ago, and another 199 MW were in the commissioning stage, 73% more than twelve months ago.

However, there can be no doubt that the essential milestone in the period for the wind farm activity was the implementation of the strategic agreement entered into by Gamesa Energía and Iberdrola Renovables in June 2008 to jointly promote, develop and operate European wind farms. The amendments to the agreement's technical terms and conditions will allow the value of both companies' project portfolios to be maximized.

By virtue of the aforementioned agreement, Gamesa Energía and Iberdrola Renovables will autonomously develop their project portfolios over the next two years. Gamesa's wind farm sales in Europe will be reactivated with the resulting positive effects on both balance sheets and cash flow.

Financial coverage through 2012:
Gamesa has also recently taken another step forward in its strategy of financial strength by signing a syndicated financing extension in the banking market for the amount of € 1.2 billion (€ 1,200,000,000). The agreement – led by eleven financial institutions and signed by an additional twenty-five Spanish and international institutions – extended the maturity date of the main financing elements that cover Gamesa’s general needs to October 2012. It therefore represents strong backing for Gamesa from the financial sector.

The granting of an additional € 200 million by the European Investment Bank should be added to this agreement, thereby providing support for Gamesa's R&D programs.

International positioning and technological leadership:
Gamesa's immediate prospects demonstrate that its investment in major growth markets and adapting to demand through the introduction of new products is providing results in terms of a truly international positioning.

Manufacturing of the Gamesa G90x - 2 MW wind turbine commenced in the third quarter of 2009 at Gamesa USA with an initial capacity of 300 MW per year. Furthermore, the corporation is consolidating its presence in the Chinese market with a capacity of 1000 MW foreseen for the beginning of 2010, and it is continuing to move forward in wind farm development with local leaders.

The start-up of the new Gamesa plant in Chennai, India should be added to these initiatives. This plant will have an annual manufacturing capacity of 200 MW. Thus, Gamesa India, along with Gamesa China and Gamesa USA, is constituted as a driving force for growth.

Gamesa has also continued to reinforce its position of technological leadership in the wind energy sector through the commercial unveiling of its new Gamesa G10x - 4.5 MW platform, which constitutes yet another step in guaranteeing wind’s and Gamesa’s competitiveness. This wind turbine has a greater unitary power output and lower generation costs than currently available or foreseen mainstream models. After extensive testing, a first prototype at the Jaulín (Zaragoza, Spain) R&D wind farm was started up and fed the first kW/h to the grid last April. Gamesa has already commenced working on the second prototype.

The design, assembly and testing process has confirmed the revolutionary nature of this new wind turbine. It also confirmed the success of the wager placed on a new concept capable of competing in terms of cost, not only with other wind turbines, but also with other energy generation sources.

This criterion of competitiveness can also be seen in the turbine's construction costs, as it has been proven possible to transport and assemble the 4.5 MW wind turbine with means similar to those used for 2 MW wind turbines.

Representatives of almost fifty customers attended the wind turbine's unveiling and commercial launch of the product offering, available on the world markets as from manufacturing of the pre-series units next year, with mass production expected to commence in 2011.

About Gamesa:
Gamesa is a company specializing in sustainable energy technologies, mainly wind power. Gamesa is the market leader in Spain and is positioned among the most important wind turbine manufacturers in the world.

Gamesa has installed over 16,000 MW of its main product lines in twenty countries spread out over four continents. The annual equivalent of this production amounts to more than 3.45 million tons of petroleum (TEP)/year and prevents the emission into the atmosphere of more than 24 million tons of CO2/year.

The company has production centers located in Spain, Asia and the United States with an international workforce of around 7,000 employees.

For more information please contact Trevor Sievert at ts@windfair.net