USA - Vestas Wind CEO optimistic on future

Wind power is on a roll in the United States., but you wouldn’t know it from looking at Vestas Wind Systems’ first quarter earnings. The Danish wind turbine maker, one of the world’s largest, reported a 32% drop in first quarter revenues to $900 million (755 million euros) and an after-tax loss of $107 million (96 million euros) on Wednesday. Earning before interest and taxes (EBIT) also fell into negative territory, to a $126 million loss.

However, demand should improve for the rest of the year, says Vestas Chief Executive Ditlev Engel. The company is forecasting EBIT margins of 10% to 11% for 2010 on revenues of $9.2 billion (7 billion euros). Half of Vestas’ market is in Europe, and the U.S. accounts for 30% of business, says Engel.

From 2006 to 2008, the U.S. was Vestas’ largest market. But in 2009, the company didn’t get a single new order from the U.S., says Engel, who calls it “a challenging year.” As Lehman Brothers went under and Wall Street swerved into a tailspin in late 2008, financing for new wind projects dried up—and stayed dry throughout 2009. “We are having a low first quarter [in 2010] because of what did not happen in 2009. Financing was tight,” Engels explains.

Competitor GE Wind Energy, a unit of General Electric, ranked number one in wind turbines sales in the U.S. in 2009, according to a recent report from the American Wind Energy Association.

Now, the dried-up financing is coming back, Engels says. Grants from the U.S. Department of Energy for renewable energy projects are available to projects that break ground before the end of 2010. Engels says that’s also spurring more orders for Vestas turbines.

Long term, Vestas is betting on significant growth in wind energy in the United States. The company has one turbine manufacturing plant in Colorado and plans to build three more, plus a service and maintenance center. Vestas said Wednesday it would hire 3,400 workers this year; 2,000 of those will be in Colorado as it ramps production.

What’s on Engel’s wish-list for the U.S. authorities? Three things:

1. A national renewable energy standard. Most renewable energy requirements are at the state level today, and not all states are on board.
2. An upgrade of the U.S. electricity transmission system to enable wind energy to flow from the middle of the country toward the coasts. Ideally, Engel says this should be undertaken at a national level. Today, states handle transmission.
3. Greater awareness of the current cost of energy. The U.S. currently spends $1 billion a day on oil imports, says Engel. There are ample wind resources in the U.S. that could replace some of the oil imports, but not enough eagerness needed to harvest the wind for electricity. “We are going to see prices of energy go up unless we do something about it,” he says.

Recently, though, low natural gas prices and reduced electricity consumption due to the recession have dampened demand for wind. From Engel’s perspective, that’s only the short-term reality.

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