Judging by market-share figures alone, times look tough for top Spanish turbine maker Gamesa. The company's global share fell from third place in both 2008 and 2007 with 12% and 15%, respectively, to sixth last year with just over 7% (see chart below), according to Danish consultancy BTM Consult. But Gamesa chairman and CEO Jorge Calvet, who took up the post in November, insists his company has lost none of its vigour and is "possibly the most competitive in the global wind sector".
Gamesa has installed 18GW of wind turbines across the world, mostly in Spain, China and the US. It operates factories in China and the US, and recently started production in India. While the plants are intended as toeholds in key overseas markets, achieving profitability is a greater priority than securing global market share, says Calvet. "Some competitors have attempted the opposite and ended up in financial trouble," he adds.
Gamesa points to three main pillars underpinning its strategy: its recently launched 4.5MW wind turbine (see box, page 74), one of the largest-capacity commercialised models specifically designed for installation onshore; a bid to go offshore - a market segment that only three years ago it brushed off as a mere niche; and a renewed focus on operations and maintenance (O&M).
Gamesa is in talks to form a partnership with German wind turbine supplier Bard, which is entering the offshore market this year. In February, the firms signed a memorandum of understanding (MOU) to negotiate a minority stake in Bard by Gamesa. The deal would also establish terms for jointly marketing Bard's offshore technology and developing joint offshore services. Bard is also considering allowing Gamesa to manufacture Bard offshore technology under licence. "Working together, Gamesa and Bard will become leading players in the world's offshore wind power market," says Calvet.
The offshore foray has not been entirely smooth sailing. The firms had planned to finalise terms established in the MOU by the end of March but missed that deadline. Calvet says the two are simply busy ironing out details and have not lost momentum, adding: "We both really want this agreement." Bard declines to comment.
The choice of Bard is essentially a question of time to market, says Calvet. With a sudden upturn expected in the offshore market, he adds, "we need a solid but ready solution". BTM expects total installed offshore capacity by end-2011 to more than double to 4.9GW from last year's level of 2.1GW, and soar to 15.6GW by end-2014. With Bard as partner, Calvet believes Gamesa could be signing its first offshore contracts by the new year. Without the German firm, he adds, Gamesa will not be able to offer its own tested offshore technology until 2013.
"It's a good fit," says Eduard Sala de Vedruna, a senior analyst at renewables consultancy Emerging Energy Research. "Bard has a test-proven 5MW machine - developed at its own risk with its own money - and Gamesa needs an offshore machine."
Analysts say Bard has the upper hand in the negotiations. The large emerging global offshore market makes it an attractive target for other turbine manufacturers seeking an offshore partner. Given the expected rush offshore, insiders suspect rival suitors could come forward for a deal with Bard. Potential contenders, according to one analyst, could be big industrial Asian giants Mitsubishi and Samsung, which are already expanding their onshore wind turbine businesses and eager to channel their marine engineering and shipbuilding skills into offshore wind. Bard also benefits from the solid industrial and marine engineering experience of its shipbuilding owners.
But Gamesa holds good cards in its hand as well. "For a start, it has more financial muscle than Bard," says Sala de Vedruna, "as well as experience setting up complex supply chains - as it has shown with its industrial bases in the US and China."
Spanish utility Iberdrola, the world's top wind operator and developer, with a 60GW global project portfolio, is both Gamesa's biggest turbine customer and its largest shareholder. As such, it has the ability to open many doors. The UK's recent Round 3 offshore development concessions awarded prospecting rights for 7.5GW to a joint venture between the utility's renewables wing, Iberdrola Renovables, and Sweden's Vattenfall. Iberdrola Renovables says it is developing 12GW of offshore wind across the world. With Iberdrola, "Gamesa has a potential global customer to offer (Bard)", says Sala de Vedruna.
Gamesa also has solid financial backing, having secured a EUR1.2 billion syndicated finance loan to 2012 signed with more than 30 banks in late 2009. That was quickly followed by EUR200 million from the European Investment Bank. "That, as much as anything, says a lot about the soundness of Gamesa's balance sheet and operations," says Sala de Vedruna. When Gamesa canvassed lenders for finance, combined loan offers exceeded Gamesa's target by 40% - "another sign of financier confidence in us", says Calvet.
Gamesa can also point to the US, where Pennsylvania Governor Edward Rendell last year announced tax credits totalling $31 million for Gamesa's turbine production complexes in Ebensburg and Fairless Hills. Combined annual output capacity at the two factories is 900MW. Gamesa will extend the facilities to 1.2GW by the autumn.
Come what may, because of the importance of offshore, Gamesa's foray will go ahead "with or without Bard", says Calvet. "That is where our clients are heading, so that's where we are heading." If the Bard deal falters, Calvet says Gamesa will simply wait until its ongoing offshore technology development is complete. But that process - mainly carried out at its research and development (R&D) centre in Aarhus, Denmark - lags behind the market due to Gamesa's lateness in taking the offshore plunge. In 2007, the company sold its stake in offshore wind development joint venture Ceowind, which had more than 4GW in the pipeline. And insiders have expressed surprise at Gamesa's exclusion from Emerge, an offshore R&D project to develop floating turbine technology for deep waters led by Iberdrola Renovables. Instead, fellow Spanish manufacturer Ecotecnia - now owned by French engineering giant Alstom - is Iberdrola's turbine partner in the project. Gamesa says it hopes to join at a later stage.
As talks with Bard continue, Gamesa is stepping up development of its own offshore turbine. Technical director Jose Antonio Malumbres says the company targets a machine with a rated capacity of 6-7MW. The company has scrapped plans for a 5MW offshore version of its existing 4.5MW machine, although parts of that design will be used in the giant turbine under development. Gamesa is using a virtual wind turbine computer model developed with Alstom-Ecotecnia in the so-called Windlider programme (Windpower Monthly, June 2008). The software is aimed at streamlining turbine design for machines with capacity up to 10MW, even if Malumbres sees 6-8MW as prospective customers' future target range for offshore turbines.
Calvet says Gamesa plans to build an offshore turbine factory that may use its own technology. "Given its national target to reach 30GW offshore by 2020, the obvious choice is the UK, where we are (talking to) the authorities," he says. Company officials decline to elaborate.
Focus on O&M
Meanwhile, Calvet has led a revival of Gamesa's focus on O&M. The company sold its O&M division to British private equity investor 3i in 2005, but is reinforcing its own O&M staff to start building up a new unit. "I cannot emphasise it enough: we are going to grow O&M into a major core business," says Calvet. He expects Gamesa's O&M portfolio to grow from 12GW last year to 20GW in 2012, with annual revenue from these activities rising from EUR225 million to EUR400 million over the same period.
"Most manufacturers are returning to O&M, Gamesa particularly strongly so," says Sala de Vedruna. Increased global turbine supply and greater caution over investment have ended the high-margin, quick-kill turbine sales popular up to 18 months ago, he explains. In the current buyer's market, "staying power and added value are what count", he adds.
Getting back into O&M makes sense for Gamesa, says Calvet. "Gamesa has experience as plant developer-operator and turbine manufacturer," he says. The company also has vertically integrated blade, gearbox and generator manufacturing. "We will offer O&M - chiefly based on predictive and preventative maintenance - as added value for customers and use it to improve margins," he says.
Besides these activities, the company is not taking any radical changes in course, but simply adjusting to changing market conditions, according to Inigo Gimenez, Gamesa's chief operating officer. Gamesa is closing a blade factory and slashing jobs in Spain (Windpower Monthly, April 2010). "(Such decisions) have been forced, in large part, by the global economic downturn," says Gimenez. Still, he says Gamesa is coping well and that an upturn will come in the second half of he year. Gamesa is even cautiously optimistic that 2011 earnings will beat the 2008 record. The company's capacity sales guidance for the year ending December 31 is 2.7-3GW. The company has not yet issued a profit guidance.
High hopes notwithstanding, 2009 sales fell 16% compared to the previous year, to EUR3.23 billion, while net profit of EUR115 million from core wind activity last year was 35% lower than in 2008. The company sold turbines with total capacity of 3GW, considerably below its 3.3-3.6GW expectations. Calvet blames orders postponed due to the global financial crisis, as well as Spanish legislation last year that capped the country's new wind capacity in 2009-2012 at 6.4GW (Windpower Monthly, March 2010). Spain is Gamesa's largest market in total installations. These developments were difficult to foresee, says Calvet, and followed an eight-month freeze to November to allow existing projects to be processed. Few new orders were signed to keep factories busy in the first half of 2010.
Calvet brushes off troubles in the home market: "We're truly a global company, not just Spanish." According to the company, turbine exports rose 61% in 2009 over the previous year and now comprise 73% of total sales, reaching 2.3GW. China and the US each accounted for just over 470MW, while the rest of Europe absorbed just over 1GW, mainly across Italy, Poland, Hungary and Romania. Exports to other world regions totalled 346MW.
Even as Gamesa pares down operations at home, it is increasing overseas capacity. In March, the firm opened its third overseas industrial base in India, a 200MW factory in the town of Chennai, in the southeastern part of the country (Windpowermonthly.com, February 12, 2010). That facility will initially produce 800kW machines, with 1.3MW machines possible further down the line. The facility is easily extendible to 500MW, says Calvet. Orders currently total 60MW. "That includes the supply of what will be Sri Lanka's largest wind plant, at 20MW," says Calvet. The Seguwantivu-Vidatamunai project is located in the district of Puttalam, in north-eastern Sri Lanka.
"A good start, but India offers much more, with 6GW expected to be developed to 2012," says the CEO. Gimenez says India will be a second main base in Asia, after China, to feed regional emerging markets.
The company's Chinese base is in the north-eastern port of Tianjin, a 600MW integrated complex making nacelles, gearboxes and blades. Until recently it has produced 850kW machines and is now equipped to make 2MW turbines. By the new year, annual production capacity is scheduled to reach 1GW. Gimenez says Gamesa is also working with Chinese joint venture partners to develop wind farms across the country with combined capacity of 700MW. The first project was recently completed - the 49MW Taipingshan project in the eastern coastal province of Shandong. It is to be operated by local utility and joint developer Guangdong Nuclear Wind.
Other suppliers are filling China's fast-growing market with lower-cost turbines. Indeed, Gamesa's global market share fell in 2009 largely because Chinese companies have assumed far greater leadership in their home market, says Javier Perea, the company's global commercial director. Gamesa is competing on the basis of design rather than price. "We are offering quality solutions to our customer base and competitive cost of energy over plant life, not low installed costs," says Perea.
He brushes off the rivalry in China and the subsequent loss of leadership there. "If we deduct China from the equation, our market share would remain similar to previous years," he adds. "It's another reason we are not worried about market share."
China, however, cannot be easily discounted. The country last year accounted for over a third of total new wind capacity worldwide, and Gamesa has watched its once-strong position there drastically weaken. Back in 2007, Gamesa was the top foreign wind turbine supplier to China and ranked third overall, close behind domestic rivals Goldwind and Sinovel. But at the end of 2009, Chinese suppliers occupied the top four spots in the domestic market. Danish supplier Vestas ranked fifth in China, with a 4.2% market share, while Gamesa fell to eighth with 2.9%, according to BTM Consult.
Still, the company says its overall marketing strategy stretches well beyond Asia. Over the past year, its sales department has started negotiations in 34 new geographical markets. Its traditional big corporate and utility customers will remain, but the company is now focusing on bringing in small developers and independent power producers, says Calvet. "That will keep us competitive and help us on our way to driving up long-term margins."
The special relationship with Iberdrola Renovables also bolsters Gamesa's global clout. A double deal signed at the end of 2008 commits Iberdrola to buying 4.5GW of Gamesa turbines for its global developments through 2012. At the same time, Gamesa's own project development wing agreed to link its project portfolio with that of Iberdrola.
Both companies will develop those portfolios separately for now. At the end of 2011, Iberdrola will exercise an option either to buy all Gamesa's developed capacity or to form a joint venture between the two companies, 75% controlled by Iberdrola. Calvet says the combined capacity will be around 10GW, mainly across Spain, France, Italy and Eastern and Central Europe.
A thorn in Gamesa's side has been a series of blade failures at US wind farms. One 2007 case involved inadequate adhesive in blade shells manufactured at Gamesa's blade factory in Ebensburg, Pennsylvania. That caused blades to split and fray at the edges even before they went into operation at the same state's Allegheny Ridge wind farm, owned then by the now-defunct Babcock & Brown (B&B). Calvet called the experience part of the learning curve during what was the first blade series produced at Ebensburg. After the fault was detected, all blades were lowered and underwent ultrasound and thermograph scans. Faulty blades were replaced.
Less cut and dried is the recent damage to 45 of the 75 blades affixed to Gamesa 2MW machines at the 50MW Kumeyaay wind farm in San Diego, California. The plant is owned by Australia's Infigen, which bought it from B&B. The blades split following gale force winds early this year. So sensitive is the case that Gamesa and Infigen limit any official comment to Windpower Monthly to a joint statement.
"As a precautionary measure, Gamesa and Kumeyaay, Infigen's subsidiary operating the plant, agreed to replace all blades in order to expedite the repair process and restoration of full operations as the companies conduct an investigation," the statement says. It adds that Gamesa turbines are designed to withstand wind speeds up to 214 km/h. Yet, according to local press accounts, wind blew at only 113 km/h at the time the blades split. A source inside Gamesa, who requests anonymity, says a local power cut prevented a mechanism inside the turbines from pitching the blade angle out of the winds, as would normally occur automatically. The company declines to comment on the cost of the replacement while it continues its probe. But what officials do say leaves no doubt: Gamesa does not plan to give up its position in the ranks of global wind turbine suppliers without a fight.
HIGH HOPES FOR BIG TURBINE
Gamesa banks on modular approach for 4.5MW model
Gamesa is upping its game. Spain's top turbine maker says next year it will produce as many as 30 of its new 4.5MW machine. Gamesa is counting on the new model to compete with global rivals producing turbines of 3MW and above. Gamesa's largest capacity offer so far has been a 2MW machine.
Eduard Sala de Vedruna, senior analyst at consultancy Emerging Energy Research, says the new G10X unit ties with German supplier Enercon's 4.5MW direct-drive machine as the largest wind turbine specifically designed for onshore use. But Gamesa says size is only part of the equation. "One rule of thumb," explains Gamesa technical director Jose Antonio Malumbres, "was to make the biggest onshore machine possible that can be installed using the same logistics used for the 2MW machine." Gamesa also aimed for the right balance between cost and efficiency. Given these criteria, the company found 4.5MW to be the capacity limit.
"The G10X will break bottlenecks in transport and marks a new standard in large turbines," says commercial director, Javier Perea. He calls the machine well suited to repowering projects in complex terrain and in areas where space is at a premium. Perea says sales negotiations are under way in northern Europe: "In 2012, the machine should also be available for the Asian and US markets."
Sales in Spain would have come first if it were not for a freeze in installations last year, he adds (see main story). Gamesa, which also develops wind farms, is pushing several 9MW projects in the Catalonia region through the construction permission process, which will use the 4.5MW machines.
A main selling point of the new turbine is that large components are split into modules, making them lighter, smaller and therefore easier to transport. No single component weighs more than the heaviest one used in Gamesa's 2MW turbine. The machine's total weight - 150 tonnes - will be one of the lightest turbines in the 3MW and above segment, says Sala de Vedruna.
Another attraction is that the turbine will have been put through the ringer by the time it debuts, says the company. Under development since 2004, the machine has undergone 350 validation tests at 75 certified laboratories, says Malumbres.
Some of the most crucial testing took place at the Laboratorio de Ensayo de Aerogeneradores test facility for wind turbine drive trains, blades and materials, where Gamesa conducted more than 80 validation tests. The lab is run by the National Renewable Energy Centre in the Navarre region, next to the factory where Gamesa is building the 4.5MW turbine.
A total 1.3 million engineering hours will have gone into the machine by the time it enters series production. Rigorous testing on all turbine components means that the machine comes to market with five years' equivalent of operation behind it, according to Gamesa chairman and CEO Jorge Calvet.
On site, a standard crane no larger than the 1,000-tonne maximum version used for the 2MW machine will be able to hoist the nacelle shell atop its tower. The tower itself is a hybrid of concrete and steel - also assembled onsite - with a maximum height of 128 metres. From there, a crane fitted within the nacelle will pull up generator components, freeing the main crane to move on to assembling the next nacelle.
A G10X prototype has been turning at the Cabeza Negra wind plant, in the Jaulin district of the Aragon region, since April last year. It uses blades from Gamesa's 2MW series, says Sala de Vedruna. But once in serial production, the turbine will be fitted with the firm's proprietary Innoblade - a central feature of the new machine. Gamesa claims the contours of the blade, designed in conjunction with Germany's Stuttgart University, reduce noise and lag. The rotor's diameter is an expansive 128 metres, with a blade length of 62.5 metres. But Gamesa has tried to minimise the difficulty of transporting such long blades by sectioning them. The longest component is 35 metres.