Italy

Italy

Analysis - Vestas closes 15-year-old Italian factory

ITALY: Vestas has announced plans to close its nacelle assembly factory in Taranto, Italy, as it continues to adjust manufacturing capacity in light of a slowdown in demand.

A Vestas V90 nacelle
A Vestas V90 nacelle

While the company says the decision must be placed in the context of supply and demand at a global level, analysts also stress that the plant closure comes amid a much weaker wind market in Italy and southern Europe in general.

"It's important for turbine manufacturers to be located close to the market," said Jacob Pedersen, an analyst at Danish bank Sydbank, "and if there's a sudden shift in demand in a geographic area, that has an impact. The market in the southern part of Europe is clearly less attractive than it was before."

Spain's market has dried up, and the wind-rich area in southern Italy where Vestas has its productive headquarters in the country has seen the market go from boom to bust. After growing at a pace of 1GW a year for the last few years, a new incentive system has put capacity ceilings on feed-in-tariffs (FITs) made available for commercial wind farms through an auction process, which means the most optimistic forecasts see Italy adding only 500MW a year now.

Elsewhere, Vestas has agreed a deal to sell its core-component casting and machining factories to German industrial group VTC for EUR 1. Under the agreement, VTC will take on ownership of the plants and continue to supply the components to Vestas as part of a long-term deal. But at least the factories will remain open and 1,000 jobs are currently safe.

Yet the Taranto nacelle facility was involved in more than just castings. It had been operating since 1998 and its closure will result in the loss of 120 jobs, including plant management. The factory assembled nacelles for V90 turbines, which have also become less popular as demand has increasingly shifted to machines with bigger rotors and longer blades suitable for lower wind sites.

While acknowledging a strong drop in orders, trade unions said they were surprised by the plant closure, given the company's long-standing presence in the country. They had expected Vestas to continue to opt for government-backed unemployment support measures made available to companies in crisis until the market improves. The importance of Vestas to the local economy has been highlighted by the involvement of Italy's economic development ministry in the negotiation process surrounding the planned plant closure.

"This is a further step in keeping our production facilities running as close to full capacity as possible, which is necessary to support improvements in Vestas' profitability and the ability to deliver competitive products to our customers," said Vestas chief operating officer Jean-Marc Lechêne as Vestas announced plans to close the factory. Analysts agree the company's strategy to close some facilities to maximise production at others makes business sense.

Vestas said it is not abandoning the Italian market, where it first established a manufacturing presence 15 years ago through a joint venture with Italian state-controlled industrial conglomerate Finmeccanica. The company will still employ 590 people in Italy at a blade factory in Taranto and in sales and service activities in the country. Vestas has sealed a number of operations and maintenance contracts in Italy, where it has installed 3.185GW of its turbines since the early 1990s and accompanied the development of the Italian wind industry.

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