Back in 2012 the company was coming through the second half or a restructuring process that led to around a quarter of its staff sacked, production facilities closed and a metaphorical massacre at board level that included chairman Bent Carlsen. In May 2013, with the worst apparently over, Vestas CEO Ditlev Engel stated with relief, that for once he was glad to be a year older. Three months later, he too was out of a job.
Since then the company has been on a roll. Most recently, it upgraded its revenue from EUR 5.5 billion to EUR 6.1 billion. Orders are on the up, especially in the US, with Vestas leading the list in 2014. Furthermore it looks likely the company will retake its place as undisputed leader for installations in 2013, following a strong production tax credit-assisted challenge in 2012 from GE. Vestas also has the world's largest wind turbine, the V164 8MW.
New chief executive Anders Runevad appears to be in a good position. Things have been nicely set up, believes Jacob Pedersen, an analyst at Danish bank Sydbank. "It's been a ball that's been pushed downhill, and it's been rolling until now. Runevad's not had to do anything other than look at Vestas and decide what measures are needed in the coming two to three years." Vestas has a much changed board, with a new chairman, chief financial officer and CEO charged with keeping the company in the number-one spot, if not coming close to past glories. It was, and still is, a truly global manufacturer with a presence in most markets. But it is also still in remission, not only from an over-ambitious expansion strategy of the late-2000s, but also from a bloodletting that rightly or wrongly ripped the spine out of its senior board.
Things were going well until the credit crunch and the production tax credit-enforced slowdown in the US. Engel drastically cut production, mainly in Denmark but also in the US and China. The share price tumbled. The nadir came in January 2012, when the company sacked its chief technical officer and the senior vice-president for offshore. The chairman, Bent Carlsen, resigned, as did deputy chairman Torsten Rasmussen.
Longstanding CFO Henrik Norremark was promoted to deputy CEO, only to be sacked weeks later. The same fate was also handed to Hans Jorn Rieks - the former vice-president of central Europe was promoted to VP of offshore for three weeks, then shown the door. In the past two years, the company has had three CFOs.
At the end of April, former Sony Ericcson CEO Bert Nordberg was appointed chairman. At the time, Vestas appeared to be struggling to cope, revealing more bad news each quarter, including gearbox failures, successive poor results and a 12-month delay to the V164 programme. While Engel was nominally in charge of the restructure, the new chairman took a noticeably more visible role than his predecesssor.
This year's strategy
"It has taken a lot of work to turn the company around as fundamentally as we have done," admits Morten Albaek, Vestas senior vice-president for marketing. "We have lowered the breaking point of the company.
It was a troublesome period. But when that's said, we are satisfied about the turnaround." Albaek is diplomatic about the lead in the restructure: "Of course, when Ditlev Engel was CEO, he was a key contributor together with other members of the management team, the chairmanship and the board. But it has always been a team effort."
On the surface, analysts are happy again. In February, Runevad revealed his first plans for the company. These featured the usual focus on costs and customers. Notably, Runevad said he aimed to raise revenue from servicing by 30% and pledged to personally take charge of the group. The company's minimum forecast of EUR 6 billion revenue and 5% rise in EBIT for 2014 was seen as solid if unspectacular.
In terms of the strategy for the company's future, it was very much more of the same. Although lacking in wow factor, the decision to focus on services and tailor turbines more closely to the market, makes sense to many. Coupled with this, the company has also sought to raise funds, both with a EUR 450 million share issue and a EUR 850 million credit facility. In the words of CFO Marika Fredriksson, it is important that customers know Vestas has the financial muscle to compete with conglomerates such as Siemens and GE.
In terms of the 2014 strategy, Europe could still play a role, especially since the EC has now set binding carbon targets for 2030. But despite a large concentration of employees in Denmark, Europe's importance appears to be declining. According to Pederson, in 2011 more than 65% of the company's business came from Europe,in 2012 it was around half of that. The slow-down appears to have halted now, with 2013 delivers across the EMEA region reaching around 3GW.
Regardless, and despite Runevad highlighting the importance of mature markets, it is still clear that the company's focus is less fixed on Europe. Albaek says: "While still important, the European market is stagnating compared to other markets like North and Latin America, South Africa, and elsewhere."
But a significant amount of the company's operating capacity remains in Europe, while much of the new business wins are in the US, which is still dependent on the stop-start production tax credit. There are other challenges, especially in terms of growing share in the big European markets.
"You have some countries that have been in wind for a long time," says Pedersen. "Like Germany, where they have a leader like Enercon who cannot be matched. Just as GE or Enercon is not going to overtake Vestas in Denmark. That's just the way things work, Vestas is not going to be number one in Germany, not today, not tomorrow, not ever."
This is not such a problem for Vestas, whose global position can afford it to be second place everywhere. One new avenue for Vestas will be the Caucasus and Russia, which has recently voted to build a number of projects. However, as in many parts of the world, local sourcing is likely to be an issue, with Russia's government aiming for as much as 60% to be built locally. Albaek describes local sourcing as a "balancing act". "Sometimes depending on the market local sourcing can work contrary to (reducing the cost of energy). Sometimes it can be cheaper producing turbines in a neighbouring country and transporting them, and that's something governments should have an eye for."
New markets could be key for Vestas. Looking ahead, analysts want the company to increase its profitability in terms of selling and servicing. But in other ways Vestas' strength, a giant pure player and arguably the only global wind-power company, could also be its weakness. Runevad's strategy could decide, as conglomerates such as GE and Siemens continue to exert pressure, whether there is space for a lone player. Or whether it needs a partner for its onshore business, too.
The health of any manufacturer must be reliant on its products. Vestas has spent the last few years moving away from the troublesome V90 platform, which has suffered from gearbox problems, and developing a range of turbines around the V112 3MW, from low wind to a high wind model for the UK onshore market. At the top of the tree is the offshore 8MW V164 turbine, to be co-developed with Mitsubishi Heavy Industries (MHI).
Where once companies in the wind tech sector compared notes over innovations, now the registration and defence of intellectual property (IP) is every bit as competitive as the rest of the technology sector. Last year's wind patent application figures show that patents generally have reduced, and specifically that Vestas has conceded second place to Siemens. GE is still at number one.
According to Philip Totaro, founder of IP consultant Totaro & Associates, Vestas has 830 inventions in total, with 113 having a high relevance - meaning technology widely used in the industry - compared with Siemens' 870, of which 105 have a high relevance.
"Looking at the trend in filings from 2008 to 2011 one can see the uptick," says Totaro. "However, we believe that based on our preliminary data, Vestas has slowed down their filings in 2012 and 2013 to conserve cost, in conjunction with other areas of their business. This is not uncommon during periods of belt-tightening in any industry."
Cross licensing deals, such as those between Gamesa and Areva, and MHI and Vestas, could provide scope for cooperation that was common in the early days of the industry.
"If one were to hypothetically combine the Vestas and MHI patent portfolios, played out in a scenario where MHI fully acquired Vestas, their combined portfolio would rival GE on scale and relevance with 1,345 total inventions and 172 of high importance," Totaro says. "In an industry where further consolidation may be warranted, scenarios like this aren't so hypothetical."
The biggest and most controversial deal for Vestas over the last year has been the joint venture with Mitsubishi Heavy Industries (MHI) to co-develop the V164 8MW turbine, the machine both companies hope will loosen Siemens' hold on the offshore market.
Despite negotiations going on for most of 2013, little is known about the structure of the joint venture, other than that it will hold all of Vestas' current offshore operations, including the V164 and the V112 offshore turbines. The finer details are likely to be known later mid-year.
The sticky question remains over the future of MHI's own 7MW SeaAngel turbine. Although its hydraulic drivetrain could eventually come over to the JV, and thus the V164, the SeaAngel could still feasibly be developed separately by MHI and go up against the V164.
Such a deal seems to be the only option for a pure-player wind-turbine manufacturers, even one the size of Vestas, when it comes to developing offshore turbines. Nordex CEO Jurgen Zeschky understood this when, as new CEO, he took the painful decision in 2012 to axe the firm's N150 6MW following a fruitless search for a development partner.
The deal is symptomatic of Vestas' financial problems over recent years, says Sydbank analyst Jacob Pedersen, who also believes the joint venture product is the only one capable of competing with Siemens. "No matter how you twist it, these offshore projects are huge. The V164 has got to come off, it's got to be a game changer. If it's not, there are going to be big problems for the JV."