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Stock market trading from the Windicator

When talking stock market performance over the last quarter, big was by no means beautiful. The wind industry's big boys, Vestas and Gamesa, not only under-performed the market, but also their smaller wind peers: Nordex, Repower and newcomer Clipper all posted sizeable gains over the period and significantly outperformed the broader share market. Indeed, the successful listing of Clipper along with rival wind turbine supplier Suzlon Energy and wind farm ownership fund Babcock & Brown Wind Partners gave welcome cheer to investors. While Vestas and Gamesa were together losing more than e1 billion of market capitalisation, the solid performance of the newcomers provided positive precedents for other new issues. The emergence of Suzlon as a listed company is particularly noteworthy, given its current market capitalisation at a cool e4 billion, albeit it on an exchange geographically remote from the European bases of its competitors and with a closely held ownership structure.

For Vestas it was an unhappy quarter, punctuated by its third quarter results and warning to the market of a likely operating loss for the full year 2005. The profit warning was far worse than the market expected and was reminiscent of the days before the launch in May last year of its "Will to Win" strategy by new boss Ditlev Engel. The dire news left the analyst community deeply divided. Can Vestas become sustainably profitable? What, if anything, does the news mean for the company's institutional and individual credibility? When exactly is the honeymoon period over for Engel? For now, it simply depends on who you ask. Some analysts fielding "buy" recommendations before the warning left them unchanged, even suggesting it could be a good time to buy cheap. They argue that Vestas is simply clearing up after the old management and the terrible headline numbers are not as bad as they look. In sorting out some of the real issues, like component supply shortages, their hope is that Vestas can deliver sustainable profits after all. Others took a completely different view, slashing their ratings on Vestas and issuing scorching criticism of the company. At least Vestas managed to round off the year positively with the announcement of an order for delivery of up to 800 MW to the US in 2007 and 2008.

Spain's Gamesa had an active quarter including changing its chief executive and a flurry of new contract announcements, among them a framework agreement of up to 600 MW in the US, new deals in China, and one large deal with major customer and shareholder Iberdrola. Gamesa seems to have escaped any sustained negative downdraft from the Vestas profit warning -- with analysts receptive to the thesis that Vestas' challenges are company-specific. But it did spend the last part of the quarter overshadowed by the Vestas' news and talk about regulatory change in Spain. Its third quarter results received a mixed reception, with some analysts viewing them as average and others suggesting reaching full year targets could be challenging.

For Repower things are looking up, with the big news being the arrival of French nuclear company Areva SA as a 21% shareholder. While the share ownership of Repower has always been somewhat concentrated, with Martifer of Portugal owning a large stake, Areva's appearance has spurred interest and excitement about the potential for Repower to more rapidly expand its business. Its share price responded accordingly -- up 31% for the period, far outpacing the broader market.

Like Repower, Nordex had a strong quarter in terms of stock price performance, ending 26% higher. The company reported much improved third quarter results compared to the previous year and reiterated its expected sales increase and profitability targets for 2006. Further positive news flow came from the signing of a joint venture contract for the local production of megawatt class wind turbines in China.

Having listed at the start of the quarter, Clipper Windpower finished 15% higher. A sharp jump in its share price on December 1 followed a trading statement announcing it had executed term sheets for the sale of 335 MW of capacity in the US. The statement also said a greater proportion of sales would be to third parties rather than to its own projects.

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