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Stock price performance from the Windicator

The first quarter of 2009 was another tough one for the publicly listed wind turbine manufacturers (charts), though they performed no worse than the wider market, unlike in the previous quarter (Windpower Monthly, January 2009). The combined share value of the Windpower Monthly Equity Index of listed wind turbine manufacturers in Europe declined by 16.3% over the three months to March 13. This is only slightly worse than the 15.4% decline in the Financial Times Stock Exchange Eurofirst 300 Index. In India, on the other hand, shares in Suzlon took another battering, with the company underperforming the Bombay Stock Exchange SENSEX 30 index by a wide margin.

The green energy promotion measures contained in the US economic stimulus bill have improved investor sentiment, but analysts and investors are still treating the wind sector with caution. During the quarter, investors continued to focus on the risks to the wind market posed by lower energy prices and the evaporation of capital for wind farm projects as equity investors pocket what money they have and loans for project development dry up in the global credit crunch. With the full impact of these factors hard to quantify, investors fear that wind turbine makers will negatively adjust their guidance to shareholders on the state of their businesses as the year progresses.

Upbeat: Nordex, Vestas and Repower

Germany's Nordex was the best performing stock in the sector. Its share price declined by just 1.2% over the quarter, a relatively strong performance that is partially attributable to the firm's reasonably upbeat guidance for the year. In early March, Nordex announced relatively good results for 2008 and, more importantly, a forecast for higher sales in 2009. The company's Thomas Richterich says he expects sales for the industry as a whole to remain flat in 2009, but predicts Nordex will increase its market share for a fifth consecutive year. The firm's stock price rose 18% following the results announcement.

Denmark's Vestas also reported a strong fourth quarter and an upbeat outlook for 2009, although one tempered with caution. Vestas told analysts in February that it still expects 2009 sales to grow 19%, but said this would only occur if the firm's order backlog increases during the first four months of 2009. The firm's stock price fell by 10.4% over the quarter. Repower of Germany, majority-owned by Suzlon, turned in a similar performance. It logged a 12.9% decline in its share price over the quarter, during which it announced strong third quarter results and reiterated guidance for sales growth in 2009 and 2010. The stock received a momentary boost from the February 18 news that the company had won a EUR 2 billion contract from utility RWE Innogy for 250 turbines for offshore use in Germany.

Downbeat Gamesa, Clipper, Suzlon

The worst performing company in Europe over the quarter was Spain's Gamesa, which suffered a 31.3% decline in its share price. The stock was badly hit in late February when the company announced 2008 results and a forecast for basically flat sales in 2009 (page 40). American firm Clipper, the first of the turbine manufacturers to lay off workers citing the market downturn, also performed poorly, declining by 23.4% over the quarter. The company's provisional figures for the second half of 2008 indicate it has lost money. It also provides a downbeat assessment for the year, predicting that order deferrals and cut backs in customer commitments are likely to result in a 20-50% decline in turbine production. Clipper's major customer and backer, energy company BP, in February lost the head of its wind division, Bob Lukefahr, to a solar company.

For India's Suzlon it was another tough trading period. It reported worse than expected third quarter results, contributing to the stock's 33.7% decline during the period compared with a 9.6% decline in the SENSEX 30 "sensitivity index." Higher than expected costs incurred for the replacement of cracked blades in the US were mainly to blame for the loss, it said. Investors were also disappointed to see a declining order book and an increase in inventories as customers delayed taking delivery. Contributing to Suzlon's troubles has been persistent speculation about the likelihood of some form of equity financing, which some analysts believe will be necessary to meet the company's liabilities.

As of March 15, 43% of the 122 broker recommendations on the six publicly listed wind turbine companies were to buy, according to data from Bloomberg (charts right). This is down from 53% in December and 57% in August 2008. Vestas remains popular, with 54% of analysts issuing a buy recommendation, but Clipper is the most popular stock, with 60% recommending it as a buy option, up from 40% in December. Nordex, despite having the best performance over the quarter, has the lowest proportion of buy recommendations, at just 23.5%, down from 33% in December.

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