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A reasonably satisfied boss -- Gamesa first half year

First-half year results from Spain's Gamesa show strong financial and operational performance from turbine manufacturing buoying up slower sales of completed wind projects -- though with the promise of big deals coming up. Extraordinary earnings aside, combined turbine and plant sales were EUR 897 million, 27% up on first half 2005, though net profits on these activities were down from EUR 65 million to EUR 63 million, mainly due to investments in new facilities abroad. On presenting the results, Guillermo Ulacia, who moved in as Gamesa's new boss at the start of the period, described them as "reasonably satisfactory."

Extraordinary items include the divestment of Gamesa's aeronautics and plant services divisions, sold for a combined EUR 125 million, boosting half-year net profits to EUR 187 million, 163% up on the same period in 2005.

Gamesa Eólica, the wind turbine manufacturing division, sold 818 MW in the first half of 2006, 45% up on the same period for 2005. Including 133 MW of work in progress, turbine sales totalled 951 MW worth EUR 748 million, 27% up on first-half 2005. Net profit was EUR 46 million, a 31% improvement. Earnings before interest, taxes, depreciation and amortization (EBITDA) also rose 31% to EUR 127 million. In June alone, Gamesa Eólica sold 200 MW, a corporate record but marking "a monthly standard for the second half of the year," said Ulacia. That implies year-end sales of over 2100 MW, way beyond 2004's record of 1474 MW.

Gamesa Energía results were not as rosy, with wind project sales dropping from 188 MW for the same period a year ago to 156 MW, and EBITDA down to EUR 23 million from EUR 26 million. Ulacia blames the dip on delays in licensing wind farms across Spain. He highlights improved performance in completing plant orders: deliveries to customers totalled 128 MW, with work in progress on 28 MW, compared to the 44 MW of plant delivered in the first half 2005, when work in progress stood at 128 MW.

Focus on accelerated delivery is a keystone of Gamesa's strategy under Ulacia's leadership. The turbine division also sharpened its performance, producing over the first six months 85% of all machines ordered in that period, compared with 65% over first-half 2005. Turbine production was up 12%, despite a world shortage of component and material supplies.

Another key strategy under Ulacia is consolidating turbine and plant sales in Gamesa's international target markets, the US, China and the rest of Europe outside Spain. Ulacia wants these to account for 60% of total group sales by end-2008.

Gamesa Eólica has started assembly at its new nacelle facility in China and is putting the finishing touches to four US facilities for production of 2 MW machines. The factories will start work immediately on supplying machines under the 264 MW deal with Shell Windenergy, announced in June. Gamesa Eólica also has a 600 MW framework agreement in the US with developer Horizon Energy. Furthermore, in both China and the US, Gamesa Eólica is "very near to closing important sales agreements with its main clients," said Ulacia.

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