Industry observers had for several months voiced disquiet about NEG Micon's aggressive takeover tactics, fearing the company was overstretched on several fronts. Reports of a potential series gear box failure (Windpower Monthly, May 1999) added to the general feeling of unease about NEG Micon's performance. These fears were confirmed last month when the company informed the Copenhagen stock exchange of its half year loss, attributing it to "considerably higher costs than expected with the completion of the large American projects, a completion that became extremely pressed and very difficult as it became necessary to check large numbers of gear boxes." NEG Micon also reported "unexpected extra costs" with other US projects.
Vice president of NEG Micon's board of directors, Erling Lindahl, has taken over Kristensen's seat until a new managing director is found. Lindahl is a director of the large Schouw concern, a Danish engineering conglomerate of diversified interests which owns 46% of NEG Micon's shares and is the largest shareholder.
One off problems
Despite the negative report, NEG Micon says "the problems in the first half year are expected to be of a non-recurrent nature." Furthermore, because the company "will be in better control" a profit of DKK 125 million is predicted for the second half of 1999. This expectation is "based on a large order book for delivery to neighbouring markets." Total profit for the year is predicted to be about DKK 75-100 million before tax.
On the other hand, NEG Micon risks a potential series failure of its gear boxes, problems the company describes as "larger than first assumed." Until last month the firm was attributing unusual wear in the gear boxes on large turbines to a problem with the gear box oil (Windpower Monthly, May 1999). In April, the company announced it would change the oil in all NEG Micon 750 kW turbines at a total cost of DKK 10 million.
Lindahl says he has been oriented about the problems with gears and bearings on the large turbines that, if true, can reduce the lifetime of gears below previous expectations. "We are investigating that at the moment and we will have a conclusion as fast as possible," Lindahl says, adding that it could happen as soon as this month. "Our attitude is that our customers must not suffer from this, and we will solve the problems together with a large and strong gear supplier," he says.
Lindahl says Kristensen's strategy for global growth-aimed at making NEG Micon the world's largest wind company-will now be thoroughly examined. Kristensen, with a background in the international dairy industry in Denmark, the US and England, took up his post just months after NEG Micon was formed in 1997 from the merger of Nordtank Energy Group and Micon A/S. Since then he steered the company towards takeovers of eight suppliers and competitors. As NEG Micon says in its half-year report: "Seen from an overall perspective, there have been too many activities going on at the same time."
Lindahl notes that three of the purchases were particularly devastating to the half yearly results. Dutch wind turbine manufacturer NedWind, bought by NEG Micon in September 1998, had losses of DKK 7 million (Windpower Monthly, July 1999) as well as management problems, which led to the firing of all NedWind managers. Meantime, Danish wind turbine maker Wind World, which was bought in August 1998 for DKK 97 million, did not bring with it the expertise in gear technology for which Kristensen and the company had hoped. "For the money we paid for Wind World, we did not get much in return," comments Lindahl bluntly.
Additionally, the British blade factory Taywood Aerolaminates-bought by NEG Micon in March 1998-had losses of DKK 10-15 million in the first half of 1999. The tide is expected to turn for this company, however. After several delays, it has got authority go-ahead for an expansion of its premises, which should cut the cost of blade production next year, Lindahl says. This will come as a relief to NEG Micon, he adds, which currently pays too much for its blades.