The Windicator: Stock price performance

With the exception of Clipper, boosted by merger and acquisition discussions, wind turbine stocks in Europe unusually underperformed the broad market in the last of the Windpower Monthly Equity Index quarterly reports for 2009.

In the European index (see graph 1 below), the five publicly traded wind turbine makers declined by 8% while the Financial Times FTSE Eurofirst 300 Index rose by 4%. For India's Suzlon, shares fell by 25% over the period, while the Sensex 30 Index of Indian stocks was up 10% and Goldwind also underperformed (see charts below).

 

 

 

 

Recent earnings announcements depict a slower than expected recovery in the US wind power market, caused by delays to the effective distribution of economic stimulus funds. Only two companies, however, actually cut their full-year guidance: Clipper, a US company traded on the Alternative Investment Market of the London Stock Exchange, and Suzlon. Other firms warned that full-year earnings forecasts depend upon recovering US demand. Clipper's stock price, up 21% over the period, was boosted by the September 16 announcement of a £4.4 million grant from the UK government. It jumped again two weeks later when Clipper disclosed it was in discussions to sell a large stake or be acquired outright. American corporation United Technologies has since emerged as the buyer of 49.5% of the company. Clipper was seeking new capital following cash flow difficulties caused by deferred shipments. It said it received interest from industrial multinationals and financial investors. The company, which entered the financial crisis weakened by having spent $290 million to date fixing its technology, announced first-half sales that were better than last year, but had to cut full-year guidance because of shipment delays.

Gamesa, nordex and Vestas

Spain's Gamesa was the worst-performing stock over the past three months, declining 17%. Its shares reacted badly to the abrupt replacement of chief executive officer Guillermo Ulacia in October and continued to slide following publication of the company's third-quarter earnings on November 12. It presented a fairly downbeat assessment of the industry's prospects through 2010 and new chairman and CEO Jorge Calvet, in the job for less than two months, said very little.

Germany's Nordex also faired badly through the period, with its share price declining 14%. First-half earnings released on November 24 included a prediction that: "Banks will not be able to sufficiently cover project finance requirements in the wind power segment in the first half of 2010." This prompted analysts to cut forecasts and ratings.

Denmark's Vestas, meanwhile, confounded expectations of a downward revision, reporting better than expected third-quarter earnings on October 25 and maintaining its full-year forecasts. As a result, it outperformed most of its peers with a modest 5% decline over the period. But Vestas said it is disappointed in orders and that its forecasts assumed US demand would improve in the fourth quarter.

 

 

Repower, Suzlon and Goldwind

Repower, now 91% held by Suzlon, traded in a narrow range over the period, rising by just 1%. In a sign that investor interest in the stock may be waning, reports of a 954 MW order received from two Canadian utilities announced on November 27 had a bigger impact on Suzlon's share price than it did on Repower itself. Repower reported improved first-half earnings on October 20, but warned that a sluggish US market heightened the risk of an earnings miss.

Suzlon's shares were buffeted by a September 23 announcement that the company's founder and major stakeholder, the Tanti family, had cut its holdings by 4.5% - to 53% - followed by the September 30 announcement of wider second-quarter losses and a downward revision to full-year targets (Windpower Monthly, December 2009). The stock failed to benefit from the announcement in November that the company disposed of a 35% stake in Hansen, but was finally boosted by news of Repower's large order from Canada.

The share price for China's only listed turbine manufacturer, Goldwind, increased 8% over the period, but the company underperformed the Shenzhen A-Share Index, which was up about 30%. The company plans to issue new shares on the Hong Kong market. It suffered from concerns about excess capacity in Chinese wind turbine manufacturing generally and declining turbine prices.

Amid general uncertainty about the outlook for demand globally, and in the US in particular, the analyst community's opinion of the wind sector has changed very little in the past three months, with buy and sell recommendations maintaining the pattern established earlier.

 

 

 

Development

A first glimpse of the year-end totals for wind power development around the world is emerging (see table, right). Global wind power capacity in Windpower Monthly's Windicator, at 146 GW, is currently running about 30 GW higher than at this time a year ago. The indication is that the volume of new wind power capacity installed in 2009 will equal or exceed the 27 GW of new facilities installed in 2008. For 2009, the year-end total is likely to hit 150 GW and may well exceed that watershed. As always, the final year-end Windicator totals will be published in the April issue of Windpower Monthly.

The US looks set to be the star performer for 2009. From reports gathered to date, it has installed 7.5 GW so far, an increase of 30%. Canada is also performing strongly, up 39% so far, but from a much smaller base. China is provisionally up 60%, with its year-end total tipped to potentially deliver another 3 GW. In Europe, Spain leads in gross volume with a 1.9 GW increase over the year, but Italy is doing best in terms of growth, with an increase of 34%, though again from a smaller base.

Progress continues to be slow in the Middle East and Pacific regions, although around 750 MW of capacity is under construction in Australia. Latin America has doubled its capacity within a year and has a number of projects in the construction pipeline.

Offshore wind megawatts have started to expand once more after a long period of sluggish growth, with the completion of some large projects in the UK and Germany. That momentum is likely to be sustained in 2010 and accelerate in 2011. Several offshore projects are at various stages of early development in North America, though with no construction starts in sight.

Economics

As raw material prices, steel and copper in particular, have stabilised, competition has returned to the wind turbine market, with more manufacturers offering machines at the same time as the global economic slowdown has reduced demand. The overall effect of the changes has been to stabilise wind farm prices (see page 41) and to strengthen the competitive position of wind relative to the fossil sources of electricity generation. Meantime, fossil fuel prices are tipped to go on rising.

Further downward pressure on prices is likely to result from continuing innovations in the wind industry, with significant advances in generator technology the most recent example: Permanent magnet generators are enabling weight and cost savings to be made.

Increasing government investment in research and development, particularly in the EU and US, is likely to boost the number and quality of innovations that reduce cost. Offshore, the performance and operating costs of wind farms have matched or exceeded expectations.

 

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