Global Markets Companies: Siemens has eyes on the prize

WORLDWIDE: Wind turbine suppliers can be forgiven for boasting a little, considering the booming market. But few companies display more confidence than Siemens Wind Power, which has made clear plans to ride the growth and even outpace it. "Our goal is to become one of the top three providers worldwide by 2012," says Rene Umlauft, CEO of the Siemens' renewables division. He has repeated the challenge to rivals in recent weeks.

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The company has many strengths - a reputation for quality, a wellspring of technological and financial know-how at parent Siemens AG, and more than 1GW of installed offshore wind power capacity that it hopes to boost to 8GW by 2014. It says it already has orders for 3GW of offshore capacity towards that target.

But the company has its work cut out. According to Danish wind consultancy BTM Consult's 2009 World Market Update (see page 81), Siemens actually dropped from sixth position in 2008 to ninth as market share fell a percentage point to 5.9%. The drop was due to the sudden rise of Chinese rivals Sinovel, Goldwind and Dongfang, whose turbines are installed almost entirely in China. But a recent batch of exports by Goldwind suggest competition may soon go global.

Odds defied

Despite the financial crisis, Siemens Wind Power achieved double-digit growth last year. New orders climbed 16% to EUR4.8 billion, while revenue at Siemens' renewables division rose 39% to EUR2.9 billion. Siemens does not divulge comprehensive earnings for its wind power unit, but says about 90% of revenues at the renewables division are produced by the wind unit.

Offshore wind is critical. In March 2009, the company secured an agreement with Denmark's Dong Energy, Europe's leading offshore wind developer, to supply 500 3.6MW turbines for 1.8GW of offshore wind projects in Northern Europe (Windpower Monthly, April 2009). The arrangement, billed by the companies as the largest of its kind, was expanded in January.

Now with the London Array, the world's first 1GW offshore wind farm, in motion, Siemens is seeing new opportunities emerge. In December, London Array awarded Siemens a EUR1 billion contract for 175 3.6MW turbines, the largest of seven orders to suppliers, worth EUR2 billion in total. Siemens is studying potential locations in eastern and north-eastern parts of the UK to build a factory to make offshore turbines.

Gearing up, gearing down

"Our investment in offshore is paying off," says Umlauft. "Our customers for these projects are mostly utilities with strong financial resources. So we changed our strategy and focused even more on the offshore segment."

And while the company is ramping up its European operations, such as opening a nacelle assembly line in Denmark that it called key to meeting its 2012 target, it is also expanding in other key markets. Besides beefed-up production capacity in the US and a new turbine plant to be built in India, operation is to start soon at a rotor blade factory in Shanghai, China. Nacelle manufacturing will follow in 2011, says Umlauft.

Siemens is also seeking an edge through innovation. It is working with Norwegian energy company Statoil on a floating offshore wind turbine that the companies hope will enable more flexible exploitation of offshore wind power. It is also developing gearless wind turbines that it claims use half as many parts as conventional models.

Prize fight

There are many challenges on the horizon. In March, Jens-Peter Saul replaced Andreas Nauen as CEO of Siemens Wind Power after Nauen left to become chief executive at German competitor Repower.

Saul had little time to settle in. Days after he started, a blade fell off a 2.3MW Siemens turbine at Scottish wind farm Whitelea, closing the giant 322MW project for several days. Then the world number-two wind turbine manufacturer General Electric announced plans to invest EUR340 million into the European offshore wind sector.

The battle for China will also be tough: rival Vestas is also expanding aggressively there. 

This could make Siemens' climb slippery. "They have the power and are a very strong organisation but there is a long way to go and the competition is fierce," says BTM Consult director Birger Madsen.

Umlauft is undaunted. "Wind will be the most important renewable power source," says Umlauft. "We are well on track to achieve our ambitious targets."

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