Gamesa looks to Latin America for recovery

SPAIN: Gamesa's plan to recover from its first ever negative three quarter result - a €67 million profit loss between January and September - is based on a combination of chance and planning.

Hopes lie in the recovery of its two key industrial hubs and markets of the US and China. Beyond that, the company's business plan to 2015 shifts the focus to emerging markets, especially Latin America and India, where it expects to combine 70% of its business next year, up from 5% in 2006.

Investor confidence, however, seems to lie more in the Spanish firm's US business. The company's share price rose 2% when Barrack Obama was re-elected as US president last month, due to raised hopes of renewal of the federal production tax credit. In contrast, the share price dropped by more than 2% the day after Gamesa announced its business plan at the end of October, together with plans to cut its workforce globally by 1,800 and to focus on higher margins from reduced business volume.

Investor doubts aside, Latin America is, with China, "one of the two main global growth markets," said Peter Sweatman of consultancy Climate Strategy. "Gamesa has a strong existing customer base, a common language and familiarity with Spanish banks and financing sources operating there," he said. Gamesa is expecting 47% of its 2013 sales to come from Latin America, which is already absorbing orders from the company's US turbine sites in Pennsylvania.

High stock market expectations for India's delayed wind boom were reflected in one of the highest hikes - nearly 5% - in Gamesa's share value in 2012, following a contract with utility SJVN Group to build a new wind farm in Maharashtra.

Meanwhile, Gamesa confirmed it is slowing down development of its 7-8MW offshore turbine to focus on the 5MW model, due to at least a two-year delay in the UK's Offshore Round 3, Gamesa's planned point of entry offshore.

Gamesa's offshore confidence was boosted by Spanish utility Iberdrola's October declaration that Gamesa would be among its offshore suppliers "providing it produces a good product", a spokesperson said.