December's Vestas-NEG Micon merger announcement was the spark for the rally. A takeover premium combined with timely shareholder and regulatory approval made NEG Micon the best performing stock, up 82% on the previous quarter, while Vestas was up 37%. Spain's Gamesa -- which continues to be the darling of the industry -- also gained, thanks to its strong full year results and investor sentiment that it will gain market share at the expense of the new Vestas.
The effect of other market drivers, such as the strong 2003 new capacity installation figures for the US, tended to be neutralised by continuing uncertainty about regulatory issues, notably those concerning wind's federal production tax credit in the US and imminent changes in Spanish and German regulations in Europe.
The recent consolidation of the industry has thrown both the competitive as well as the investment landscape into sharp relief. Vestas is the reconfirmed giant trying to prove it can deliver shareholder value and hit its turnover and profit forecasts. Gamesa is the ascendant challenger hoping to maintain its outstanding growth and momentum. Vestas remains captive to realising its future, while Gamesa is captive to continuing its past. The sentiments of many stock market analysts covering the wind sector reflects this -- 46% of them rate Gamesa a "buy," compared to 35% for Vestas.
Analysts looked at Vestas with various shades of tinted glass. There were few changes in share ratings, but much speculation about the future performance of the newly merged wind giant. In comparison, a number of analysts downgraded the shares of Gamesa from "buy" to "hold," illustrating concerns that the stock price is too high and fears that the company cannot maintain its impressive record of financial performance and positive news flow.