Since it was founded in 1984, Germany's leading wind turbine manufacturer, Enercon, has developed into perhaps the most enigmatic company in the wind industry. Despite selling what appear to be the most expensive wind turbines available in the business, it dominates its home market, the largest in the world, and sold more turbines globally last year than any other company bar Vestas and Gamesa, while in 2003 it was only beaten by Vestas. Enercon's success is something of mystery to many.
In Germany last year Enercon installed 940 MW, 42% of the 2037 MW developed worldwide, and exports grew to 450 MW. Its performance in taking 15.8% of the global market in 2004 compares with sales of 1474 MW by Spain's Gamesa Eólica (18.1% of the market) and 2783 MW (34.1%) by Vestas, according to this year's edition of the wind industry's World Market Update by Denmark's BTM Consult. By the end of the 2004, cumulative sales by Enercon in its 20 years of existence amounted to 7075 MW, putting it in second place behind the merged Vestas and NEG Micon's 17,580 MW, reports BTM. Enercon's higher priced turbines have clearly not been a deterrent for high volumes of sales.
Little information about the company is available in the public domain. Enercon -- a conglomerate of limited liability firms -- is largely owned by its founder, Aloys Wobben. It is a medium sized industrial company employing around 6000. In a stagnating home market, it is focused on increasing its international business. Enercon sought a financial rating last year and was qualified as an A+ company by German rating company Euler Hermes, part of the Allianz group. Euler Hermes is rated A+ by Standard & Poors.
no pressure to please
As a private company Enercon is not required to present its accounts for public scrutiny, unlike listed Vestas. Less in the corporate limelight and not under pressure to please shareholders, Enercon does as it pleases, often challenging accepted industry wisdom. More than once, Wobben has stood on platforms at international wind power events and harangued other industry leaders for their focus on cheaper wind turbines. Pressuring vendors to cut component costs is not the way to go, he admonishes, using language that leaves no doubt about his strong feelings on the issue.
Wobben has also publicly stated he is unconcerned about having no presence on the US market, saying he does not wish to make money in a country which "wages wars on other countries." Until recently, Enercon was legally banned from selling its turbines in the US following a long-running patent dispute, first with Kenetech, then with Enron and finally solved after GE bought Enron Wind (Windpower Monthly, June 2004). The dispute stopped a major project in Texas being equipped with Enercon turbines in the mid 1990s and Enercon has yet to sell a turbine in the US. The backdoor may be opening, though. It has its foot in Canada (page 29).
Enercon makes much of its absolute commitment to quality. Unprepared to compromise on materials or design parameters, quality is the unique selling point it uses to justify its higher product price. "Each of our turbines is a unique product," stresses Wobben. What counts, he says, is price per kilowatt hour, not the price per turbine. Even if it means high labour costs, it is still cheaper to put the effort into high quality manufacture and produce a product that will last 20 years than deal with the cost of outages for repairs and replacements, he stresses.
Enercon's employees are its most prized asset, says Wobben. The company has deliberately avoided automating all production processes, which might account for why it employs 6000 people compared with Vestas' 9450 strong workforce, even though Enercon's business is half the size. But Enercon turbines are not produced in sufficient quantities to warrant automation, Wobben says. "And people are more flexible," he points out. On the factory floor, drips of paint on metal parts are sanded smooth by hand and dust removed from sensitive parts with a paintbrush.
Enercon's fortunes are closely linked to those of the stagnating German market. The company's peak year for megawatt sales was back in 2002, according to BTM Consult. The pattern is reflected in company revenues. After a sharp increase from EUR 0.6 billion in 2000 to EUR 0.92 billion in 2001, turnover peaked at EUR 1.23 billion in 2002, dropping slightly to EUR 1.2 billion in both 2003 and 2004. Interestingly, megawatt sales in 2004 were higher than in 2003, suggesting that even at Enercon, costs are being cut or profit margins squeezed as it struggles to moves its business abroad and out from under the sheltering arm of Germany's highly protected wind power market.
Despite Enercon's second and third place rankings in terms of sales in the past two years, its revenues for 2004 are half those of industry leader Vestas and megawatt sales well under half. Vestas reports net turnover of EUR 2.56 billion on sales of 2784 MW. Enercon's nearest rival today in terms of revenues is Spain's Gamesa group. Yet although Gamesa projects 2004 net turnover at EUR 1.8 billion, its turbine manufacturing division, Gamesa Eólica, accounts for only EUR 1.16 billion, just under Enercon's turnover, even though Gamesa sold 186 MW more than Enercon in 2004, according to BTM. GE Energy's wind unit increased its revenue from $500 million in 2002 to more than $1 billion in 2004, according to the company, though in terms of sales, BTM puts it well behind Enercon at 918 MW, or 11.3% of the global market.
Enercon now has sales offices in 17 countries. Last year exports accounted for around 33% of its sales, up from 17% just two years ago, with the largest overseas deliveries in 2004 going to India (137 MW), Austria (102 MW) and Portugal (84 MW). In an overview of the top ten markets by BTM Consult, Enercon sold more megawatts in Portugal than any other wind company and is ranked as the third supplier in India, after Suzlon and Vestas, and the third supplier in the Netherlands, after Vestas and Nordex.
For 2005, the company wants exports to account for 50% of its business. New opportunities are expected in Australia in particular. Although by the end of 2004 the company had delivered a total of just 39 MW to the country, it has recently won a 70 MW order for a wind farm at Mount Millar on the Australian Eyre Peninsula.
Enercon is increasing its production this year to meet a forecast increase in sales of around 7%. A sharper increase in production and sales is expected for 2006, but new customers will still have to wait for deliveries -- this year's production is largely accounted for as is part of that in 2006.
The company is updating its standard turbine products, with series production of three new onshore models planned for later this year. Its 300 kW machine will be replaced with a 330 kW turbine (E33) and the 600 kW machine with an 800 kW version (E48). In both cases energy yield will increase by 25%, the company says. Meanwhile, its 1.8 MW turbine will be replaced by a 2 MW machine (E70), providing an additional yield of around 12%. The 330 kW and 2 MW models are being equipped with rotors based on an entirely new design and production technique, says the company.
New manufacturing facilities are under construction. These include a factory in the harbour town of Viana do Castelo near Porto in Portugal, which will turn out blades for the 2 MW machine. "Infrastructure is excellent for sea transport," says the company of its choice of location. A blade factory is also being planned for neighbouring Spain. At home in Germany, new production and administration facilities are being built at Enercon's already substantial works in Magdeburg, in east Germany at a cost of at least EUR 10 million.
The expansion of the Magdeburg manufacturing base, established in 1998, will increase the number of employees there from 2500 to 3000 by the end of this year. Local politicians already dub the area "Europe's secret wind energy capital." A new blade production facility at Magdeburg, for the 2 MW machines, already started output in 2004. In February, it was converted to produce the new blade design, which will be making 15 to 35 blades a week by the autumn.
confident of the future
Meanwhile, series production of the Enercon 4.5 MW turbine, of which five are currently in operation, is also planned to start at Magdeburg in late 2005 at a rate of one a month. The machine is currently being tested for offshore use, but Enercon is confident the 4.5 MW unit has a future in Germany's market on land as well. Wobben points out that just 5700 of these turbines on land would generate electricity to meet 25% of the country's needs. Today, more than 16,500 turbines generate 4% of German electricity production. Wobben believes the giant turbine could play a substantial role in repowering of old wind stations, with single turbines replacing groups of several smaller machines.
In addition to facilities at Magdeburg and at Enercon headquarters in Aurich, not far from Germany's North Sea coast, the company has operations in Sweden, Portugal, Brazil, India, and Turkey. In Sweden it works with a former submarine manufacturer to produce turbine towers using heavy steel suitable for use with the 4.5 MW machine in offshore conditions. A Portugal facility produces steel towers, while in Brazil the company's factory, acquired in 1996, produces 600 kW turbines and blades for both 600 kW and 1.8 MW turbines.
Enercon India's manufacturing plant produces 300 kW and 600 kW machines, including blades for both models and the entire Indian operation, including marketing and sales, employs some 1000 people. Meanwhile, Enercon's factory at Izmir, Turkey, opened in 2002 to produce blades for the 600 kW machines. The facility can turn out ten blades a week, but the company is waiting for the Turkish wind market to take off before full production capacity is reached, it says. The UK market is also being considered for a potential production site. "We could build towers or blades, generators or do assembly," says Wobben. "The UK has good foundries for steel casting and there is a big potential turnover for sub-suppliers."
While much of Enercon's success undoubtedly stems from its privileged position in Germany -- and some of it may also be linked to its determination to produce machines that need few repairs -- it also has a long history of industry innovation. From its tried and tested concept of wind turbines without gear boxes right down to solving problems connected with transportation of huge component parts, Enercon has frequently been an industry leader.
In Jamnagar in India the company has a mobile prefabricated concrete tower manufacturing facility for 600 kW turbines. Under the protection of two huge tents, 74 metre high towers are produced in 18 segments, with a 5.5 metre base diameter and a tower top diameter of 1.8 metres. The canvas-roofed facility, employing up to 300 people, will remain in operation for the next three years to produce towers for more than three hundred 600 kW machines destined for sites in the state of Gujarat.
In a similar initiative, this time to solve transport problems associated with large steel towers, mobile tower production is being planned by an Enercon subsidiary, Stahlturm und Apparatebau Magdeburg. Towers will be delivered to sites as heavy steel plate. Under a tent construction, the plate will be rolled and welded into towers and treated against corrosion. This procedure, says the company, will pay for itself with a single turbine sale. "It is significantly simpler and cheaper to transport components and tools to the construction site than to shift extremely large components through the countryside," it notes.
Enercon's ability to think outside the box -- and the flexibility to innovate that private ownership affords -- may be the real key to its continuing success.