Stock price performance from the Windicator

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Against a backdrop of ever-increasing oil prices and continually volatile stock markets, the publicly listed wind turbine manufacturers had another bumper quarter. European listed manufacturers posted a 28% gain for the period, compared to an overall stock market increase of only 3.2%. In India, Suzlon also outperformed the market, up 8.5% against a market decrease of 1.3%.

Vestas has now been a listed company for ten years and this last quarter its share price reached an all-time high on the back of a 26.1% increase for the period. Looking back on a decade on the Copenhagen exchange, Vestas' share price looks like the plotline of a movie in five, two-year parts. The first part, running from its initial public offering and through 2000, was rosy, with accelerating and dramatic price increases reaching highs in late 2000 that were not to return until just a few weeks ago. The second part, through 2002, sees almost all of these gains unwound in equally dramatic fashion. As in all good drama, rock bottom is hit in the third part as 2002-04 prove to be lean years on balance for investors. In the fourth part the company rises from the ashes, with some notable setbacks, but 2004-06 are good years with the share price steadily climbing on the back of more consistent performance and a will to succeed. Just picture the montage that might accompany this on the screen. Now in the current, fifth part of the drama, the share price really takes off, hitting a new record this quarter as past problems are put to bed and everything seems to go the company's way, a fulfilling end to a ten year saga.

But unlike movies, and unless mergers or insolvency intervene, companies do not just end. They keep going indefinitely. The past ten years are just the prelude to the next ten. As the share price suggests, the future currently looks bright for Vestas. The company is talking of an annual production of 10,000 MW in 2010, producing more in a year than was installed in all of Europe when the company went public in 1998. Everything looks terrific, but the one certain thing you know about the future is that this will not always remain so. In its Q1 results presentation (Windpower Monthly, June 2008), Vestas asked whether the current recipe of high oil and steels prices and a weak US dollar was a short or long term trend. While it is a highly relevant question, what is needed for high valuations to be supported over the long term is a company that is not only more than ready to capitalise on the opportunities available today, but is nimble and able to react to changing market conditions over time, regardless of the oil price. Whether after a decade of being publicly listed Vestas is ready to carry that mantle remains to be seen, but once more we give it the benefit of the doubt.

Corporate evolution

Gamesa took a further decisive step in its corporate evolution in the past quarter. Fourteen years ago it entered the business as a Vestas partner, shaking itself loose from that tie in 2002. Now it is moving ever closer to its key customer and shareholder, Iberdrola, in effect repositioning itself as more of a "pure-play" turbine manufacturer. Gamesa's European wind development business, historically a key engine of its growth, has become a joint venture with Iberdrola on the back of a 4.5 GW turbine sales agreement (page 55). Although Gamesa retains its development business in the US and China, the European tie with Iberdrola represents a significant change. Gamesa's share price through June 5 was up 15.0% for the quarter.

Like Gamesa, Suzlon also reported not unexpected corporate development news. Following significant share price appreciation after the resolution of the Repower takeover battle, Suzlon acquired Areva's shares in Repower, securing 89% of voting rights (page 56). Suzlon's shares, up 8.5% for the period, were pressured earlier in the quarter by fears that the purchase price for the Areva block of shares might be higher than budgeted. As Suzlon moves closer to controlling Repower, it suffered a setback during the quarter when Edison Mission opted not to order 150 turbines. Some commentators pointed to Suzlon's recent blade failures as a possible reason for this. The company ended its financial year reporting strong results. Market analysts have noted Suzlon's strong order intake, particularly during the past quarter. Suzlon has also shown it knows how to make money in the sector, both through selling turbines and acquisitions.

Nordex and Clipper

Nordex posted another strong quarter, leading the field with a 36.2% share price increase after posting solid Q1 results, broadly in line with expectations. The company further announced a $100 million investment plan to produce turbines and rotor blades in the US (page 40). A degree of speculation continues over whether any Nordex shareholders might sell their stakes, though the company continues to produce strong results and exceptional returns for its investors.

While Nordex may or may not change core shareholders, Clipper added an important new one as it continued down the inevitably bumpy road to full operational ramp up. The company announced a number of different capital raisings to support its growth, taking $50 million equivalent from existing institutional shareholders to meet working capital requirements, a $60 million new bank loan and, perhaps most significantly, a $150 million investment from privately held One Equity. Its prospective focus on strengthening the company's supply chain and board membership are seen to be particular sources of potential added value. Clipper's order book continues to grow, reaching 2063 MW of firm orders through 2011. Its Capgen joint venture capital raising is progressing, says the company, with receipt of non binding commitment letters based on a $900 million valuation (pre-capital raising). Clipper's shares were up 2.3% for the period.

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