Major merger in the works, Nordtank and Micon

Seeking higher profits and a competitive boost on the global market, two of Denmark's wind industry heavyweights have announced intentions to merge. While turnover at Nordtank Energy Group A/S and Micon A/S has exploded in recent years, competition has been fierce and profits have failed to keep pace. The merger could make the new entity NEG Micon A/S the second largest wind firm after Vestas.

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Two of Denmark's wind industry heavyweights have announced their intention to merge. The boards of Nordtank Energy Group A/S and Micon A/S, both publicly traded companies, outlined their plans in Copenhagen on May 30. Their aim is for the new entity, NEG Micon A/S, to make a profit of 6-8% of turnover in 1998, a fivefold increase of the combined profit of both Nordtank and Micon last year. The merger would make NEG Micon the second largest wind firm after Vestas.

Earlier in the month, Nordtank and Micon had jointly informed the Danish stock exchange of "a possible integration on a fifty-fifty basis." Detailed merger plans are to be put to shareholders for approval on July 4. Under the plans, Nordtank's share capital is to be doubled to DKK 46 million, with the new shares offered to Micon's existing shareholders.

Micon and Nordtank say the aim of the merger is to create a company with powerful competitive advantages on the global market. Industry observers, however, suggest the potential for savings through rationalisation of the two businesses is also behind the decision. While the Danish wind industry's turnover has exploded in recent years, competition has been fierce and profits have failed to keep pace -- with Nordtank and Micon no exception.

Turnover at Micon increased from DKK 388 million in 1994 to DKK 875 million in 1995, and DKK 755 million in 1996, but profit last year was just DKK 3 million compared with DKK 14 million in 1994. At Nordtank, turnover increased from DKK 551 million in 1995/96 to DKK 700 million last fiscal year. But while net profits in 1995/96 were DKK 26 million, they dropped to DKK 14 million last year. Nordtank's Vagn Trend Poulsen insists the proposed merger is an "offensive plan" from two companies in profit, but it seems it can also be seen as a defence strategy in a time of crucifyingly hard competition.

Indeed a recently published market report states that the manufacturing capacity of the ten largest companies in the wind industry will exceed market demand over the next five years by some 35-40%. According to "International Wind Energy Development -- World Market Update 1996," published by BTM Consult (Windpower Monthly, April 1997), the world's five largest wind companies could have supplied all the turbines sold in 1995 and 1996 -- just under 1300 MW.

Of this nearly 70% was supplied by the top six -- Micon and Nordtank among them -- according to BTM. While Micon, in third place behind Vestas and Enercon, sold some 134 MW of capacity (10.4% of total sales) in 1996, Nordtank lay in sixth place with sales of 82 MW, representing a 6.4% share of the 1996 market. In terms of total sold megawatt over the past couple of decades, Micon, with sales of 531 MW, lies in third place behind Vestas and Kenetech, which with all-time sales of 1304 MW and 706 MW apiece, respectively, account for 20.6% and 11.1% of the existing market. Micon has 8.4%. Nordtank lies in sixth place, not far behind Enercon and Bonus, with total sales of 432 MW, or 6.8% of the market.

Now and then

If the merger goes ahead, NEG Micon will be headed by a new face in wind energy, Jens-Erik Kristensen, who would assume his post by December. He is currently director of a British company with 1000 employees -- APV Contracting in Crawley, a division of APV Plc of London, a medium sized global engineering group in the food, beverages and pharmaceutical business with 20,000 employees. Nordtank's director and co-owner, Vagn Trend Poulsen, would head marketing at NEG Micon, while Micon's director, Ole Bøgelund Nielsen would head the technical side.

Nordtank and Micon headquarters both lie in the east of Jutland, about 50 kilometres apart. NEG Micon's administration would be carried out from Micon's purpose-built premises in Randers, along with production of Nordtank's 1.5 MW turbine. Assembly of 600 kW, 750 kW and 1 MW turbines would be at Nordtank's current headquarters in Balle, with other work carried out at Nordtank's facility in nearby Grenaa.

In countries where both companies have subsidiaries, these would be merged. Regarding Micon's long term relationship with NEPC Micon in India and Nordtank's marketing agreement with German giant Thyssen for sales in specific countries, the future seems unclear. Bøgelund Nielsen and Trend Poulsen merely say there is nothing in the merger plan to prevent existing co-operation agreements from continuing.

NEG Micon's new owners would be: VTP Holding, owned by Nordtank director Vagn Trend Poulsen (10%); Kommunernes Pensionkasse, a pension fund (7.4%), Union Bank of Switzerland (2.29%); company board (0.08%), employees (0.11%), A/S Schouw & Co (46.20%), Momenta Aps -- owned by the chairman and director of Schouw -- (3.65%); NEG Micon's own shares 0.22%; with the remaining 29.96% mainly owned by today's small shareholders in Nordtank.

Micon became a publicly traded company through the back door after the firm's founder, Peder Mørup, sold his shares some years ago. The company has since been owned by the industrial group Schouw & Co together with Vestervangen Holding. Schouw has gradually bought Vestervangen's shares and now owns a controlling 71.9%. At Nordtank, Poulsen, together with UBS, bought the company from its founder, T. Rørbæk Jensen in 1993.

Nordtank and Micon stress they would both win from a merger. On overseas markets, they have concentrated on different regions, with Micon active in South America, especially Argentina, while Nordtank has made inroads in Asia, China in particular. Micon turbines are produced in Minnesota, in the US, as well as in Denmark. Technically the companies complement one another. Micon's product programme includes 600 kW, 750 kW and 1 MW models. Nordtank supplies a 600 kW turbine and a 1.5 MW unit.

BTM Consult estimates a market of 1600-3000 MW annually over the next five years, bringing world wind capacity to over 17,500 MW in 2001, up from today's base of 6000 MW. Much of this will be developed by utilities using megawatt turbines, says BTM.

Since the beginning of the year both Nordtank and Micon have seen their share prices rise, Nordtank's from 276 to 410 and Schouw & Co's from 458 to 540. If NEG Micon becomes a reality, the new company sees the light of day nearly 20 years after Nordtank built its first wind turbine under the leadership of a factory controller named Peder Mørup, who later left Nordtank to start Micon.

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