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An industry caught unawares -- Shock and surprise

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Customer reaction to the intended merger of Vestas and NEG Micon (previous story) has been one of surprise, even of shock. Most are turning a cautiously optimistic face to the news, saying that a merged and bigger company should bring synergies that will drive down the cost of wind power, not least because a stronger, more firmly established Vestas should be able to negotiate cheaper financing. Others are concerned that a reduction in the number of market suppliers could lead to turbine prices going up.

"Because they are both big companies, the scale at which they are doing things should provide economies of scale that can be passed on to customers. Anything that makes us more competitive and have a better price is going to help us in our business in North America," says Jason Edworthy of Canada's Vision Quest. Edworthy is not concerned about a diminishing selection of turbine suppliers. "It's as much choice as you've got when you go to buy a car," he says.

Also from North America, Walt Hornaday of Texas wind developer Cielo hopes faster technology advances will result. "If they are to combine efforts and push on developing more efficient turbines, that's good for us," he says. "It's also good if the merger means that it shores up the financial conditions for these companies."

Alan Mortimer of Scottish Power, which develops projects in Britain and markets wind power in the United States through subsidiary PPM, also hopes for maximum technology innovation. "We did not see this particular merger coming, but in the longer term, consolidation in the market is expected," he says. "Overall we would see it as positive for the industry."

Even long time members of the business were caught unawares. "It came as a bit of a shock," says Ian May's of Britain's Renewable Energy Systems (RES), which develops wind plants worldwide. "What I am surprised about is that it is NEG Micon and Vestas," he continues. "I am surprised that there was not a new entrant coming into the market." He feels competition in turbine supply will be reduced, but that a stronger company will emerge.

"It's positive for the industry. It has its pluses and its minuses -- it reduces the number of competitors, but provides a larger, stronger company that is a counterweight to other large parties," says David Jones of Shell Wind Energy, another global developer. He sees the merger as particularly good for the offshore market, in which Shell is a major player.

In Australia, Colin Lieberman of RES's Sydney office says he feels the merger is good from a shareholder's point of view, but less good from that of a customer. "Less competition amongst suppliers usually means higher prices. But a stronger company is good from a financier's point of view."

Unconcerned Spanish

In Spain, the merger will put Vestas firmly back into a market which closed its doors on the Danish world leader after it split from Spanish technology partner Gamesa two years ago. Gamesa shareholders appear not to be worried about rival supplies hitting the market of the same basic turbine concept: Gamesa share prices went up after the merger was announced. The rise was apparently a reaction to news the same day that Vestas and Gamesa were ending their technology transfer agreement ahead of time, leaving both companies free to trade components with one another (Vestas can buy components from Gamesa at a discount for eight years) -- and letting Gamesa keep royalties on turbine sales in 2003 that were otherwise due to Vestas.

In Cerstin Lange of Energiekontor, Germany has a developer who claims not to be surprised at news of the merger against what she calls "the general background of consolidation in the industry." She adds that larger wind projects require greater production scope. Vestas secured 26% of the German market in the first six months of last year, while NEG Micon had just 3.5%. In recent years, both have been losing market share in Germany, mainly to local rival Enercon.

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