En Español

Very usefull links


News links




Dow Jones

Oil price



Views and News





Wind power industry pressure as sector moves more efficient




By Christoph Steitz

Petroleumworld 08 24 2017

A sell-off in shares of recently merged wind turbine makers highlights the growing speed at which competition in the sector is heating up, raising expectations for more deals in the quest for scale.

In the latest sign of the squeeze, Siemens Gamesa last week said it would cut 600 staff, less than a month after it revealed third-quarter operating profit had dwindled by a fifth, partly due to India's shift to auctions from guaranteed tariffs.

The wind power industry, growing steadily but still largely reliant on state support, has witnessed a number of large M&A deals in recent years that were triggered by a steep drop in turbine prices, down a quarter since 2010.

General Electric beefed up its wind business with the takeover of France's Alstom, Germany's Nordex snapped up the turbine unit of Spain's Acciona and Siemens merged its wind division with rival Gamesa.

The latter created the world's No.2 player, with a combined market share of 14 percent last year, still behind Danish sector leader Vestas but overtaking GE, according to consultancy MAKE. Nordex ranks sixth.

Followed by the usual mix of job cuts and the replacement of top management, these deals come at a time the industry is moving towards an auction-based system that favours those who can bid at the lowest price, not those busy with integration.

"Mergers are always difficult. And if it's companies from two different cultures it's not going to get easier," said Thomas Deser, senior portfolio manager at Union Investment, a shareholder of Siemens Gamesa.

"The introduction of auctions has led to a significant price erosion that has triggered concerns about margins."

Significant share price declines also suggest that the deals were too expensive. Since the transactions were publicly announced in October 2015 and June 2016, respectively, Siemens Gamesa's stock has declined by about a quarter, while Nordex's has more than halved.

"Both companies have their own individual problems in certain markets. But it's also true that they both have to manage a merger which is a burden," a person who worked on one of the deals said.

Rival Vestas, in contrast, has seen its shares gain by about two thirds since late 2015.


Before the advent of auctions, wind farm developers could rely on feed-in tariffs that were guaranteed by law for as much as two decades, which critics say prevented the industry from becoming cost-competitive more quickly.

Now, they are increasingly relying on cheap wind turbines, leading their manufacturers to look for ways to cut production costs, including buying up rotor blade makers or outsourcing more to them. tmsnrt.rs/2iIwVd5

Nordex, which suffered a major loss of investor confidence earlier this year after slashing its mid-term outlook, has also flagged further job cuts, saying business in Europe contracted sharply in the first half of 2017.

"Wind is now becoming a really mature market. Parties now have to prove that they are the most efficient," said Danny van Doesburg, senior portfolio manager at APG Asset Management, a shareholder in Siemens, which owns 59 percent of Siemens Gamesa.

"The time you could hide in a project is over," he added.

In April, Germany's EnBW became the first project developer to say it would be able to build offshore wind parks -- the most expensive renewable energy source -- without any government subsidies.

That, along with recent ultra-low bids for onshore wind in Turkey, will force equipment makers to gain even more scale and seek more deal opportunities, afraid they might fall behind or go down otherwise, analysts and M&A sources said.

"We strongly believe the global... market will consolidate further, putting smaller players such as Nordex at risk of being marginalized," Barclays analysts wrote earlier this month.

Sources that have worked on the two German-Spanish tie-ups said that Nordex and smaller German peer Senvion were particularly exposed to become takeover targets themselves, pointing to their relatively small size.

At an EV/EBITDA multiple of 5 and 4 times, respectively -- a key indicator for M&A deals -- both groups look cheap compared to sector leaders Vestas and Siemens Gamesa, which trade between 7 and 8 times.

Acciona, which became Nordex's largest shareholder as part of the deal and now holds 29.9 percent, will likely make an offer for the rest once a three-year lock-up period ends next year, the sources said.

"We currently see no need for us to consolidate further," a spokesman for Nordex said. A spokesman for Senvion said that while the group saw "enormous consolidation pressure" it was working to implement its future strategy.

Acciona and private equity firm Centerbridge, Senvion's majority owner, both declined to comment.

Story by Christoph Steitz ;Additional reporting by Clara Denina in London; editing by Philippa Fletcher from Reuters.

08 23 2017

We invite all our readers to share with us
their views and comments about this article.

Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels


Sept. 14-15,
Accra, Ghana


Nov 13-14 ;
Mexico City, Mexico









Contact: editor@petroleumworld.com,

Editor & Publisher:Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2017, Petroleumworld   / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.