Goldwind and Sinovel look into buying Vestas

April 17, 2012
Vestas going Chinese

Danish wind turbine maker Vestas, the global market leader, could be subject to a takeover bids from Xinjiang Goldwind Science & Technology Co and Sinovel Wind Group.

A report in the Danish daily Jyllands-Posten, citing unidentified Danish corporate financiers, said the two leading Chinese wind energy firms have been in talks with bankers about a possible bid on the much larger competitor. None of the companies have so far been prepared to comment on the story.

"Vestas would be a strong acquisition target for either Sinovel or Goldwind," said CIMB Research analyst Keith Li told Reuters. “Goldwind is very aggressive and has plans to expand downstream and operate wind farms. Acquiring Vestas will offer a platform for further global expansion and boost product branding."

The Danish company has a much stronger international brand that the Chinese wind turbine makers who, facing a tough market at home, are seeking to expand overseas but suffer from the perception that their technology is not as good as that of Western competitors.

Last year Goldwin surpassed Sinovel to become China’s largest wind turbine marker, according to figures recently released by the China Wind Energy Association, posting increased revenues and a healthy net profit while its rival’s numbers plunged.

Ample funding

That said, both companies should find no difficulty in raising funds to bid on Vestas since both enjoy strong backing from China’s state-owned banks. In February, for example, the China Development Bank made 35 billion yuan (USD5.5 billion) available to Goldwin to invest in new wind power projects.

Based on yesterday’s closing price of 55.55 Danish kroner, Vestas has a market capitalization of 11.37 billion kroner (USD2 billion), which would appear to be well within the Chinese firms’ funding abilities, even assuming a significant premium on the current market price.

To win the prize, however, Goldwin and Sinovel would have to convince 90 percent of Vestas large and diverse shareholding base, according to the Jyllands-Posten report. And there is always the possibility of another well-heeled competitor, such as America’s GE Energy, stepping into the fray.

Industry downturn

Last year Vestas was forced to issue two profit warnings and in February recorded 2011 revenues of EUR5.8 billion (USD 7.6 billion), which were lower than the EUR6 billion (USD7.9 billion) predicted in January, and substantially lower than original expectations of EUR7 billion (USD9.2 billion).

It has since announced a major management reshuffle and a plan to trim costs by eliminating 2,335 jobs worldwide in a bid to restore investor confidence.

These are, however, uncertain times for the global wind sector, which last year saw the end of what appeared to be its ever-upward trajectory. According to research released last week wind sector investment within G20 countries dropped 15 percent to USD72.1 billion in 2011, overshadowed by the boom in solar power investment.

Even the mighty Chinese wind market, which suffers from serious fragmentation and over-capacity, saw a 6.9 percent fall in new capacity installation last year compared with 2010. According to the chairman of Spanish wind turbine maker Gamesa, the market in China is going to get quite a bit worse before it gets better.