Wind energy: Fall in orders in 2009 will affect 2010 revenues

RP news wires, Noria Corporation
Tags: energy management

Due to the strong growth and placement of wind turbine orders in 2008 and the lead time between placing the orders and shipping them out to customers, the top line for wind turbine manufacturers in 2009 has been relatively unaffected. However, the fall in orders in 2009 will affect revenues of these companies in 2010. Therefore, it is essential for companies to adopt new strategies to keep their margins intact. And some companies have already started taking extraordinary and urgent measures to sustain and accelerate growth in a tough environment.

 

Frost & Sullivan, the Growth Partnership Company, in addition to the in-house expertise and the regular tracking of the market, has analysed the results of the quarterly statements and presentations of leading wind energy players and has presented the following observations and conclusions.

 

"Certainly the consequence of the recent slowdown of activity has been a fall in lead times and order backlogs, prices of turbines, freight costs and raw-materials leading to renegotiation of contracts by wind turbine manufacturers with sub-suppliers and in turn sub-suppliers with raw material producers," observes Frost & Sullivan analyst Gouri Kumar. "To keep their margins intact for next year, it is essential for companies to revisit their priorities and strategies. Some of them have already started working on this and it is interesting to see what they have been doing to keep afloat, grow or adapt strategically to the tough environment."

 

A number of M&A and JV transactions have been taking place in the industry world-wide. "GE Drivetrain Technologies formed a joint venture with Chongqing XinXing Fengneng Investment in China to produce gear boxes for the Chinese market," continue Gouri Kumar. "This inorganic growth strategy has also been adopted by companies such as South Korean Daewoo Shipbuilding and Marine Engineering, Areva, Chinese XEMC Windpower and Hyundai Heavy Industries."

 

Other companies are focusing on improving value proposition internally; these companies are fine tuning quality management, supplier auditing, operation and maintenance and training of technical personnel. This strategy reduces capital expenditure per megawatt and also accelerates their value proposition.

 

One strategy that can be expected is a greater emphasis on the bottom line by shutting down factories or cutting down on shifts in terms of working hours of labour, especially in regions where new orders are expected to fall below boom levels. Recently Vestas refocused its activities and manufacturing in higher growth areas like the U.S. and China, and shut down factories in low growth areas like the UK and Denmark. LM Glasfiber also downsized in order to maximize its presence in higher growth areas.

 

Finally, there are companies like Gamesa that are taking the situation of less demand and slower growth rates as an opportunity to diversify and re-define their priorities. In order to move away from being a full scale developer and focusing more on closing stage sales, Gamesa formed a venture with Iberdrola. This brought their businesses together to develop wind farms. Using the lag in this market to refocus priorities is another successful strategy.

 

To receive a complimentary brochure on the Wind Energy Market in Europe and globally and to hear more about Frost & Sullivan's Growth Strategies, e-mail Chiara Carella, corporate communications, at chiara.carella@frost.com, with the following information: your full name, company name, title, telephone number, e-mail, address, city and country.

 

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best in class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 31 offices on six continents.