Wind News

Wednesday 29 April 2009

Vestas chief executive Ditlev Engel told investors yesterday that Vestas’ business is now slowing in Europe

The world's largest wind turbine manufacturer, Vestas, is set to axe up to 625 jobs in its UK operations, with the possible closure of its Isle of Wight factory.

Just months after pulling out of its tower factory in Campbeltown, Scotland, the Danish company confirmed yesterday it will start talks with employees at its Isle of Wight factory to discuss the future of the facility.

Investments in the research and development centre at the Isle of Wight site will continue, the company said.

Despite suggesting the worst of the Credit Crunch was now beginning to pass for the wind industry, Vestas chief executive Ditlev Engel told investors and the press yesterday that Vestas' business is now slowing in Europe, where 49% of the company's employees are based.

The company is now projecting just 12% of its global demand will be found in Northern Europe over the next few years.

With a big push into the US and investment in a new 850kW turbine to be made in China for the Chinese market, the Vestas chief signalled weak political support in the UK as one of the key reasons for its gloomy forecast here.

While the company suggested recent government Budget announcements of "massive investments" in wind power were positive for the wind industry, with promised higher subsidy levels having a "positive influence" on the company's prospects for producing blades in the UK, it suggested that a lack of support from local politicians in the planning system was directly related to its slow-down in demand.

"People before megawatts"

Commenting on the job cuts, which will also see 1,275 lay-offs in Denmark, Mr Engel said: "We have seen different developments over the last number of months which unfortunately have meant we have to reduce our staff and investments in the Denmark and the UK.

"Vestas has always been running under the device - and will continue to do so - ‘people before megawatts' and therefore I am personally very sad that we have to say goodbye to a lot of good people who have done a tremendous effort for Vestas, but unfortunately the overall market development means we have no other choice," explained the Vestas chief executive.

The announcement about the Isle of Wight factory came as Vestas laid out its financial results for the first quarter of 2009.

The company has seen profits rising by 70% compared to last year to £50 million for the first quarter, with revenues at about £986 million for the period.

Unveiling its results, Vestas reported that the economic slow-down had seen wind projects waiting for finance, with everything else in place to proceed. However, the company said the effects of the Credit Crunch were now "starting to wear off", with new banks entering the wind market and government stimulus initiatives beginning to take effect.

Processing times will be longer than before the recession hit, with more banks involved in each project and credit facilities therefore more complicated to secure. Projects are also affected by higher raw materials prices, Vestas said, with the weaker Pound hitting UK wind developers.

However, supply chain bottlenecks have eased, thanks to large-scale investments, the manufacturer claimed.

UK

Vestas believes it is now the third largest supplier of wind turbines to the UK market, after German firms Siemens and Nordex. The company had announced last year that it would invest in the Isle of Wight factory at St Cross, Newport, to produce larger blades for 3MW machines.

The factory has made turbine blades since the year 2000, generally for export to the USA. The company is still investing in the Development Centre at the Isle of Wight site, which is being upgraded to test longer blades from 2010.

Vestas' recent strategy has been to make the most of demand for its turbines in Northern Europe before turning towards an expected boom in demand in the US. However, the company said yesterday it had now "lost our faith in sufficient demand from the North European markets in the coming periods".

Northern Europe will not now absorb Vestas' growth in turbine manufacturing, which has been gearing up for the expected change in environmental policy in the United States.

As a result, investment in its British and Danish manufacturing facilities will be cut back by £180 million.

Even with the cutbacks, Vestas said it would still have "substantial excess capacity in Northern Europe compared with the current, local market prospects for the coming years".