Specialist
Former Head at Vattenfall
Agenda
- Market demand outlook, land availability, power demand and grid capacity
- Supply chain challenges, steel prices and cost pass-through
- Product and service quality – Vestas (CPH: VWS) vs Siemens Gamesa (BME: SGRE) and other competitors
- Service insourcing potential by wind farm operators and SG&A outlook
Questions
1.
What do you think is the main driver of wind turbine orders? How might the unique situations we’re facing – a weak year for wind speeds, a looming energy crisis, particularly in Europe, plus supply logistics challenges intertwined with supply chain – impact demand?
2.
What medium-to-longer-term bottlenecks could define the top level of total installations in grid capacity, contract availability and land availability? What might be the major limiting or defining factor?
3.
Our expert in a Forum Interview [see Energy Transition – Grid Requirements & Renewable Installation Limitations – 20 August 2021] said grid capacity expansion plans leading up to 2030 could be a good proxy for wind turbine gigawatt installations. Do you think that is reasonable given how far in advance the grid capacity expansion plans are made? To what extent will the wind turbine build-out track those plans?
4.
Steel price accounts for about 30-40% of the input cost, so it seems there’s no real cost pass-through to the contracts. However, do you expect the new contracts to bear the increased costs and do you think customers will tolerate and pay it?
5.
At what steel price would you expect there to be a meaningful impact on turbine demand? How close to that price are we? Where would you expect significant drops in demand due to IRR impacts?
6.
Are certain projects less price-sensitive than others? What proportion of the projects are very price sensitive? What are the characteristics of the most price-sensitive ones?
7.
What’s the timeframe and magnitude of delays? How much demand would you expect to drop off if the steel price rose from USD 700 to USD 1,900 per tonne? How long would it take for demand to return?
8.
How much would you expect new orders and demand to be delayed over the current period, given the high steel prices?
9.
What happens if steel prices sustain at current levels? How might that turn a delay into a cancelled project?
10.
Could there be any scenarios where buyers of turbines shift their supplier as the market ramps back up? How are you assessing Vestas and Siemens Gamesa’s abilities to ramp back up as demand comes back online?
11.
Do you expect any movement of purchase volumes between various preferred suppliers?
12.
Could you elucidate on how much market share might move from players such as Enercon and Nordex to Siemens Gamesa and Vestas? Do you expect meaningful capacity to come out of the market, or consolidation among smaller players?
13.
Siemens Gamesa is around EUR 630,000 per megawatt while Vestas is far higher at EUR 790,000 per megawatt, but these players were equal at roughly EUR 730,000 per megawatt in Q3 2020. What’s driving the variation? Why can Vestas charge a higher price than Siemens Gamesa and is it sustainable?
14.
Do you think there is meaningful differentiation in the pricing between Siemens and Vestas for a turbine of the same size and in the same region?
15.
The ROI for the turbine buyer is very useful for investors but ASP per megawatt is more useful for forecasting OEMs’ [original equipment manufacturers’] top line. What would you expect the ASP to be on Siemens Gamesa vs Vestas? Would it vary given the differences in balance of plant and servicing costs?
16.
How do you expect market share to develop in the onshore segment given current platform availabilities?
17.
How might the share of operator and OEM mix develop in the servicing segment? Do you expect any risks of further insourcing by operators, given the rises in steel price and CAPEX cost per megawatt-hour?
18.
How might servicing pricing trend? Would you expect more aggressive negotiation on servicing as turbine price rises?
19.
Vestas’ absolute SG&A and the SG&A as a percentage of sales have been increasing over the past year. Do you expect the company’s sales process to become significantly costlier over time, or is this just due to new region expansions? When might it start to come down again?
20.
How do you expect Vestas and GE’s offshore market share to develop? Do you think the third player in the offshore segment will end up dropping out of the market, or will they also have enough volume?
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