Vestas will not chase market share at any price
COLORADO SPRINGS, Colo.
COLORADO SPRINGS, Colo. (Reuters) - Wind turbine maker Vestas Wind Systems is more concerned with keeping customers and spreading risk than with retaining its global number-one spot, and does not plan to compete on price.
Under pressure after a profit warning two weeks ago devastated its stock, Vestas executives on Wednesday sought to allay investor concerns about the competitive threats in an industry where growth has slowed.
The company held on to its world-leading position in 2009 with a 12.5 percent market share, but General Electric Co was close behind at 12.4 percent, according to BTM, consultants based in Vestas's home country, Denmark.
"We have no specific market share targets," Chief Executive Ditlev Engel told Reuters.
"Looking after the customers, we sort of tend to believe that then things will click. The products and the presence are really what matters for them. Whatever that will give you in terms of market share, I don't know."
Vestas also faces turbine-making rivals from emerging markets, including fast-growing Chinese companies Sinovel, Goldwind and Dongfang, as well as India's Suzlon Energy Ltd. But Vestas sees no point in discounting for customers who have 20-year investment horizons.
Bob Fritz, its senior vice president for quality, told a meeting of investors on Wednesday that price wars are a "desperation" strategy and he was echoed by colleagues.
"We will not go into price competition and we are not going to compete with the cheapest," Finn Strom Madsen, president of Vestas Technology R&D, later told the meeting in Colorado, where Vestas has built new manufacturing plants.
That U.S. focus is expected to pay off, regardless of power price volatility, since the mandates of U.S. states alone require over 100 gigawatts (GW) of new renewable power capacity by 2020, according to Vestas Americas President Martha Wyrsch.
Despite a "slow" North American market now, Vestas was doing relatively well, receiving half of the firm new orders in the region so far in 2010.
"We're winning at least our fair share of what is getting awarded," Wyrsch told Reuters.
As for elsewhere, Engel noted Vestas was the largest non-Chinese player in China, which was the top market in 2009.
"We are number one, two or three in nine of the 10 largest markets in the world," he said in an interview on the meeting's sidelines. "That is very important for us in terms of a risk perspective -- we don't want to be dependent on any one area."
The top Vestas executive in China, pointing out that the wind market there doubled in 2009, said he still expects more growth this year, even while the Chinese government "takes a step back" to assess the sustainability of the expansion.
STOCK HIT HARD BY WARNING
The Vestas share price is down 28 percent since August 18, when it cut its 2010 profit forecast because of order delays in the United States, Spain and Germany. But Engel still expects the orders next year, since they were held up by permitting.
He declined to give further details, saying 2011 guidance would come on October 26, along with third-quarter results.
Earlier on Wednesday in Copenhagen, Vestas shares rose 2.7 percent, having just touched their lowest since November 2008.
In what Engel said was the biggest technology leap in his half-decade at the company, executives also offered details on the new V112 3-megawatt turbine, which they say will need half as much maintenance and lead to 20 percent lower tower costs.
Each 54.6-meter (179-foot) blade will be built with twice as much carbon as previous blades, which is an expense that will be made up for by the 30 percent more energy per kilogram of turbine that the machines will pump out, executives said.
Asked about the V112 cannibalizing sales of older models, Madsen said bigger was not always better with wind projects.
"If you just take the turbines on head-to-head competition, the V112 will always win," he said. "But there are simply sites out there where the regulatory regimes, infrastructure or other parameters don't make it possible to use the V112."
This winter, Vestas will test turbines that can shed ice in cold climates, and it is developing "stealth" turbines for markets where radar interference concerns hold up projects -- amounting to 9 gigawatts worth in the United States alone.
(Reporting by Braden Reddall; editing by Phil Berlowitz, Steve Orlofsky editing by Andre Grenon)
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