UPDATE 2-Vestas shares soar on Mitsubishi talks

Tue Aug 28, 2012 6:15am EDT

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By Mette Fraende

COPENHAGEN, Aug 28 (Reuters) - Ailing wind turbine maker Vestas is in talks with Japan's Mitsubishi Heavy Industries which could result in a much-needed capital injection, sending its shares sharply higher.

The talks could centre on the industrial conglomerate investing up to 200 million euros ($250.3 million) in return for a 20 percent stake in Vestas and access to some of its technology, possibly for offshore turbines, analysts said on Tuesday.

Vestas, the world's largest wind turbine manufacturer which has been hit by government cuts to renewable energy subsidies, is more likely to be looking for a partner than a buyer for the whole company, they added.

The Danish company has been the subject of takeover speculation after it agreed with its banks to delay a check on whether it would meet loan covenants and issued two profit warnings due to manufacturing problems that wiped out 2011 earnings.

Its shares jumped nearly 18 percent at the stock market open in Copenhagen on Tuesday, hitting a three-month high and traded up 15.5 percent by 1005 GMT against a flat benchmark index

"Vestas needs cash so without having to go to market, they are trying to see if anyone wants to take a stake," Sanford C. Bernstein analyst Martin Prozesky said.

Vestas Chief Executive Ditlev Engel has been under pressure to restore investors' confidence following the profit warnings in January and last October.

The company last week unveiled plans for 1,400 more job cuts to save an extra 100 million euros ($125 million), as it battened down the hatches for another difficult year in 2013. ID:nL6E8JLEXV]

A cash injection from Mitsubishi would only be a short-term solution, as the company needs to generate cash in the future, Prozesky said.

Vestas' debt stood at 1.15 billion euros at the end of June and said last month it had a free cash outflow in the second quarter of 338 million euros, more than the previous three months.

Some form of tie-up between the two groups, which have both invested heavily in 7 megawatt offshore wind turbines, could be attractive, another analyst said.

"It is a strategically good match," said Sydbank analyst Jacob Pedersen. "I do not believe (it will lead to) ... a takeover by Mitsubishi, but I believe in a strategic co-operation within the area of offshore wind turbines," Pedersen said.

Such a deal would raise Mitsubishi's technology significantly and strengthen Vestas' financial position, he said.

The company said late on Monday it was discussing a "strategic cooperation," and declined to give details. ($1 = 0.7990 euros) (Editing by Erica Billingham)

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