Executive Briefings

As Wind Power Sector Grows, Turbine Makers Feel the Squeeze

Vestas Wind Systems and Siemens Gamesa are giants of the wind-power industry, building mammoth turbines that rise high into the air and power more and more homes. But disappointing earnings reports from the two companies last week indicated that even they are struggling to adapt to a fast-changing sector.

Wind power is an increasingly important source of electricity around the world, and prices for the technology are dropping fast. But belt-tightening governments across Europe and North America are phasing out subsidies and tax incentives that had helped the industry grow, squeezing companies like Vestas and Siemens Gamesa in the process.

Last week, Vestas, the world’s largest maker of wind turbines, said its revenue in the third quarter fell 6 percent compared with the same period a year ago, to 2.7bn euros, or $3.1bn. Profit dropped 18 percent, to about €250m ($291.5m), Vestas said. The figures sent the Danish company’s shares plummeting by as much as 20 percent.

The Vestas results came just days after Siemens Gamesa Renewable Energy — the recently formed company combining the wind-power units of Siemens, the German conglomerate, and Gamesa of Spain — reported a €147m ($171.4m) loss for the third quarter. The Madrid-listed company also said it would have to shed 6,000 jobs.

Executives and analysts blamed several factors for the two companies’ poor results.

In addition to the phasing out of tax credits and guaranteed prices by some governments, prices for solar power have fallen rapidly, making it a competitor to wind in some parts of the world.

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Wind power is an increasingly important source of electricity around the world, and prices for the technology are dropping fast. But belt-tightening governments across Europe and North America are phasing out subsidies and tax incentives that had helped the industry grow, squeezing companies like Vestas and Siemens Gamesa in the process.

Last week, Vestas, the world’s largest maker of wind turbines, said its revenue in the third quarter fell 6 percent compared with the same period a year ago, to 2.7bn euros, or $3.1bn. Profit dropped 18 percent, to about €250m ($291.5m), Vestas said. The figures sent the Danish company’s shares plummeting by as much as 20 percent.

The Vestas results came just days after Siemens Gamesa Renewable Energy — the recently formed company combining the wind-power units of Siemens, the German conglomerate, and Gamesa of Spain — reported a €147m ($171.4m) loss for the third quarter. The Madrid-listed company also said it would have to shed 6,000 jobs.

Executives and analysts blamed several factors for the two companies’ poor results.

In addition to the phasing out of tax credits and guaranteed prices by some governments, prices for solar power have fallen rapidly, making it a competitor to wind in some parts of the world.

Read Full Article