2020 was a record year for the wind industry with 93GW installed during the year. With more and more countries having binding decarbonisation targets for 2050, wind energy is assured a leading role in the generation mix for the coming decades. In addition, new technologies and promising applications are opening up, such as floating offshore or green hydrogen… in short, everything seems to be shining (or blowing in this case) in the wind energy universe, except for one small detail: the main players in this industry are having a lot of trouble making this growth profitable.

 

Let’s take a look at a summary of the figures for 2020 for the main OEMs in the sector from a financial point of view.

 

Revenues

Vestas once again leads the ranking of manufacturers by revenue with almost €15 billion. It is followed by GE, which this year, thanks to the boom in the US market, is in second place, with SGRE completing the podium.

As can be seen in the quarterly evolution of revenues, the turbine sales business is very seasonal, with large peaks at the end of the year due to the expiry of different legislations such as the PTC in the USA. Service revenues, however, are much more stable throughout the year.

 

If we look at the revenue per employee ratio, Goldwind stands out for its high productivity compared to GE, which has the lowest revenue per employee. The truth is that Goldwind’s employee figure is suspiciously low, especially for a Chinese company whose personnel costs are low and which tends to be very labour intensive.

 

Profitability

SiemensGamesa has had a disappointing year in terms of profitability. Losing almost € 1 billion in a year is not easy. Nordex has not had a much better year either. In fact, if we were to discount the extraordinary profit from the sale of its pipeline of projects, the profitability figures would be similar to those of SGRE.

 

At the other extreme are Goldwind and Vestas. Although Goldwind is the sector leader in terms of profitability, Vestas, with a business very similar to GE and SGRE, is the only one that manages to achieve profitable growth in volume.

 

O&M services

In this aspect, SiemensGamesa and Vestas are the leaders. SGRE is the one that derives the highest percentage of its revenues from services (19%), while Vestas is the one that achieves the highest profitability with almost 28% EBIT.

 

Goldwind’s weakness in services is very striking, being the only manufacturer that loses money in this business. Once again, Goldwind stands out from industry trends: it is extremely profitable in turbine sales, while services are a drag on its results.

 

Currently the difference in profitability between turbine sales and O&M services is brutal as can be seen in the following graph

Order book

Once again, Vestas leads this aspect by a wide margin, as at the end of 2020 it had €43 billion in orders, which means that it could almost cover its revenues for the next 3 years. SGRE follows with more than €30,000m, which is more than 3 years of revenues. SGRE’s high ratio is greatly benefited by its large number of signed offshore projects.

 

Nordex, however, does not cover 2 years with its backlog, probably caused by no offshore projects and few long-term framework contracts.

 

Average Selling Price (ASP)

Let us now analyse the quarterly evolution of the average selling price per MW of onshore turbine for Vestas, SGRE and Nordex:

 

We see that there is large variability from quarter to quarter in the case of SGRE. Overall there is a slight downward trend. This ratio is somewhat misleading as it provides a price per MW but does not take into account the rotor or tower height, aspects that can account for more than 50% of the final price. That is, an ASP of 0.7 m€/MW for a 4MW turbine, rotor 120m and tower 100m is a very high price (and will surely have high profitability) but however, the same ASP for a model with the same power but rotor 150m and tower 140m is a very low price.

 

As a conclusion, 3 of the 4 main western manufacturers have serious profitability problems. Covid-19 and other circumstantial issues have been part of the problem, but the Vestas case shows that it is possible to be profitable under the same conditions. It is clear that there are structural issues to be resolved if these manufacturers (and their shareholders) are to be profitable in the current golden age of the wind industry.