Enlarge image Vestas May Cut Forecasts a Third Time, Investor Says

Ken James/Bloomberg

Wind-energy stocks around the world have suffered as the aftershocks of the global credit crisis limited investment in carbon-free power generation.

Wind-energy stocks around the world have suffered as the aftershocks of the global credit crisis limited investment in carbon-free power generation. Photographer: Ken James/Bloomberg

Vestas Wind Systems A/S, the biggest wind-turbine maker, may have to cut its forecasts a third time this year as banks curb loans for wind farms and its competitors gain market share, the top-ranked money manager said.

The forecasts may be too high in a year global turbine production capacity exceeds demand, said SAM Group Holding AG’s Thiemo Lang, the best-performing manager in Bloomberg New Energy Finance’s 2009 ranking of 41 funds that invest in clean-energy stocks. Vestas spokesman Peter Kruse said the company stands by the forecasts it made on Aug. 18.

Wind-energy stocks around the world have suffered as the aftershocks of the global credit crisis limited investment in carbon-free power generation. Vestas shares plunged 23 percent on Aug. 18 after the company lowered its forecast for 2010 sales and posted a bigger second-quarter loss than analysts expected.

“I’m not sure if that’s it for the reductions in earnings estimates or if there’s more to come,” said Lang, who doesn’t own the stock and doesn’t plan to buy in the near term. “I’d prefer to wait until I see more stability in their estimates,” he said in a telephone interview yesterday.

Analyst Predictions

Most analysts predict the company will meet its forecast of 6 billion euros in sales this year. Revenue was 1.8 billion euros in the first half of the year.

Vestas shares fell as much as 1 percent and rebounded with European markets to close little changed at 221.70 kroner in Copenhagen trading. The WilderHill New Energy Global Innovation Index rose 0.4 percent. Vestas has lost about 29 percent this year. Rival turbine makers Gamesa Corporacion Tecnologica SA of Spain and India’s Suzlon Energy Ltd. have dropped about 52 percent and 45 percent, respectively.

Randers, Denmark-based Vestas last cut its 2010 sales forecast to 6 billion euros from 7 billion euros, citing delays in expected orders in the U.S., Spain and Germany. Most analysts predict the company will meet its sales forecast.

“We were maybe too optimistic on what we expected we could execute in the second half of 2010,” Vestas Chief Executive Officer Ditlev Engel said in an Aug. 18 television interview. “The financial crisis had a delay effect on our industry and we’re seeing it in 2010 rather than in 2009.”

Industry Overcapacity

Overcapacity in the turbine industry is squeezing manufacturers’ margins, Bloomberg New Energy Finance analyst Justin Wu said on June 21.

Most analysts expect that Vestas will meet its sales target, with 20 predicting sales of 6 billion euros or more while 11 analysts have estimates below 6 billion euros, according to data gathered by Bloomberg. The average estimate of the 31 surveyed is 5.99 billion euros.

Lang, a 46 year-old former engineer at Siemens AG, manages about $1.3 billion of clean-energy holdings at the Zurich-based funds company including SAM Smart Energy Fund. The euro- denominated fund returned 78 percent last year to top the New Energy Finance rankings. This year the fund has fallen about 10 percent, outperforming the 88-member WilderHill New Energy Index, which lost 22 percent.

Vestas shares are “not cheap” at about 28 times expected 2010 earnings, Lang said. Gamesa’s shares trade at about 18 times its expected earnings.

Sales Boost

The Danish company may get a sales boost in future quarters from its new turbine model, which is attracting interest from clients, Lang said. The company’s V112 generator is superior to General Electric Co.’s comparable unit, the 2.5xl, and will help it win market share in the U.S., Jyske Bank A/S said yesterday in a note.

In July, the company won an order to supply Terra-Gen Power LLC with 570 megawatts of turbines for a wind farm near Tehachapi, California, its biggest ever order for a single site, the company said on its website.

“If 2011 is a normal year and they also have deferrals from 2010 it could look like a very strong year,” Rupesh Madlani, a renewable energy analyst at Barclays Capital in London, said in a telephone interview today. Still “there is a risk for an additional revision to expectations. It’s largely outside of their control because it depends on when new orders are delivered.”

Lang said that should the company prove it can deliver the improvement in its margins that Chief Executive Officer Ditlev Engel forecast in an Aug. 18 conference call that may boost some investors’ confidence. Even then the shares may struggle to attract buyers because many large funds that sold the stock this year may be reluctant to reinvest, Lang said.

BlackRock Stake

BlackRock Investment Management (UK) Ltd. cut its stake in Vestas by 187,430 shares to 10.1 million shares, a stake of about 5 percent, as of Aug. 31, Vestas said on its website.

Vestas cut its sales forecast for the first time this year in February, when it scrapped a prediction that revenue would be 7 billion to 8 billion euros.

Teea Reijonen, a London-based analyst with Royal Bank of Scotland Group Plc, described last month’s downward revisions at the time as a “shock” and a “serious blow” to Vestas’s credibility.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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