Gamesa projects resumption of growth: sales of 4,000 MW in 2013, with over 15% annual growth (Spain)

Business Plan 2011-2013 focuses on three strategic vectors: a reduction in the Cost of Energy (CoE), growth and improved efficiency.

* Steady recovery in the EBIT margin (WTG), to 6%-7% in 2013.

* Orders will provide a solid foundation for growth: backlog of 7,500 MW (including framework agreements) and orders of 719 MW through September 2010 (for delivery in 2011), compared with 152 MW in September 2009 (delivery in 2010).

* Capital expenditure will amount to 250 million euro per year in 2011-2013 with no need to resort to the capital markets. Offshore will account for 20% of total capex.

* Gamesa plans to double MW under maintenance by its services arm within three years, to 24,000 MW.

* Wind farm development business: delivery of 700 MW per year in 2011-2013.

* The company is steadily reorganising its manufacturing arm to boost its footprint in growth markets (China, India, Brazil and the US) and will reduce exposure to the Spanish market by halving current capacity.

* Gamesa plans to become the industry benchmark for Cost of Energy: it plans to reduce its clients’ cost of energy by 20% over 3 years and by 30% over 5 years.

* Technology will lay the basis for improved cost of energy: 3 new onshore families will be launched in the next five years plus two new offshore platforms.

London, 8 October 2010. Gamesa unveiled its new Business Plan 2011-2013 in London today; it plans to become a benchmark in the wind power industry by offering the lowest cost of energy (CoE), while focusing on three vectors: Cost of Energy (CoE), growth and efficiency. Under the Business Plan, Gamesa will progressively restore growth and recover its main financial and operating figures, enabling it to sell 4,000 MW of wind turbine generators (WTG) in 2013, attaining a 15% compound annual growth rate. The EBIT margin in the WTG business will be 6%-7% and working capital will amount to 20% of sales under a rigorous policy of aligning production to orders.

The guidance for 2011 is for sales of 2,800-3,100 MW and an EBIT margin of 4%-5%. Working capital will amount to 20%-25% of sales and the target net debt/EBITDA ratio is under 2.5.

Gamesa will also invest intensively to expand its operating capacity and technology lead worldwide, in both onshore and offshore wind power. It plans to invest 250 million euro per year in the next three years to establish manufacturing capacity where necessary to meet market demand and launch new products, including the development of offshore WTGs, to which it will allocate 150 million euro in 2011-2013 (20% of total capex planned for the period).

Nevertheless, Gamesa does not plan to tap the capital markets; it will maintain a solid financial position, with a net debt/EBITDA ratio of no more than 2.5 in 2011-2013 (1.1 in June, among the lowest in the industry). When presenting the plan, Gamesa noted that it has over 2.2 billion euro in available credit lines to enable it to undertake its expansion plan without resorting to the capital markets.

Growth and globalisation: sales of 4,000 MW in 33 markets in 2013

The growth strategy designed by Gamesa for the next three years (2011-2013) focuses on two major objectives: selling 4,000 MW in 33 markets, and doubling MW under operation and maintenance contracts to 24,000 MW by 2013. Gamesa expects solid growth in the world’s main wind power markets. In the period 2009-2013, sales will increase by an annual average of 15% in the US, 20% in China, 166% in India and 50% in Central and South America.

Gamesa expects sales in Europe to decline in that period, by around 20%, as a result of the market slowdown and regulatory uncertainty, primarily in southern Europe.

Growth in international markets will be driven by a sales strategy that is enabling the company to enter new markets and new customer segments. Gamesa has designed a new commercial structure with 24 field offices in 8 regions worldwide. In the last 12 months, it has sold MW to over 20 new customers in 10 new markets, including Brazil, Honduras, Turkey, Sweden, Costa Rica and Kenya.

The commercial and product strategy has also enabled Gamesa to lay the foundation for future growth underpinned by a sizeable backlog of orders. The backlog currently amounts to 7,500 MW (including framework agreements) to be fulfilled in the coming years, and new orders through September 2010 amounted to 719 MW for delivery in 2011, contrasting with 152 MW through September 2009 for delivery in 2010.

In the coming years, Gamesa plans to consolidate its position as one of the world’s leading wind farm developers. To that end, it will continue to build out the backlog, which totals over 22,000 MW at various stages of development. By 2013, the wind farm division projects deliveries amounting to 700 MW in its three main markets: 300 MW in China, 200 MW in the US, and 200 MW in Europe.

Improved efficiency through progressive industrial reorganisation

Gamesa’s Business Plan 2011-2013 establishes a steady reorganisation of the company’s production capacity worldwide based on each market’s specific conditions; it will increase investment and its industrial footprint in growing markets (such as India and Brazil) and markets with considerable wind resources (China and the US) while trimming capacity in other markets, such as Spain, where Gamesa plans to reduce production capacity to 1,000 MW by 2013, compared with close to 2,200 MW in 2009. Gamesa will use the new investment to commence mass production of its new G9X and G10X platforms so as to optimise the number of plants and moulds in Spain. The company estimates 10 million euro in restructuring costs in 2011.

In contrast, effective production capacity will double in the US and China in the period 2009-2013, to over 1,000 MW in each country; Gamesa will establish up to 300 MW of capacity in Latin America by 2013; and attain 800 MW of capacity in India by the end of that same period. Gamesa plans five new plants in India between 2010 and 2012.

The strategy includes other efficiency measures, under which structural costs will be cut by 15% per MW by 2013.

The search for greater efficiency also involves cutting production and logistics costs; implementing a new integrated global logistics system, which will cut costs by around 13%; and cutting lead times from 12 to 4 months. Construction processes will also be optimised, and lower value-added supplies will be outsourced to a greater extent.

Technology in new platforms to reduce the Cost of Energy (CoE)

Gamesa’s plan for the next three years includes becoming the benchmark in the industry for Cost of Energy based on two lines of action: innovation and technology in its new WTG platforms, and maintenance services, enabling it to cut its clients’ Cost of Energy by 20% over three years and by 30% over five years. To this end, the company will launch an ambitious five-year plan to develop three new onshore WTG product families (based on the G9X and G10X platforms) and two new offshore platforms (G11X and G14X), both underpinned by pre-existing multi-MW technology. Gamesa is working towards the launch of its first offshore platform, the G11X-5.0MW, the prototype of which will be available in the fourth quarter of 2012 and which will enter mass production in 2013, as well as the G14X-6/7MW, which will go into mass production in 2015. Gamesa plans to erect the first offshore WTGs in the UK in 2014.

Gamesa has announced an agreement with Northrop Grumman, a leading defence contractor and America’s largest shipbuilder, to work together on offshore wind technology. The agreement provides for the two companies to participate in commissioning the first offshore prototype of the Gamesa G11X-5.0 MW WTG in the US, based on Gamesa’s multi-MW technology and Northrop Grumman’s extensive experience in marine environments.

Gamesa will also continue to work on cutting costs and improving availability through innovative approaches to operation and maintenance and a programme to extend WTG life cycles.

Global, integrated, efficient and profitable

When presenting the Business Plan 2011-2013, Jorge Calvet, Chairman of Gamesa, emphasised the company’s global reach. “Our revenues are global (90% came from outside Spain in 1H10), and so too are our funding sources, our customers and our industrial footprint”, Over the last 15 years, Gamesa has attained a unique position due to its integrated approach to the wind power business, having developed 4,000 MW directly, installed over 18,000 MW on four continents, and provided operation and maintenance services for more than 12,000 MW.

Calvet also noted Gamesa’s “efficient, profitable” business approach in the last few months, in an adverse market situation, plagued with uncertainties and constant changes, “in which we managed to expand with the market, maintaining margins and aligning volume and production to orders. We are investing in growth-expanding sales in such markets as China, India and the US-and optimising production capacity in markets that are experiencing a slowdown, such as Spain”.

[mappress]

Source: gamesacorp,October 08, 2010