Bloomberg News

Wind Purchases to Fall in 2012 as Sinovel Profits Drop

February 01, 2012

(Source corrects turbine data in first, second, sixth and 10th paragraphs of story published Jan. 31.)

Jan. 31 (Bloomberg) -- Purchases of wind turbines and other equipment will decline 14 percent this year and won’t surpass 2011 levels for two years, reducing profits at companies including Sinovel Wind Group Co., according to Bloomberg New Energy Finance.

Capital investment in wind-power assets worldwide will be $69.2 billion in 2012, down from $80.5 billion last year, as oversupply and waning government support in the U.S. and Europe cut demand. Total installations, including onshore and offshore projects, will be 49 gigawatts, said Justin Wu, head of wind analysis at New Energy Finance in Hong Kong.

Sinovel, China’s top turbine maker, said yesterday it expects 2011 profit to decrease by more than half from 2.86 billion yuan ($451.6 million) in 2010. Vestas Wind Systems A/S this month cut 10 percent of its staff after twice reducing sales forecasts since October.

Struggling wind-equipment makers are less likely to get bought than solar companies because they have less to offer buyers, said Martin Prozesky, an analyst at Sanford C. Bernstein Ltd.

“I think there’s a bigger risk for the smaller guys to go out of business more than being bought up,” Prozesky said in a telephone interview from London. “There isn’t any real technology that you can acquire with smaller players now. There’s maybe a bit of manufacturing, but not a huge amount.”

Installations won’t surpass last year’s total until 2014, when New Energy Finance expects spending to reach $87 billion.

2011 Acquisitions Doubled

Acquisitions of wind companies last year, excluding direct investment and private-equity buyouts, more than doubled to $16.6 billion from $7.2 billion in 2010, the London-based research company said.

That was the sixth increase in seven years, driven largely by two deals in the third quarter worth about $11 billion together. Electricite de France SA and Iberdrola SA both purchased the remaining stakes of partially owned subsidiaries.

“Third quarter 2011 was unusually large,” said Amy Grace, a New Energy Finance wind analyst in New York. “We potentially could see some more activity in terms of the volume of project acquisitions this year, but dollar amounts won’t likely reach the 2011 level.”

One market that is growing is offshore wind. Investment is predicted to increase 44 percent to $8.5 billion this year and to climb for the following eight years. By 2020, about $55 billion will be spent on offshore wind farms, compared with $84.7 billion for onshore projects, according to New Energy Finance.

Offshore Growth

About 12 gigawatts of offshore turbines will be installed in 2020, compared with 2 gigawatts this year.

General Electric installed an offshore turbine in Sweden’s Gothenburg Harbor in December, and Siemens AG won contracts for six offshore wind farms totaling 1.4 gigawatts in 2011, including a project in China.

“If companies like Siemens and others are looking to extend in this sector, then they’re looking more to the East than to the West,” Ankit Jain, an analyst at Standard & Poor’s in London, said in a telephone interview.

For related news and information: Sinovel news: 601558 CH <Equity> CN BN <GO> Offshore wind projects: TNI OFFWIND ORDER <GO> Most-read wind news: MNI WIND <GO> Top renewable-energy news: GREEN <GO> Most-read alternative energy stories: MNI ALTNRG <GO>

--Editors: Will Wade, Jessica Resnick-Ault

To contact the reporter on this story: Justin Doom in New York at jdoom1@bloomberg.net

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


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