Bloomberg News

First Solar-to-Vestas Wind Profit Crash Deters New CEOs: Energy

February 13, 2012

Feb. 13 (Bloomberg) -- Renewable energy companies are losing their allure with top executives after profits and stock prices collapsed across the industry, making it more difficult for boards to replace underperforming managers.

First Solar Inc., the biggest U.S. solar company, ousted its chief executive officer in October and is still seeking a replacement. At Vestas Wind Systems A/S, the largest turbine maker, the chairman and finance director are leaving after the company cut sales forecasts twice in three months, and CEO Ditlev Engel said his own job is safe.

“It’s becoming significantly more difficult to attract people into this market,” said Shelly Fust, who leads clean technology recruiting in Los Angeles at Korn/Ferry International, the world’s largest executive search firm. “In my 15 years, this is probably the most difficult time to recruit.”

The renewable-energy industry, which just four years ago drew managers from Silicon Valley to join the fight against global warming, is suffering increased competition from Chinese companies that gutted margins. The bankruptcy of Solyndra LLC, which left the U.S. government responsible for $527 million in debt, and concern that President Barack Obama’s administration won’t be able to extend support for the industry, is driving executives back to chipmakers, Fust said.

The interest from outside executives in the clean energy industry peaked in 2008 when natural gas approached $14 per million British thermal units, said Steven Goodman, North America energy leader at executive recruiting company Egon Zehnder International. That sparked interest in alternative fuel sources.

Gas Slump

“It was going gangbusters in 2007 and early 2008,” Goodman said. The recruiting environment slowed in late 2009 as gas prices fell, curbing demand for expensive renewable power, he said. Gas in New York dropped 32 percent in 2011 to $2.99 a million British thermal units, falling below $3 for the first time in a decade.

Q-Cells SE Chief Financial Officer Marion Helmes resigned in November, leaving her duties to Nedim Cen, the CEO, who has concentrated on refinancing the solar company’s debt instead of replacing her. Conergy AG, a German solar company negotiating with creditors, last month named Chairman Philip Comberg to serve as CEO until the end of this year, filling a post open for 15 months.

Q-Cells and First Solar declined to comment on recruiting issues.

Shares Slump

The WilderHill New Energy Index of 97 shares tumbled 40 percent last year, and both Vestas and First solar told investors profits will slump. Solyndra filed for bankruptcy in September, touching off debate in Congress about whether the government has any business subsidizing the industry.

Global oversupply battered wind and solar industries in the past year as Germany, France and Spain trimmed support for the technology. Prices for solar panels fell 51 percent in 2011, and global purchases of wind turbines will fall 14 percent this year from 2010, and won’t surpass 2011 levels for two years, according to Bloomberg New Energy Finance.

“You will start to see a dearth of talent, and people will leave this industry,” Goodman said. “We’re starting to see it already.”

On Feb. 7, Vestas Chief Financial Officer Henrik Noerremark, 45, quit less than a month after he was promoted to also serve as chief operating officer. Chairman Bent Erik Carlsen, Deputy Chairman Torsten Erik Rasmussen and board member Freddy Frandsen also won’t stand for re-election, the company said in a statement on Feb. 8.

Vestas Vacancies

That departures follows CEO Engel’s announcement on Jan. 12 that Vestas will cut 2,335 positions worldwide, or 10 percent of its total. After reducing earnings forecasts four times in as many years, the loss of 166 million euros ($220 million) in 2011 reported on Feb. 7 was four times wider than analysts had estimated. Engel said it would be “unnatural” for him to leave despite his performance.

“The right time to leave a company is not when it’s facing challenges and is in trouble, it’s when things are going well,” Engel said on Jan. 12. “Vestas is facing challenges now, both externally and internally.”

With several open spots on the executive team, “a lot of people are very interested in joining a company like Vestas,” Engel said in a telephone interview from Aarhus on Feb. 8.

Bonus Crunch

Another hurdle is the reluctance of corporate boards to offer big signing bonuses, said Guy Chaffin, president of Elite Search International, a Roseville, California-based recruiting firm that’s filled positions at First Solar and Solar Millennium AG, a German company that filed for bankruptcy in December.

First Solar gave Rob Gillette $5 million in signing bonuses to help induce him to take the CEO post and jump from Honeywell International Inc. in 2009, according to filings. Gillette left in October. The Tempe, Arizona-based company paid similar bonuses to other executives, such as former legal counsel John Gaffney, who was offered $14 million to join in 2007. He left two years later to work at Solyndra.

“The brakes are on now because the search committee is going to be under increased scrutiny,” Chaffin said, adding that a CEO candidate “would have to bring some added value that would improve their technology or open a new sales channel.”

First Solar is being run by Michael Ahearn, the chairman and founder. As acting CEO, Ahearn is taking base pay of $500,000 a year and didn’t get a signing bonus.

Stuck as CEO

Ahearn may be stuck in the job for a while, said Dawn Dzurilla, founder and chief executive of Gaia Human Capital Consultants, a boutique renewable energy search firm that found a chief financial officer in December for the solar developer Main Street Power.

“First Solar will need to find a top-flight executive from a public company, and the pool is really quite small,” she said in an interview. “There aren’t nearly enough executives coming into the clean energy industry. How do we compete with the money pouring into social networks and fossil fuels?”

Promising shares to executives is little inducement, she said. The Bloomberg Wind Energy Index of 64 companies fell 22 percent in 2011 as Vestas lost 65 percent of its market value. First Solar’s market value plunged 74 percent last year, helping drag the Bloomberg Industries Large Solar Energy Index of 17 companies down 68 percent.

Jobs are drying up across the industry. The end of a U.S. grant program in December puts at risk more than 37,000 solar jobs, about a third of the national total, according to Washington-based Solar Energy Industries Association. Vestas says it will fire 1,600 in the U.S. unless incentives for wind energy are extended.

Departing Executives

First Solar’s president of operations Bruce Sohn left in April to join Fluidic Energy Inc., a startup developing metal- air batteries that he quit in December.

Mark Morelli resigned as CEO of solar panel producer Energy Conversion Devices Inc. in May and this month started as chief operating officer at Brooks Automation Inc., which makes automation systems used in semiconductor manufacturing plants. Energy Conversion replaced Morelli with, Julian Hawkins, a former senior vice president at Abound Solar Inc.

“There are a lot of folks who became disillusioned,” Fust said. “The Solyndra failure, and the media storm that followed it, has given a lot more folks cold feet.”

--With additional assistance from Stefan Nicola in Berlin and Alex Morales in London. Editor: Will Wade, Reed Landberg

-0- Feb/13/2012 17:07 GMT

To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net

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


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