Vestas Wind Systems A/s · OMXCOP:VWS
Vestas Wind Systems A/s — Investor Day (November 2018)
117 slides from Vestas Wind Systems A/s's investor day presentation, Nov 29, 2018
Slide 1: Capital Markets Day
CAPITAL MARKETS DAY November 2018
Slide 2: Agenda
AGENDA Click on a presentation to go the related slides > 10.00-10.15 Welcome and introduction, Anders Runevad, Group President & CEO 10.15-10.45 Market outlook & Strategy update Anders Runevad, Group President & CEO 10.45-11.15 Growing our industry-leading position Juan Araluce, Executive Vice Pres
Slide 3: Market Outlook & Strategy Update
MARKET OUTLOOK & STRATEGY UPDATE Anders Runevad Group President & CEO Copenhagen, 29 November 2018
Slide 4: Outstanding growth outlook for the sector
OUTSTANDING GROWTH OUTLOOK FOR THE SECTOR Renewable energy to become the dominant generation source Over the next +10 years… Global Electricity Consumption PWh ~36 • Renewable energy capacity to 3.0 Nuclear grow significantly 5.4 Hydro Other fossil • >USD 3tr to be invested by ~25 6.3 RE 2030 2.6 Co
Slide 5: Growth drivers (1/2): high demand for new electric capacity
GROWTH DRIVERS (1/2): HIGH DEMAND FOR NEW ELECTRIC CAPACITY 1. Electricity demand projected 2. Significant retirements of to grow >40% till 2035 coal and nuclear on the horizon Projected electricity demand Projected retirements PWh PWh Equal to roughly 25% ~36 ~6 of current capacity ~4 ~25 2017 2035
Slide 6: Growth drivers (2/2): fundamental support for RE to win
GROWTH DRIVERS (2/2): FUNDAMENTAL SUPPORT FOR RE TO WIN 3. Strong global policy and 4. Accelerated commitment to renewables competitiveness of RE EU 2030 target for renewable energy Development of LCOE (US example) increased from 27% to 32% USD/Mwh 400 EU nations committing to even bolder targets Wi
Slide 7: Our portfolio consists of three attractive RE segments
OUR PORTFOLIO CONSISTS OF THREE ATTRACTIVE RE SEGMENTS Vestas’ market position ONSHORE WIND WIND SERVICE OFFSHORE WIND Large market, healthy#1 #1 #1 #2 growth Mid-sized market, high growth Small market, high growth New installations Installed fleet New installations GW GW GW +6-8% + 9-11% +15-20% 61
Slide 8: Keeping our market leadership
KEEPING OUR MARKET LEADERSHIP Vestas is the market leader and remains committed to gain market share Market share 2017 Percent 100% = 47 GW 100% = 30 GW Vestas 16.4% No. 1 position in the US market 24.5% Vestas Siemens Gamesa 14.6% Increasing market share in LATAM 22.2% Siemens Gamesa Goldwind 11.6%
Slide 9: We have four key differentiators in this market
WE HAVE FOUR KEY DIFFERENTIATORS IN THIS MARKET Technology Proven Global reach and service Scale execution leadership 9 Capital Markets Day 2018 Classification: Restricted
Slide 10: Global reach
GLOBAL REACH Order intake from 33 countries across all regions in 2017 Scandinavia Northern Europe Finland United Kingdom Sweden Canada Netherlands Denmark Belgium Russia Norway • Pioneer and most USA Ireland experienced wind energy company in the world Dominican Rep. Bahrain South Korea Mongolia Me
Slide 11: Technology and service leadership
TECHNOLOGY AND SERVICE LEADERSHIP Continuing to lead the industry on its key competitive parameters Industry-leading wind power plant offering Industry-leading service value and cost 2+4 MW platform Scale leverage technology upgrades Pioneering hybrid Leading multibrand projects capabilities World-c
Slide 12: Scale leadership
SCALE LEADERSHIP Positioned to leverage leadership economics Installations 2017 (GW) Fleet under service 2017 (GW) 8 75 7 55 4 40 3 3 15 15 1 1 Sources: MAKE; Company reports and Vestas estimates; Source: Note: Results Excludes presentations Chinese andservice OEMs; Fleet under Vestas estimates numb
Slide 13: Proven execution
PROVEN EXECUTION High quality of products continues to bring comfort to customers Warranty provisions made and consumed Lost Production Factor (LPF) mEUR Percent 228 6 185 5 160 143 4 117 122 108 3 95 90 84 2 1 0 2013 2014 2015 2016 2017 Dec Dec Dec Dec Dec Dec Dec Dec Dec Sep 2009 2010 2011 2012 20
Slide 14: Responding to a changing environment remains critical
RESPONDING TO A CHANGING ENVIRONMENT REMAINS CRITICAL Quick transition to auctions and merchant markets increases the need to optimise power plant solutions Subsidised industry • Projects reliant on Feed-in-Tariffs Industry wide average selling price • Sub-optimal technology solutions mEUR per MW 1,
Slide 15: Our strategic framework
OUR STRATEGIC FRAMEWORK Market leader We have a clear strategy and priorities in Revenue Grow faster than the market Our long-term Global leader in vision Sustainable Energy Solutions Our mid-term Global leader in Global leader in Best in class objectives Wind Power Plant solutions Wind Service solu
Slide 16: Looking forward
LOOKING FORWARD Why we are strongly positioned to win in the future 1 2 ‘ 3 We are in the best We have the We have the right We have the best position to win right strategy values to guide us people to do it 16 Capital Markets Day 2018 Classification: Restricted
Slide 17: Growing our industry-leading position
GROWING OUR INDUSTRY-LEADING POSITION Juan Araluce EVP & Chief Sales Officer Copenhagen, 29 November 2018
Slide 18: Agenda
Track record and Performance Trends in the Sector Commercial Strategy to maintain #1 position Summary and Q&A AGENDA 18 Capital Markets Day 2018 Classification: Restricted
Slide 19: Track record
TRACK RECORD On track to expand market leadership Order Intake (GW) Vestas’ Transfer of Risk (GW), market share* (%) 16.1% 16.4% +17% 11.2 14.4% 10.5 13.4% 8.3 1.5 3.1 8.7 Emerging 10.4% Market share 6.8 2.0 2.1 Mature Vestas 6.0 1.5 1.9 9.0 9.3 8.5 8.1 7.3 5.3 6.3 6.6 5.9 4.1 4.7 2013 2014 2015 201
Slide 20: Pricing and profitability
PRICING AND PROFITABILITY Price stabilisation mainly driven by higher volumes and better discipline in the industry Average Selling Price (mEUR/MW) and Vestas EBIT margin (%) Key notes Average Selling Price (ASP) and Profitability 0.89 0.93 0.90 0.80 0.71 0.74 • Historically, stable ASP delivers inc
Slide 21: Agenda
Track record and Performance Trends in the Sector Commercial Strategy to maintain #1 position Summary and Q&A AGENDA 21 Capital Markets Day 2018 Classification: Restricted
Slide 22: Changes in the sector's risk-reward profile
CHANGES IN THE SECTOR’S RISK-REWARD PROFILE From FiT to Auctions, Corporate PPAs, and Merchant Risk Key notes • The transition from support schemes into auctions drived prices downwards Feed-in-tariff (or similar) • The customers’ profiles are changing Auctions towards players with a strong balance
Slide 23: Value chain movements
VALUE CHAIN MOVEMENTS Responding to market trends Moving across the value chain is the new normal Commercial Strategy in place to ensure continuous growth EPC Co-development Auctions Hybrids Transform KAM Commercial Capabilities Emerging € Value Engineering markets New players in the market, opportu
Slide 24: Agenda
Track record and Performance Trends in the Sector Commercial Strategy to maintain #1 position Summary and Q&A AGENDA 24 Capital Markets Day 2018 Classification: Restricted
Slide 25: Auctions
AUCTIONS Strong share of wins around the world YTD auction results 2018 remaining auction pipeline* Key notes Mexico 1GW (tech. neutral) Open COD 2021 • In 2018, Vestas has obtained its fair share in auctions across the world ~ 3 GW Denmark/Greece 0.3GW COD 2020-21 • Most order intake from auctions
Slide 26: EPC & co-development
EPC & CO-DEVELOPMENT Being present across the value chain is crucial Engineering Procurement and Construction Co-development % of Order Other Orders Intake (MW) EPC • Development of own projects to serve customers´ 96% 92% 90% needs • Capture additional revenue 4% 8% 10% • +700 MW of firm orders so
Slide 27: Hybrids
HYBRIDS Capture value in increasingly complex market 1 Turbine 2 Project 3 Portfolio Integrated wind, solar and/or storage Optimised use of assets in a system (e.g. by Utilities) Benefits Potential • Grid stability and utilisation • Mainly Australia and India • Project optimisation • Growing in othe
Slide 28: Agenda
Track record and Performance Trends in the Sector Commercial Strategy to maintain #1 position Summary and Q&A AGENDA 28 Capital Markets Day 2018 Classification: Restricted
Slide 29: Summary
SUMMARY 1 Market leading performance, maintaining #1 position 2 Price stabilization in 2018 3 Positive outlook for wind energy in short-, mid- and long-term 29 Capital Markets Day 2018 Classification: Restricted
Slide 30: North American market continues to be attractive
NORTH AMERICAN MARKET CONTINUES TO BE ATTRACTIVE Chris Brown President, Vestas North America Copenhagen, 29 November 2018
Slide 31: Chris Brown
CHRIS BROWN Vestas, North America Vestas WTG Sales North American Order Intake (MW) 3.700 3.600 3.077 2.189 1.733 2013 2014 2015 2016 2017 2018 31 Capital Markets Day 2018 Classification: Restricted
Slide 32: Agenda
AGENDA North American Market Vestas North America Summary and Q&A 32 Capital Markets Day 2018 Classification: Restricted
Slide 33: PTC glidepath carries US market through 2023
PTC GLIDEPATH CARRIES US MARKET THROUGH 2023 US Industry has 5+ years of policy certainty North American Installations (MW) 14.000 PTC 100% 100% 80% 60% 40% Value 12.000 10.000 8.000 6.000 4.000 2.000 0 2018 2019 2020 2021 2022 2023 Source: MAKE and Vestas Key highlights • Organic demand for renewab
Slide 34: RPS demand expected to remain in 2021
RPS DEMAND EXPECTED TO REMAIN IN 2021 States continuing with renewable targets despite lack of federal support 2021 Projected RPS Gaps 2040 2030 2035 2,045MW 2,197 2030 3,800MW 2021 4,390 500 2040 2040 938MW 1,400MW 2026 2025 2,456 800MW 2045 9,400MW 2030 490MW 2021 Compliance Gap with proposed expa
Slide 35: Organic growth of renewables continues
ORGANIC GROWTH OF RENEWABLES CONTINUES Despite headwinds, renewable energy remains in demand 35 Capital Markets Day 2018 Classification: Restricted
Slide 36: PPA prices in USA
PPA PRICES IN USA US PPA Landscape Key highlights $200 1. PPA prices have fallen 76% since 2009 $180 2. Product dimensions double in 3 years: $160 2017: V110 @ 2MW, 9,498m of swept area $140 2020 V150 @ 4.2MW, 17,663m of swept area $120 3. Asset class maturity attracting institutional capital, drivi
Slide 37: North American wind industry fully mature
NORTH AMERICAN WIND INDUSTRY FULLY MATURE Wind infrastructure is built and here to stay Cumulative North American installations (MW) Key highlights 120.000 1. NORTH AMERICA TO BREAK 100 GW IN 2018: Supply chain, transportation, and service infrastructure 100.000 fully mature 2. SUPPLY CHAIN ACROSS A
Slide 38: Agenda
AGENDA North American Market Vestas North America Summary and Q&A 38 Capital Markets Day 2018 Classification: Restricted
Slide 39: Vestas takes top spot in US industry
VESTAS TAKES TOP SPOT IN US INDUSTRY Commercial success a function of best products, best team Key methods to gaining market share U.S. market share of wind turbine manufacturers by MW 100 1. Making Markets: Introducing utility customers to 90 the value of wind ownership and educating them 80 on how
Slide 40: Vestas is the largest operator in North America
VESTAS IS THE LARGEST OPERATOR IN NORTH AMERICA Scale and technology enable Vestas to have the lowest operating costs Vestas 23,902 GE 14,243 NextEra EDF SiemensGamesa Avangrid Duke Suzlon EON NRG Diamond (MHI) Invenergy EDPR Nordex Acciona Senvion AES Noble Allete Other Goldwind Source: MAKE 40 Cap
Slide 41: Vestas transitioning from turbine supplier to solutions provider
VESTAS TRANSITIONING FROM TURBINE SUPPLIER TO SOLUTIONS PROVIDER Bringing the widest breadth and depth of solutions to serve the industry Equipment Supply Construction Service Repower Full Suite of Service 2014 V100 Logistics & Commissioning Offerings Full Suite of Service 2015 V110, V136 Logistics
Slide 42: Project development
PROJECT DEVELOPMENT Entering earlier in the value stream brings value to our customers and to Vestas Optimize Technology Value Creation Development Entering the process earlier allows By increasing influence on the levers that Ownership of development assets allows Vestas to tailor the technical sol
Slide 43: Vestas modular 2 MW platform creates unique opportunity
VESTAS MODULAR 2 MW PLATFORM CREATES UNIQUE OPPORTUNITY With 90, 100, 110, 116, and 120m rotors, Vestas has maximum product flexibility BP Clipper Prototype Adapter Installation - Flat Ridge, Kansas Repower Platforms (2005-2011 Vintage) 40.000 Other - 2.122 35.000 MWT 2.4 - 1.224 30.000 Clipper - 1.
Slide 44: Tariffs
TARIFFS Strong footprint in the USA and a global setup provides flexibility Key highlights 1. US projects use US products: supply for projects in the USA already source nearly 60% of their needs from US factories +60% U.S. projects source more than 60% of their BLADES from U.S. factories 2. World’s
Slide 45: Agenda
AGENDA North American Market Vestas North America Summary and Q&A 45 Capital Markets Day 2018 Classification: Restricted
Slide 46: Summary
SUMMARY 1 USA remains strong market both short and long-term Vestas remains a market leader in the USA with tailored product 2 line, efficient manufacturing, and productive customer relationships 3 Expanded offerings add value 46 Capital Markets Day 2018 Classification: Restricted
Slide 47: Connecting future and legacy
CONNECTING FUTURE AND LEGACY Anders Vedel Executive Vice President & CTO Copenhagen, 29 November 2019
Slide 48: Agenda
AGENDA Market trends Technology strategy Summary and Q&A 48 Capital Markets Day 2018 Classification: Restricted
Slide 49: Technology trends in a changing renewables industry
TECHNOLOGY TRENDS IN A CHANGING RENEWABLES INDUSTRY Value of energy Auctions and Faster development LCOE trend to increasingly Forward-Selling cycles continue important 49 Capital Markets Day 2018 Classification: Restricted
Slide 50: Levelised cost of energy (LCOE)
LEVELISED COST OF ENERGY (LCOE) Onshore wind among the most cost-efficient sources of electricity Levelised cost of energy Key highlights USD/MWh • Global average LCOE of onshore wind declined from 96 USD/MWh in 2009 to 55 USD/MWh in 2018 – a reduction of 48 percent • This impressive cost decrease h
Slide 51: Agenda
AGENDA Market trends Technology strategy Summary and Q&A 51 Capital Markets Day 2018 Classification: Restricted
Slide 52: Our response to ensure continued technology leadership
OUR RESPONSE TO ENSURE CONTINUED TECHNOLOGY LEADERSHIP Short-, medium-, and long-term focus to ensure new technology opportunities are fed into product portfolio Product candidates Committed Strategic road map road map 1-2 years 6-10 years 3-5 years Future market requirements, technology trends, and
Slide 53: Product strategy defined by our customers' expectations
PRODUCT STRATEGY DEFINED BY OUR CUSTOMERS’ EXPECTATIONS Broad product range enables tailored solutions for specific markets What customers need What Vestas does • Proven technology: 2 & 4 MW platforms • Standardisation and modularisation License to • Full supply chain perspective Energy Operate • Ta
Slide 54: Vestas' global platforms meet market-specific needs
VESTAS’ GLOBAL PLATFORMS MEET MARKET-SPECIFIC NEEDS Scale benefits, flexibility, and service simplicity Rotor size: 105 - 150m Power range: 3.45 - 4.2 MW Installed globally: +19 GW* V112-3.0 MW V117/126-3.3 MW V105-3.3 MW V136-3.45 MW V150-4.2 MW 2010 2013 2014 2016 2018 Rotor size: 90-120m
Slide 55: 4 MW platform continues to represent larger part of sales
4 MW PLATFORM CONTINUES TO REPRESENT LARGER PART OF SALES Shift in market demand from 2 MW to 4 MW Order intake 2016 FY Order intake 2017 FY Order intake 2018 9M 55 Capital Markets Day 2018 Classification: Restricted
Slide 56: Our next step: modularity
OUR NEXT STEP: MODULARITY Increasing modularity of our products TODAY FUTURE Singular product development Modular product development Single product variant Individual modules Multiple variants 56 Capital Markets Day 2018 Classification: Restricted
Slide 57: Benefits of modularisation
BENEFITS OF MODULARISATION Modularisation enhances the flexibility of our solutions, while maintaining benefits of scale Enabling more customised Expanding number of More standardised Increased opportunities to solutions to match customer variants, lowering number of components enable efficiency bui
Slide 58: Pioneering solutions to expand leadership
PIONEERING SOLUTIONS TO EXPAND LEADERSHIP Combining technologies with wind at the core that enable further penetration Hybrid demonstrator Kennedy Energy Park Northvolt partnership Test project in Spain with EDPR to The world’s first on-grid utility-scale hybrid Technology collaboration: Lithium-ion
Slide 59: Agenda
AGENDA Market trends Technology strategy Summary and Q&A 59 Capital Markets Day 2018 Classification: Restricted
Slide 60: Summary
SUMMARY 1 Levelized Cost of Energy accompanied by other significant value drivers 2 2 MW and 4 MW are strong, proven platforms that continue to deliver customer value 3 Modular products next step on our journey to maximize flexibility and maintain scale 60 Capital Markets Day 2018 Classification: Re
Slide 61: A competitive supply chain
A COMPETITIVE SUPPLY CHAIN Jean-Marc Lechêne Executive Vice President & COO Copenhagen, 29 November 2018
Slide 62: Agenda
AGENDA Safety & Quality Competitive Footprint Value chain Cost-outs Summary and Q&A 62 Capital Markets Day 2018 Classification: Restricted
Slide 63: Business starts with safety
BUSINESS STARTS WITH SAFETY Continuous improvements through targeted efforts Vestas Safety Principles 1. All injuries can be prevented 2. Every hazard can be managed 3. Management is accountable for safety 4. People are the most critical factor in a safety effort 5. Working safely is a condition of
Slide 64: Safety matters to our customers
SAFETY MATTERS TO OUR CUSTOMERS 64 Capital Markets Day 2018 Classification: Restricted
Slide 65: Agenda
AGENDA Safety & Quality Competitive Footprint Value chain Cost-outs Summary and Q&A 65 Capital Markets Day 2018 Classification: Restricted
Slide 66: Flexible, asset-light, and low-cost supply chain footprint
FLEXIBLE, ASSET- LIGHT, AND LOW-COST SUPPLY CHAIN FOOTPRINT Increasing share in low cost locations and outsourcing percentage OBJECTIVES MEASURES • Agility in ramp up and down • Asset light setup • Lowest landed cost • Supply and manufacturing footprint in lowest cost countries • More outsourcing to
Slide 67: Ramping up production to meet high market demand
RAMPING UP PRODUCTION TO MEET HIGH MARKET DEMAND Our new products V120, V136, and V150 represent 80% of our deliveries in 2019 Ramp up USA Mexico Brazil Argentina Spain Russia India China examples Brighton: V136 TPI ramped up Aeris V150 in Assembly Daimiel ramp up Start of Blades, Ahmedabad TPI new
Slide 68: Strengthening our global supply chain to win new business
STRENGTHENING OUR GLOBAL SUPPLY CHAIN TO WIN NEW BUSINESS Focus on cost competitiveness and strategic partnerships Russia: Blade / assembly factory Argentina: Hub / nacelle assembly factory Brazil: V150 assembly production China: Blade supply agreements 68 Capital Markets Day 2018 Classification: Re
Slide 69: Improving productivity while increasing activity
IMPROVING PRODUCTIVITY WHILE INCREASING ACTIVITY Efficient manufacturing and supply chain setup reduces cost Manufacturing cost pr. MW Key highlights Index, 2013=100 100 • Production cost per MW decreases as 90 operations gets more efficient 80 70 60 50 40 30 20 10 0 2013 2014 2015 2016 2017 69 Capi
Slide 70: Agenda
AGENDA Safety & Quality Competitive Footprint Value chain Cost-outs Summary and Q&A 70 Capital Markets Day 2018 Classification: Restricted
Slide 71: E2E program takes us to the next level
E2E PROGRAM TAKES US TO THE NEXT LEVEL Unlocking savings through multi-functional collaboration Unlocking the full potential E2E multi-functional Full value chain optimisation Accelerate Earnings Phase III Cross-functional Procurement & R&D co-operation Accelerate Earnings Pro Functional Procurement
Slide 72: E2E initiatives optimise the full value chain
E2E INITIATIVES OPTIMISE THE FULL VALUE CHAIN Unprecedented levels of cross-functional collaboration Design Procurement Manufacturing Transport Construction Service Functional Cross-functional End-to-end multi-functional Optimising THE FULL VALUE CHAIN to develop the best solutions for OUR CUSTOMERS
Slide 73: Agenda
AGENDA Safety & Quality Competitive Footprint Value chain Cost-outs Summary and Q&A 73 Capital Markets Day 2018 Classification: Restricted
Slide 74: Summary
SUMMARY 1 Excellence in Safety and Quality remains the foundation of our competitive supply chain Manufacturing and supply chain footprint secures ongoing action to deliver lowest cost and 2 agility to ramp up 3 Our organizational maturity unlocks further saving opportunities across the full value c
Slide 75: The leading service provider in a growing market
THE LEADING SERVICE PROVIDER IN A GROWING MARKET Christian Venderby Group Senior Vice President & Head of Vestas Service Copenhagen, 29 November 2018
Slide 76: Agenda
AGENDA Introduction Market trends and strategy Deep dives Summary and Q&A 76 Capital Markets Day 2018 Classification: Restricted
Slide 77: Our aim is to grow the service business, while taking out cost
Our aim is to grow the service business, while taking out cost. 77 Capital Markets Day 2018
Slide 78: Vestas service performance
VESTAS SERVICE PERFORMANCE The service business has delivered a CAGR of 16-23% on all key metrics from 2015 to 2017 Service revenue Service order backlog Fleet under service mEUR bnEUR GW +16% 1,522 1,309 1,138 +19% +17% 12.1 76 70 10.7 FY FY FY 2015 2016 2017 8.9 54 Service EBIT mEUR +23% 306 201 2
Slide 79: Key facts
KEY FACTS True global player with 83 GW under service and 20% larger fleet than nearest competitor AMERICAS EMEA APAC 30.8 GW 43.0 GW 9.2 GW Fleet under service per region, Q3 2018 +10,000 employees Servicing +8,000 Operating in €13.2bn +40.000 turbines dedicated to service MW of non-Vestas 64 count
Slide 80: Agenda
AGENDA Introduction Market trends and strategy Deep dives Summary and Q&A 80 Capital Markets Day 2018 Classification: Restricted
Slide 81: The potential
THE POTENTIAL The global wind O&M market is expected to grow 8-9% annually until 2026 Global wind O&M market, 2017-2026 BnUSD 28 26 CAGR 8-9% 24 22 20 18 16 14 12 10 8 6 4 2 0 2017 2026e Source: Make 2017 81 Capital Markets Day 2018 Classification: Restricted
Slide 82: Market growth drivers
MARKET GROWTH DRIVERS The market growth is supported by an expected 11% annual growth in installed fleet and an aging fleet that are not outweighed by price development that historically has decreased 8% annually Installed base Aging fleet LCOE development Global onshore installed wind base, Average
Slide 83: Key market trends
KEY MARKET TRENDS Vestas is well positioned to maintain leading position INDUSTRY From support schemes to Industry maturity reduces cost TRENDS competitive market mechanisms and AEP uncertainty Deal complexity and SERVICE Commoditisation of Increased focus on Accelerated increased sharing of TRENDS
Slide 84: Capturing the growth opportunities
CAPTURING THE GROWTH OPPORTUNITIES Customised offerings supporting main customer segments MAIN CUSTOMER SEGMENTS Financial investors Active asset managers • Flexibility Customer • Business case certainty needs • Ease of doing business • Performance optimization support • Low response time across reg
Slide 85: Capturing scale advantages in optimised operating model
CAPTURING SCALE ADVANTAGES IN OPTIMISED OPERATING MODEL INITIAL FOCUS ~5% reduction in back-office ~5% reduction in labour cost cost over the last two years from over the last two years from creating centers of excellence in from application of Lean India and Poland Footprint Process methods optimis
Slide 86: Agenda
AGENDA Introduction Market trends and strategy Deep dives Summary and Q&A 86 Capital Markets Day 2018 Classification: Restricted
Slide 87: Multibrand footprint
MULTIBRAND FOOTPRINT Vestas is servicing all major platforms across 345 sites, 17 countries and 5 continents Canada Europe USA Mexico India Brazil Australia 87 Capital Markets Day 2018 Classification: Restricted
Slide 88: Multibrand case study
MULTIBRAND CASE STUDY Proven capabilities on non-Vestas platforms Contractual Multiple sites Highlights Availability (%) Location: Brazil • Vestas Service team takes over service Size: 58 WTGs in January 2018 Scope: AOM 4000 100 • Tailored service recovery plan for immediate operational improvements
Slide 89: Our ambition
OUR AMBITION Positioning Vestas for accelerated digitalisation Our ambition is to become the digital leader in sustainable energy Industry-leading ability to Industry-leading volume of data Industry-leading technology capture value through scale - across turbine technologies stack from Utopus Insigh
Slide 90: Utopus Insights: a digital powerhouse
UTOPUS INSIGHTS: A DIGITAL POWERHOUSE With the acquisition of Utopus Insights, Vestas has created a platform for future digital solutions to make Vestas as the digital leader in sustainable energy Advanced analytics capabilities Scalable platform and applications Multi-brand focus to cover all major
Slide 91: Bridging to the future of digital energy
BRIDGING TO THE FUTURE OF DIGITAL ENERGY Vestas’ digital journey Vestas’ digital offerings XPLORE 1 MAESTROS Intuitive, interactive and customizable energy asset data visualization and Scalable, secure and performance monitoring 2 flexible energy analytics platform for data ingestion and curation 3
Slide 92: Summary
SUMMARY Worlds largest service provider with 83 GW under service and largest 1 multi-brand service provider Vestas expects to continue being the market leader given strong value 2 propositions on both core and advanced offerings like digital solutions Capturing additional scale advantages in the dig
Slide 93: MHI Vestas Offshore Wind A/S
Vestas Capital Markets Day MHI Vestas Offshore Wind A/S PHILIPPE KAVAFYAN LARS BONDO KROGSGAARD 93 | MHI Vestas Offshore Wind A/S – Vestas Capital Markets Day, Copenhagen | 29 November 2018 CEO Co-CEO © 2018 MHI Vestas Offshore Wind A/S
Slide 94: Journey since the Joint Venture was established in 2014
Journey since the Joint Venture was established in 2014 Installations and focus areas 2.7 GW installations and 3.8 GW order backlog since the beginning of the JV Focus areas MW Establishing MVOW (2014-2018) 9,000 Safety performance • Strong Health and Safety discipline from shareholders 8,000 7,000
Slide 95: Current pipeline
Current Pipeline 5.6 GW of projects selected V164 Overview of the order pipeline Project pipeline MW Firm orders 6,000 • Horns Reef 3 (Vattenfall), DK - 406 MW (49 x V164-8.3 MW) inst. 2018 • Norther (Norther NV), BE - 370 MW (44 x V164-8.4 MW) inst. 2019 5,500 • Northwester 2 (Parkwind), BE - 219 M
Slide 96: The V164
The V164 Technology split and platform evolution Split of V112 Installed MW and splitV164 – The V164since by Technology quickly thereplacing beginning the of V112 theorders JV in 2014* Installation years for the V164 platform MW installed Power rating (MW) 10.0 1,000 948 10.0 900 V112 9.5 800 V164 7
Slide 97: Service
Service The offshore service business Average remaining contract durations of the Service Backlog (Incl. FOI, COI) Time to invest in offshore services GW 8 Past the initial launch phase, V164 brings 7 long term services contract portfolio 7.7 years Legacy 6 on 2 GW contracts 1. OPEX optimization by
Slide 98: Global offshore market: volume outlook
Global offshore market Volume outlook Annual forecasted installed capacity split by region, 2017-2027 (GW)* Future top 12 markets (accumulated installation in GW 2027e)* China Asia excl. China GW Americas Europe South Korea 1 16 15.3 15 Japan 2 14 13.3 13.7 Poland 2 13 12 Belgium 3 11 10.4 10.4 Denm
Slide 99: Global offshore market: price levels
Global offshore market Price levels Price Levels in Recently Awarded Global Projects (EUR/MWh)* Comments Increasingly competitive prices • Significant LCoE reductions achieved in recent years • “Zero subsidy” bids in Germany and the Netherlands • New markets leaning towards LCoE levels from establis
Slide 100: Expanding reach
Expanding reach Development in new MVOW markets Opportunities in Taiwan Taiwan USA Opportunities Opportunities in inTaiwan the USA Taiwan JapanOpportunities in Japan Forecasted installed capacity, 2017-2027e (GW)* Forecasted installed capacity, 2017-2027e (GW)* Forecasted installed capacity, 2017-20
Slide 101: MVOW global footprint
MVOW global footprint – our offices, manufacturing & assembly facilities OFFICE location MANUFACTURING / ASSEMBLY facility 101 | MHI Vestas Offshore Wind A/S – Vestas Capital Markets Day, Copenhagen | 29 November 2018 © 2018 MHI Vestas Offshore Wind A/S
Slide 102: MVOW to double its business and increase profitability
MVOW to double its business and increase profitability over the next four years Operational Excellence: • Double revenue • Build offshore service business • Continuously improve profitability Financial Discipline: • Earn freedom to grow • Selective investment in capacity • Maintain high product deve
Slide 103: Financial performance
Financial performance Financial performance is progressing to exceed initial expectations Financial performance Financial guidance and expected 2018/19 result for MVOW kEUR 2016/17 2017/18 2018/19 Revenue 531,243 942,155 Accordingly, MHI Vestas Offshore Wind expects to double its revenue over the th
Slide 104: Summary
Summary • MVOW is a market leader in the offshore wind industry and will remain a market leader by: ✓ Continuously improving health and safety ✓ Executing and further building on the strong pipeline through: 1. Execution in robust core markets 2. Expansion in new markets 3. Development of service ✓
Slide 105: Financial update
FINANCIAL UPDATE Marika Fredriksson Executive Vice President & CFO Copenhagen, 29 November 2018
Slide 106: Long-term financial ambitions
LONG-TERM FINANCIAL AMBITIONS Long-term ambitions reflect organic growth and profitability improvements Revenue EBIT margin Free Cash Flow Grow faster than the Minimum 10 percent Positive every year market 106 Capital Markets Day 2018 Classification: Restricted
Slide 107: Diversification of business model continues
DIVERSIFICATION OF BUSINESS MODEL CONTINUES Strong platform for future financial performance Power solutions Service Offshore • Wind power competing on market- • Growth in annual installed wind • JV on track to net profit breakeven based mechanisms power capacity in 2019 • RE targets in place in all
Slide 108: Revenue growth supported by strong markets
REVENUE GROWTH SUPPORTED BY STRONG MARKETS Vestas is in a unique position to outgrow the market Revenue Future drivers EURm ▲ 6-8 percent annual growth in onshore volumes towards 2021 10.237 9.953 1.309 ▲ Drop in the US post 2020 expected to be offset by 1.522 8.423 EMEA, and especially Asia Pacific
Slide 109: Delivering minimum 10 percent EBIT margin
DELIVERING MINIMUM 10 PERCENT EBIT MARGIN Service accounts for an increasingly large part of profitability EBIT before special items Future drivers EURm ▲ Increased activity 1.421 225 1.230 ▲ New products and technology 306 ▲ Committed to cost-out and efficiency improvements 906 ▲ Service to grow it
Slide 110: Costs: keeping a global balance
COSTS: KEEPING A GLOBAL BALANCE A global company constantly adjusting to reflect global market conditions Adjusting global footprint Follow market developments Constant focus on cost 110 Capital Markets Day 2018 Classification: Restricted
Slide 111: Cost discipline remains a key priority
COST DISCIPLINE REMAINS A KEY PRIORITY Controlling the fixed cost base SG&A Priorities EURm 705 733 • Lean and flexible organisation 645 • Highest R&D spending in the industry securing best-in-class products Drivers 7.7% 7.5% 7.4% 6.9% 6.7% ▲ Leverage 6.0% ▲ Increased activity in low cost countries
Slide 112: Investing in order to capture the growth momentum
INVESTING IN ORDER TO CAPTURE THE GROWTH MOMENTUM Investments expected to increase in the coming years Investments Priorities EURm, excl. M&A and divestments • Support organic growth initiatives • Highest R&D spending in the industry securing 600 best-in-class products 512 506 Future drivers 370 4%
Slide 113: Managing working capital in a growth environment
MANAGING WORKING CAPITAL IN A GROWTH ENVIRONMENT Complex and large projects call for careful management, timing, and control of cash flows Net Working Capital priorities Inventories Sourcing • Close cooperation between Sales, Sourcing and • Use of standard components Manufacturing • Increased outsou
Slide 114: Capital allocation
CAPITAL ALLOCATION Priorities for capital allocation remain unchanged Allocation to shareholders Capital allocation to shareholders EURm +271 • EUR 2.5bn returned since 2014 – equaling around 1.000 961 20 percent of current market cap 900 +335 800 • Priorities for capital allocation remain unchanged
Slide 115: All operations take a responsible approach
ALL OPERATIONS TAKE A RESPONSIBLE APPROCH Sustainability at Vestas Local community Wind turbine environmental development performance Environmental impact of Social License to Operate Vestas’ operations Responsible supplier Health & safety management 115 Capital Markets Day 2018 Classification: Rest
Slide 116: Summary
SUMMARY 1 Business model provides stability and reduced risk profile 2 Balance sheet remains strong and provides flexibility 3 Value creation shared with our shareholders 116 Capital Markets Day 2018 Classification: Restricted
Slide 117: Disclaimer and cautionary statement
DISCLAIMER AND CAUTIONARY STATEMENT This document contains forward-looking statements concerning Vestas’ financial condition, results of operations and business. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statement