Vestas Wind Systems A/s · OMXCOP:VWS
Vestas Wind Systems A/s — Investor Day (June 2014)
159 slides from Vestas Wind Systems A/s's investor day presentation, Jun 12, 2014
Slide 1: Welcome to Vestas Capital Markets Day 2014
Welcome to Vestas Capital Markets Day 2014 Lars Villadsen, SVP, Investor Relations Aarhus, 12 June 2014
Slide 2: Disclaimer and cautionary statement
Disclaimer and cautionary statement This presentation 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 state
Slide 3: Safety First
Safety First If the fire alarm starts you MUST leave the building following the EXIT signs and go to the assembly point at the parking lot. 3 │ CMD 2014 Classification: Restricted
Slide 4: Practical information
Practical information Coffee/tea and lunch will be served in the basement. Food and beverages except water are not allowed in the auditorium. No photos. Rest rooms are also located in the basement. Drinks and dinner will take place in the canteen at 5.45 pm. 4 │ CMD 2014 Classification: Restricted
Slide 5: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 6: Introduction
Introduction Anders Runevad, Group President & CEO Marika Fredriksson, Executive VP & CFO Aarhus, 12 June 2014
Slide 7: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Profitable Growth for Vestas 2. Capital structure and net working capital 7 │ Introduction – CMD 2014 Classification: Restricted
Slide 8: Profitable Growth for Vestas
Profitable Growth for Vestas From paper to implementation and execution mode Vision: To be the undisputed global wind leader Strongest brand in industry | Best-in-class margins Market leader in volume | Bringing wind on a par with coal and gas Grow profitably in Capture full potential of mature & em
Slide 9: Recap: Focus on Profitable Growth for Vestas
Recap: Focus on Profitable Growth for Vestas Profitable growth strategy to strengthen global leadership STRATEGY OBJECTIVES AMBITIONS KEY ENABLERS Markets & Customers Grow profitably in Global reach Grow faster than 1 mature & the market emerging markets Trusted partner Service Capture full potentia
Slide 10: Everything ties together
Everything ties together Collaboration, simplicity and accountability unite Vestas in order to reach its mid-term ambitions 10 │ Introduction – CMD 2014 Classification: Restricted
Slide 11: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Profitable Growth for Vestas 2. Capital structure and net working capital 11 │ Introduction – CMD 2014 Classification: Restricted
Slide 12: Stronger and more resistant capital structure
Stronger and more resistant capital structure Significant improvement in net debt to EBITDA and solvency ratio Net debt to EBITDA Solvency ratio ×EBITDA Percentage 1.8 1.5 32 31.0 1.4 30 min.30.0 <1.0 28 27.0 26 23.4 24 22.8 (0.1) (0.6) 22 20.5 0 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2013 2013 2013 2013 201
Slide 13: Profitable Growth for Vestas
Profitable Growth for Vestas The current capital structure supports the strategy Vision: To be the undisputed global wind leader Strongest brand in industry | Best-in-class margins Market leader in volume | Bringing wind on a par with coal and gas Grow profitably in Capture full potential of mature
Slide 14: Vestas – a global project-driven organisation
Vestas – a global project-driven organisation Last year, we had an order intake of 6 GW from 37 countries Announced orders 2013 Wind markets with announced orders in 2013 Production sites Europe – 1,203 MW Asia – 454 MW USA & Canada – 1,693 MW Mexico – 155 MW Australia – 107 MW South America – 421 M
Slide 15: Backlog: Market development calls for a strong balance sheet
Backlog: Wind turbines and service Market development calls for a strong balance sheet and access to bonding lines Our growing project pipeline… … is a main driver for increasing our bonding lines 2012: New EUR 1bn bank agreement and capital increase in 2014: EUR • Improved flexibility towards 12.4b
Slide 16: Project lifecycle and associated guarantees
Project lifecycle and associated guarantees The complexity and size of a wind project imply high demand on payment and risk mitigations 1 Quotation/offer 2 Signing of contract 3 First shipment / delivery on site 4 Taking over Types of guarantees 1 Bid bond (2%) 2 Advance payment bond (10%) 3 Perform
Slide 17: Importance of operational excellence
Importance of operational excellence Complex and large projects call for careful management, timing and control of cash flows Suppliers Customers 17 │ Introduction – CMD 2014 Classification: Restricted
Slide 18: Working capital optimisations paying off
Working capital optimisations paying off Release of more than EUR 1.2bn since peak… Net working capital mEUR 672 317 233 197 (71) (56) (117) (596) (570) 2009 2010 2011 2012 Q1 Q2 Q3 Q4 Q1 2013 2013 2013 2013 2014 18 │ Introduction – CMD 2014 Classification: Restricted
Slide 19: Continuous working capital management
Continuous working capital management … mainly driven by better inventory control and cash collection implying improved cash conversion Inventories • Better planning and Contract control. management • Closer cooperation • Alignment of Sourcing between Sales, payment terms and Sourcing and payment •
Slide 20: Return on invested capital
Return on invested capital Going forward, ROIC must be above 10 per cent – even in trough years Return on invested capital (ROIC) Percentage 43.4 45 40 35 30 25 21.3 20 14.4 14.5 15 10.8 9.5 10 7.7 5 (1.3) 0.2 0 -5 -10 FY FY FY FY FY FY FY FY Q1 2006 2007 2008 2009 2010 2011 2012 2013 2014 ROIC, las
Slide 21: Thank you for your attention
Thank you for your attention Copyright Notice The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any means - such as graphic,
Slide 22: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 23: Grow profitably in mature and emerging markets
Grow profitably in mature and emerging markets Juan Araluce, Executive VP & CSO Aarhus, 12 June 2014
Slide 24: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. What does our market environment look like? 2. How is Vestas doing today? 3. What are we doing to grow profitably in mature and emerging markets? 24 │ Grow profitably in mature and emerging markets – CMD 2014 Classification: Restricted
Slide 25: World energy demand & related CO2 emissions by scenario
IEA forecasts increase in energy demand and CO2 emissions Low-carbon energy at a reasonable price will be a market for the future World energy demand & related CO2 emissions by scenario Mtoe 20 000 80 Gt Primary energy demand: Current Policies Scenario New Policies Scenario 15 000 60 450 Scenario CO
Slide 26: Renewables take the lead of capacity additions
Renewables to dominate capacity additions from 2013-2035 IEA predicts that renewables will increase their share of energy generation from 20 to 31 per cent Renewables take the lead of capacity additions Cumulative global renewables-based capacity additions & retirements, 2013-2035 GW 1 500 Additions
Slide 27: Historical annual wind installations
Historical annual wind installations Annual wind installations dropped for the first time in 2013 after more than 15 years with an annual average growth rate of 25 per cent Global annual installed wind capacity GW 45 41 38 39 35 +25% 27 20 15 12 7 8 8 7 3 3 4 1 2 1996 1997 1998 1999 2000 2001 2002 2
Slide 28: Wind market forecast 2013-2023
Wind market forecast 2013-2023 Annual average growth rates of 3-7 per cent expected Wind market forecast, net additions GW CAGR: 7 per cent 70 65 60 55 CAGR: 3 per cent 50 45 40 0 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E MAKE IHS Source: MAKE Consulting March 2014, IHS Energy
Slide 29: Wind is competitive against other energy sources
Wind is competitive against other energy sources While LCoE for many energy sources increases, wind has lowered its LCoE by 15 per cent over the last five years Levelised Cost of Energy (LCoE), January 2014 USD/MWh 350 329 300 313 250 200 187 166 150 140 140 149 134 100 91 82 82 82 70 64 60 50 26 37
Slide 30: Politics and regulations still matter
Politics and regulations still matter Continued focus on local content and LCoE reductions to lower dependency on politics Policy and regulatory examples Emerging markets • Emerging legislation Europe USA • Subsidy scheme revisions • PTC extension Brazil • BNDES Australia financing • RET review Vest
Slide 31: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. What does our market environment look like? 2. How is Vestas doing today? 3. What are we doing to grow profitably in mature and emerging markets? 31 │ Grow profitably in mature and emerging markets – CMD 2014 Classification: Restricted
Slide 32: Market shares 2013
Market shares 2013 External analysts have Vestas as a clear No. 1 with a market share of more than 13 per cent Market shares 2013 (onshore and offshore) Key takes: Percentage 100% = 36 GW 100% = 37 GW 100% = 37 GW • Three leading external analysts Vestas 13.3% Vestas 13.1% place Vestas as No. 1 in w
Slide 33: Vestas has a strong position in the top-10 markets
Vestas has a strong position in the top-10 markets Except for China and India, Vestas is among the leading three players in the top-10 markets New Vestas rank Country installations Rank #1 Rank #2 Rank #3 Source 2012 - 2013 2013 (MW)* 1. China 16,100 Goldwind Guodian United Power Mingyang 11 - 13 CW
Slide 34: Customers have regained trust in Vestas
Customers have regained trust in Vestas Customers have renewed trust in Vestas’ future and offerings – CRSI increases 3 index points vs 2012 Reputation (RS) Satisfaction (CSS) 77 +2 71 +1 Customer Relationship Strength Indicator (CRSI) 76 +3 Preference (PPS) Recommendation (NPS) 85 +3 38 +7 • Reputa
Slide 35: Vestas' major key differentiators
Vestas’ major key differentiators Largest installed base, world-class products, global reach and a high quality Total installed base (GW) Lost production factor 5 +53% 4 ~61 3 ~40 2 1 0 2nd largest Vestas WTG supplier Dec Dec Dec Dec Dec 2009 2010 2011 2012 2013 • Largest global installed base, prov
Slide 36: First mover in 35 countries around the world
First mover in 35 countries around the world While Vestas has a strong position in new wind markets and mature markets there is room for improvement in China, India and Brazil Key takes: >20%* • Solid performance in North America Attention: <5%* and Europe. Solid performance in Mature China, • Pione
Slide 37: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. What does our market environment look like? 2. How is Vestas doing today? 3. What are we doing to grow profitably in mature and emerging markets? 37 │ Grow profitably in mature and emerging markets – CMD 2014 Classification: Restricted
Slide 38: Grow faster than the market
Grow faster than the market Build partnerships and generate new opportunities to enable growth STRATEGY OBJECTIVE MID-TERM AMBITIONS & INITIATIVES Grow profitably in 1 mature & Grow faster than the market emerging markets • Strengthen the position in mature markets. Capture full 2 potential of the •
Slide 39: Vestas maintains strong position in volatile US market
Vestas maintains strong position in volatile US market Significant near-term potential from non-exercised MSA/TSAs US wind installations shrink and stabilise Vestas captured a solid share of 2013 orders 13 IHS MAKE 37% 10 8 8 28% 7 7 7 6 5 5 5 555 18% 5 5 4 4 4 4 16% 3 3 3 2 3 1 22 1 2014E 2015E 201
Slide 40: European market expected to be fairly stable
European market expected to be fairly stable Low energy demand and focus on reducing LCoE Annually installed wind capacity in Europe GW IHS MAKE 16 15 15 15 14 14 12 13 12 11 11 11 12 10 11 11 11 10 11 11 11 10 10 10 9 8 9 7 7 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2005 2006 200
Slide 41: China, India and Brazil constitute a large part of the market
China, India and Brazil constitute a large part of the market China, India and Brazil accounted for more than 50 per cent of the world market in 2013 measured in MW – a trend that is expected to continue Wind capacity installations 2013 Percentage Country MW % Share China 16,100 45% Germany 3,238 9%
Slide 42: Vestas to focus on China, India and Brazil
Vestas to focus on China, India and Brazil Strong leadership appointed and local market strategy process initiated Local market strategies being developed • Cost out of products • Strengthening of local sourcing • “On-the-ground” leadership Ruben Lazo Jorn Hammer Chris Beaufait Brazil India Asia Pac
Slide 43: Importance of strategic accounts
Importance of strategic accounts Strategic accounts are becoming increasingly important as the customer landscape is changing Year-end 2008 Year-end 2012 Year-end 2020E ILLUSTRATIVE ~ 120 GW ~ 280 GW 8 years > 600 GW Global wind market 2008 Global wind market 2012 Global wind market 2020 100% 100% 1
Slide 44: Greater focus on developing strategic accounts
Greater focus on developing strategic accounts In 2013, priority accounts constituted almost 50 per cent of order intake WTG order intake Customer Loyalty Survey 2013 MW CRSI index 5,964 83 2,882 3,738 (48%) 1,489 +8 (40%) 75 3,082 2,249 2012 2013 Strategic accounts Priority Other CRSI 2012 CRSI 201
Slide 45: Becoming 'opportunity originator'
Becoming ‘opportunity originator’ Head of new Global Deal Structuring function appointed Becoming originators is about locking the sales opportunities earlier on in the value chain by engaging much earlier with developers, policy makers and with financial institutions. On 1 May 2014, Søren Elbech jo
Slide 46: Deal origination early in the value chain
Deal origination early in the value chain Value chain considerations and potential for expansion to secure profitable growth WTG • Vestas has Intermediate Basic Main reorganised its value Raw materials Assembly Goods components Components business model to chain become more • Cast iron • Blades asse
Slide 47: Summary
Summary What have we learned 1 Greater focus on cost of energy in the market environment. 2 Vestas is well-positioned globally – Special attention on China, India and Brazil. 3 Strategic account development and deal origination – Key elements of commercial strategy. 47 │ Grow profitably in mature an
Slide 48: Thank you for your attention
Thank you for your attention Copyright Notice The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any means - such as graphic,
Slide 49: Q&A
Q&A 49 │ Grow profitably in mature and emerging markets – CMD 2014 Classification: Restricted
Slide 50: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 51: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 52: Capture full potential of the service business
Capture full potential of the service business Christian Venderby, Group SVP and Head of Service Aarhus, 12 June 2014
Slide 53: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Introduction 2. The successful transformation of the service business 3. Capturing the full service potential 53 │ Capture full potential of the service business – CMD 2014 Classification: Restricted
Slide 54: Introducing your speaker
Introducing your speaker Christian Venderby • Group Senior Vice President and Head of Service. • Joined Vestas in 2006 as CFO for North America and was appointed COO in 2010 with responsibility for Construction, Service, Supply Chain and Technology. • Degree in Finance from Copenhagen Business Schoo
Slide 55: My Vestas journey
My Vestas journey Christian Venderby USA annual wind installations GW 13 • CFO during the US wind industry’s 10 8 boom and burst years 2006-10. 7 5 5 • P&L responsibility for North American 2 3 1 construction and installation of > 4 GW wind turbines. 2005 2006 2007 2008 2009 2010 2011 2012 2013 • P&
Slide 56: Service customers, create value and acquire fair share of it
Service customers, create value and acquire fair share of it Building on our strong performance and long-term customer relationships • Always delivering a high level of safety performance. • Being transparent to our customers and having an open dialogue and collaboration about performance and opport
Slide 57: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Introduction 2. The successful transformation of the service business 3. Capturing the full service potential 57 │ Capture full potential of the service business – CMD 2014 Classification: Restricted
Slide 58: The service business today
The service business today Today, Vestas has more than 45 GW under service from a total installed base of more than 61 GW MW under service and track record end 2013 Europe & Africa 26 GW - out of 34.5 GW installed base Americas Asia Pacific 10.6 GW 6.6 GW - out of 15.4 GW - out of 10.3 GW installed
Slide 59: Satisfactory development in service business' financials
Satisfactory development in service business’ financials… Continuous growth in revenue and order backlog while earnings have improved significantly Service revenue and EBIT margin Service order backlog mEUR and percentage bnEUR mEUR % Market 1,000 CAGR 18%* 954 28 8 886 6.9 +6% 6.7 +19% 24 800 6.1 5
Slide 60: Driven by successful transformation of service activities
… driven by successful transformation of service activities Improved operational performance, leverage and customers’ demand for business case certainty Lost Production Factor (LPF) Average duration of service contracts Percentage Number of years 5 Average duration BNEF sample* Average duration Vest
Slide 61: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Introduction 2. The successful transformation of the service business 3. Capturing the full service potential 61 │ Capture full potential of the service business – CMD 2014 Classification: Restricted
Slide 62: Grow the service business by more than 30 per cent
Grow the service business by more than 30 per cent Leverage on the installed base and establish a new service organisation STRATEGY OBJECTIVE MID-TERM AMBITIONS & INITIATIVES Grow profitably in 1 mature & Grow the service business by more than emerging markets 30 per cent Capture full 2 potential of
Slide 63: Current growth drivers in the service business
Current growth drivers in the service business Current trend in performance indicators and value drivers point in the direction of growth 1. Keep the existing service renewal level AND 2. Ensure a stable price development AND 3. Continue the cost-out efforts AND 4. Grow with the market in terms of i
Slide 64: Capture full service sales potential
Capture full service sales potential Examples: Recapture share of the lost GW; and increase current renewal rate Recapture opportunity (acc. Q1 2014) Renewal opportunity (acc. Q1 2014) GW GW 16.2 GW 11.3 GW 61.2 45.0 45.0 33.8 Accummulated Accummulated Accummulated Accummulated installed base instal
Slide 65: Initiatives to grow the service business
Initiatives to grow the service business PowerPlusTM improves annual energy production (AEP) on existing plants Service solution Customer value Power Uprate • Modify control parameters • Vestas is able to increase that allows the wind turbines AEP, generally by 1.0-4.0 to increase their maximum per
Slide 66: Initiatives to grow the service business
Initiatives to grow the service business Aligning full scope service offerings to match a liberalised energy market Power plant portfolio management Gas turbine • Aligning full scope long-term contracts to customers’ operational and commercial Solar model. • Inclusion of customers’ • Variable input
Slide 67: Summary
Summary What have we learned 1 We have a large and profitable service business with an order backlog of approx EUR 7bn. 2 We have a significant growth potential to be captured with a robust commercial strategy. 3 We have an opportunity to improve our service delivery model leveraging our size and cr
Slide 68: Q&A
Q&A 68 │ Capture full potential of the service business – CMD 2014 Classification: Restricted
Slide 69: Thank you for your attention
Thank you for your attention Copyright Notice The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any means - such as graphic,
Slide 70: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 71: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 72: Reduce Levelised Cost of Energy
Reduce Levelised Cost of Energy Anders Vedel, Executive VP & CTO Johnny Thomsen, SVP, Product Management Jorge Magalhaes, SVP, Engineering Solutions Aarhus, 12 June 2014
Slide 73: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Looking back: What have we done since 2012? 2. Looking forward: What are the main strategic focus areas for product and service solutions? • Reducing the Levelised Cost of Energy • Innovation • Industrialisation and modularisation 73 │ Reduce Levelised
Slide 74: Faster delivery of wind turbines and services to the market
Faster delivery of wind turbines and services to the market Harvesting the full potential of our 2 and 3 MW platforms Q4 2012 Q2 2013 Q4 2013 Q2 2014 V126-3.3 MW V110-2.0 MW De-icing option Vestas V112-3.3 MW (VDS) PowerPlus™ V117-3.3 MW V105-3.3 MW Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2
Slide 75: Vestas' turbines are performing well
Vestas’ turbines are performing well Warranty consumption and LPF continue at a low level Warranty provisions consumed Lost Production Factor (LPF) Percentage Percentage 5.6 5.1 5 4.5 4.4 4 3.7 3.1 3 2 1.6 1.4 1 0 2006 2007 2008 2009 2010 2011 2012 2013 Dec Dec Dec Dec Dec 2009 2010 2011 2012 2013 P
Slide 76: Our customers are satisfied with our products
Our customers are satisfied with our products Positive trend from the Customer Loyalty Survey 2013 Customer Loyalty Survey 2013 Index number 2012 2013 80 78 77 75 74 73 Power generation WTG portfolio Power curve performance 76 │ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 77: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Looking back: What have we done since 2012? 2. Looking forward: What are the main strategic focus areas for product and service solutions? • Reducing the Levelised Cost of Energy • Innovation • Industrialisation and modularisation 77 │ Reduce Levelised
Slide 78: Profitable Growth for Vestas
Profitable Growth for Vestas Reducing Levelised Cost of Energy to support Vestas’ mid-term ambitions Vision: To be the undisputed global wind leader Strongest brand in industry | Best-in-class margins Market leader in volume | Bringing wind on a par with coal and gas Grow profitably in Capture full
Slide 79: Reduce cost of energy faster than market average
Reduce cost of energy faster than market average Reducing Levelised Cost of Energy to support Vestas’ mid-term ambitions STRATEGY OBJECTIVE MID-TERM AMBITIONS & INITIATIVES Grow profitably in 1 mature & Reduce Levelised Cost of Energy faster than emerging markets market average • Cost out and optimi
Slide 80: Introducing deep dives into strategic focus areas
Introducing deep dives into strategic focus areas Reduce Levelised Cost of Energy, innovation and industrialisation Reduce levelised cost of energy Johnny Thomsen, SVP, Product Management Industrialisation and modularisation Jorge Magalhaes, SVP, Engineering Solutions Innovation Jorge Magalhaes, SVP
Slide 81: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Looking back: What have we done since 2012? 2. Looking forward: What are the main strategic focus areas for product and service solutions? • Reducing the Levelised Cost of Energy • Innovation • Industrialisation and modularisation 81 │ Reduce Levelised
Slide 82: LEC formula: Hmmm, is that what we are talking about?
Hmmm, is that what we are talking about? Complicated formula to be simplified into… 𝑛𝑛 𝐼𝐼𝑡𝑡 + 𝑀𝑀𝑡𝑡 + 𝐹𝐹𝑡𝑡 ∑𝑡𝑡=1 (1 + 𝑟𝑟)𝑡𝑡 LEC = 𝑛𝑛 𝐸𝐸𝑡𝑡 ∑𝑡𝑡=1 (1 + 𝑟𝑟)𝑡𝑡 LEC = Average lifetime levilised electricity generation cost. It = Investment expenditures in year t. Mt =…
Slide 83: Hmmm, is that what we are talking about?
Hmmm, is that what we are talking about? … something more tangible Annualised CAPEX + Annualised OPEX LCoE = Average Annual Energy Production 83 │ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 84: Being competitive
Being competitive Cost of ownership is important… … and in our industry it is called Levelised Cost of Energy. 84 │ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 85: Why is Levelised Cost of Energy important?
Why is Levelised Cost of Energy important? LCoE is important because… 1. Vestas needs to stay competitive and increase shareholder value. 2. Customers request wind power at lower cost of energy. 3. Wind support schemes are under pressure. 4. The world needs clean, affordable and predictable energy.
Slide 86: Levelised cost of energy for onshore wind
Levelised Cost of Energy for onshore wind LCoE depends on different factors resulting in different cost of energy ranges for different sites USD 37-187 per MWh Production/wind climate CAPEX OPEX Finance cost Source: Bloomberg New Energy Finance, January 2014. 86 │ Reduce Levelised Cost of Energy – C
Slide 87: What does it take to lower LCoE?
What does it take to lower LCoE by 3 per cent? Approximate figures -9% Bill of material -3% +3% Rotor Cost of Energy +10% Rating - all other factors being equal -17% Service -15% Balance of Plant 87 │ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 88: Levelised Cost of Energy: How much can Vestas affect?
Levelised Cost of Energy How much can Vestas affect? Fully influenced by Vestas Partially influenced by Vestas Turbine Tower and foundations Electrical infrastructure Installation, construction, commissioning CAPEX [EUR/year] Cost of capital Project management and other Operation, maintenance, after
Slide 89: Value creation and capture
Value creation and capture A business case has to consider all aspects to improve ROIC and/or to create growth Value creation Value capture 89 │ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 90: Examples
Examples 90 │ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 91: Turbine quality and operation strategies lowers LCoE
Turbine quality and operation strategies lowers LCoE Examples on lowering cost of energy Lost Production Factor (LPF) Testing facilities Percentage 5 4 3 2 1 0 Dec Dec Dec Dec Dec 2009 2010 2011 2012 2013 Translates into 2.8 per cent more annual energy production on the installed base and for new tu
Slide 92: 3 MW platform – standardising and modulising
3 MW platform – standardising and modulising Examples of lowering cost of energy 2012 2014 IEC 1A V105 V100-2.6 MW +22% AEP** IEC 1B & 2A Up-rate to 3.3 MW V112 V90-3.0 MW +3% AEP* IEC 2A V112-3.0 MW V117 +8% AEP* IEC 3A V126 Note: AEP improvements depend on assumptions. +17% AEP* * Compared to V112
Slide 93: 2 MW platform transition - simplification and AEP
2 MW platform transition - simplification and AEP Examples of lowering cost of energy 2012 2014 2 MW Mk 7 IEC 2B 2 MW Mk 8 Update – 2 MW Mk 10 V100 +12% AEP* 2 MW Mk 9 IEC 3A V110 +13% AEP** 2 MW Mk 7H 60 Hz Note: AEP improvements depend on assumptions. * Compared to V90-1.8/2.0 MW. ** Compared to V
Slide 94: Large diameter steel tower for the 3 MW platform
Large diameter steel tower for the 3 MW platform Examples of lowering cost of energy • 137 m tower for V126-3.3 MW. • 141.5 m tower for V117-3.3 MW. 94 │ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 95: Vestas PowerPlus – LCoE improvements in the aftermarket
Vestas PowerPlus™‒ LCoE improvements in the aftermarket Examples on lowering cost of energy Up to Vestas PowerPlus™ is the newly launched product bundle for production improvement solutions 5% AEP dedicated to the aftermarket. Site-specific optimisation of control parameters and aerodynamic It curre
Slide 96: Summary
Summary What have we learned 1 LCoE continues to go down year-on-year. Vestas’ ambition is to lower LCoE faster than the market in 2 general. The new product roadmap focus initiated in 2012 resulted 3 in products and services with lower LCoE. This contributes to a strong order intake and growth poss
Slide 97: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Looking back: What have we done since 2012? 2. Looking forward: What are the main strategic focus areas for product and service solutions? • Reducing the Levelised Cost of Energy • Innovation • Industrialisation and modularisation 97 │ Reduce Levelised
Slide 98: Building on a strong innovation heritage as pioneer in wind
Building on a strong innovation heritage as pioneer in wind 1,100 patent applications filed and ability to commercialise innovation at scale 2003: Magnetic 1998: Vortex attachment of internals Generators for AEP to create stronger 1985: OptiTip, towers 2012: Adv. lightning 1998: Composite protection
Slide 99: What is the purpose of innovation at Vestas?
What is the purpose of innovation at Vestas? Ensuring competitive products and capabilities also in the long-term To bring commercially relevant, game-changing ideas to the market in a profitable way, enabling Vestas to fulfill its vision: “To be the undisputed global wind leader.” 99 │ Reduce Level
Slide 100: How will we do that?
How will we do that? Focus on the entire value chain Product Validation Project Source & Logistic & Operation & design testing siting production construction maintenance Innovation culture • Build on Vestas’ capability to innovate across the value chain … unleash it throughout the organisation. • Sh
Slide 101: Example Product: New generation structural shell blades
Example Product: New generation structural shell blades Innovation across the value chain: Design, manufacturing and transportation Enables delivery of a 110 m rotor on the proven 2 MW platform: • Innovative aeroelastic carbon design ensures light-weight, low-load blades. • Flexible, scalable, low-C
Slide 102: Example Product: Large diameter steel tower (LDST)
Example Product: Large diameter steel tower (LDST) Innovation across the value chain: Design, manufacturing and transportation Vestas has launched the Large Diameter Steel Tower, a cost effective solution to increase tower height for 3 MW turbines to over 140 m. The new solution boosts annual energy
Slide 103: Example of innovation across the value chain
Example of innovation across the value chain Foundation for the V126-3.3 MW prototype at Oesterild, Denmark 103│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 104: Example of innovation across the value chain
Example of innovation across the value chain V110-2.0 MW in Hoevsoere, Denmark 104│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 105: Example of innovation across the value chain
Example of innovation across the value chain Tooling and transport: V126-3.3 MW blade lift test in Lem, Denmark 105│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 106: Example: Big data-driven solutions for wind power plants
Example: Big data-driven solutions for wind power plants Integrating data insights from value chain with state-of-art analytics and supercomputing Big Continued leadership in design data capability for WPP* (Siting) & Operations 47 GW Monitored: +25.000 wind turbines Data every 10th minute 24/7 surv
Slide 107: Example: Maximising site-optimality of wind power plants
Example: Maximising site-optimality of wind power plants The ability to optimise every link of the WPP- from the wind to electrons to local conditions Via sentient controls that allow turbines to run harder and smarter (load & power modes) Power output • PowerPlusTM commercial launch: up to 5 per ce
Slide 108: Vestas blades – architecture and focus
Vestas blades – architecture and focus High performance, manufacturability, supply chain efficiency and lowered costs Advanced materials Modular Architecture Customisation & options Standardisation & fabrication Enhanced aerofoils 108│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restr
Slide 109: Challenges and focus areas across the value chain
Challenges and focus areas across the value chain High performance, manufacturability, supply chain efficiency and lowered costs Future power New capabilities Innovation to ensure New capabilities plants and for future for services construction transportability maintenance • Wind turbines • Minimise
Slide 110: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Looking back: What have we done since 2012? 2. Looking forward: What are the main strategic focus areas for product and service solutions? • Reducing the Levelised Cost of Energy • Innovation • Industrialisation and modularisation 110│ Reduce Levelised
Slide 111: 25 times more Annual Energy Production now than in 1985
25 times more Annual Energy Production now than in 1985 From pioneer years to industrialisation Annual energy production (MWh) 16,000 14,000 5) Industrialisation. 12,000 4) Field optimisation and reflections 10,000 theory vs real life difference. 8,000 3) Optimisation of products. Size became an iss
Slide 112: What is the objective of industrialisation?
What is the objective of industrialisation? Flexibility, speed and cost To offer more options and flexibility to the market and supply chains faster and with significantly reduced internal complexity and cost. 112│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 113: What is industrialisation?
What is industrialisation? Moving from “one-size-fits all” to customer configurability based on standardised building blocks Modularisation • All products share the same architecture and the same interfaces, enabling configurability through a selection of modules suiting the actual customer needs. S
Slide 114: Industrialisation addresses key market challenges
Industrialisation addresses key market challenges Enabling flexibility in design to enable right market requirements at right time and right cost 1. Global varying and diverse requirements: Being the most global player, Vestas is exposed to the largest demand for variety in performance, compliance,
Slide 115: More value propositions at lower complexity
More value propositions at lower complexity Illustration Delta bill of material cost for Internal average customer complexity demands costs “One-size-fits-all” Impact of modularisation and standardisation “One-size 4 rotors” “One-size optimised for each sale” 2008-10 2013 201X 115│ Reduce Levelised
Slide 116: Part simplification and re-use across platforms
Part simplification and re-use across platforms Illustration Unique items Total nacelle component numbers across product platforms 40 per cent reduction in unique items 60 per cent shared items 13 per cent shared items today Time 116│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restri
Slide 117: Modularity on sub-module level in practice
Modularity on sub-module level in practice Examples Hydraulic module design Transformer component across 2 and 3 MW Transformer Old New “component” Trafo (sub) module Sales configurator linked to BoM*. Sub-module level – still ensure use of standard components. * Bill of Material. 117│ Reduce Leveli
Slide 118: Sourcing of design and assembly at sub-system level
Sourcing of design and assembly at sub-system level Close collaboration with suppliers Benefits for Vestas • Part simplification – 150 to 1. • Supplier simplification – from 30 to 1. • Transferred value chain responsibility. • Reduced number of internal transactions. • More resources for core techno
Slide 119: Full value chain and life cycle impact
Full value chain and life cycle impact Cost model used for holistic cost and trade-off analyses Supply chain planning Market Design Sourcing Production Transport Installation O&M* Market and Reduced Buying power Flexibility in Standard Skill and facility Configurability customer number of and fewer
Slide 120: Externals' view on potential savings by standardisation
Externals’ view on potential savings by standardisation Significant reduction in bill of material, fixed costs and time-to-market 120│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 121: Summary
Summary What have we learned Innovation, building on creative heritage and commercially focused, highly leveraged and networked and focused on 1 developing a sustainable culture that delivers game changing profitable ideas. 2 Innovation focused across the entire value chain. Industrialisation will o
Slide 122: Thank you for your attention
Thank you for your attention Copyright Notice The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any means - such as graphic,
Slide 123: Q&A
Q&A 123│ Reduce Levelised Cost of Energy – CMD 2014 Classification: Restricted
Slide 124: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 125: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 126: Improve operational excellence
Improve operational excellence Jean-Marc Lechêne, Executive VP & COO Albie Van Buel, GSVP, Global Sourcing Aarhus, 12 June 2014
Slide 127: Profitable Growth for Vestas
Profitable Growth for Vestas Optimised manufacturing footprint, closer collaboration with suppliers and working capital mana- gement to support Vestas’ mid-term ambitions Vision: To be the undisputed global wind leader Strongest brand in industry | Best-in-class margins Market leader in volume | Bri
Slide 128: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Lower costs while more flexible and asset-light 2. Global Sourcing 128│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 129: A leaner and more streamlined organisation
A leaner and more streamlined organisation Merging the four production business units into one and reducing employees by +40 per cent New organisational setup From 4 to 1 Employee reduction Employees in Manufacturing & Global Sourcing Number of employees end of year -42% 11,000 42 per cent 6,430 FY
Slide 130: Focus on core activities and rightsizing capacity
Focus on core activities and rightsizing capacity From 31 to 19 factories resulting in a cost-effective, flexible and global manufacturing footprint Divestment of non-core Closure where growth was activities: lower than expected: • Towers in Varde, DK. • Spain • Machining and casting • Italy units.
Slide 131: Added flexibility and scalability
Added flexibility and scalability Working conditions and manufacturing set-up initiatives to add flexibility and scalability in order for Vestas to achieve cost leadership within the industry • Flex working conditions at Leon factory, Spain. • Shifts between blades factories in the USA. • Manufactur
Slide 132: Manufacturing's main priorities for 2014
Manufacturing’s main priorities for 2014 Focus on ramping up production to meet demand and phase in new technology Nacelles: Blades: • Phase in and ramp up 3.3 MW nacelles for • Ramp up production to meet demand. V105, V112, V117 and V126. • Phase in new blades in the manufacturing • Ramp up 2 MW pr
Slide 133: But we must not forget safety and quality
But we must not forget safety and quality We remained focused during the turnaround Vestas’ safety improved substantially Incidence of lost time injuries (LTI) Per one million working hours • Further improvements must be done. 8 • LTI target of 0.5 in 2015 (some segments 5 are already close). 3 3 2
Slide 134: Summary
Summary We are ramping up in a prudent manner Safety, Delivery on time and at quality and NWC control… … are key KPIs for Manufacturing & Global Souring. … but so are product costs, which is why we have launched a program called Accelerated Earnings. 134│ Improve operational excellence – CMD 2014 Cl
Slide 135: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Lower costs while more flexible and asset light 2. Global Sourcing • Global Sourcing today • Objectives • Priorities 135│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 136: Introducing your speaker
Introducing your speaker Albie Van Buel • Joined Vestas in 2012 as Group Senior Vice President for Global sourcing. • 20+ years background in the automotive industry holding various positions in supply management for Mitsubishi, Ford Motor Company and Volvo (SVP Purchasing, Sweden and member of the
Slide 137: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Lower costs while more flexible and asset light 2. Global Sourcing • Global Sourcing today • Objectives • Priorities 137│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 138: Profitable Growth for Vestas
Profitable Growth for Vestas Global Sourcing can support all four strategic objectives of Profitable Growth for Vestas STRATEGY Grow profitably in Capture full Reduce the Improve OBJECTIVE 1 mature & 2 potential of the 3 Levelised 4 operational emerging markets service business Cost of Energy excell
Slide 139: Global Sourcing Organisation
Global Sourcing Organisation CEO Anders Runevad CSO CFO COO CTO Service Juan Araluce Marika Fredriksson Jean-Marc Lechêne Anders Vedel Christian Venderby Controls & Blades Assembly Global Sourcing Global QSE PEX Generators Albie Van Buel Sourcing Management Analytics & Support Operations GS project
Slide 140: Global Sourcing scope
Global Sourcing scope All spend with external suppliers is in scope Direct spend Market sourcing Indirect spend • All item parts of the • All materials and • Indirect products wind turbine (bill of services that are used and services material spend). in the sales business (car hire, office units for
Slide 141: Category team development
Category team development The importance of cross-functional networks 141│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 142: Challenges
Challenges Global Sourcing faces challenges related to customers, markets and products Our challenges consist of: Customer expectations are changing and more demanding • Reliability of performance and output. • Flexibility and shorter lead times. • Cost competitiveness. Markets are changing • New (n
Slide 143: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Lower costs while more flexible and asset light 2. Global Sourcing • Global Sourcing today • Objectives • Priorities 143│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 144: How are we measuring our business
How are we measuring our business Key ingredients “6 Cs” Customer (satisfaction) Commitment (employees) • Acquire substantial innovation • Employee engagement. from suppliers. • Build and retain talent. • 100% reliable performances. • Resource to win in Global • Service provider. Sourcing. xxxxxxxxx
Slide 145: Global teams with focus on total cost reductions
Global teams with focus on total cost reductions Generic model representing typical contribution to total obtainable savings Typical share of savings potential Negotiate competitively – bid to traditional Commercial and non-traditional suppliers, develop a fact- management base on spend and true pro
Slide 146: Implement professional global standards
Implement professional global standards In control 1. Vestas sourcing process Build Understand (building the facts) Analyse and Plan Execute Review Oppor- Implement Supply and strategy internally Continuous Organising Situation Demand tunity and Strategy market improve- sourcing analysis analysis st
Slide 147: Examples
Examples 147│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 148: Direct sourcing
Direct sourcing Examples Pitch cylinder Hydraulic station Blade bearing 148│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 149: Market sourcing
Market sourcing Examples Global vessel tender Freight: standard Site infrastructure / Balance of Plant 149│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 150: Indirect spend
Indirect spend Examples Factory consumables Car leasing Canteen and cleaning 150│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 151: Agenda
Agenda CMD Capital Markets Day, 12 June 2014 1. Lower costs while more flexible and asset light 2. Global Sourcing • Global Sourcing today • Objectives • Priorities 151│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 152: How Global Sourcing can provide additional value creation?
How Global Sourcing can provide additional value creation? Going from traditional cost reductions to top-line value creation Impact on top-line growth 3.Commercial partnership 2. Strategic collaboration 1. Supplier innovation Time: Sustainability of margin improvement The above development can only
Slide 153: Supplier innovation through early engagement
Supplier innovation through early engagement Top-line growth as the result of a well-functioning process Early engagement Early Innovation engagement network Supplier innovation De-icing Innovative logistical solution Innovation in product development 153│ Improve operational excellence – CMD 2014 C
Slide 154: Strategic collaboration via early engagement
Strategic collaboration via early engagement Regulatory frameworks call for a strategic collaboration with suppliers in order to meet customer requirements Explicitly tied to FIT. Explicitly tied to financing. Explicitly tied to tender. Other requirements/duties. 154│ Improve operational excellence
Slide 155: Commercial partnerships delivering top-line growth
Commercial partnerships delivering top-line growth Opportunities identified via strong relationships and business acumen 155│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 156: Thank you for your attention
Thank you for your attention Copyright Notice The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any means - such as graphic,
Slide 157: Q&A
Q&A 157│ Improve operational excellence – CMD 2014 Classification: Restricted
Slide 158: Agenda for Vestas Capital Markets Day 2014
Agenda for Vestas Capital Markets Day 2014 Time Topic Speakers Anders Runevad, Group President & CEO 09.30-10.00 Introduction Marika Fredriksson, Executive VP & CFO Grow profitably in mature and emerging 10.00-11.00 Juan Araluce, Executive VP & CSO markets 11.00-11.30 Break Capture full potential of
Slide 159: We have a gift for you…
We have a gift for you… … or for your children 159│ Closing remarks – CMD 2014 Classification: Restricted