Vestas Wind Systems A/s · OMXCOP:VWS
Vestas Wind Systems A/s — Investor Day (June 2016)
124 slides from Vestas Wind Systems A/s's investor day presentation, Jun 21, 2016
Slide 1: Welcome – Vestas Capital Markets Day
Welcome Vestas Capital Markets Day 21 June 2016
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: Market outlook
Market outlook Anders Runevad, Group President & CEO London, 21 June 2016 Classification: Public
Slide 4: What is the real market opportunity?
What is the real market opportunity? Today, renewable energy only accounts for a small portion of total world energy consumption World energy consumption by source Million tonnes oil equivalent Source: BP Statistical Review of World Energy 2016. 4 │ CMD 2016 – Market outlook Classification: Public
Slide 5: Renewable energy to lead the way in global electricity generation
Renewable energy to lead the way in global electricity generation Growth in energy demand expected to be met primarily by renewable energy sources with wind forecasted to lead Global electricity generation by source in 2014 and 2040 TWh Renewables expected to account for half of additional global el
Slide 6: Positive investment outlook for wind and renewables until 2040
Positive investment outlook for wind and renewables until 2040 Planned investments in wind leaves plenty of opportunities for continuously increasing competitiveness Cumulative investments 2016e-2040e* tnUSD (real) 3.1 2.1 1.8 1.6 1.5 1.3 Wind Utility-scale PV Small scale PV Other RE** Nuclear Fossi
Slide 7: Long-term outlook for wind and renewables
Long-term outlook for wind and renewables Wind to remain the main utility-scale renewable energy source Cumulative capacity GW 5,884 7,299 8,995 5% Wind 8% 2% 12% Solar Other RE 5% Non-renewables 8% 21% 21% 21% 71% 65% 59% 2013 2020e 2030e * Onshore and offshore. ** Biomass, Geothermal, Hydro, Solar
Slide 8: Long-term outlook for LCOE
Long-term outlook for LCOE LCOE for wind and solar to decrease Onshore wind Utility scale PV USD/ MWh (real) USD/ MWh (real) 100 120 80 100 60 80 60 60 60 40 40 40 40 20 20 0 0 2016 2030E 2016 2030E Coal Gas USD/ MWh (real) USD/ MWh (real) 120 120 100 100 105 100 80 80 60 60 40 40 40 50 20 20 0 0 20
Slide 9: Why wind will remain the preferred renewables choice
Why wind will remain the preferred renewables choice The competitiveness of wind will continue to improve. Market specific reduction between 23 and 36 percent expected 2016-2030 Expected LCOE development, onshore wind 2016 2020e 2030e USD/MWh USA -23% China 64 60 49 -33% Germany -27% 75 65 50 78 73
Slide 10: Long-term outlook for wind penetration
Long-term outlook for wind penetration Significant upside in both OECD and non-OECD markets OECD wind* penetration Non-OECD wind* penetration Percent of cumulative capacity Percent of cumulative capacity +33% +120% 12% 11% 11% 9% 8% 5% 2015 2020e 2030e 2015 2020e 2030e * Onshore and offshore. Source
Slide 11: Drivers of renewable demand – OECD markets
Drivers of renewable demand – OECD markets Decommissioning of assets and long-term policy targets secure wind and renewables additions Significant asset pool to Push for early retire- Long-term support for be decommissioned ment of non-renewables renewables Decommissioned capacity Economic decarboni
Slide 12: Drivers of renewable demand – non-OECD markets
Drivers of renewable demand – non-OECD markets According to IEA, non-OECD countries will account for all the increase in energy use Significant growth in Long-term support for New growth markets electricity demand renewables opening up Growth in electricity Strong regulatory MoUs on energy demand su
Slide 13: Steady growth expected for wind
Steady growth expected for wind Forecasts agree on a steady development for onshore and offshore market New wind additions (onshore and offshore), global GW +4.7% +6.2% 74 71 69 64 66 MAKE Consulting 61 63 58 59 BNEF 55 2016e 2017e 2018e 2019e 2020e Source: BNEF Q2 2016 Global Wind Market Outlook, J
Slide 14: Vestas key differentiators remain intact
Vestas key differentiators remain intact… Global reach, technology and service leadership, and scale give Vestas a unique position to compete in the marketplace Technology and service Global reach Scale leadership • Pioneer and most experienced • More people dedicated to wind • Wind turbines coverin
Slide 15: … and we are well positioned
… and we are well positioned According to Make Consulting, Vestas is the global No. 1 in terms of market shares. Further, Vestas was also the largest company in the industry as measured in revenue Cumulative historic installations 2015 grid-connected Onshore and offshore, end 2015 Onshore, 2015 Perc
Slide 16: Focus on Profitable Growth for Vestas continues
Focus on Profitable Growth for Vestas continues Market environment and Vestas key differentiators continue to support our profitable growth strategy To be the undisputed global wind leader • Market leader in revenue • Strongest brand in industry Our vision • Best-in-class margins • Bringing wind on
Slide 17: Well positioned to capture growth opportunities
Well positioned to capture growth opportunities Juan Araluce, Executive Vice President & CSO London, 21 June 2016 Classification: Public
Slide 18: Introducing your speaker
Introducing your speaker Juan Araluce • Executive Vice Predisident & CSO. • Joined Vestas in 2007 as President for Vestas Mediterranean. • Appointed CSO in 2012 based in Copenhagen, Denmark. • Education: − Complutense, Economics and Business Administration. − ICADE, PhD Courses in Economics. − IESE
Slide 19: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and commercial strategy 2. Growth opportunities 3. Summary and questions & answers 19 │ CMD 2016 - Commercial Classification: Public
Slide 20: Our track record speaks for itself
Our track record speaks for itself We have performed well on our set targets Firm order intake (FOI) FOI by customer account type Transfer of Risk GW % of cumulative FOI 2012-2015 GW x 2.4 8.9 +7% 7.5 6.3 6.0 6.5 6.0 4.9 44% 56% 3.7 Others 2012 2013 2014 2015 Strategic & Key Accounts 2012 2013 2014
Slide 21: Markets moving at different speeds and levels of stability
Markets moving at different speeds and levels of stability Mature and emerging markets: two parallel tracks, different challenges. To be the undisputed global wind leader • Market leader in revenue • Strongest brand in industry • Best-in-class margins • Bringing wind on a par with coal and gas Looki
Slide 22: Focus remains on both mature and emerging markets
Focus remains on both mature and emerging markets Varying characteristics and requirements in mature and emerging markets call for different approaches. To succeed, we must master both tracks. Mature market strategy Emerging market strategy Objective Objectives Build and hold leadership position in
Slide 23: Overall stable pricing, but outliers can distort the ratios
Overall stable pricing, but outliers can distort the ratios Pricing has come down since 2012, but has reached a new steady-state level Average selling price of order intake (Vestas) Average selling price of order intake (BNEF) mEUR per MW mEUR per MW Increase in share 1.05 1.05 of supply-only orders
Slide 24: Value Selling
Value Selling Pricing and unlocking the value Pricing… is only the tip of the iceberg! Terms & Conditions Construction Customer Wind Business Model Conditions Cost of Energy Price Complexity Competitor Loads Envelope many drivers / variables Benchmark Value levers many disciplines Financing Power St
Slide 25: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and commercial strategy 2. Growth opportunities − New opportunities from repowering and decommissioning − Successful positioning in auctions and tenders − Continued success in the US and Germany − Profitable Growth in China, India, and Bra
Slide 26: New opportunities arise as the industry evolves
New opportunities arise as the industry evolves Planned decommissioning and an increasingly ageing installed base to drive wind growth Decommissioned capacity between 2020-30 Percent • A total of 255 GW expected 4% to be decommissioned 22% between 2020-2030. 44% • New onshore wind projects are the c
Slide 27: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and commercial strategy 2. Growth opportunities − New opportunities from repowering and decommissioning − Successful positioning in auctions and tenders − Continued success in the US and Germany − Profitable Growth in China, India, and Bra
Slide 28: Auctions and tenders – the new normal
Auctions and tenders – the new normal Auctions and tenders are not new phenomena. And they will increase in number going forward. Countries with auction programmes or renewable energy tenders Onshore wind bids The use of auctions Solar PV bids and tenders will only increase: * Pay-as-bid auctions –
Slide 29: Our customers succeed in auctions and tenders
Our customers succeed in auctions and tenders We helped our customers succeed in numerous auction systems throughout Latin America, Europe and Africa Italy • Vestas continues building profitable wind farms even after the PPA is now half of pre-auction Only between these levels. • Vestas was market l
Slide 30: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and commercial strategy 2. Growth opportunities − New opportunities from repowering and decommissioning − Successful positioning in auctions and tenders − Continued success in the US and Germany − Profitable Growth in China, India, and Bra
Slide 31: US market introducing long-term stability
US market introducing long-term stability Unprecedented PTC certainty underwrites market stability and industry growth. But not without challenges. PTC extension and IRS guidance provide US policy certainty Strategic challenges: Qualification Installation PTC • Market certainty invites new entrants.
Slide 32: Germany moving towards auctions with effect from 2018
Germany moving towards auctions with effect from 2018 Increase market share through key accounts, technology leadership, and operational excellence German auction system • Technology-specific auctions. • Volume 2.8 GW/year 2017-2019 (2.9 GW from 2020). Historical avr. 2-2.8GW* • 3-4 auction rounds p
Slide 33: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and commercial strategy 2. Growth opportunities − New opportunities from repowering and decommissioning − Successful positioning in auctions and tenders − Continued success in the US and Germany − Profitable Growth in China, India, and Bra
Slide 34: Update on China, India, and Brazil
Update on China, India, and Brazil Good momentum in 2015 to be further increased by targeted sales and customer intimacy China India Brazil Dominated by local OEMs. Strong commitment to wind. Auction system drives highly competitive market. Highly competitive. “Land bank” and regional differences in
Slide 35: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and commercial strategy 2. Growth opportunities − New opportunities from repowering and decommissioning − Successful positioning in auctions and tenders − Continued success in the US and Germany − Profitable Growth in China, India, and Bra
Slide 36: Efforts across emerging markets
Efforts across emerging markets Localisation and customer intimacy are key to succeed Strategic challenges: • Governmental regulations. Vestas has… • Auction systems. … a global presence in 75 countries, more than • Proximity. any other OEM. … pioneered in 37 countries. … a cumulative market share o
Slide 37: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and commercial strategy 2. Growth opportunities 3. Summary and questions & answers 37 │ CMD 2016 - Commercial Classification: Public
Slide 38: Summary
Summary 1 Strongest commercial track record on a global level. 2 Well positioned to utilise growth opportunities in both in mature and emerging markets. 3 Successfully delivering profitable growth in China, India, and Brazil. 38 │ CMD 2016 - Commercial Classification: Public
Slide 39: Ensuring Vestas' current and future competitiveness
Ensuring Vestas’ current and future competitiveness Anders Vedel, Executive Vice President & CTO London, 21 June 2016 Classification: Public
Slide 40: Introducing your speaker
Introducing your speaker Anders Vedel • Executive Vice President & CTO. • Joined Vestas in 1995 and became CTO in 2012; based in Aarhus, Denmark. • Engineering degree from Engineering University, Horsens, Denmark, IMD and SIMI Management Programs. • 2004-2012 Vice President of Service Northern Europ
Slide 41: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Our strategy and the link to LCOE 3. Evolution of Vestas 2 MW and 3 MW platforms 4. Investing in innovation in the short-, mid-, and long-term 5. Summary and questions & answers 41 │ CMD 2016 – Technology & Service Solutions
Slide 42: Highest nominal R&D investments in the industry
Highest nominal R&D investments in the industry Vestas’ size allows for large investments in R&D R&D costs 2015 Key takes: mEUR 211 3 • 2015 cash spend of EUR 156m in the R&D organisation, the highest 156 in the industry, however benefitting from scale only equalling approx. 154 2% of revenues. 102
Slide 43: What does it take to secure the most competitive products
Our task ? What does it take to secure that Vestas has the industry's most competitive products 43 │ CMD 2016 – Technology & Service Solutions Classification: Public
Slide 44: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Our strategy and the link to LCOE 3. Evolution of Vestas 2 MW and 3 MW platforms 4. Investing in innovation in the short-, mid-, and long-term 5. Summary and questions & answers 44 │ CMD 2016 – Technology & Service Solutions
Slide 45: Enabling Vestas to deliver on profitable growth strategy
Enabling Vestas to deliver on profitable growth strategy Lowering the levelised cost of energy (LCOE) faster than the market average To be the undisputed global wind leader • Market leader in revenue • Strongest brand in industry • Best-in-class margins • Bringing wind on a par with coal and gas Con
Slide 46: Innovation driven by constant need to reduce LCOE
Innovation driven by constant need to reduce LCOE Historically, turbine size has been a key driver in lowering LCOE V10-30 kW V39-500 kW V90-2.0 MW (1979) V10-30 kW V136-3.45 MW (1979) (2016) Swept area: 78.5m2 Swept area: 14,527m2 Hub height: 18 metre Hub height: 149 metre Rated power: 30 kW Rated
Slide 47: Strong future ahead for wind
Strong future ahead for wind LCOE reduction expected to continue at significant pace Expected LCOE development, onshore wind USD/MWh 2016 2020e 2030e -27% -33% -36% 78 -30% -23% 75 -32% 75 73 66 69 64 65 60 60 60 56 53 50 49 48 48 44 USA Mexico Brazil Germany China Australia • Market specific wind L
Slide 48: Drivers of LCOE
Drivers of LCOE How much can Vestas affect? Fully influenced by Vestas Partially influenced by Vestas Turbine Tower and foundations Electrical infrastructure CAPEX [EUR/year] Installation, construction, commissioning Cost of capital Project management and other Operation, maintenance, aftermarket im
Slide 49: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Our strategy and the link to LCOE 3. Evolution of Vestas 2 MW and 3 MW platforms 4. Investing in innovation in the short-, mid-, and long-term 5. Summary and questions & answers 49 │ CMD 2016 – Technology & Service Solutions
Slide 50: Two highly competitive turbine platforms
Two highly competitive turbine platforms Vestas is the only company in the industry with significant volume and track record in both 2 and 3 MW segments 2 MW platform 3 MW platform Order intake by region, 2015 Order intake by region, 2015 MW MW Americas Americas EMEA EMEA 20% 3% 11% Asia Pacific Asi
Slide 51: Evolution of the 2 MW platform
Evolution of the 2 MW platform Upgrading our proven products result in significant increased production, driving down LCOE 1.8/2.0 MW 2.0 MW 2.0/2.2 MW • V80/90-1.8/2.0 MW • Upgrade to 2.0 MW • Introduction of the built based on nominal rating. 2.2 MW power previous model • New rotor: 110m. optimise
Slide 52: 2 MW high-level design changes
2 MW high-level design changes Increasing annual energy production and lowering LCOE Blades New power modes - 2.2 MW Improved cooling system • Aerodynamic add-ons increase • Up to app. 3.3 % (V110) & • New slim Cooler Top Design power production 3.9%(V100) AEP improvement • Generator cooling switch
Slide 53: Evolution of the 3 MW platform
Evolution of the 3 MW platform Upgrading our proven products result in significant increased production, driving down LCOE 3.0 MW 3.3 MW 3.45 MW • V112-3.0 MW first • Upgrade to 3.3 MW • Upgrade to 3.45 MW member of new 3 rating. rating. MW platform. • New rotors: 105m, • New rotor: 136m. +18-35% •
Slide 54: 3 MW high level design changes
3 MW high level design changes Increasing annual energy production and lowering LCOE • Optimized load carrying structure for higher rating and wind class upgrade • Main shaft (hotspot optimization). • Optimised modification for transformer higher loads. foundation. • Aero add-ons on blades • Improve
Slide 55: Full-scope testing proves Vestas' turbine quality
Full-scope testing proves Vestas’ turbine quality A significant contributor to keeping Lost Production Factor at a low level, improving output, and reducing cost Vestas testing strategy Proof of Other Main + Critical System test Integration Nacelle Prototype 0 series concepts components components t
Slide 56: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Our strategy and the link to LCOE 3. Evolution of Vestas 2 MW and 3 MW platforms 4. Investing in innovation in the short-, mid-, and long-term 5. Summary and questions & answers 56 │ CMD 2016 – Technology & Service Solutions
Slide 57: Ensuring market-leading products through innovation
Ensuring market-leading products in the future through innovation Working with external partners in all stages of the process Innovation process Implementation process Process Technology Concept System Product ingredients development maturation development Partners Universities, Strategic partners a
Slide 58: Example: Multi-rotor demonstrator
Example: Challenging scaling rules with multi-rotor demonstrator Continuous reduction of LCOE requires new solutions and new ways of thinking What are the benefits of a turbine like this? 58 │ CMD 2016 – Technology & Service Solutions Classification: Public
Slide 59: Examples: Investing in new technology materials
Examples: Investing in new technology materials Optimising performance, cost and sustainability • Radical weight reduction through Bionic • Active damping and design and Additive Manufacturing. control solutions to minimise societal disturbance of wind turbines. • Recyclable composites through alter
Slide 60: Examples: Value chain and supply chain concepts
Examples: Value chain and supply chain concepts Providing access to new markets with undeveloped logistical infrastructures • Mobile Factory reducing logistics challenges • Flexible crane through portability and offering local labor solutions for high creation at low investments. towers and markets
Slide 61: Examples: Ancillary services and solutions
Examples: Ancillary services and solutions Responding to solar, distribution and intermittence • Improve capability to offer ancillary services • Offer turn key off-grid/micro grid solutions for by improving control and optimal integration frontier markets integrating MW/kW wind, of storage in wind
Slide 62: Examples: Investing in digitalisation
Examples: Investing in digitalisation Leveraging on Vestas’ world-class data collection • Further utilise model prediction, high • Combine power capacity and quality control performance computing and big data to through Internet-of-Things based Real Time support energy systems dynamics. interoperabi
Slide 63: Reducing LCOE faster than the market average
Reducing LCOE faster than the market average Vestas has the capabilities and know-how to deliver on our promise of reducing LCOE faster than the market average Expected LCOE development, onshore wind USD/MWh 2016 2020e 2030e -27% -33% -36% 78 -30% -23% 75 -32% 75 73 66 69 64 65 60 60 60 56 53 50 49
Slide 64: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Our strategy and the link to LCOE 3. Evolution of Vestas 2 MW and 3 MW platforms 4. Investing in innovation in the short-, mid-, and long-term 5. Summary and questions & answers 64 │ CMD 2016 – Technology & Service Solutions
Slide 65: Summary
Summary Vestas continuously optimises energy output in its products and is 1 committed to reduce LCOE faster than market average – enabled by the strongest product line-up in the industry. 2 Vestas invests in innovation across the value chain, both on current platforms and on breakthrough technologi
Slide 66: Operational excellence contributes to lowering LCOE
Operational excellence contributes to lowering LCOE Jean-Marc Lechêne, Executive Vice President & COO London, 21 June 2016
Slide 67: Introducing your speaker
Introducing your speaker Jean-Marc Lechêne • Executive Vice President & COO. • Joined Vestas in 2012 as COO based in Aarhus, Denmark. • Master degree in Engineering from École des Mines de Paris and has completed a MBA at INSEAD, Fontainebleau. • Prior to joining Vestas, Jean-Marc Lechêne served as
Slide 68: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Enabling reduction of LCOE 3. Summary and questions & answers 68 │ CMD 2016 – Manufacturing & Global Sourcing Classification: Public
Slide 69: Sticking to strategy pays off
Sticking to strategy pays off Unchanged Vestas and COO strategy pays off with well executed plans To be the undisputed global wind leader • Market leader in revenue • Strongest brand in industry • Best-in-class margins • Bringing wind on a par with coal and gas Deliver best-in-class wind energy solu
Slide 70: Safety is always number one
Safety is always number one Improving operational excellence while building strong safety culture Industrial injuries Number per 1 million working hours Total Recordable Injuries: 35 ‘lost time injuries’ + ‘restricted work injuries’ + 30 ‘medical treatment injuries’ 25 20 2015 target: 10.1 15 achiev
Slide 71: .. and ensuring high quality
.. and ensuring high quality Vestas quality ensures strong reliability and supports our technology and service leadership Lost Production Factor (LPF) Percent 6 LPF: 5 Steady reductions year-on-year. 4 3 Warranty consumption: Continues at low level 2 - approx 1.1 percent of revenue over the 1 last 1
Slide 72: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Enabling reduction of LCOE 3. Summary and questions & answers 72 │ CMD 2016 – Manufacturing & Global Sourcing Classification: Public
Slide 73: Operational Excellence to reduce the Levelised Cost of Energy
Operational Excellence to reduce the Levelised Cost of Energy Flexible, asset-light and low cost manufacturing footprint Reducing the Levelised Cost of Energy 73 │ CMD 2016 – Manufacturing & Global Sourcing Classification: Public
Slide 74: Flexible, asset-light, and low-cost manufacturing footprint
Flexible, asset-light, and low-cost manufacturing footprint • Lowest delivered cost. • Outsourcing. • Supply chain managed at worldwide scope. 74 │ CMD 2016 – Manufacturing & Global Sourcing Classification: Public
Slide 75: Evolution of manufacturing footprint
Evolution of manufacturing footprint Driven according to a set of guiding principles Optimisation logic Strategy • Transport & Lead Time >> Labor • Implementing 2-3 MW flexibility as market requires Assembly → Factory close to market (USA, China). • Growth and Outsourcing are enablers to optimize de
Slide 76: Assembly footprint
Assembly footprint Assembly consists of six factories, three of them being flexible to produce both the 2 and 3 MW platform Ringkobing Denmark Brighton Leon Tianjin USA Spain China Chennai India Fortaleza Brazil 2 MW 2+3 MW 3 MW 76 │ CMD 2016 – Manufacturing & Global Sourcing Classification: Public
Slide 77: Blades footprint
Blades footprint Blades comprises 11 factories, three of them subcontracted. Footprint based on regional and global presence – supported by cross-regional supply e.g. China/India to USA. Lem Denmark Lauchhammer Germany Taranto Brighton Windsor Daimiel Tianjin Italy USA USA Spain China Turkey Dafeng
Slide 78: Generators and Controls footprint
Generators and Controls footprint Generators and controls consists of both an in-house and subcontracted setup Hammel Denmark Travemunde / Lubeck Germany Tianjin Viveiro China Germany Spain Brazil Vestas Generators Vestas Controls Subcontracted generators 78 │ CMD 2016 – Manufacturing & Global Sourc
Slide 79: Reducing product cost across the whole value chain
Reducing product cost across the whole value chain • Product & Value Chain cost-out: ‒ Commercial negotiation. ‒ Design optimization. ‒ Best cost countries. ‒ Scale. • Reducing complexity: ‒ Buy more systems and less parts ‒ Standard parts and reuse. • Design for Manufacturing, Transport, Constructi
Slide 80: AE to AEPRO - from cost to built-in value
AE to AEPRO - from cost to built-in value Unchanged targets but more value chain focused levers to execute on plan Maturity Accelerated Focus: earnings - Value Chain cost-out. PRO - From price to value. Focus: Accelerated - Category cost-out. earnings time 2014 - 2015 2016 - 2018 80 │ CMD 2016 – Man
Slide 81: Minimising working capital
Minimising working capital • Make to order. • Lean manufacturing. • Standard lead times. • Industry 4.0 @ Vestas. 81 │ CMD 2016 – Manufacturing & Global Sourcing Classification: Public
Slide 82: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. Enabling reduction of LCOE 3. Summary and questions & answers 82 │ CMD 2016 – Manufacturing & Global Sourcing Classification: Public
Slide 83: Summary
Summary 1 Consistently executing in accordance with the strategy delivering operational excellence. 2 A flexible, asset-light and low cost global manufacturing footprint contributes to securing competitive products and lowering LCOE. Continued focus on cost-out. Accelerated Earnings PRO 3 programme
Slide 84: Service: An increasingly important volume and value enabler
Service: An increasingly important volume and value enabler Christian Venderby, Group Senior Vice President & Head of Global Service London, 21 June 2016
Slide 85: Introducing your speaker
Introducing your speaker Christian Venderby • Group Senior Vice President and Head of Global Service since 2014. • Joined Vestas in 2006 as CFO, North America. • In 2010 appointed COO, North America with P&L responsibility for Construction, Service, Supply Chain and Technology. • 20+ years of intern
Slide 86: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. The importance of service in the marketplace 3. Capturing the full potential of the service business 4. Summary and questions & answers 86 │ CMD 2016 – Service Classification: Public
Slide 87: Capture the full potential of the service business
Capture the full potential of the service business Good traction on growing the service business by more than 40 percent To be the undisputed global wind leader • Market leader in revenue • Strongest brand in industry • Best-in-class margins • Bringing wind on a par with coal and gas Deliver best-in
Slide 88: Vestas service financial performance
Vestas service financial performance Service revenue grown 11 percent annually and backlog increased by 68 percent from 2012 to Q4 2015 Onshore service revenue and EBIT margin Service order backlog mEUR and percent bnEUR % +68% 1,200 1,138 20 +11% 8.9 1,000 949 889 16 7.0 825 6.7 800 12 5.3 600 8 40
Slide 89: Vestas has the largest installed base in the service market
Vestas has the largest installed base in the service market 41 percent higher than closest competitor and 63 GW under service across 55 countries Installed base per OEM, as of 2015 MW under service per region, as of Q1 2016 GW bnEUR Vestas 72 EMEA +41% GE/Alstom 51 35.0 GW Enercon 42 Split across 31
Slide 90: Vestas service KPIs
Vestas service KPIs Vestas service 76 percent of the installed base with a high renewal rate of 73 percent - supported by strong operational performance with 50 percent reduction in LPF since 2010 Share of fleet under contract, as of Q1 2016 Lost production factor (LPF) Percent Percent MW under serv
Slide 91: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. The importance of service in the marketplace 3. Capturing the full potential of the service business 4. Summary and questions & answers 91 │ CMD 2016 – Service Classification: Public
Slide 92: Key market trends
Key market trends Global service market expected to grow by 9 percent annually towards 2024 Service market revenue opportunity, 2014 -2024 bnUSD CAGR: 19.3 +9% 16% 8.1 (42%) 3.9 9% 7.7 (20%) 1.8 1.7 (24%) (22%) 7.3 4.2 (38%) 6% (55%) 2014 2024e Asia Pacific Americas EMEA Source: MAKE Consulting Glob
Slide 93: Service market growth
Service market growth Service market maturing thus requiring high-quality service while lowering LCOE in each step of the value chain From availability From availability 1 2 focus to turbine focus to cost game optimisation From standard Data solutions of 3 product to unique 4 increasing offerings im
Slide 94: Competitive situation
Competitive situation The current strong turbine uptime has shifted focus to cost reductions and areas for increasing turbine production Core O&M Advanced offerings offerings • Scheduled • Major correctives • Product upgrades • Risk and insurance Key maintenance • Spare parts and • Data and consulta
Slide 95: Service offerings to reduce LCOE
Service offerings to reduce LCOE Vestas’ service offerings have the opportunity to further improve the business case of the customer after construction High Low Impact Offerings to reduce LCOE Key levers Revenue Cost • Improve diagnostics and Improving LCOE by 1%-point requires preventive maintenanc
Slide 96: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. The importance of service in the marketplace 3. Capturing the full potential of the service business 4. Summary and questions & answers 96 │ CMD 2016 – Service Classification: Public
Slide 97: Foundation for Vestas' service business
Foundation for Vestas’ service business Vestas’ services are built on comprehensive experience from 30 years of global data collection The right O&M plan Focused on preventive and predictive maintenance to secure highest possible availability for customers. The right Infrastructure Build on 30 years
Slide 98: Service growth strategy
Service growth strategy Service business to grow by 40 percent by being the market leader within both core and advanced offerings as a Fleetwide partner Overall Target Capture the full potential of the service business || Grow Service by more than 40% Fleetwide lifetime service partner Business Area
Slide 99: Maintenance Partnering growth
Maintenance Partnering growth The high contract capture and renewal rates with long contract duration fuels growth within Maintenance Partnering Fleetwide lifetime service partner Data & Consultancy Maintenance Partnering Parts & Repair Upgrades Services VALUE PROPOSITION MARKET DRIVER O&M service p
Slide 100: Acquisitions support Fleetwide partner growth
Acquisitions support Fleetwide partner growth Availon and UpWind add important capabilities while leveraging Vestas’ scale and global footprint to increase competitiveness Strategic rationale Impact • Vestas covers MW under service, as of Q1 2016 GW less than 20 • Additional 4.8 percent of total 63.
Slide 101: Parts & Repair growth
Parts & Repair growth Vestas’ scale based on current contract business provides a strong platform for sales growth targeting customers focusing on insourcing Fleetwide lifetime service partner Data & Consultancy Maintenance Partnering Parts & Repair Upgrades Services VALUE PROPOSITION MARKET DRIVER
Slide 102: Upgrades growth
Upgrades growth Upgrades market driven by several turbines reaching design life and opportunities for significantly boosting output without risk Fleetwide lifetime service partner Data & Consultancy Maintenance Partnering Parts & Repair Upgrades Services VALUE PROPOSITION MARKET DRIVER LifePlus solu
Slide 103: Data & Consultancy Services growth
Data & Consultancy Services growth Data solutions are primarily driven by insourcing trend – Vestas uniquely positioned to offer services Fleetwide lifetime service partner Maintenance Partnering Parts & Repair Upgrades Data & Consultancy Services VALUE PROPOSITION MARKET DRIVER • Proven tools based
Slide 104: Continued growth with stable margins
Continued growth with stable margins Strength of offering combined with attractive market opportunity allows value generation to continue Growth enabled by… Stable margins supported by… New equipment sales Increased volumes and advanced offerings Almost all new turbine sales supplemented Competitive
Slide 105: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Introduction and status 2. The importance of service in the marketplace 3. Capturing the full potential of the service business 4. Summary and questions & answers 105│ CMD 2016 – Service Classification: Public
Slide 106: Summary
Summary The service segment increasingly serves as an important volume and 1 value enabler although the competitive landscape continues to evolve, forcing companies to evolve as well. Vestas is the leading global service provider and well positioned to 2 continue profitable growth in segment based o
Slide 107: Strong financial performance delivered
Strong financial performance delivered Marika Fredriksson, Executive Vice President & CFO London, 21 June 2016 Classification: Public
Slide 108: Profitable Growth for Vestas
Profitable Growth for Vestas Vestas has delivered strong financial results since the launch of the strategy 2½ years ago Market leader in revenue… Revenue, 2015 bnEUR To be the undisputed global wind leader 8.4 • Market leader in revenue • Strongest brand in industry 5.7 • Best-in-class margins • Br
Slide 109: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Is stability the new normal for Vestas? 2. Balance Sheet and Capital Structure reflections 3. Summary and questions & answers 109│ CMD 2016 - Finance Classification: Public
Slide 110: Vestas' business model has diversified over the last 5 years
Vestas’ business model has diversified over the last 5 years With strong positions in each of the three main business areas, Vestas is well positioned to reap the benefits of a more stable market situation Wind turbines Services MHI Vestas Offshore Wind • Long-term PTC visibility. • Stable business
Slide 111: Turbine business supported by broad-based demand
Turbine business supported by broad-based demand Although fluctuating somewhat, turbine revenues have been increasing over time, supported by a diversified market footprint, second to none in the industry Project revenue mEUR 7,285 6,330 5,946 Order intake 5,115 5,130 2015: 8,943 MW • 34 countries •
Slide 112: Service business continues to contribute with stability
Service business continues to contribute with stability Strong growth in service revenue, supported by sale of new turbines and the largest installed base in the industry Onshore service revenue mEUR 1,138 889 949 Installed 825 base: 659 > 75 GW • 75 countries • 6 continents 2011 2012 2013 2014 2015
Slide 113: MHI Vestas Offshore Wind: performance according to plan
MHI Vestas Offshore Wind: performance according to plan Solid order intake and continued strong performance of the existing fleet provide a firm base for the years ahead. Extensive V164 start-up costs expected to offset increased revenue in 2016. Key messages 2015/16 • Solid order intake. • Maturing
Slide 114: JV net income not expected short term to absorb 8 MW ramp-up
JV net income not expected short term to absorb 8 MW ramp-up Quarterly fluctuations will remain. V164 start-up costs expected to negatively impact the JV in 2016. Income from investments accounted for using equity method Key takes: mEUR 26 • Vestas’ share of JV profit: 6 Extensive start-up costs rel
Slide 115: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Is stability the new normal for Vestas? 2. Balance Sheet and Capital Structure reflections 3. Summary and questions & answers 115│ CMD 2016 - Finance Classification: Public
Slide 116: Net Working Capital a key enabler in balance sheet journey
Net Working Capital a key enabler in balance sheet journey Impressive NWC development which has been stabilising in current high-activity environment Net working capital Key takes: mEUR • Main cash conversion cycle opportunities: 672 − Lower MW under 317 completion. 233 − Better payment terms. − Low
Slide 117: Cash increasingly generated by earnings
Cash increasingly generated by earnings Cash generation increasingly driven by operations in recent years, signalling longer term ability to sustainably generate cash Net debt to EBITDA Change in net cash ×EBITDA mEUR 397 (425) 2,270 1.8 1.9 1,075 (188) < 1.0 1,411 260 (285) 484 (0.1) 866 86 829 239
Slide 118: Solvency ratio a key metric in conservative capital structure
Solvency ratio a key metric in conservative capital structure Solvency ratio currently the more limiting factor in the re-distribution of cash Solvency ratio Solvency ratio Percent Percent/Percentage points 35.0 36 34.0 0.3 (1.1) 33.8 34.0 35.0 (1.1) 33.5 34 33.8 4.6 5.7 32 (4.0) 30.0 30 30.0 28 27.
Slide 119: Risk-averse customers are still requiring certainty
Risk-averse customers are still requiring certainty …and hence, contingent obligations such as e.g. guarantees continue to play a role 1 Quotation/offer 2 Signing of contract 3 First shipment / delivery on site 4 Taking over Types of guarantees 1 Bid bond 2 Advance payment bond 3 Performance bond 4
Slide 120: The need for credit facilities has not vanished
The need for credit facilities has not vanished Vestas’ credit and bonding facilities are being utilised to support ongoing business operations Credit and bonding facilities, year end 2015 mEUR Amount Drawn Available Expiry First of two options to extend Main credit facilities* 1,050 92 958 2021 the
Slide 121: Priorities for capital allocation
Priorities for capital allocation In years without major extraordinary investments the total return to shareholders through dividends and share buy-backs may constitute the majority of the FCF. Mid-term ambitions: Capital structure targets: • Double-digit ROIC • FCF ≥ 0 • Net debt to EBITDA < 1.0x •
Slide 122: Agenda
Agenda CMD Capital Markets Day, 21 June 2016 1. Is stability the new normal for Vestas? 2. Balance Sheet and Capital Structure reflections 3. Summary and questions & answers 122│ CMD 2016 - Finance Classification: Public
Slide 123: Summary
Summary With strong positions in each of the three main business areas, wind 1 turbines, service and offshore, Vestas is well positioned to reap the benefits of a more stable market situation. A strong balance sheet and credibility as it relates to maintaining 2 a trustworthy capital structure polic
Slide 124: 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,