Wind turbine manufacturers brace for Covid-19 fallout

Danish wind turbine manufacturer Vestas announced that it would aim to layoff up to 400 of its employees, as the economic crunch triggered by the Covid-19 pandemic hits the project pipeline for new projects, seeing new orders beginning dry up.

The cut represents a loss of around 10 per cent of the company’s Denmark based workforce, which will mostly be from operational staff, as the company prioritises the delivery of existing orders.

While the company announced positive financial results for the first quarter of 2020, the uncertain future for the global energy market led the company to suspend its earnings guidance, mirroring the responses of other major global suppliers of wind turbines.

“The COVID-19 pandemic caused disruptions to the company’s manufacturing, supply chain, and installation plans. As a response to the total lockdown in Spain, it had to suspend production at both the plants in the country, which also forms a major hub for the continent’s renewables sector.” senior power analyst at GlobalData Somik Das said.

“Two other wind turbine manufacturers, Siemens Gamesa Renewable Energy and General Electric Co’s unit LM Wind Power have also halted their operations at their factories in Spain owing to the pandemic.”

Vestas secured a number of new deals to deliver turbines throughout the remainder of 2020 including a 80MW deal to supply turbines to the Macquarie Bank owned Green Investment Group in Norway.

But the company said in a statement that it would look to downsize its workforce in areas not directly linked to the fulfillment of orders for wind turbines. Most of the impacted employees are based in Denmark, with a small number of additional positions impacted in other European countries.

The Danish company said that while it was disappointed to find itself in a position where it had to lay off staff, it believed the long-term future for the wind industry was overwhelmingly positive, given the ongoing need for lower cost sources of energy and to transition the global energy market to cleaner power sources.

“We’re in a period of high uncertainty and by making a strategic decision on our product portfolio and reduce complexity, we sustain our competitiveness in the future and ensure we can adjust quickly to COVID-19 challenges,” Vestas CEO Henrik Andersen said.

“It’s always difficult to say goodbye to good colleagues and the timing for these decisions is never good, but our responsibility is to strengthen Vestas for long-term success. By making Vestas and wind energy more competitive, we want to provide the solutions that make the energy transition an integral part of rebuilding societies and economies, and ultimately creating jobs across the value chain.”

Vestas said that it believed the market fundamentals for wind power remained strong, and will look to the long-term prospects of the business, including its position in a post Covid-19 economic recovery.

“In 2020, the COVID-19 pandemic has and will continue to shape societies and economies, and the industrial challenges and economic turmoil it brings will likely take years for societies to recover from. Together with the renewables industry’s changing competitive landscape, Vestas is taking steps to ensure we exit 2020 in the position of strength with which we entered it,” the company said in a statement.

The GlobalData analysts highlighted how the disruption to the wind turbine industry may lead to a shift in the relative positions of wind turbine manufacturers. In particular, countries that can successfully transition out of Covid-19 lockdowns earlier may have a strategic advantage.

“What would be interesting to note that in the race to capitalize on the post-pandemic phase, which company would stand out? Definitely, with the halt in production, a large number of orders would face backlog,” Das added.

“Thus if the Chinese manufacturers creep out of the pandemic before these companies, then it might be so that customers might run to them to fulfill their orders. This would then provide a huge boost to the Chinese manufacturers and the declining Chinese economy.”

Vestas said that its executive management team would take a 10 per cent reduction in pay, that will remain in place until the end of 2020.

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