The current level of orders for wind turbine manufacturer Vestas is far too low compared to previous first quarters.
This is the case with only a few days left in the first quarter, and often the company receives many orders just in time for a new quarter. But so far, the order intake has been weak.
However, investors need not be deeply concerned about this yet, says Jacob Pedersen, head of equity research at Sydbank.
On Wednesday, Vestas announced an order of 62 megawatts (MW), which is only the third order from the Danish company this year.
The total order intake so far is 508MW. In comparison, in the first quarter of last year, Vestas announced orders with a total capacity of 1,503MW, while the figure for the first three months of 2023 was over twice as large – at 3,022MW.
However, as mentioned, Vestas still has time to pick up more orders before Tuesday, when the calendar changes to April, and this year’s first quarter follows a very strong fourth quarter last year with over 6,000MW in announced orders.
“There is no doubt that the level right now is not just too low. It’s way too low. But we have seen before after a very strong fourth quarter that the pipeline of orders that are just about to materialize becomes somewhat weaker, and therefore the first quarter also becomes somewhat weaker. So I don’t think it’s something to be overly concerned about,” says Pedersen to MarketWire.
“It takes more than a weak first quarter after a strong fourth quarter for me to start getting nervous about what I expect for the whole year,” he elaborates.
Uncertainty about the US market
Much of the uncertainty surrounding Vestas’ orders relates to the large US market, where political opposition to wind energy has grown significantly with Donald Trump as president.
However, there is still an opportunity to obtain tax support for the development of wind turbine projects through the Safe Harbor rules for construction in progress.
These ensure that developers can obtain full support for a project by spending 5% of the total project cost upfront.
“The uncertainty is very much tied to the US and whether you can lock in some subsidies for the future before Donald Trump has time to roll them back,” says Jacob Pedersen.
“The easiest thing for developers to do is to buy 10% of the wind turbines or components they need. Then you have secured the subsidy,” he continues.
This also means that there could potentially be several smaller orders for the US market, which will later result in something significantly larger.
At the same time, Vestas has a sizable order book for the US market, so it will be a long time before it reaches a low level.
“There is uncertainty around this, but Vestas has 7,500MW in the order book for the US, so the construction will not stop the day after tomorrow,” says Jacob Pedersen.
Germany could be interesting
Wednesday’s order for Vestas came from Germany, and the neighboring country to the south may prove to be particularly interesting for Vestas in the coming years, according to Pedersen.
Development in Germany is moving at full speed, and through auctions, many projects are awarded that have not yet been built – providing an opportunity for Vestas.
“Germany looks like a very interesting market. 11,000MW were awarded in auctions last year, and at the same time 3,500MW were installed. So it’s a market that could explode,” says Pedersen.
“It’s also a market where Vestas is very strong, and it’s a market where traditionally a small proportion of orders are announced,” continues the head of analysis, who also points out that a number of unannounced orders can be expected for the German market.
“In 2023 it was around a third, and last year it was around 40% that were announced,” says Pedersen.
(English edit by Kristoffer Grønbæk)
