Wind industry suffers blows but forecasts growth

In the past eight months, three major wind-energy players in Northern Colorado have seen sharp declines in their business.

• In the second quarter, Vestas Wind Systems A/S (OMX: VWS), based in Aarhus, Denmark, saw a dramatic acceleration in losses. Its $83 million loss was up from $10.7 million during the same period a year earlier. Vestas has four factories in Colorado: one in Windsor, two in Brighton and one in Pueblo.

• Stamford, Conn.-based Hexcel Corp. (NYSE: HXL), which operates a plant in Windsor that supplies the nearby Vestas factory, saw a 35 percent decline in its wind business during the second quarter.

• In July, Fort Collins-based Woodward Inc. (Nasdaq: WWD) decided it will no longer expand its wind business in China.

Throughout 2013, wind-equipment manufacturers were hit hard by uncertainties in the international and domestic energy markets, including congressional inaction on renewing a U.S. tax credit. The tax credit was eventually renewed, but that uncertainty delayed planning and orders.

In fact, only one wind turbine was installed in the United States during the first half of the year, said Elizabeth Salerno, director of industry data and analysis for the American Wind Energy Association. “It shut down manufacturing,” she said. “We lost employment because of that uncertainty. … The halt of activity caused a dearth of new projects.”

Salerno, however, believes that increased investment by utilities in wind and the declining cost of wind production will drive future growth. Companies have reached 4,000 megawatts of wind-energy deals since the beginning of the year, she said.

“We’re seeing, looking forward, a lot of new contracts, a lot of new projects coming down the pipe,” she said. “We’re seeing manufacturers respond to that and start to ramp up efforts to be prepared for that new activity.”

In Colorado, requirements for use of more renewable energy by utilities have encouraged wind-industry growth, she said. Xcel Energy Inc. (NYSE: XEL), which provides service in Greeley and other parts of Northern Colorado, recently said it plans to add a 200-megawatt wind project to its 2,400-megawatt wind portfolio in Colorado.

For beleaguered Danish turbine manufacturer Vestas, any increase in demand is welcome. The company has seen two consecutive years of quarterly losses as the company undergoes a restructuring that it started in 2011. After this year’s losses were reported, the company replaced its chief executive, Ditlev Engel, with Anders Runevad.

“Anything that adds more wind is going to help,” said Chris Brown, president of Vestas’ sales and service division in the United States and Canada.

Vestas representatives say the company’s new V110 2.0-megawatt turbine will help lead to sales during the second half of the year. The company recently reached an agreement to manufacture 400 megawatts of the turbines for U.S. wind farms developed by EDP Renovaveis. To generate more electricity, the V110 2.0 turbine has longer blades than the popular V100 1.8-megawatt turbine and also has an upgraded gearbox.

“As technology gets better, it’s very attractive to customers,” Vestas spokesman Andrew Longeteig said. “I think the 2-megawatt machine is very competitive, especially in the Midwest markets where the best wind resources are.”

Windsor factory workers will make the blades for the turbine while factory workers in one of the company’s two Brighton plants will make the nacelles, a part of the turbine containing technical parts. The Brighton blade plant won’t be working on the project.

Workers in Pueblo, where Vestas recently hired about 200 workers, will make the turbine towers. Vestas employs more than 1,200 manufacturing employees statewide and says it has “gradually” grown its employee base at its Brighton and Windsor blade factories this year after laying off people in 2012, when it had 1,700 employees statewide.

“As far as the other factories, it’s hard to tell at this point,” Longeteig said. “It depends on the order book, but we do… expect them to grow with the market as we secure new orders.”

Vestas’ stock price has more than doubled to $105.60 from $41.24 a year ago, but the company has not seen a quarterly profit since the second quarter of 2011.

Fort Collins-based Woodward Inc. makes wind-turbine converters. It expects to see a year-over-year decline in its wind business to $120 million from $220 million. It saw a $35 million drop in wind-turbine converter sales for the third quarter.

Woodward’s wind business is based in Germany, where it also has an electronics business. The business’ customer base is in Europe, so the company has not seen a significant amount of growth in the United States, said Bob Weber, Woodward’s chief financial officer.

Woodward said during a July earnings call that it planned to halt additional investment in its Chinese wind operations because Woodward’s products do not fit in that market.

“We found ourselves, from a strategic standpoint, chasing volume,” he said. “Volume has never been a Woodward hallmark. It’s usually been high-value products.”

The company, however, will focus on its European wind business, he said.

Woodward’s Northern Colorado work is focused in its energy division, including industrial-turbine and natural-gas systems for energy production, but that has less to do with wind.

“None of this impacts any of our growth here in Northern Colorado,” he said. “Here, our growth is alive and well.”

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