Chair of the Board of Directors, Vestas
Vestas CEO on 2Q Earnings, Energy Storage
Aug.17 -- Anders Runevad, chief executive officer at Vestas, discusses his underperformance in the second quarter, doing business in the U.S., energy storage and the patent suit with general electric. He speaks on "Bloomberg Markets: European Open."
Transcript (14 segments)
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Interviewer0:00
Ask first about the outlook. You've maintained your outlook, but you missed your sales estimate, you missed your revenue estimate, or their estimates of global Wall Street. Why the underperformance in the most recent quarter?
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Anders Runevad0:16
I really think it's a very solid quarter. We always knew that the year-on-year comparison with Q2 was going to be a tough quarter to compare against. So overall, I would say that it's a solid result.
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Interviewer0:36
But if it's a solid result, why is the market selling the shares so hard? You're down 6% in today's trading.
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Anders Runevad0:43
I can't really speculate in the market. Of course, I'm looking out there at the Vestas business and how we can improve that over the long term. And we maintain our guidance, and so the results are very much within line of our expectations.
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Interviewer1:02
You've done very well in the United States, you're making big orders in the United States. And are you worried about what is happening politically in the United States? Is there a cost to you that you can see further down the road — it may not be an obvious one — but the opportunity, do you think it'll be as big in the United States going forward under Donald Trump?
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Anders Runevad1:24
I will say that in the United States, what drives the market is the current PTC structure, and we strongly believe — and I think the rest of the market agrees — that that will stay in place, and that will be the driver in the market up to 2020 to 2023. So we don't expect any changes there. I'm really happy with Vestas' performance in the US, and we haven't changed our outlook, so to speak, for the US market overall. We saw a good inflow of PTC orders at the end of last year, and we see a good order inflow also in the beginning of this year.
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Interviewer2:17
Yeah, essentially you talk about those points. Those were the points at which the kind of the Trump trade was on. People were anticipating that the US economy was growing, would be growing at 3-4%. That's not going to take place by the looks of things, at least not in the near term. So I'm just wondering whether or not you're concerned that that opportunity that existed at the back end of last year or the beginning of this year — that perceived opportunity — is no longer there.
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Anders Runevad2:48
No, I mean if you look at external analysts, they say — well, I believe that the market up to 2020 will be around 40 to 50 gigawatts in the US, and we also believe that. That's our outlook as well, and we don't see any other signs. Actually, if I look at the first half of this year, intake as I said is very strong in the US market. So it's a pace, a cycle that we are in, which is a long-term cycle that drives activity levels in the US, and we continue to see a very high activity level.
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Interviewer3:33
I want to ask you about energy storage, because every time I see these windmills all over the place generating so much energy, I wonder where you put it. It's a business that you've gotten into. What do you forecast? What do you anticipate as to how big this business is going to be for you, say in the next two years?
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Anders Runevad3:53
I think storage is definitely starting to happen, but so far, if you look at pure storage together with grid storage, it's still fairly small. I mean, what we see is that there are many ways to achieve storage-type solutions in the market. In Denmark, 40 percent of the country is powered by wind, and here of course it's stored in hydro, in pump storage, or stored in the heating system to even out the fluctuation of wind. And it's stored in a good grid build-out. So there are many ways of achieving storage. Of course, further on, we see good development in battery technology, for example, that also I believe will come into play when it comes to storage, but that to me is a little bit further out.
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Interviewer5:02
Yeah, you want to be ahead of that curve though, don't you? And I'm wondering, therefore, do you make acquisitions in the space? You are in a pretty good position at this point, your stock is recently well valued despite what we're saying at the moment, but you kind of wonder: how do you as Vestas take advantage of this?
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Anders Runevad5:23
The way I see it, of course, we look at this very much from a technology point of view. We will not be a battery manufacturing company, but we are very keen on looking at this from a technology point of view and from a wind turbine point of view, because of course we see the opportunity to optimize the storage and optimize the cost structure in battery from a wind turbine point of view. So that's the way we are looking at it, not from a battery manufacturing point of view.
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Interviewer6:02
I want to ask you about General Electric — a patent suit they've recently filed. While I do that, I want to draw attention to your stock chart here. I've pulled up a Bloomberg comp page that shows General Electric shares here over the past five years in yellow, the stock six hundred index in orange, and then Vestas Wind Systems over the past five years in white. It's just silly how much growth this stock has created, and it's absolutely clobbered anything else in the market. But I wonder what's ahead, considering that GE filed a patent infringement suit on your turbines in the US. They were successful with the same kind of suit against Mitsubishi Heavy Industries. What do you expect from that suit?
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Anders Runevad6:44
We obviously consider the complaint to be without merit and will vigorously defend ourselves. It is now a legal proceeding in the US, so I don't have more comments than that.