Solutions and Services - Vestas/media/vestas/investor... · product and services release in the...

Solutions and Services – Our second revenue stream

by John Nielsen, SVP, Global Solutions and Services

Keith Grassi, SVP, Plant Products & Technologies

Agenda

1. Shareholder value 2007-2012

The financial impact of our commitment to flawless turbine performance.

2. Customer value 2007-2012

The journey from reactive to predictive service

provider.

3. Growth drivers

Service business opportunities and challenges

4. Unique revenue enablers Boosting sales and delivering project specific optimisation

Vestas’ capital markets day 2012 2

CONTINOUS DEVELOP,

COST OUT,

EXPAND ON RETROFITS,

UPGRADES AND NON-

VESTAS TURBINES.

Vestas Solutions and Services covering the entire value chain

3 Vestas’ capital markets day 2012

Shareholder value

2007-2012

1

Growing revenue and earnings


Translating into shareholder value

*Service EBIT before allocation of Group costs.

850

705

504

396

298

0

100

200

300

400

500

600

700

800

900

0

2

4

6

8

10

12

14

16

18

2012 (outlook) 2011 2010

623

2009 2008 2007

EBIT margin % *

Revenue (mEUR)

EBIT margin %* Revenue

(mEUR)

Where we came from

Not recognised as a business

Service revenue of EUR 298m resulting in loss

Customer loyalty index alarmingly low

Baseline 2007


Where we are today


Service recognised as a business opportunity

<2% Lost Production Factor (2009: 4.5 per cent)

90% Renewal rate of service contracts (year-to-date)

94% Orders with service agreement (year-to-date)

55% Reduction of warranty work (from 2009)

95% Improvement of revenue per technician by (from 2007)

69 Customer loyalty index for service (2007: 46)

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Customer Value

2007-2012

2

The journey from reactive to predictive A cultural change has created sustainable customer and shareholder value

Vestas’ “virtual” service business was established in 2007.

Clear performance targets set with data derived from SAP and SCADA.

A performance driven journey.


Investments in processes, tools and training Integrated and global operational model in place

Vestas

Central

WTG Components

Wind Turbine Generator

VMP Controller

WTG Operation

Set Points

WTG Control

Operators

Technical

validation &

recommendation

Vestas Data Center Condition Based Operation

CBO

CBO

CBO

CBOGenerator

Gearbox

Pitch

Blades

WTG Health

Reports

Sales Business Unit


Prevention of severe damages through monitors Predictive intelligence and condition monitoring enabled prevention of severe generator failures

Cost reduction Changed motor instead of whole bearing or worst case, entire generator (reduced cost by factor 7)

Minimised lost production Optimal planning (reduced downtime by a factor 5)

Monitoring generator slip ring suction system

Problem solved – Replace suction motor

Damage detected

Business impact


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Investment in supply chain with global footprint


High delivery performance while reducing inventory and driving cost out

Drop-off warehouse

Repair facility

Parts and repairs

provider

Operations

In-house Repair Distribution

Vestas

central

parts setup

Local

sourcing

Central

sourcing Regional Warehouse

Parts

Depot

New parts

New parts

Parts exchange

Wind turbines End-customer

Kan ban of ready

components

We are committed to flawless turbine performance June 2012: Performance of all turbines covered by performance guaranteed contracts


Monthly LPF and contractual availability for Vestas’ fleet

95%

96%

97%

98%

99%

1.5%

1.0%

0.5%

0.0%

Jan.

2010

Jan.

2009

2.0%

Jan.

2012

Jan.

2011

5.0%

4.5%

4.0%

3.5%

3.0%

2.5%

Availability (RHS)

LPF (LHS)

Lost Production Factor

1% of LPF

=

EUR 1,840 MW/Year* ×

30,000 MW ×

2.5% improvement

=

EUR 138m


* Based on CF 30 per cent and a PPA of 70 EUR/MWh

Total annual customer value from improving LPF

Industry leading full scope service contracts

Time based

availability

Energy based

availability

= 1 - (energy lost / total possible production) = total available time / calendar time

Technically reliable turbine

Supply chain efficiency

Troubleshooting efficiency

Effective planning and bundling

Drives high performance Drives high performance

with enhanced planning

Technically reliable turbine

Supply chain efficiency

Troubleshooting efficiency

Effective planning and bundling

Weather based planning

AOM4000 AOM5000


0,0

100,0

200,0

300,0

400,0

500,0

600,0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Wind speeds

Hours

0,0

100,0

200,0

300,0

400,0

500,0

600,0

700,0

800,0

900,0

MW

h

Energy based availability incentives ensures availability when the wind is there

In a typical European wind farm 50 per cent of annual energy production is obtained in

21 per cent of available time

Distribution of hours in a year

at different wind speeds Energy produced in a year at

different wind speeds

21%

50%

Source: V112-3.0 MW turbine; noise mode 0; air density 1,225; Wind distribution estimated with a A = 8 and k 2.2.


Growth drivers

3

Several market growth drivers Vestas’ market potential within maintenance service is extensive

52

211

263*

3rd party

turbines

Vestas

turbines

43

9

MW under

service

AOM2000+

MW not

under service

52*

Total service market

30 June 2012 (GW)

*Calculated as 2011 installed base + 0,5*expected market size for 2012 based on BTM figures

Sources: BTM and Vestas track record as per 30 June 2012.

Vestas MW installed

30 June 2012 (GW)

Shipments of

6.3 GW in 2012

Renewal rate of

90 per cent

Upgrades

Order backlog of

EUR 4.8bn with

average contact

length ~ 6-7 years

~20 per cent of

this potential is

realistic and

meaningful to

capture


Several market growth drivers Vestas market potential within maintenance service is extensive

Total service market

30 June 2012 (GW)

*Calculated as 2011 installed base + 0.5* expected market size for 2012 based on BTM figures.

Sources: BTM and Vestas track record as per 30 June 2012.

Vestas MW installed

30 June 2012 (GW)

52Vestas

turbines

3rd party

turbines

263*

211

43

9

MW under

service

AOM2000+

MW not

under service

52*

Growth rate of

35-43 GW/year

2013-2015

Opportunity of

servicing third-

party turbines


New WTG orders

with service

agreements

Business opportunities and challenges towards 2015

Opportunities:

• Reduce service cost per MWh

• Develop upgrade solutions

• Develop repair solutions

• Recapture service contracts

• Service and maintenance of third-party turbines

Challenges:

• Experienced WTG owners insourcing or commoditising maintenance.

• Increased competition from OEMs, independent service providers and upstream suppliers.

• Emerging market with no or small infrastructure and footprint.

Achievable within our

current business model

Our current business

model must adapt


To sum up

Shareholder value

Customer value

Growth drivers

Service earnings more stable and

higher than turbine earnings.

Lower LPF generates higher revenue

for Vestas and more cash and

certainty for the customer.

New WTG sales, renewals and

upgrades.


Unique revenue

enablers

4

My role at Vestas

Past experience

Microsoft Corporation, USA:

Delivered key component of largest

product and services release in the

company’s history.

Xcel Energy, USA:

Delivered business solutions that

combine wind and traditional

generation assets for maintenance

optimisation and energy market

participation.

23

Today’s value

Global delivery of quality products

and services, on-time and in-full.

Deliver products and services that

bring direct value to our customers

and boost sales.

Keith Grassi

Vestas’ capital markets day 2012


Pre-sales services

and solutions Plant operations

related services

and solutions

Solutions and Services Covering the entire customer value chain


Solutions and Services

This is about enabling Vestas projects

=

revenue

Global, high resolution library – Faster time to market

Unique sales enablers

Optimised plant layout drives optimised business case.

Early grid compliance analysis and cost certainty

Fast responding plant control for on-going grid compliance

Platform integrating monitoring, reporting and data


4.9 GW


Capex light solutions and services


Customer benefits

5.8 GW – new customer project pipeline identified SiteHunt

4.8 per cent – additional annual energy generation SiteDesign

EUR 750k – cost savings on substation Electrical PreDesign

EUR 4.2m – recovered energy production Power plant controller

29

Lower cost of energy and improved business case certainty


Concrete examples:

Macarthur

420 MW wind power plant

a business case


Macarthur wind power plant

31

Pre-sales challenges

Commercially

• Meeting aggressive investment hurdle

rates.

• Meeting low cost of energy targets.

Technically

• Creating technical solutions to meet

plant reliability requirements.

• Providing strong technical due

diligence.

Operationally

• Creating customer specific, long term

service & maintenance package


Macarthur wind power plant

32 32

Pre-sales solutions and benefits

Energy production optimised to lower

cost of energy and improve project IRR

Optimised use of wind turbine electrical

capabilities to minimise cost

Using existing platforms for project

specific optimisation

Minimising risk of down-time through

enhanced reliability

Minimising risk of loss of plant revenue

through integrated stand-by solution

Benefits

Winning package:

• Wind turbines

• Advanced

solutions and

services

• EPC

(Engineering,

Procurement &

Construction)

• Long-term service


Offering

Potential cost of

EUR 3m avoided


What’s in the pipeline?


35

New and coming unique solutions and services

OCAS OCAS

Site specific optimisation Site specific optimisation

New & pending releases


To sum up

Unique revenue enablers

• Boost sales

(4.9 GW)

• Capex light

(based on unique existing Vestas

knowledge and competencies)

• Lower Cost of Energy

(avg. 4.8 per cent improved annual

energy production)

• Better Business Case Certainty

(grid compliance and operating

reliability)

• More offerings in the pipeline

(OCAS®, Site specific optimisation

and more)


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 statements are statements of future expectations that are based on

management’s current expectations and assumptions and involve known and unknown risks and uncertainties

that could cause actual results, performance or events to differ materially from those expressed or implied in

these statements.

Forward-looking statements include, among other things, statements concerning Vestas' potential exposure to

market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections

and assumptions. There are a number of factors that could affect Vestas' future operations and could cause

Vestas' results to differ materially from those expressed in the forward-looking statements included in this

presentation, including (without limitation): (a) changes in demand for Vestas' products; (b) currency and interest

rate fluctuations; (c) loss of market share and industry competition; (d) environmental and physical risks; (e)

legislative, fiscal and regulatory developments, including changes in tax or accounting policies; (f) economic and

financial market conditions in various countries and regions; (g) political risks, including the risks of expropriation

and renegotiation of the terms of contracts with governmental entities, and delays or advancements in the

approval of projects; (h) ability to enforce patents; (i) product development risks; (j) cost of commodities; (k)

customer credit risks; (l) supply of components from suppliers and vendors; and (m) customer readiness and

ability to accept delivery and installation of products and transfer of risk.

All forward-looking statements contained in this presentation are expressly qualified by the cautionary

statements contained or referenced to in this statement. Undue reliance should not be placed on forward-looking

statements. Additional factors that may affect future results are contained in Vestas' annual report for the year

ended 31 December 2011 (available at vestas.com/investor) and these factors also should be considered. Each

forward-looking statement speaks only as of the date of this presentation. Vestas does not undertake any

obligation to publicly update or revise any forward-looking statement as a result of new information or future

events others than required by Danish law. In light of these risks, results could differ materially from those stated,

implied or inferred from the forward-looking statements contained in this presentation.

Disclaimer and cautionary statement

39 39 Vestas’ capital markets day 2012

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