Vestas China Jyske Bank

Vestas (Buy)

Year of the Tiger – a turning point for Vestasturning point for Vestas

in China?

Senior Equity AnalystChristian Nagstrup

Jyske Banky2011

1

BUY, Price target DKK 250

• Strong order intake has reduced uncertainty• Upside to Vestas’ 2011-guidanceUpside to Vestas 2011 guidance• We do not expect Vestas to issue new shares• Low valuation: P/E (2011) 14.0X and P/E (2012) 9.8X

Price targetFair 12 months

value price target1 Weight Score4 Comment

DCF 359 393 10%

Relative2 223 244 40%

Sentiment 210 230 50% 6.6 Reduced uncertainty

Price target 252 100%

2

Agenda

1) The importance of China to Vestas (2 slides)

2) Energy and wind power development in China (5 slides)

3) The Chinese market structure (13 slides)3) The Chinese market structure (13 slides) Legislation, Pricing, Customers etc.

4) Competive situation (23 slides)

5) M k t t ti l f V t / JB ti t (12 lid )5) Market potential for Vestas / JB estimates (12 slides)

6) Valuation (5 slides)3

6) Valuation (5 slides)

Why do we focus on China?

• Vestas’ order intake in China has quadroupled to a new record of 972 MW in 2010

• Record-high Chinese exposure in 2010 (19% of volume)

• Vestas has invested EUR 400m in 1.6 GW of annual production capacity in China

• The 12th Five-year plan is due to come into effect in March 2011 and it will significantly impact the future of wind power2011, and it will significantly impact the future of wind power in China and thereby Vestas’ future in China

4

Conclusion

• We have been very positive on Vestas’ activities in China since Q1 2010

• Our research has confirmed our positive view in the short term 2011 has developed like 2010 so farp

• We expect the central government to increase its wind power t t f 2020 i M h 2011target for 2020 in March 2011

• China will NOT add to growth for Vestas in the medium and• China will NOT add to growth for Vestas in the medium and long term, which has been a surprise

5

China is the world’s largestChina is the world s largest market for wind turbines

• China and the US now account for 62% of the world market• China will remain #1 during 2010-14 according to BTM• Measured by accumulated installations the US is still no. 1,

but this will change in 2011The US and China’s share of new global installed wind

50%

60%

70%The US and China s share of new global installed wind energy capacity (MW) 2000-2014E

30%

40%

%

0%

10%

20%

0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

China USA

6Source: Jyske Bank and BTM Consult

ENERGY AND WIND POWER DEVELOPMENT IN CHINADEVELOPMENT IN CHINA

(5 SLIDES)( )

7

Chinese Energy Consumption

• Chinese energy consumption doubled from 2000 to 2007• Wind accounts for 0.4% of energy production

Energy consumption development in China 2000 2007

• China is still Coal Country

1,800,000

2,000,000

nt)

Distribution of Electricity Production in China2005 2006 2007

Electricity production (GWh) 2,499,564 2,864,205 3,279,233

China 2000-2007

1,400,000

1,600,000

Ener

gy u

set o

f oil

equi

vale

n

Sources of electricity production (% of total)

Coal 78.9 80.4 81.0

Hydroelectric 15.9 15.2 14.8

1,000,000

1,200,000

2000 2001 2002 2003 2004 2005 2006 2007

(kt

Oil 2.4 1.8 1.0

Nuclear 2.1 1.9 1.9

Natural gas 0.5 0.5 0.9

Source: Jyske Bank and The World Bank Group 8

Promising future for wind in China

120 000

Cumulative- and annual installed capacity in China 2003 – 2014E

80 000

100,000

120,000

40 000

60,000

80,000

MW

0

20,000

40,000

0

2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E

Cumulative Installed Capacity Annual Installed Capacity

9Source: Jyske Bank, China Wind Power Center, and BTM Concult

Good wind conditions in remoteGood wind conditions in remote areas

Distribution of effective wind power density

• 700-1200 GW wind power potential in China

Distribution of effective wind power density in China

• ~26 GW onshore wind installed end-2009a d d 00

• The best wind sites are l t d i t flocated in remote areas of China (mostly in the North)…

S Wi d P M thl

• … but energy consumption is concentrated in Eastern

10

Source: Wind Power Monthlyis concentrated in Eastern China

Grid capacity is a bottleneck

Map over the grid companies’ coverage

• No unified national grid

• Very little inter-grid connectivity

• Grid not geared to large amounts of wind power

• Lack of incentive for grid companies to connect wind

Source: Wang (2009) “Effective policies for renewable energy – the example of China’s wind power – lessons for China’s photovoltaic power”

companies to connect wind farms

11

Offshore is developingOffshore Projects Planned by ProvincesProvince Project Size Comment

Heibei Tangshan 100 MW

Shandong Changdao 48 MW First stage

1 5 GW Long term1.5 GW Long term

Weihai 10 MW First stage

1 GW Long term

Jiangsu Guanyun 100 MWXiangshui 200 MWBinhai 500 MWSheyang 100 MWDafeng 6 GW By 2020g

Dongtai 600 MW In two projects of 300 MW

Rudong 300 MWNantong 300 MW

Zhejiang Daishan 500 MWZhejiang Daishan 500 MW200 MW

Fujian Ningde 100-150 MW First stage

2 GW By 2020

12

Source: Jyske Bank and Wind Power Monthly

Guangdong Nan'ao 48 MW For Pilot

Zhanjiang 50 MW

CHINESE MARKET STRUCTURESTRUCTURE

(10 SLIDES)( )

13

The Legal Environment

• Energy Bureau of the National Development and Reform Commission

Renewable Energy Targets10% Renewable Energy by 2010

and 15% by 2020 100 GW by 2020

Grid Companies

Mandatory Grid

ProjectDevelopers

Mandatory

Wind Turbine Manufacturers

Reform Commission

• Renewable Energy Law of Mandatory Grid Connection of Wind Farms

Mandatory purchase of

Mandatory requirements of non-hydro renewables

Fixed feed in

R&D Support

Reduced tax

ab gy a othe People’s Republic of China (1 Jan 2006) was created to attract purchase of

electricity generated by wind farms

Renewable

Fixed feed-in tariff

Reduced VAT on power

rates

Tax rebate on import of

components

created to attract stakeholder interest…

energy surcharge levied on

customers

generation

Reduced income tax

components

70% local content

requirement

• … but is in reality just a “framework law” with vague stipulations, i.e.

14

g p ,flexible

Source: Jyske Bank and CWPC

2007 was busy year for energy2007 was busy year for energy lawmakers in China

• Medium and Long-term Development Plan for R bl E i Chi (2007)Renewable Energy in China (2007)– 3% renewable energy target for large utilities by 2010

and 8% by 2020 (sourcing, not production)

• Guidelines on Adjusting Import Taxes on High-Voltage Wind Turbines (2007)Voltage Wind Turbines (2007)– Higher import tariffs on turbines below 2.5 MW

• Approach of Grid Enterprises Purchasing Renewable Energy Electricity (2007)– Grid operators responsible for losses in connection

15

with grid connectivity problems for renewable energy

Legal milestones 2006-10

Fixed rate feed-in tariff Unofficial target revision:

Timeline of major legislative changes within the wind-power sector in China (2006-2010)

NDRC is responsible for projects > 50MW provincial

Renewable Energy Law Amendment:

system implemented for inland projects

Wind power given priority rights on grids

Domestic and

revision:150 GW by 2020

projects > 50MW, provincial govenrment for < 50MW

Renewable Energy Law:-Mandatory grid connection and p rchase of electricit b

-Renewable energy development plans shall include plans for grid improvement.-Minimum quotas on share

Targets established:-10% renewables by 2010 and 15%

Chinese controlled wind power companies are granted

VAT and import tariff

b t

Ban on turbines < 1MW in concessions

and purchase of electricity by grid companies.-Surcharges to be levied on consumers

of renewable energy.

Abolishment of the 70% local content requirement.

by 2020-5GW wind by 2010 and 30 GW by 2020

are granted tax levies.

rebate on certain wind turbine components

Target revision:100 GW by 2020

2006 2007 2008 2009 2010

Source: Jyske Bank

16

y

State vs. provincial wind projects

• Projects above 50 MW must be approved by the central government

• More state control indicates less provincial projects

Development and expected tendency of wind power projects above and below 50 MW

• More state control indicates less provincial projects

80%

100%

20%

40%

60%

0%

2005 2006 2007 2008 Expected Tendency

17

> 50 MW < 50 MW


The Chinese wind turbine industry

• Chinese wind power equipment based on European technology (licenses or joint development)

• Setup of government funds has supported development

• Small Chinese wind turbine manufacturers have low technological skills

• Chinese players have very different budget constraints relative to non-Chinese playersp y

18

83 Chinese turbine manufacturers

• Legislative action since 2007 has attracted many new players in the Chinese market

• Massive production overcapacity

80

90

• Massive production overcapacity

50

60

70

80

20

30

40

50

0

10

20

2007 2008 2009 2010

19Source: Jyske Bank and Wind Power Monthly, US National Foreign Trade Council, China Climate Change Info-Net, and Liao, Jochem, Zhang, and Farid “Wind power development and policies in China

Time for consolidation

• The central government has built up the local wind turbine industry in China and is now keen on consolidation

• China Machinery Industry Federation (government controlled• China Machinery Industry Federation (government controlled trade organization) only sees need for 10 GW of annual production capacity

• Only the strongest turbine manufacturers will survive due to new requirements

New requirements for manufacturers to be eligiblefor tax breaks, land use and government loansManufactures should be able to produce turbines of 2.5MW bMW or above

Annual capacity of at least 1 GW

At least 500 MW total installed capacity

Manufactures should have in house R&D facilities

20Source: Jyske Bank and Wind Power Monthly

Manufactures should have in-house R&D facilities

Turbine prices under pressure

• Turbine prices dropped as low as CNY 4,000/kW in 2010• Non-Chinese turbine manufacturers offer prices of CNY

5 000/kW

Development of turbine prices in Chinese concession projects

5,000/kW

21Source: Jyske Bank and CWEA

Main wind developers in China

The Largest Wind Power Developers in ChinaCompany Market share 2009 Capacity Installed in 2009

Longyuan 18 8% 2600 4 MWLongyuan 18.8% 2600.4 MW

Datang 12.6% 1739.9 MW

Huaneng 11.9% 1644.8 MW

Huadian 8 9% 1230 1 MWHuadian 8.9% 1230.1 MW

CGN wind 6.2% 854.5 MW

BEIH 5.8% 797.5 MW

Guohua 4.3% 590.3 MW

Source: Jyske Bank and CWEA

Guohua 4.3% 590.3 MW

• Top-3 installed 44% of all new capacity in 2009• Top-3 installed 44% of all new capacity in 2009• Top-5 installed 59% of all new capacity in 2009• Many small developers with insignificant market share

22

y p g• 90% of Chinese wind capacity controlled by state-owned

companies

Customer/supplier relationships

• Based on research on wind farms built up to 2007 we have identified the following customer/supplier relationships:relationships:

– Longyuan: Gamesa, Vestas, and Goldwind

– Datang: Vestas, Gamesa, and Suzlon

– Huaneng: Sinovel, Vestas, and Gamesa

– Huadian: Sinovel, Gamesa, Goldwind

• Since then focus has however moved towards Chinese manufacturers

23Source: Jyske Bank and CWPC

VESTAS’ COMPETITIVE SITUATION IN CHINASITUATION IN CHINA

(23 SLIDES)( )

24

Vestas in China

• Entered Chinese market in 1986• First Chinese production facility announced July 2005• 2.1 GW installed across 13 provinces• 1.6 GW annual production capacity (JB estimate)

– 1 000 MW of 2 MW platform1,000 MW of 2 MW platform – 600 MW of 850 kW platform (fully up and running in 2011)

Vestas and total market volume (MW) in China2000R 2001R 2002R 2003R 2004R 2005R 2006R 2007R 2008R 2009R2000R 2001R 2002R 2003R 2004R 2005R 2006R 2007R 2008R 2009R

Vestas delivered MW in China 4 - 10 27 75 77 379 458 596 584

Growth y/y (%) n/a n/a n/a 170% 178% 3% 392% 21% 30% -2%

Total Chinese market 84 54 67 98 198 498 1 334 3 287 6 246 13 750Total Chinese market 84 54 67 98 198 498 1,334 3,287 6,246 13,750

Growth y/y (%) n/a -36% 24% 46% 102% 152% 168% 146% 90% 120%

Vestas market share China 4.8% 0.0% 14.9% 27.6% 37.9% 15.5% 28.4% 13.9% 9.5% 4.2%


Vestas in China

• From 38% market share to 4% in 5 years

Market share development for Vestas in China 2003-2009

80%

90%

100%

38%40%

50%

60%

70%

25%

14%

28%

13%9%

4%%

10%

20%

30%

0%

2003 2004 2005 2006 2007 2008 2009

Vestas Chinese manufacturers

26Source: Jyske Bank, Vestas and BTM Consult

Vestas has invested EUR 400mVestas has invested EUR 400m in China from 2005 to 2010

First round of Vestas' investments in China (2005-2006)

Announced Location Type Official capacity Investment Operations start Comment

July 2005 Tianjin Blade factory 600 (2MW) EUR 25m Q1 2006 240 employees before

expansion

January 2006 Tianjin Nacelle and hub 350 nacelles and

h b (2MW)

EUR 19m Q1 2007 225 employees

hubs (2MW)

April 2006 Tianjin Expansion of blade factory 600 (2MW) EUR 13m Mid 2007 Expansion from 600 to 1,200

blades and from 240 to 400

employees

Source: Jyske Bank and Vestas

June 2006 Tianjin Generator factory 350 generators

(2MW)

EUR 8.5m Q2 2007 75 employed from the

beginning

27

Vestas took big investmentVestas took big investment decisions in 2008

Second round of Vestas' investments in China (2008-2010)

Announced Location Type Official capacity Investment Operations start Comment

May 2008 Hohhot Factory USD 90m Mid 2010 Manufacturing V52-850 kW

and V60-850 kW turbines for

the Chinese market

May 2008 Xuzhou Foundry Max. 40,000 tons

of castings

n/a November

2009

Vestas is the only wind

turbine manufacturer in China

with an in-house foundry (180 y

employees)

June 2008 Tianjin Addition of production of

control systems and

machined parts

n/a CNY 1.8bn May 2009 Production of control panels,

high power racks and cable

production for the V52 and p p

V80 wind turbines. A 15,000

sqm. plant with approx. 250

local employees.

August 2008 Tianjin Expansion of generator n/a n/a Mid 2009g j p g

and machining factories

April 2009 Tianjin Expansion of blade factory n/a USD 90m n/a

October 2010 Beijing R&D center n/a USD 50m October 100 employees in 2010 and

28Source: Jyske Bank and Vestas

October 2010 Beijing R&D center n/a USD 50m

over 5 years

October

2010

100 employees in 2010 and

over 200 in 2012

Vestas’ “kW-strategy” is risky

• 53% 850 kW turbines sold since 2005

47% 1 8 2 0 MW t bi ld i 2005• 47% 1.8 or 2.0 MW turbines sold since 2005

• Vestas has launched its custom made V60-850 kW turbine• Vestas has launched its custom made V60 850 kW turbine for the Chinese market

• Surprisingly low order intake of the V60-850 kW turbine…

• but V52 850 kW has continued its success• …but V52-850 kW has continued its success

• Vestas’ ”kW-strategy” can prove risky in the medium to long

29

gy p y gterm, as average turbine size is trending upwards

Most peers focus on multi-MWMost peers focus on multi MW turbines

• Domestic suppliers focus on the multi-MW segment• Turbine sizes of 6 to 10 MW are now under development

D l b ildi i ith lti MW t

Installed capacity by end-2009

Company 0.75MW 0.85MW 1.25MW 1.5MW 2MW 2.5MW 3MW 3.6MW 5MW Total

• Developers are building experience with multi-MW segment

p y

Sinovel 3,426 R&D 69 R&D 3,495

Goldwind 813 1,904 3 3 R&D 2,722

Dongfang Electric 2,036 R&D R&D 2,036

United Power 768 768United Power 768 768

Mingyang 749 R&D R&D 749

XEMC 454 Prototype 454

Shanghai Electric 206 68 R&D 274

Vestas 387 222 R&D* 609Vestas 387 222 R&D 609

Suzlon 125 168 R&D* 293

REpower 198 R&D* R&D* 198

GE 323 R&D* R&D* 323

30

Source: Jyske Bank and CWEA

Trend towards larger turbines

• Average turbine size up from 850 kW in 2005 to 1.36 MW in 2009

Average wind turbine size of new installed Distribution of turbine sizes of new

5% 6%90%

100%

1 500

Average wind turbine size of new installed capacity in China (2005-2009)

Distribution of turbine sizes of new installed capacity in China in 2007 and 2009

7%

40%

67%60%

70%

80%

90%

1,200

1,300

1,400

1,500

size

(kW

)

24%

9%

7%

3%20%

30%

40%

50%

800

900

1,000

1,100

erag

e tu

rbin

e

4%

25% 12%

0%

10%

2007 2009600

700

800

2005 2006 2007 2008 2009

Ave

31

other 750 kW 850 kW 1250 kW 1500 kW 2000 kW

Source: Jyske Bank, CWEA and CWPC

New price system for wind energy

• New wind energy price system introduced in November 2009• This will shift attention more towards quality than initial price

F d i P i f Wi d P P j A di P iFeed-in Price of Wind Power Projects According to Province

Wind Ressource

Region

Benchmark Feed-in Price (Yuan/kWh)

Specific Jurisdictions in Region

Class I wind Inner Mongolia (excluding) Chifeng, Tongliao, Class I wind ressource

region0.51

g ( g) g, g ,

Xing'an Meng, Hulunbeir; Xinjiang's Urumqi, Yili,

Changji, Klamayi, Shihezi.

Class II wind ressource 0 54

Heibei's Zhangjkou and Chengde; Inner

Mongolia's Chifeng, Tongliao, Xing'an Meng, ressource

region0.54

Hulunbeir; Gansu's Zhangye, Jiayuguan, and

Jiuquan.

Class III

Jinlin's Baicheng and Songyuan; Heilongjiang

privince's Jixi, Shuangyashan, Qitaihe, Shuihua, Class III

wind ressource

region

0.58

Yichun, and Daxing'anling area; Gansu province

(excluding Zhangye, Jiayuguan, and Jiuquan);

Xinjiang privince (excluding Urumqi, Yili,

Changji, Klamayi), and Shihezi; Ningxia Hui

Autonomous Region

32


g

Class IV wind

0.61Those areas excluded in Class I, II, and III

regions.

Local suppliers have capturedLocal suppliers have captured the Chinese market since 2007

• Non-Chinese wind turbine manufacturers had a combined market share of 12.3% in 2009

90%100%

Market share of Chinese vs. non-Chinese wind turbine manufacturers in China

73%79%

72%

61%

49%50%60%70%80%

49%

27%

12%10%20%30%40%50%

12%

0%10%

2003 2004 2005 2006 2007 2008 2009

Chinese Non-Chinese33

Source: Jyske Bank and BTM Consult

Non-Chinese wind turbineNon Chinese wind turbine manufacturers peaked in 2004Market share development of non-Chinese wind turbine manufacturers in ChinaMarket share development of non Chinese wind turbine manufacturers in China

40%

45%

25%

30%

35%

10%

15%

20%

0%

5%

10%

2003 2004 2005 2006 2007 2008 2009

Vestas Gamesa GE Wind


Acciona Nordex Suzlon

Market shares of accumulatedMarket shares of accumulated installed capacity 2009

• Vestas’ accumulated market share has been reduced from a level of 20% in 2004-2007 to 9% in 2009

Other Non-

Market share of accumulated installed wind energy capacity in China in 2009 (MW)

Sinovel21%

Other Chinese

Chinese10%

Chinese19%

Goldwind20%

Vestas

Gamesa7%

Dongfang14%

Vestas9%

35Source: Jyske Bank and calculations based on BTM Consult

Market shares of new installedMarket shares of new installed capacity in 2009

• Top-3 accounted for 63% of the market in 2009• Vestas and Gamesa are largest non-Chinese suppliers

Other Non-Chinese

Market share of new installed wind energy capacity in China in 2009 (MW)

Sinovel25%Gamesa

3%

Other Chinese

13%

Chinese5%

Mingyang4%

Hara XEMC3%

Goldwind20%

Dongfang

United Power

Vestas4%

4%

Dongfang18%7%


Overview of Chinese competitors

Chinese Turbine ManufacturersTier 1 Tier 2 Tier 3

Goldwind XEMC A very large number of y g

Sinovel Mingyang small manufacturers

Dongfang Shanghai Electric

United Power

Source: Jyske Bank

United Power

• Tier 1: 800 MW+ annual output• Tier 2: 100 800 MW annual output• Tier 2: 100-800 MW annual output• Tier 3: >100 MW annual output

37

Sinovel: No. 1 in 2009

Sinovel90%

Sinovel market share development

Global Market Share 9.2%

Chinese Market Share 25.0%

Installed Capacity 2009 3,510 MW 60%

70%

80%

90%

Products:

SL1500 series 1.5 MW

SL3000 series 3.0 MW19%

22%

25%

20%

30%

40%

50%

Source: Jyske Bank BTM Consult and Sinovel

Just announced 5.0 MW

Under development 6.0 MW

19%

0%

10%

2003 2004 2005 2006 2007 2008 2009

Source: Jyske Bank, BTM Consult and Sinovel Sinovel Non-Chinese manufacturers

38

Goldwind: No. 2 in 2009Goldwind market share development

GoldwindGlobal Market Share 7.2%

Chinese Market Share 19.5%60%

70%

80%

90%

Goldwind market share development

Products:

600 kW

1.5 MW PMDD 1.5 MW

2 5 MW PMDD 2 5 MW

24%

20%

25%31%

23%

18%

20%

10%

20%

30%

40%

50%

2.5 MW PMDD 2.5 MW

GW300 3.0 MW


0%

10%

2003 2004 2005 2006 2007 2008 2009

Goldwind Non-Chinese manufacturers

Goldwind Key Figures in RMBm2007 2008 2009 H1 2010

MW installed 755 1 373 2 036 1 326MW installed 755 1,373 2,036 1,326

Revenue 3,089 6,417 10,667 6,265

Growth y/y 108% 66%

Profit before tax 622 1,146 1,991 994

39Source: Jyske Bank, BTM Consult and Goldwind

Profit before tax 622 1,146 1,991 994

Growth y/y 84% 74%

Dongfang: No. 3 in 2009Dongfang Dongfang market share developmentg gGlobal Market Share 6.5%

Chinese Market Share 17.7%

Manufacturing Capacity 2009 1,804 MW

Dongfang market share development

60%

70%

80%

90%

Products:

1.0 MW

1.5 MW6%

16% 18%

10%

20%

30%

40%

50%

2.0 MW

2.5 MW


6%

0%

10%

2003 2004 2005 2006 2007 2008 2009

Dongfang Non-Chinese manufacturers

Dongfang Key Figures in RMBm2007 2008 2009 H1 2010

Revenue, net 24,099 27,717 32,754 16,613Revenue, net 24,099 27,717 32,754 16,613

Growth y/y 15% 18%

EBIT 2,804 637 1,980 1,218

Wind Power Business

40

Revenues 552 2,617 6,279

Growth y/y 374% 140%

Source: Jyske Bank, BTM Consult and Dongfang

Chinese Tier 2 competitors (I)

• China Guodian United Power– A unit of state-owned China Guodian Corporation, established 2007– Main product: 1 5 MW turbine developed with German based AerodynMain product: 1.5 MW turbine developed with German based Aerodyn– Sees opportunities in the US

• Mingyang– Privately owned, established 2006

h d f b 200 d l d h d– Launched first 1.5 MW turbine in 2007, developed with Aerodyn– Product range: 1.5 MW-6.0 MW (under development)– Set up operations in the US in May 2010

41

Chinese Tier 2 competitors (II)

• Hara XEMC– One of the two leading suppliers of direct drive technology– Launched a 2 0 MW turbine with direct drive with a license fromLaunched a 2.0 MW turbine with direct drive with a license from

Japanese Harakosan– Developing a 5.0 MW offshore turbine with direct drive– Aqcuired Dutch-based Darwind Estate in August 2009Aqcuired Dutch based Darwind Estate in August 2009

• Shanghai ElectricListed on the Hong Kong stock exchange– Listed on the Hong-Kong stock exchange

– First wind turbine launched in 2007– Product range: 1.25, 1.5 MW as well as 3.6 MW and 5.0 MW (under

development)development)

42

Gamesa: No. 8 in China in 2009

Gamesa Key Figures in EURm2006 2007 2008 2009 H1 2010

MW i Chi 246 518 499 47280%

90%

100%

Gamesa market share development

MW in China 246 518 499 472

Sales 2,401 3,070 3,834 3,113 963

Growth y/y 28% 25% -19%

Mwe 2,250 3,289 3,684 3,145 1,00136% 33%

30%

40%

50%

60%

70%

Growth y/y 46% 12% -15%

EBITDA 441 442 530 430 138

Growth y/y 0% 20% -19%

13% 16%15%

8% 3%0%

10%

20%

2003 2004 2005 2006 2007 2008 2009

Gamesa Chinese manufacturersSource: Jyske Bank, BTM Consult and Gamesa

43

Suzlon

Suzlon market share developmentSuzlon Key Figures in INR Crore

2006/07 2007/08 2008/09 2009/10

MW in China 100 134 249 182 80%

90%

100%

MW in China 100 134 249 182

Revenue 8,082 13,947 26,531 20,849

Growth y/y 73% 90% -21%

Revenue China 1,266 1,475 40%

50%

60%

70%

80%

MW 1,456 2,311 2,790 1,460

Growth y/y 59% 21% -48%

EBITDA 1,393 2,051 2,816 943 0%6%

3%0%

10%

20%

30%

2003 2004 2005 2006 2007 2008 2009Source: Jyske Bank, BTM Consult and Suzlon

2003 2004 2005 2006 2007 2008 2009

Suzlon Chinese manufacturers

44

GE Energy

GE market share development

90%

100%GE Energy Key Figures in USDm

2006 2007 2008 2009 H1 2010

Revenue 19,406 22,456 29,309 31,028 18,195

Source: Jyske Bank BTM Consult and GE 40%

50%

60%

70%

80%Growth y/y 16% 31% 6%

EBIT* 2,918 3,835 4,880 6,149 3,391

EBIT-margin 15.0% 17.1% 16.7% 19.8% 18.6%

Source: Jyske Bank, BTM Consult and GE

21% 10% 7%3%

0%

10%

20%

30%

2003 2004 2005 2006 2007 2008 2009

GE Chinese manufacturers

45

Nordex

Nordex Key Figures in EURm2006 2007 2008 2009 H1 2010

T t l R 552 807 1189 1144 379Total Revenue 552 807 1189 1144 379

Growth y/y 46% 47% -4%

EBIT 17 40 63 40 7

EBIT-margin 3.0% 5.0% 5.3% 3.5% 1.9%EBIT margin 3.0% 5.0% 5.3% 3.5% 1.9%

MW sales in China 45 155 111

Turbine production MW 584 800 1128 983 387

Of which in China 65 176 86 59

Source: Jyske Bank, BTM Consult and Nordex

• From a market share of 3% in 2006 to less than 1% in 2009

46

Siemens Wind Power

Key figures Siemens in EURm (Renewable Energy division)2006/07 2007/08 2008/09 1Q2010 2Q2010 3Q2010

Revenue 1 365 2 092 2 935 480 862 953Revenue 1,365 2,092 2,935 480 862 953

Growth y/y 53% 40% -33% 8% 25%

Order intake 2,452 4,434 4,823 1,576 628 2,271

Profit before tax 134 242 382 29 107 129

Source: Jyske Bank, BTM Consult and Siemens

PBT-margin 9.8% 11.6% 13.0% 6.0% 12.4% 13.5%

• No exposure to China until 2010• Opened its first Chinese production facility in November 2010• Opened its first Chinese production facility in November 2010

(components for 2.3 MW and 3.6 MW turbines)• 600 MW annual capacity for China and export markets

47

JYSKE BANK ESTIMATESJYSKE BANK ESTIMATES(12 slides)

48

Total market volume estimates

Global wind turbine volume (MW) - reported figures and JB estimates

2006R 2007R 2008R 2009R 2010E 2011E 2012E 2013E 2014EEurope 7,681 8,285 9,179 10,738 10,500 9,500 11,500 14,500 18,000Europe 7,681 8,285 9,179 10,738 10,500 9,500 11,500 14,500 18,000Growth y/y 8% 11% 17% -2% -10% 21% 26% 24%

Americas 3,515 5,815 9,527 11,433 7,650 9,300 10,800 13,200 15,500 Growth y/y 65% 64% 20% -33% 22% 16% 22% 17%

S th & E t A i 3 712 5 010 8 201 14 991 16 500 16 800 17 000 17 500 18 000South & East Asia 3,712 5,010 8,201 14,991 16,500 16,800 17,000 17,500 18,000

- of which China 1,334 3,287 6,246 13,750 14,000 14,000 13,500 13,500 13,500

- Growth y/y 146% 90% 120% 2% 0% -4% 0% 0%

Growth y/y 35% 64% 83% 10% 2% 1% 3% 3%

Other areas 109 683 1,284 942 1,900 2,500 3,000 3,600 4,500 Growth y/y 527% 88% -27% 102% 32% 20% 20% 25%

Total 15,017 19,791 28,190 38,104 36,550 38,100 42,300 48,800 56,000 Growth y/y 32% 42% 35% -4% 4% 11% 15% 15%


Growth y/y 32% 42% 35% 4% 4% 11% 15% 15%

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Total market volume estimateTotal market volume estimate changesJB estimates for global wind turbine volume (MW) including estimate changes

2010E 2011E 2012E 2013E 2014EEurope 10,500 9,500 11,500 14,500 18,000 Change in estimates (MW) 0 0 -1000 -1500 -2000

Americas 7,650 9,300 10,800 13,200 15,500 Change in estimates (MW) -900 0 0 0 0

South & East Asia 16,500 16,800 17,000 17,500 18,000 Change in estimates (MW) 1500 -200 -1000 -2500 -4000

- of which China 14,000 14,000 13,500 13,500 13,500

Change in estimates (MW) 1000 -200 -1000 -2500 -4000

Other areas 1 900 2 500 3 000 3 600 4 500Other areas 1,900 2,500 3,000 3,600 4,500 Change in estimates (MW) 0 0 0 0 0

Total 36,550 38,100 42,300 48,800 56,000 Change in estimates (MW) 600 -200 -2000 -4000 -6000


50

We are not as optimistic asWe are not as optimistic as BTM Consult

Volume estimates China - BTM vs. JB

2007R 2008R 2009R 2010E 2011E 2012E 2013E 2014EMW deliveries (BTM) 3,287 6,246 13,750 14,000 15,000 15,500 16,500 18,000

Growth y/y (%) 146% 90% 120% 2% 7% 3% 6% 9%

MW deliveries (JB estimates) 14,000 14,000 13,500 13,500 13,500

Growth y/y (%) 2% 0% -4% 0% 0%

Difference (%) JB vs. BTM 0% -7% -13% -18% -25%


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Historical order development forHistorical order development for Vestas in ChinaDevelopment of Vestas' order intake in China 2004-2010

YearAnnounced

orders (MW)Announced

orders (no.)Average order

size (MW)

2004 100 1 100

2005 0 0 n/a

2006 383 2 192

2007 387 3 129

2008 766 9 85


2009 248 5 50

2010 972 16 61

• Order intake quadroupled in 2010• Average order size has declined since 2007• Average order size has declined since 2007

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li f d d d d i hi

Uannounced orders decliningSplit of announced and unannounced orders in China

2005R 2006R 2007R 2008R 2009R 2010E

Total Chinese market (BTM and JB estimates) 498 1,334 3,287 6,246 13,750 14,000

Growth (y/y) 152% 168% 146% 90% 120% 2%

Vestas volume in China (MW) 77 379 458 596 584 975

Growth (y/y) 3% 392% 21% 30% -2% 67%

Vestas order intake (MW) 0 383 387 766 248 972 Growth (y/y) n/a 1% 98% -68% 292%

Vestas market share (BTM and JB estimates) 15.5% 28.4% 13.9% 9.5% 4.2% 7.0%

Vestas' China exposure (Chinese volume/total volume) 2% 9% 10% 11% 12% 19%

D li d d V t d * 0 363 320 475 577 975Delivered announced Vestas orders* 0 363 320 475 577 975 Growth (y/y) n/a -12% 48% 21% 69%

Delivered unannounced Vestas orders (residual)* 77 16 138 121 7 0Growth (y/y) -79% 762% -12% -94% -100%

Share of announced orders 0% 96% 70% 80% 99% 100%

Share of unannounced orders 100% 4% 30% 20% 1% 0%

Source: Vestas, BTM Consult and Jyske BankSource: Jyske Bank and Vestas*) Based on Jyske Bank estimates of the timing of deliveries of announces orders from China.

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Volume recognition 2004-10 (I)Announced orders from China 2004-2011

Expected revenue recognitionDate Project Turbines MW total 2006 2007 2008 2009 Q110 Q210 Q310 Q410 2010 201131-12-2004 n/a V80-2,0 MW 100 100

30-03-2006 n/a V52-850 kW 238 238

31-10-2006 n/a V80-2,0 MW /

V52-850 kW

145 25 120

Expected revenue recognition

02-02-2007 n/a V52-850 kW 187 100 87

10-04-2007 n/a V80-2,0 MW 100 100

03-08-2007 n/a V80-2,0 MW 100 100

04-01-2008 Inner Mongolia V52-850 kW 197 138 59

27-06-2008 Danianzi V80-2,0 50 30 20

27-06-2008 Bolike-II V80-2,0 50 30 20

24-07-2008 Chuandao V52-850 kW 85 50 35

04-08-2008 Shicheng V80-2,0 MW 40 40

21-08-2008 Sigeng V90-2,0 MW 48 48

16-10-2008 Suniteyou Wind Farm III V52-850 kW 98 98

29-12-2008 n/a V52-850 kW 98 98

31-12-2008 n/a V52-850 kW 100 100

24-04-2009 Zhaqi Phase I Wind Farm V52-850 kW 50 50

06-07-2009 Pingtan Aoqian V80-2,0 MW 34 34

10-07-2009 N/A V90-1,80 MW / 75 15 10 15 35 60

V90-2,0 MW /

V80-2,0 MW

17-12-2009 Keyqouqianqi V60-850 kW 49 20 20 9 49

28-12-2009 Zhaolitouzi (Liaoning Province) V90-2,0 MW 40 10 20 10 40

25-02-2010 Huitong Energy’s Zuozi Bayinxile

Wi d F

V80-2,0 MW 48 30 18 48

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Wind Farm

30-03-2010 n/a n/a 50 25 25 50

06-04-2010 n/a n/a 50 25 25 50

15-04-2010 n/a V52-850 kW 49 20 29 49

Volume recognition 2004-10 (II)Announced orders from China 2004-2011

Date Project Turbines MW total 2006 2007 2008 2009 Q110 Q210 Q310 Q410 2010 201120-04-2010 Ningxia Hui Autonomous Region

(NHAR)

V90 49 20 29 49

22-04-2010 n/a n/a 49 20 29 49

Expected revenue recognition

27-04-2010 n/a V52-850 kW /

V90-2.0 MW

198 30 30 90 150 48

17-06-2010 Dashuiboluo windfarm, Linxi,

Inner Mongolia Autonomous

Region

V80-2,0 MW 50 20 30 50

g

21-06-2010 Alatan wind farm, Tongliao,

Inner Mongolia Autonomous

Region

V80-2,0 MW 50 20 30 50

24-06-2010 Putian County, Fujian Province V80-2,0 MW 48 16 32 48

19-07-2010 Huianbao, Ningxia Hui V90-1,80 MW 49 30 19 4919 07 2010 Huianbao, Ningxia Hui

Autonomous Region

V90 1,80 MW 49 30 19 49

02-08-2010 n/a V80-2,0 MW 36 10 26 36

13-08-2010 n/a V90-2,0 MW 74 74 74

18-08-2010 Guangdong Province V52-850 kW 74 74 74

15-12-2010 Huianbao Ningxia Hui V90-1 80 MW 49 4915-12-2010 Huianbao, Ningxia Hui

Autonomous Region

V90-1,80 MW 49 49

29-12-2010 Jiaochekou wind farm, Hebei

province

V52-850 kW /

V60-850 kW

49 49

07-01-2011 Daqinghe Yanchang wind farm,

Laoting County

V90-2,0 MW 50 50

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Laoting County

Total 2,907 363 320 475 577 0 70 321 584 975 196

Zero volume growth beyond 2010

Vestas and total market volume (MW) in China2005R 2006R 2007R 2008R 2009R 2010E 2011E 2012E 2013E 2014E

Vestas delivered MW in China 77 379 458 596 584 975 975 975 975 975

G h / (%) 3% 392% 21% 30% 2% 67% 0% 0% 0% 0%Growth y/y (%) 3% 392% 21% 30% -2% 67% 0% 0% 0% 0%

Total Chinese market 498 1,334 3,287 6,246 13,750 14,000 14,000 13,500 13,500 13,500

Growth y/y (%) 152% 168% 146% 90% 120% 2% 0% -4% 0% 0%


Vestas market share China 15.5% 28.4% 13.9% 9.5% 4.2% 7.0% 7.0% 7.2% 7.2% 7.2%

• Stable market share around 7%• Vestas will stay in the game because of quality products• Vestas will stay in the game because of quality products• New legislation is the main risk

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Vestas volume estimatesVestas MW deliveries and market share by region

2006R 2007R 2008R 2009R 2010E 2011E 2012E 2013E 2014EEurope 2,109 2,087 2,707 2,772 2,438 2,280 2,760 3,480 4,320 Market share 27.5% 25.2% 29.5% 25.8% 23.2% 24.0% 24.0% 24.0% 24.0%

Americas 1,070 1,416 1,719 1,304 1,220 2,040 2,410 2,890 3,375 Market share 30.4% 24.4% 18.0% 11.4% 15.9% 21.9% 22.3% 21.9% 21.8%

South & East Asia 1,060 999 1,154 683 1,505 1,405 1,405 1,485 1,580 Market share 28.6% 19.9% 14.1% 4.6% 9.1% 7.5% 8.0% 9.0% 9.0%

- of which China 379 458 596 584 975 975 975 975 975

- market share China 28.4% 13.9% 9.5% 4.2% 7.0% 7.0% 7.2% 7.2% 7.2%

- share of total volume 9% 10% 11% 12% 19% 16% 14% 12% 10%

Other areas 0 0 0 5 0 350 300 350 400 Market share 0.0% 0.0% 0.0% 0.5% 0.0% 14.0% 10.0% 9.7% 8.9%

Total 4,239 4,502 5,580 4,764 5,163 6,075 6,875 8,205 9,675 Market share 28 2% 22 7% 19 8% 12 5% 14 1% 15 9% 16 3% 16 8% 17 3%


Market share 28.2% 22.7% 19.8% 12.5% 14.1% 15.9% 16.3% 16.8% 17.3%

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Vestas volume estimate changesJB estimates for MW delivered by Vestas including estimate changes

2010E 2011E 2012E 2013E 2014EEurope 2,438 2,280 2,760 3,480 4,320 Change in estimates (MW) 0 46 -240 -360 -480

Americas 1,220 2,040 2,410 2,890 3,375 Change in estimates (MW) 0 0 0 0 0

South & East Asia 1,505 1,405 1,405 1,485 1,580 Change in estimates (MW) 0 20 -35 -315 -400

- of which China 975 975 975 975 975

Change in estimates (MW) 0 20 -35 -315 -400

Other areas 350 300 350 400Other areas - 350 300 350 400 Change in estimates (MW) 0 0 0 0 0

Total 5,163 6,075 6,875 8,205 9,675 Change in estimates (MW) 0 66 -275 -675 -880


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Record order intake in 2010

Vestas order intake 2007-2010

8673

7000

8000

9000

10000

5613

3400

6019

3072 30314000

5000

6000

7000

1708963

510

2432

648 6461277

458 54210501022

3072

1258

303122782106

0

1000

2000

3000

0

Q1 07

Q2 07

Q3 07

Q4 07

FY 07

Q1 08

Q2 08

Q3 08

Q4 08

FY 08

Q1 09

Q2 09

Q3 09

Q4 09

FY 09

Q1 10

Q2 10

Q3 10

Q4 10

FY 10

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60-70% order coverage in 2011

• We estimate that about 3.8 GW of Vestas’ announced orders will be recognised as revenue in 2011, assuming that half of the 1 5 GW EDPR framework agreeement will benefit 2011the 1.5 GW EDPR framework agreeement will benefit 2011

• Our estimate equals 63% of Vestas’ guidance of 6 GW

• We find it realistic that the residual of 2.2 GW will be covered by orders in 2011 (Vestas is guiding 7 8 GW for 2011)by orders in 2011 (Vestas is guiding 7-8 GW for 2011)

• Orders needed for Europe and Asia to reach our estimatesp

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VALUATIONVALUATION(5 slides)( )

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Estimate changes

(DKKm) 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012EChange in %Previous estimate New estimate

(DKKm) 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E

Sales 6,805 6,806 7,765 6,806 6,826 7,731 0.0% 0.3% -0.4%

EBIT 323 510 738 324 513 734 0.0% 0.5% -0.4%

Profit before tax 283 464 692 284 467 688 0.0% 0.5% -0.5%Profit before tax 283 464 692 284 467 688 0.0% 0.5% 0.5%

Net profit 204 334 498 204 336 496 0.0% 0.5% -0.5%

Sales growth 34.0% 0.0% 14.1% 34.0% 0.3% 13.2% 0.0 p.p. 0.3 p.p. -0.9 p.p.

EBIT margin 4.8% 7.5% 9.5% 4.8% 7.5% 9.5% 0.0 p.p. 0.0 p.p. 0.0 p.p.

Source: Jyske Bank

EBIT margin 4.8% 7.5% 9.5% 4.8% 7.5% 9.5% 0.0 p.p. 0.0 p.p. 0.0 p.p.

EPS 1.00 1.64 2.44 1.00 1.65 2.43 0.0% 0.5% -0.5%

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Vestas’ guidance2011 guidance New PreviousgOrder intake 7-8 GW 7-8 GW

Volume (produced and shipped) 6 GW 6 GW

Revenue total EUR 7 bn EUR 6.8bn

Revenue service EUR 700mRevenue service EUR 700m

EBIT-margin total* ~7% ~7%

EBIT-margin service ~15%

Net financial items EUR -60m

Tax rate 28%

Investments in fixed assets EUR 550m EUR 400m

Investments in intangible assets EUR 300m EUR 250m

Free cash flow Positive Positive


Free cash flow Positive Positive

Guarantee provisions (% of revenue) Below 3% Below 3%

• Upside to 2011 EBIT-margin guidance (JB 7.7%)

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EBIT margins will trend upwards

W t i t f th EBIT i d tWe expect an improvement of the EBIT margin due to:

1) Higher capacity utilisation, partly offset by lower selling1) Higher capacity utilisation, partly offset by lower selling prices

2) An internal improvement of efficiency

3) Cost reductions in 1H 2011 resulting from 3 000 layoffs3) Cost reductions in 1H 2011 resulting from 3,000 layoffs

4) Successful attempts to even out seasonal fluctuations over ) pthe year in order to improve the utilisation of the production capacity

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Fair DCF value of DKK 359Avg.

2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E budget

Hist. avg.

5 years1g

Sales growth 0.5% 11.1% 19.7% 17.9% 10.2% 10.2% 10.2% 9.3% 7.7% 6.2% 10.3% 17.0%

EBITA-margin 7.7% 9.5% 9.7% 10.4% 10.1% 9.7% 9.4% 9.1% 9.1% 8.9% 9.3% 6.0%

Tax rate 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 28.0% 48.6%

Working capital as a % of sales 8.6% 8.1% 8.3% 9.3% 9.0% 8.7% 8.5% 8.3% 8.1% 8.0% 8.5% 2.5%

CAPEX as a % of sales 12.3% 10.1% 9.5% 8.2% 7.3% 7.1% 7.0% 7.0% 6.2% 5.8% 8.1% 10.1%

y

Sales 6,958 7,728 9,247 10,901 12,010 13,234 14,582 15,935 17,169 18,233 12,600 5,182

EBITA 536 734 902 1,128 1,207 1,290 1,363 1,442 1,554 1,626 1,178 316

FX and financial instruments 0 0 0 0 0 0 0 0 0 0 0 0

Tax on EBITA -148 -204 -251 -315 -337 -360 -380 -402 -434 -455 -329 -122

NOPLAT 388 530 651 814 870 930 983 1,040 1,120 1,171 850 194Depreciation 269 290 320 310 331 353 375 400 425 448 352 134

Amort. ex goodwill 110 140 165 190 210 232 258 285 302 317 221 56

CF from operations 767 959 1,136 1,313 1,411 1,515 1,616 1,725 1,848 1,936 1,423 385Change in working capital -255 28 148 240 68 75 83 83 76 66 61 62

CAPEX2 856 782 879 893 875 946 1,022 1,114 1,069 1,064 950 549

Frit cash flow 166 149 109 180 468 494 510 528 702 805 411 -227Frit cash flow 166 149 109 180 468 494 510 528 702 805 411 -227

Current risk premium4 Historical risk premium5

NPV of free cash flow 2,590 2,646 3.8%

NPV of terminal value 7,899 8,764 4.4%

Value of operations ex options 10,489 11,410 Historical risk premium 4.0%

Current risk premium

Risk-free interest rate

Existing employee options 0 0 1.35

Value of operations 10,489 11,410 -0.3%

Associated companies 4 4 7.8%

Minority items 0 0 7.4%

Other values 0 0 20 years

NV of interest-bearing net debt -682 -682

CAP period3

Liquidity premium

WACC (current risk premium)

Beta

WACC (historical risk premium)

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NV of interest bearing net debt 682 682

Shareholder value 9,811 10,732Number of shares (million) 203.70 203.70

Fair value per share (EUR) 48 53Fair value per share (DKK) 359 393

Relative valuationMarket cap PE PE EV/EBITDA EV/EBITDA EV/EBIT EV/EBITMarket cap PE PE EV/EBITDA EV/EBITDA EV/EBIT EV/EBIT(USDm) (2011) (2012) (2011) (2012) (2011) (2012)

VESTAS WINDSYSTEMS 6,610 14.2 11.3 6.3 5.3 10.6 8.7

GAMESA CORP N.TEGC. 1,928 22.7 15.8 5.5 4.5 13.3 10.0

NORDEX 582 18.4 18.4 5.9 5.5 9.0 8.8

REP OWER SYSTEMS 1,509 21.1 17.6 9.0 7.9 12.7 10.6

SUZLON ENERGY 1,774 18.4 18.6 8.6 40.2 11.7

A l V t 20 7 17 6 9 8 6 6 18 8 10 3Average excl. Vestas 20.7 17.6 9.8 6.6 18.8 10.3

Average weigthed by market cap 14.9 17.3 10.5 6.8 20.9 10.6

Vestas premium vs. average -31.5% -35.6% -35.0% -20.5% -43.6% -15.6%

Source: Jyske Bank and Datastream

• 20 35% discount to peers• 20-35% discount to peers • We expect Vestas to close the gap

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THANK YOU

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Vestas China Jyske Bank

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