By Jason Deign in Barcelona

Gamesa chairman and CEO Jorge Calvet was bullish as he presented his company’s 2011 to 2013 business plan to analysts in London this month. Double-digit growth rates, a return to 2009 profitability levels, stable working capital… all great news. Except in Spain.

Gamesa’s home market, once a rich seeding ground that helped propel the company to its current position as one of the biggest wind energy manufacturers in the world, is faltering.

In May this year, the country’s top wind energy player went to the government for help in the form of an expediente de regulación de empleo de reducción (ERE), a measure where the state provides temporary financial support to workers whose company hours and pay have been cut.

Days before the business plan presentation, Gamesa went back to the unions to secure a 180-day extension to the ERE, which affects 309 employees, or 7% of the company’s Spanish workforce.

“In Spain we are still seeing uncertainty in this market,” explains Susana Sanjuán, Gamesa’s communications director. “There is no visibility in the legislation and our clients, big electrical companies, are slowing down their orders. There is no work for our factories.”

The slowdown is not just a problem for Gamesa. Just as the Spanish company was announcing further union talks, Danish wind power giant Vestas was reported to have introduced a 12-month ERE affecting 190 workers at its Villadangos del Páramo plant in Leon, Spain.

No layoffs

Due to the imposition of a pre-reporting quiet period, Vestas Mediterranean spokeswoman María Vazquez declined to discuss the company’s financial performance in Spain but confirmed: “There is an agreement in this production facility.

“Vestas has been working to minimise the impact for employees. There have been no layoffs and the ERE is a temporary measure. The agreement is for one year but that might change. It can be reviewed.”

This was not the first employment hiccup for Vestas in Europe this year, either. In August the company laid off 154 production workers from Danish blades and nacelles plants in Lem, Viborg and Skagen. Is this a sign of wider problems in the wind power market?

Emphatically not, says Emerging Energy Research European wind energy analyst Marc Mühlenbach: “Vestas has obviously taken a bashing earlier this year but that is not to say they are not tapping into opportunities. They have more orders than any other listed provider.

“Gamesa is moving into marine wind power, which is a costly endeavour,” he adds, pointing out that the company could not make such a move without significant cash reserves.

Calvet confirmed this in his analyst briefing, citing €2 billion in credit facilities that meant: “we will not access equity markets to fund daily operations.”

Isolated problem

All of which indicates the EREs by Gamesa and Vestas are “not indicative of the market on a global scale,” says Mühlenbach. “It’s very much a Spanish problem.” 

Spain’s wind energy industry, he says, has been hit by a perfect storm of overlapping problems: strong growth in renewable energy, coupled to strong growth in the construction sector generally, followed by a deep economic crisis which has affected both.

This combination has “been rumoured to be expected to happen in other countries too, but hasn’t,” he says. “In Greece, where you would expect these kinds of things to be frozen, the response was the opposite: they increased the level of support.”

Gamesa publicly accepts that Spain is not the market it once was, that much greater opportunities are opening up elsewhere around the world.

Calvet told analysts 61% of his company’s sales were from international markets in 2007; by 2009 this had risen to 70%, and in the first semester of 2010 it stood at 90%, with China accounting for 25%, the US for 17% and India 9%.  

Outlook gloomy for Spain

“Gamesa is establishing itself in local markets,” says Sanjuán. “Serving China from China, United States from United States, India from India. In Spain our production capacity is going to fall.”

The Spanish factories, she adds, will produce fewer small turbines and focus on the 2MW G9X and 4.5MW G10X products; “but it depends on orders. We built plants in Spain because of the pull of the market. Now we will have to see how we manage the new outlook.

“This has been a reference market which has generated a lot of business but now we face a regulatory situation which has paralysed it. This isn’t Gamesa’s problem, it’s the market’s, and there is no-one in Spain who is doing well.”

With all this, Mühlenbach believes there may still be opportunities in the Spanish market. “In Spain our forecasts are only going to be mildly adjusted,” he says.

While it may not matter so much any longer to their globally-focused bosses, the workers idling in Spain’s wind power factories will no doubt hope he is right.

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Or write to the editor: Rikki Stancich