Vestas swings to operating loss in Q1; COVID-19 cuts Siemens Gamesa profit by $61mn

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Vestas posts operating loss in Q1 due to delivery delays

Leading turbine supplier Vestas posted an operating loss in the first quarter of 2020 as supply chain and logistics challenges impacted the delivery of low-margin projects and these were amplified by COVID-19 restrictions.

Earnings before interest and taxes (EBIT) swung to a loss of 54 million euros ($59 million) in Q1 2020, compared with a profit of 97 million euros in Q1 2019, Vestas said May 5.

The COVID-19 outbreak increased costs by 10 million euros in the first quarter and these costs would rise in the coming quarters, Vestas CFO Marika Fredriksson told Reuters.

“The supply chain and transportation are the challenges,” Fredriksson said. “Anyone that you want to transport with makes sure that they charge as much as possible.”

On April 7, Vestas suspended its 2020 financial outlook due to uncertainties over the COVID-19 crisis. Vestas had predicted revenues of 14 to 15 billion euros in 2020 and planned to invest 700 million euros.

On April 20, Vestas announced it would lay off 400 employees by stopping technology projects and prioritizing 2020 deliveries in response to the pandemic.

Strong global demand for wind in the first quarter boosted Vestas revenues and order backlog, providing the company with "stability in the current period of high uncertainty," Henrik Andersen, President & CEO, said May 5.

First-quarter revenues rose by 29% year-on-year to 2.2 billion euros, while the backlog of wind turbine and service orders grew by 5.8 billion euros to 34.1 billion euros, Vestas said.

The group maintained its suspension of 2020 guidance, but said it was "still possible" it would meet these targets.

COVID-19 cuts Siemens Gamesa profit by 56 million euros

The COVID-19 crisis cut Q1 2020 profits at turbine supplier Siemens Gamesa by around 56 million euros ($60.9 million), the group announced May 6.

"This complicated situation further intensified the challenges in the onshore business, mainly in the Indian market and the execution of projects in Northern Europe," it said.

Despite "strong commercial activity" in the first quarter, revenues were impacted by COVID-19, Siemens Gamesa said.

Revenues fell by 8% between January and March, to 2.2 billion euros, dented by lower sales of wind turbine generators.

Siemens Gamesa has enacted strict health and safety protocols during the pandemic and applied new solutions such as rerouting supply chains, optimizing remote monitoring to guarantee service operations, and extending at-sea periods for offshore maintenance teams, the company said.

GE Renewable Energy posts $300 million loss in Q1

GE Renewable Energy posted a loss of $300 million in Q1, down 61% on a year ago, despite a 26% increase in revenues to $3.2 billion.

Turbine orders also fell by 13% to $3.1 billion, as declining U.S. production tax credits (PTCs) impacted demand, while service orders fell 23%, GE said April 29.

The COVID-19 pandemic has had a "limited impact to date" on the renewable energy business, unlike in aviation, where GE plans to cut up to 25% of its workforce, the company said.

Onshore wind deals drove up renewables revenues in the first quarter but this was "more than offset by fulfillment and execution issues impacting profitability," Carolina Dybeck Happe, CFO of GE, said in the group's earnings call.

Renewables margins fell by 210 basis points on a year ago to minus 9.5%.

Onshore equipment revenue rose by 81% as new turbine deliveries doubled to 731 and delivery of repowering kits rose 40% to 219 kits, Dybeck Happe said.

Onshore services revenue rose by 15% and the onshore pricing index continued to stabilize at around 1%, in line with recent trends, she said.

US wind build activity hit record before COVID-19 outbreak

US wind developers installed 1.8 GW of capacity in the first quarter of 2020, double the capacity installed in the same period a year ago, the American Wind Energy Association (AWEA) said in its latest quarterly report.

US wind construction activity is set to soar this year as developers race to meet end-of-year deadlines for production tax credits (PTCs). Most of the new capacity was scheduled online in Q4 but COVID-19 restrictions have delayed projects. The pandemic could be putting 25 GW of new projects at risk, jeopardizing 35,000 US wind jobs, AWEA has warned.

Wind developers started construction of 4.1 GW of new projects in Q1, increasing total construction activity to a record 24.7 GW, AWEA said.

"An additional 19.8 GW are in advanced development, including 8.3 GW of offshore wind," it said.

AWEA estimates a total project pipeline of 44.4 GW, including some 7 GW in Texas alone.

U.S. wind developers signed a record 2.9 GW of power purchase agreements (PPAs) in the first quarter, of which 1.7 GW were with utilities, AWEA said.

Evergy, AEP Energy, Eversource Energy, National Grid, and Unitil all signed PPAs while corporate buyers included Saint Gobain and Toyota Motors.

Since the COVID-19 outbreak, PPA activity has slumped as counterparties wait for a clearer picture of the looming economic downturn and forward price movements. 

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