Download now: Cannabis Cash

Vestas Considers Options Pending Mitsubishi Talks

Planning If Talks Fall Through

Written by Swagato Chakravorty
Posted September 14, 2012 at 4:43PM

Vestas Wind Systems A/S (CPH: VWS) may be mulling over possible options should ongoing talks with Mitsubishi Heavy Industries Ltd. (TYO: 7011), regarding a possible strategic cooperation, break down. Current possibilities include selling shares to Vestas’s existing investors.

The Denmark-based company could raise a possible 500 million euros, or $646 million, from a rights offering, according to anonymous sources who spoke to Bloomberg. Such matters, of course, are entirely dependent on the final outcome of the Mitsubishi talks. Vestas didn’t comment.

Rising costs for the V112 turbine development program combined with dropping government subsidy levels have been major problems for Vestas recently; back in July, the company decided to defer testing its financial commitments—never a good sign.

However, by deferring, Vestas was able to draw on current credit lines even as its cash flow steadily dried up. Currently, Vestas has credit lines amounting to 1.3 billion euros ($1.7 billion) with various banks including Commerzbank AG (ETR: CBK), Unicredit SpA (BIT: UCG), Nordea Bank AB (STO: NDA-SEK), SEB AB, DNB ASA (PINK: DNBHY), and HSBC Holdings Plc (NYSE: HBC).

From Bloomberg:

“If they raise equity, they should do a big one in order to get the balance sheet concerns out of the way,” Andreas Willi, an analyst at JPMorgan Chase & Co said in a phone interview. “If they deliver on their free cash flow promise of 1 billion euros for the fourth quarter, then a 500 million rights issue may be enough.”

Vestas announced the Mitsubishi discussions on August 27. On Thursday, Vestas shares dropped by 13.4 percent; that’s the largest single-day drop in seven months. Although shares had risen 38 percent between August 27 and September 10, they dropped by 26 percent overall in just the past three days. Today, they were back up 5.67% to $36.51.

This year, Vestas has also slashed 3,700 jobs over two rounds of cuts. That’s nearly one-sixth of its entire workforce. In addition, the company is restructuring to try and lower fixed costs by more than 250 million euros ($327 million).

Related Articles

Vestas Wind Temporarily Buoyed by Buyout Rumors
Vestas falls as rumors of a buyout by Ming Yang are denied.
Offshore Wind Struggles in Germany, the UK
Despite David Cameron's and Angela Merkel's efforts, offshore wind power has hit a rut.
Vestas Engaged in Talks in Japan?
As Vestas struggles to regain profits, the company may be discussing turbine development with Japanese firm Mitsubishi...


Is it Safe for You to Buy Coal Stocks Yet?
Shedding Light on the Death of the Coal Industry
Investing in the Future of Solar
How to Profit Like an Investment Banker
Without the ITC, is Solar Still a Good Investment?
Will THIS Kill the Solar Industry?
The Secret Behind the Gatwick Gusher
Is the UK Running Out of Options?
Buffett Has a $4.5 Billion Stake in This Refiner
Refiners Are Safe Havens During the Low-Price Period
An OPEC Civil War Erupts
Strange Things Afoot in the House of Saud
Energy Utilities NEED the Internet of Things
Stay connected to stay on target!
The Lithium Revolution Just Got Hotter
Utility-Scale Lithium Batteries Taking Off
Metal Oil Investing 101
Meet the Oil of the 21st Century
Tesla's (NASDAQ: TSLA) Final Deathblow
The Ultimate Tesla Play