Vestas Engaged in Talks in Japan?

Brian Hicks

Written By Brian Hicks

Posted August 29, 2012

News that Vestas Wind Systems (CPH: VWS) is heading toward a “strategic cooperation” with Mitsubishi Heavy Industries (TYO: 7011) (likely in matters related to offshore wind turbines) sent Vestas’ stocks soaring to a two-month high, a rise of 19 percent.

This news comes just five days after Vestas stated that it would eliminate 1,400 jobs on top of a previous cut of 2,335 jobs back in January. Vestas is battling uncertainty as it struggles to regain profitable operations even as it stated that it expects shipments for 2013 to drop due to the vacillating U.S. market.

From Bloomberg:

“The place where Vestas’s need for cash and Mitsubishi’s need for technology can meet is in offshore wind turbines,” Jacob Pedersen, an analyst in Aabenraa, Denmark, at Sydbank said today in a phone interview. “That could speed up the launch of the V164 turbine, and both companies could benefit.”

Previously, Vestas mentioned that it is actively looking for partners to speed up development of the V164 7-megawatt offshore turbine. This turbine is intended to only be developed on order, and a prototype is set for completion by 2014. The turbine is massive, with a sweep circle of 538 feet across and the blades alone accounting for 500 tons.

Spokespeople from Vestas and Mitsubishi declined to comment. The rise in shares to 40.19 kroner meant that Vestas’ decline over the past year was reduced to 61 percent. Mitsubishi fell a little over 2 percent to 329 yen. The company had announced first-quarter net income of around $241 million.

There has been speculation that Vestas may be seeking a buyer after it initiated debt restructuring talks with lenders some time ago. At the end of July, Vestas stated that it has been allowed to draw on credit by banks and defer a test meant to uncover whether the company is breaching debt covenants, Bloomberg reported.

Mitsubishi is pursuing development in Japan; the company is building a 16-megawatt pilot floating wind facility off the Fukushima coast, with turbines due for installation by 2016. It has ambitious plans of expanding capacity to over 1,000 megawatts. Japan’s trade ministry has allocated $159 million for investment in the early phases of this project. As we know, Japan has been pursuing renewables heavily, providing generous incentives via its feed-in tariffs.

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