27.11.2002: Meldung: Vestas reduces expectations for 2002 and 2003 (engl.)

The American market leads to reduced expectations for 2002 and 2003 - Stock exchange announcement no 18/2002 Ringkøbing, 26 November 2002.
Previously, it was generally expected that the Energy Bill / PTC (Production Tax Credit) situation would be clarified at the end of September 2002. The clarification has now been postponed several times. Consequently, the American customers have had to postpone their plans. In addition, several other factors such a 10 per cent decline in the dollar rate, declining rating of energy companies and more difficult financing opportunities affect the projects to a certain individual degree.

It is now clarified that there will not be an approved Energy Bill including a RPS (Renewable Portfolio Standard). However, there is still a hope for an extension of the PTC until the end of 2006. This extension may be approved in March / April 2003, however, it will most likely not happen until October / November 2003. Therefore, the expectations for order intake for the American market this year have been reduced.

On this background, the Board of Directors of Vestas Wind Systems A/S has on a board meeting today discussed the situation. The expectation for turnover in 2002 has now been reduced from previously bnEUR 1.4-1.5 to now approximately bnEUR 1.3. In addition, the expectation for projects to be built in 2003 is reduced, which leads to a decline in the expectation for turnover in 2003 from bnEUR 2.1-2.2 to now bnEUR 1.7-1.8 (cf. Stock Exchange announcement no. 11/2002 of 22 August 2002). In total, the expectations for growth from 2002 to 2003 have been reduced from previously 50 per cent to now approximately 30 per cent.

The changes to the estimate for the current year and the expectations for growth in the coming year will mean that the labour force has to be adjusted reflecting the level of activity. The level of adjustments is not finally defined, but will be discussed in works committee meetings during the next few days.

In connection with the finalisation of the offshore project at Horns Reef, delays in grid connection of the turbines and implementation of monitoring system have occurred. In order to limit these delays, extraordinary resources have been used. Furthermore, it is expected that fines can not be avoided completely. The extra costs of finalising the project are estimated to total mEUR 15-17.

The expected reduction in turnover leads to an adjustment of the result for 2002 of approximately mEUR 30 equivalent to a reduction of EBIT margin of approximately 2 percentage points. In addition, the extra costs on the Horns Reef project affect the EBIT margin negatively by a further approximately 1-percentage point. In total, the expectations for result for 2002 are adjusted from previously approximately 9 per cent (cf. Stock Exchange announcement no. 11/2002 of 22 August 2002) to now 5-6 per cent.

Similarly, the expected reduction in turnover leads to an adjustment of the result for 2003 of approximately 2 percentage points on the EBIT-margin from previously more than 10 per cent to now approximately 8 per cent. This is primarily related to a less optimal capacity utilisation during 2003.

The lower level of activity leads to a slow-down in the capital expenditures, primarily in 2003. The level of capital expenditure in 2002 is now expected to total approximately mEUR 130 and mEUR 90-100 in 2003. In addition, operational lease investments in primarily buildings in 2002 and 2003 are expected to total approximately mEUR 50 and mEUR 10, respectively. Investments in manufacturing facilities in the USA (cf. Stock Exchange announcement no. 11/2002 of 22 August 2002) have been put on hold and are not included in the amounts mentioned above.

The development on markets outside the USA during second half-year 2002 has been positive as expected. Especially in Germany, the order intake has been positive with a continued large interest for the V80 turbine. Currently, there is a very high level of activity on this market with installation of a large number of turbines.

The high level of activity puts pressure on installation capacity. Therefore, weather conditions can lead to delays. This will not necessarily affect turnover and result, but might affect working capital at year-end. However, working capital is expected to be reduced by year-end compared to the situation mid-year.

Also in Italy, the order intake has been positive during second half-year. There is still not a clarification on the future price for energy certificates. The expectations for 2003 on the Italian market are positive.

In Scandinavia, the activities are concentrated on the finalisation of the offshore project at Horns Reef and installation of a number of smaller re-powering projects in Denmark. The size of the Danish market is expected to be very limited in the coming years.

Continuously, the market in the UK and Ireland is characterised by a high level of activity. Many projects are being planned in the UK and 2003 is expected to be a positive year for Vestas on this market, where the deliveries for the North Hoyle offshore project will be commenced during the spring 2003. In Ireland, the completion of projects is still delayed due to the lack of a so-called "public service order", which has to be issued from the EU to the Irish government. The lack of the public service order prevents final clarification of PPA"s (power purchase agreements). This clarification, however, is expected to fall into place in the beginning of 2003 and the prospects for the Irish market are therefore positive.

In the Netherlands and Belgium, the level of activity is still high and especially the Dutch market shows positive signs for 2002 and a positive order backlog for 2003. Also on this market, a number of offshore projects are being planned. For new projects being planned in the Netherlands, there is an uncertainty concerning power sales prices, which can be clarified after the election in January 2003 at the earliest.

Continuously, the Australian market looks positive. A number of projects are being planned and with the decision to build the Bass-link between Tasmania and the mainland, the potential is large. The establishment of an assembly plant in Tasmania has just been started up and the plant is expected to be ready for production mid 2003.

In connection with the half-year announcement (Stock Exchange announcement no. 11/2002 of 22 August 2002), a number of issues where described in relation to V80-2.0 MW turbines installed primarily in Germany at the end of 2001 and in the beginning of 2002. The activities related to correction of the turbines are still being carried out according to a plan for each project and each customer. The activities are expected to be finally concluded at the end of the first quarter of 2003. The financial consequences for Vestas in relation to these activities can be assessed to mEUR 16-17.

Vestas" new large prototype turbine, V90-3 MW, is now installed in Germany, Denmark and Sweden and in the beginning of 2003, prototypes will also be installed in North America. The testing programme is in good progress and the first experiences are very positive. Continuously, this turbine type is expected to enter into serial production at the end of 2003.

Vestas" expectations for the world market in 2004 and onwards are very much related to the American market. In case of an early extension of the PTC in 2003, the expectations for the American market in 2004 and onwards are positive. In case of a late extension of the PTC in 2003, the expectations for the American market in 2004 are lower, however, growth is expected again in 2005 and 2006.

For further information, the Board of Management, Vestas Wind Systems A/S, will be available at telephone conferences to be held tomorrow, Wednesday, 27 August 2002, at 12.00 (in Danish language) and 4.00 p.m. (in English language). Information concerning contact person and telephone number for the conference will be announced Wednesday on the company"s website www.vestas.com.

Vestas Wind Systems A/S
Smed Sørensens Vej 5
DK-6950 Ringkøbing
Tel. +45 96 75 25 75
Fax +45 96 75 24 36
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