Frost & Sullivan, the Growth Partnership Company, in addition to the in-house expertise and the regular tracking of the market, has analysed the results of the quarterly statements and presentations of leading wind energy players and has presented the following observations and conclusions.
"Certainly the consequence of the recent slowdown of activity has been a fall in lead times and order backlogs, prices of turbines, freight costs and raw-materials leading to renegotiation of contracts by wind turbine manufacturers with sub-suppliers and in turn sub-suppliers with raw material producers," observes Frost & Sullivan analyst Gouri Kumar. "To keep their margins intact for next year, it is essential for companies to revisit their priorities and strategies. Some of them have already started working on this and it is interesting to see what they have been doing to keep afloat, grow or adapt strategically to the tough environment."
A number of M&A and JV transactions have been taking place in the industry world-wide. "GE Drivetrain Technologies formed a joint venture with Chongqing XinXing Fengneng Investment in China to produce gear boxes for the Chinese market," continue Gouri Kumar. "This inorganic growth strategy has also been adopted by companies such as South Korean Daewoo Shipbuilding and Marine Engineering, Areva, Chinese XEMC Windpower and Hyundai Heavy Industries."
Other companies are focusing on improving value proposition internally; these companies are fine tuning quality management, supplier auditing, operation and maintenance and training of technical personnel. This strategy reduces capital expenditure per megawatt and also accelerates their value proposition.
One strategy that can be expected is a greater emphasis on the bottom line by shutting down factories or cutting down on shifts in terms of working hours of labour, especially in regions where new orders are expected to fall below boom levels. Recently Vestas refocused its activities and manufacturing in higher growth areas like the U.S. and China, and shut down factories in low growth areas like the UK and Denmark. LM Glasfiber also downsized in order to maximize its presence in higher growth areas.
Finally, there are companies like Gamesa that are taking the situation of less demand and slower growth rates as an opportunity to diversify and re-define their priorities. In order to move away from being a full scale developer and focusing more on closing stage sales, Gamesa formed a venture with Iberdrola. This brought their businesses together to develop wind farms. Using the lag in this market to refocus priorities is another successful strategy.