Coronavirus: measuring the temperature of wind OEMs

So far the communication from wind OEMs has been to say that it is too early to measure the consequences of the coronavirus on the business. The full impact will be a function of how long the plants are shut down. And although Vestas has the highest exposure to China in terms of production, all of the industry will be impacted through its supply chain.

First impressions indicate that Vestas could be the most impacted if operations remain closed. But this is not Vestas-specific as both SGRE and Nordex are also impacted by local rules that stop corporates from resuming work. SGRE remained fuzzy in its explanations, indicating that it is in the process of assessing the impact from the coronavirus, which is so far marginal.

Regarding Nordex, we also have had a few details mentioning that production in China is notably used for projects in Latin America, such as Brazil or Argentina, which are two dynamic regions for the group. Lastly, Vestas can continue to ensure its global activity thanks to its production outside China but, if the situation continues, component shortages could then halt some installations, especially in the US.

CEO Andersen indicated that he could not determine when to resume production because it is a decision that depends on the supply chain as well as decisions made within the country. According to him, despite appearances, transport is not the most disabling part at the moment, it is more the impact on the entire supply chain that is affected by commodities and components.

About 10% of Vestas’ workforce is in China (c.5% for SGRE and insignificant for Nordex), but the most problematic is the production of some crucial parts for the turbine such as converters and generators which are located in Tianjin (four factories), which borders Hebei province, the epicentre of the outbreak. So far, Vestas has been able to offset it by speeding up production at its European plants (Denmark, Germany, and Spain) that also produce these parts (Figure 1). Such an event is even more impactful since 2020 is expected to be a peak year in terms of installations, with the US accounting for more than 40% of sales.

While Vestas was expecting to receive approval from the local authorities to resume production yesterday, it is still waiting for permission to do so. It should have more visibility by the end of this week.

Figure 1: Vestas’ global exposure

Figure 2: SGRE’s global exposure