Grow or Go - Study by Oliver Wyman on the global wind energy market
12.04.2012/XNUMX/XNUMX Munich -
- The wind power industry will only grow dynamically again from 2015
- Overcapacities and price pressure are fueling consolidation
- Size is the recipe for success of the future
- Winners act now
For the manufacturers of wind turbines, the golden days are over for now. After rapid growth up to 2009 and subsequent stagnation, the world market will only grow moderately in the coming years. Overcapacities and massive price pressure are the result and trigger a wave of consolidation in an increasingly mature industry. For all manufacturers of wind turbines, it is important to act quickly. Size is the order of the day, M&A the central issue. It is important to buy competitors and thus increase market share. Those who cannot act as buyers have to proactively look for partners in order to stay in the market. These are the results of the global Oliver Wyman study "Wind 2020: The Growth Imperative".
The global wind energy market shone from 2005 to 2009 with explosive growth rates for newly installed wind power capacity. They averaged 35 percent per year, which resulted in an increase from 11,5 GW to around 38,3 GW. But since then the clocks have ticked differently. In the slipstream of the financial crisis, the industry slipped into stagnation. Between 2009 and 2011, the newly installed capacity rose on average by just 3,9 percent annually to 41,2 GW. Only Asia showed strong growth in this period with an average annual increase of 17,4 percent - China in particular stood out. Chinese wind turbine manufacturers were among the growth champions in terms of newly installed wind power capacity in 2011, but this decreased at some European OEMs.
In addition, the current Oliver Wyman study shows that international OEMs are suffering from enormous excess capacities of 25 to 40 percent, which have triggered massive price pressure. Prices have been in free fall since 2009 - to date they have fallen by around 25 percent. As a result, the profitability of western manufacturers of wind turbines has fallen dramatically. On average, the EBIT margins in 2011 were just 1,4 percent - after 4,4 percent in 2010. Some OEMs even recorded negative EBIT. "Manufacturers cannot expect a solution to their problems with price and overcapacities from the market in the next few years," says Wolfgang Krenz, partner at Oliver Wyman, with conviction. “Dynamic market growth is not in sight for the time being. Light can only be seen at the end of the tunnel from 2015. "
Enormous challenges
As a result, the entire wind power industry faces completely new challenges. Organic growth in the dominant onshore segment will be difficult to realize in the future. In new business, OEMs will have to prepare for continued low profit margins over the next three years. Consistent cost management and product cost reduction remain key tasks. Growth accents can be set above all in the service business. In fact, many international equipment manufacturers have been more successful than expected in defending their market share in maintenance and repair. However, it is not yet possible to predict whether the increasingly concluded long-term service contracts will be profitable in the long term. Although the offshore market offers high percentage growth rates, today it only accounts for three percent of newly installed capacity. In absolute gigawatts, however, onshore construction will remain larger until 2020, and will still account for over 80 percent of the overall market. Chinese competitors will not be moving in their home market as they have done so far. Their entry into international markets with technologically comparable but cheaper products also increases competitive pressure.
Compulsion to size
Size is the future recipe for success. The reasons for this are complex in the highly fragmented industry. Manufacturers of wind turbines are forced to derive considerably more cost advantages from economies of scale. Ever larger, more professional customers and wind farm operators will increasingly rely on large OEMs. The projects are getting bigger and more extensive, mainly driven by the growing offshore segment. Analogous to traditional energy plant construction, the demands of customers on general contracting and complementary services are increasing. This creates greater individual risks. These can better cushion larger, financially strong players - also through more professional risk management. Its size and financial strength also make it easier to access project finance, which is still difficult. In addition, investments in research and development must be increased significantly, especially in the offshore area, where Asian players are currently developing new wind turbines. Only size ensures a corresponding amortization of the R&D investments.
International OEMs will have to have a market share of well over ten percent in order to be able to keep up with global competition in the future. At 12,7 percent, only the industry leader Vestas is currently above this mark, but it has already lost considerable market share in recent years. The need to grow will massively heat the M&A market in the coming years. The classic large power plant and plant manufacturers will increasingly buy into the wind market and make the race with their wide range of services in the offshore segment, which will play an important role at least in Europe in the coming years. Chinese manufacturers of wind power plants will increasingly acquire international competitors. Accordingly, western players now have to move quickly in order to achieve economies of scale and be on the winning side by 2020.
The market is being distributed now
Those who cannot acquire themselves should not rely on maintaining their independence at any cost and thus risk further erosion of the company's value. Rather, it is a matter of proactively looking for a partner in order to be able to act on the market under their umbrella. For this it means to restructure sustainably and to make yourself attractive for possible partners. "Time is of the essence, the market is now being distributed," emphasizes Krenz. “Wind power is a good technology. It is more competitive and attractive than any other in the renewable energy sector. But the current problems in the wind market will not go away on their own. The OEMs have to act quickly and purposefully. "
The complete press release and the corresponding graphics can be downloaded here: http://ots.de/t8YeC
ABOUT OLIVER WYMAN
Oliver Wyman is a leading international management consultancy with worldwide 3.000 employees in more than 50 offices in 25 countries. Further information can be found at www.oliverwyman.de
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