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Executives

Ditlev Engel – President and Chief Executive Officer

Dag Andresen – Chief Financial Officer

Analysts

Arnaud Brossard – Exane BNP Paribas

Claus Almer – Carnegie

Patrik Setterberg – Nordea

Daniel Patterson – SEB

Patrick Hummel – UBS

Sean Mcloughlin – HSBC

Mark Freshney – Credit Suisse

Håkon Levy – DNB Markets

Klaus Kehl – Nykredit Markets

Lars Heindorff – ABG

Vestas Wind Systems ADR (OTCPK:VWDRY) Q4 2012 Earnings Call February 6, 2013 4:00 AM ET

Ditlev Engel

Good morning and welcome to Vestas Wind Systems Full Year 2012 Results as well as the outlook for 2013. Special welcome to everybody who has decided to join us here in Aarhus, everybody who has decided to tune in on the web and follow this and we will follow our normal procedures, i.e. go through the presentation myself and my colleague Dag Andresen, and then later on turn to Q&A both in the room and people over the phone.

The highlights that we would like to take you through today is of course apart from full year 2012, is also some of the main drivers for Vestas both as we have seen them during year, but also as we see them going forward with the outlook for the year 2013 and as I said, we will be two out here presenting and taking the questions.

Lets start to drill into and have a little reflection on what kind of journey is it that Vestas have been on over the last 12 months. Back in November 2011, we announced a new organization that was going to focus on scalability and flexibility and the fact that we unfortunately during 2012, have had to lay off 5000 people is a consequence of having this kind of organization being put in place.

What we did not know at the time was obviously that we had a significant cost over run of the new technology related to V112 and GridStreamer, which have haunted Vestas financials significantly in the year 2012. The important thing here is that that had nothing to do with the fact that we were in the process of adjusting the organization.

We said already back then that we would have a tough 2012 and an even tougher 2013 also related to the uncertainty in United States amongst other places and the target was to reduce the cost by more than 400 million euros in this two years period and here after the first year has elapsed, more than 250 million euros of cost have been taken out and as you would see later in the presentation a lot of this is really starting to kick in, in the end of the year in particular in the fourth quarter.

This also means that it is a much scalable leaner and agile Vestas that is entering 2013 compared to where we were twelve months ago. This scalability, flexibility and the importance of being lean have been very important part of the operating business model in the year 2012 and remain to be so during 2013. We have been focusing on reducing cost through operational excellence, reduced investment and improve capacity utilization.

All this has to take place while three other main focus areas are still in place and will remain in place. The focus on R&D and the advanced wind turbine technology and services and more efficient manufacturing set up and sales and services with two revenue streams which was one of the very important drivers for changing the organizational set up of Vestas are still very much in place and as with the new organization and operating business model had to cater for that.

Here twelve months later, it’s very important to say that the new organization is in place and it is also demonstrating that it is much more scalable and flexible than it was twelve months ago. And these are some of the things that we are starting to emerge in particular in the fourth quarter.

If we start just with the number of colleagues that unfortunately had to leave us during this process, then we ended the year 2011 with 22, 721 people at Vestas and we leave the year with 17,778 i.e. nearly 5,000 have unfortunately had to leave us and if you look particular of how it has played out, then nearly 4,000 of them left us in the second half of the year and as you can see on the slide here in particular in the fourth quarter.

This obviously means that the total cost base for Vestas going into 2013 has been at just as, as we have gone through 2012 and again means that the full benefit of these changes are not really impacting the 2012 financials that much but much more is going to have a positive effect on the 2013 financials.

Apart from the reduction that has taken place quarter-by-quarter, it’s also important to look at where in the organization have this scalability and flexibility taken place. If you look at the split, then 3122 positions have been closed down within the salaried area and 1821 within the hourly paid.

So, there has been a lot of focus on the optimization of the manufacturing footprint and I will come back and talk about this, but it’s important to be aware of that the vast majority of positions have been taken within the salaried area thus far. If we look, coming back to some of the very important objectives has been to lower the CapEx and also the cash investment into this and by the end of 2011, we were having a CapEx of more than 700 million euros and that has been lowered down to 286 million euros.

The main reason for this is that when we left 2011, we were still developing more than one platform, in particular the V112 and if you look into the balance sheet you will actually see the 350 million went in and started to be depreciated at that time. So here during 2012, the key focus has been the development of the V164 8 megawatt, as well as the V126, even though that actually still comes on the 3 megawatt platform.

So the ability to lower the CapEx as much means that we are no longer running the same amount of R&D projects because the 3 megawatt platform is now going to be with us for sure for many years to come and also that in this year we’ll – going forward we’ll still have the V164 as the main platform that we are working on.

Coupled with this should definite be that the regionalization and focus we have had in the R&D and technology area has definitely proven to be in the right direction to working even more focused on this development which also have enabled us to reduce the CapEx.

Just looking a little into how important the standardization and the platform approach is for Vestas. We’ve just shown a little flavor of the type of turbines that we working with. They are more and normally known as the V80 the V90, but it’s important to look at how many platforms do we actually operate.

If you start on the left hand side on this chart, you will see that on the very well-known 2 megawatt platform, we have today more than 10,000 turbines related to the V80, the V90 and the V100. On the right hand side, you see the – if I can say the word the older 3 megawatt platform more than 2500 turbines related to the V90 and the V100.

Of the new 3 megawatt platform that I was just referring to on which the V112 is built and now also the V126, we have already seen more than a 1000 turbines. And as you will see later on, the introduction of the V112 to the market has been quite successful not just in terms of numbers sold, but also in the performance of the fleet that you will see later on.

This is very important because this platform is going to be one of the main drivers in the years to come for Vestas and the fact that we have had the challenges in terms of the cost overrun has in no way impacted the performance of this new platform. Going through here in 2012 within that area, we have sold the tower factory in Walden, Denmark.

We have closed the manufacturing facility in Hohhot in China. We have consolidated the manufacturing organization. We have reduced the manufacturing workforce in the United States. Seized production of the control factory in Spain, reduced production capacity at the blade factory also in Spain in Daimiel.

We have merged to control factories in Lem and Hammel here in Denmark in order to optimize this and moved part of the production to Tianjin in China and lastly but not least, we have also started the supply to third-parties for some of our facilities within both tower and castings another way to improve the capacity utilization at Vestas plants.

This journey is no way over, but we have taken a lot of important steps during 2012 in order to get to where we want to be by the end of this year. So more is to come within the manufacturing area in 2013 and decisions are going to be taken on the manufacturing footprint.

As you can see and which Dag Andresen will talk to a little later concerning some of the write-downs, we have put a number of facilities up for sales that could be divested, whether or not this will happen during 2013.

Time will take and time will tell, but it is important to say that, still a lot of work is ongoing within this area and as I previously mentioned, also suppliers to third-party is part of the way that we are constructing our manufacturing footprint now.

Turning into the activity level during 2012, I cannot say hard enough and sincere enough what the Vestas organization have done. They have done a remarkable work in terms of increasing the shipments with 22% and at the same time the number of employees has gone down by 22%.

And as you can see a lot of people have known that a lot of things had to happen during the year, but people have just executed according to the plans and on behalf of management, I would really like to thank everybody at Vestas for a significant job done in a very difficult year.

It’s also important to say that you cannot just look at the delta between the 22 and 17,000 for instance the year-on-year it’s important to see how it has evolved quarter-by-quarter and thus we have brought it down the cost level step-by-step during the year.

Talking about the quarters, there are few things as ever that one needs to recognize with Vestas. Also in 2013 that we can see huge fluctuations between the quarters. But it is maybe if we start on the EBIT side, it is maybe forgotten that actually in Q2, Q3 and Q4 Vestas had a positive EBIT result and of course in particular in the fourth quarter.

The real challenge for Vestas materialized in the first quarter, where we came out with a deficit of more than 200 million euros, particularly related to the cost overrun on the V112 and GridStreamer technology which has been haunting us during the entire year, but operational wise, it actually have been three positive quarters.

Not so on the cash flow, we had hoped for a positive free cash flow in 2012 and unfortunately we did not deliver on positive free cash flow. We changed the guidance during 2012 down to minus 500 and we ended up with a minus 359. However in the fourth quarter we had a significant rebound with a positive free cash flow of 416 million euros and in a minute I will take you through some of the deltas here that is important to be aware of as well.

A point here is, huge deltas between the quarters, just if you look at the EBIT side, it was minus 18% in Q1 and plus 6% in Q4, i.e. a delta of 24 percentage points within the same year. That again is important to be aware of, of how huge the swings can be from quarter-to-quarter within Vestas.

Turning into the cash flow. As I said, we actually had a negative, as you can see here on the right hand side of the slide; we had a negative free cash flow of minus 359, versus a positive free cash flow by the end of 2011 of 79. However, what is the main driver for this big delta between the two quarters, if you look at the middle of the slide, you will see that payables decreased with 555 million euros.

That meant that by the end of 2011, we were financed 1.5 billion euros of our suppliers and during 2012, because the way the manufacturing has panned out, that number now stands at 1 billion euros, meaning that the financing from the suppliers has gone down with 555 million euros, that’s important to be aware of.

At the same time, the inventories did improve with 300 million euros and we still have 1950 megawatts under completion. We had hoped to release even more from the net working capital, but we expect to see that materializing during 2013. Due to the much lower order intake, obviously prepayments, did also have a negative impact compared to last year and was thus impacting us with a minus 110.

So when you look at the total development of the free cash flow, the important point here is actually that more needs to be done, but in particular the payables was the main reason for the big delta between Q4 level and Q4 2012.

Lot more financials are going to come now, so I will ask Dag to come up on stage and take you through some more numbers.

Dag Andersen

Thank you, Ditlev. We go directly into the next level; it’s actually activity level of factories. The changes between 2011 and 2012 are 22%, shipments up to 6.2 gigawatt and that’s driven mainly by higher activity shipments in the European community. If you look into deliveries, as we said before it’s the primary revenue driver has increased by 16%. The biggest contributor this time was US that delivered 1.3 and relative to last year where US was 1.5.

The growth as we say here is primarily driven by higher activities in Italy, Canada, Australia, Sweden, UK and Poland. If you look at the income statement in Q4, as Ditlev has said, we had a revenue increase of 23% and we also had a fixed cost produced by 19% and we have an operating profit before special items as high as 155, and that’s the highest operating profit for a quarter in Vestas history.

We also had big write-downs in the last quarter, impacting the profit for the period ending at 618 negative. If you look at the EBITDA margin before special items, it improved by approximately 3% up to 10.6% and operating margin improved by more close to 4% up to 6.2%.

If you look at the income statement for the full year, the income statement is of course heavily impacted by the write-downs that we have taken last year. It means actually that classified several assets for sale and in addition done the necessary write-down to be more precise finding a balance for the sales price.

If you look at the write-down of other non-current assets, this is due to other issues both regarding scalable activities, less activities and also closing down of factories. The company has also together with its external board decided to look over the whole balance sheet. It means also that goodwill has been under an assessment.

And we have a write-down of 104 and also of development projects and software that is naturally for the company to do an impairment testing of and then finally we have 119 million euros due to the layoff and that’s actually has some cash effect together with some small other issues ending up in a total cash effect of approximately 130.

Gross margin, less as in 2011, but we also see that’s still there is volatility. Gross margin has a specific focus and we see this really improve over the years to come, but this has special attention from top management and the organization to secure as we can have less volatility going forward. Back to reduction of the employees, what is important to have in mind here that approximately 4000 of the 5000 is actually reduced in the last two quarters in 2012; it means actually that the cost due to the reduction is actually hitting the balance sheet and the P&L in the end of 2012.

This still keep up the guidance that we will have more than 4000 million euros with full effect as from the end of 2013 and we also say at least 1800 more will come through reduction divestments continuation hiring freeze and lay-offs during 2013 and we have estimation to be maximum 16,000 people or lower during 2013.

Fixed costs, if you look at the 2011 you see it was a ramp up of fixed cost, if you are comparing the graphics here and the bars for 2012 you can see it’s ramped down. It’s very clear then if you look at Q4-to-Q4 we have a 42% reduction and it’s very clear that over the 250 million euros cost savings with full effect, this has also impacted cost of sales. And we see this will continue into 2013 and this is good enough according to our plans going forward.

Operating profit development, well it is very important to look into this pictures and graphics here, it’s actually this is nailing down both at the product cost out of the platforms that we have talked a lot of in 2012 and in addition, the reduction of fixed capacity cost is coming in the end of the year and especially for the last quarter.

If you are comparing product volume that is netted by product margin, comparing 2011 with 2012, you’ll see more or less these two are netting each other out. If you go into product volume, product margin for the fourth quarter 2011, comparing this quarter 2012, you can see that the product margin is much lesser; both in real terms and in percent and this is actually a very clear definition that product cost is now hitting the P&L as we said all the time.

If you look into the fixed capacity cost of 79 for comparing 2011 with 2012 and also comparing Q4 2011 with 2012, you can say that 77 million euros of this 79 million euros is hitting in the last quarter. And this is a clear evidence that the reduction of the cost in a company is going according to the plan and got more and more effects according to the quarters.

Service, service is the most profitable part of Vestas going forward, we had an increase by 10% compared to last quarter 2011 and we have as much 26% increase if you are comparing full year. We have an operating profit of 147 million euros and a margin as we have guided during 2012 with 17%.

After allocation of group cost we have a operating profit of 81 million euros and a margin of 9% and as we said before, we have also in certain areas of the company added new people in the most area where we had best growth and this is actually now in the service area where we have added approximately 450 new employees.

As I said before, balance sheet heavily impacted by the significant write-downs for the year, number two impacted also by the 112 and also the extra amortization and depreciation. If you look into the intangible assets of – and the reduction there, of the 526 that we have been writing down, 168 is actually into the intangible assets and if you look at property plant and equipment, 359 is impacted by this post in the balance sheet.

Equity is impacted by the negative result for the year and also net debt increase of 355 million euros in 2012 due to the increase in networking capital and of course our solvency ratio is also impacted by the large deficit for the year.

Change in net working capital, this is the same story as Ditlev also told you. We can see here on the left side that inventories is actually reduced by 1.1 billion euros, prepayments was not according to expectation not for the year and not actually for the last quarter and we also payables with a positive 390 million euros giving a net working capital of 223 million euros.

And this is according to the plans above improving net working capital, reducing inventories and freeing up cash for the company. And this is actually also showing that megawatt under completion, a significant reduction in Q4 and it’s very clear that this is going to be further reduced now going forward and this will also free up net working capital improving the free cash flow also for the company.

Warranty provision, a loss production factor. This time is the first time that we have consumed less than we have provided for. It’s also very important to identify that we consume it actually hit the direct – the cost line but what we provide for is actually not the real cash effect. So what is important here in the trend line we see there is actually a very, very strong proof for the technology leadership of this company in the turbine sector where we are operating in.

If we go into the lost production factor, it’s below two. This is the leading lost production factor in the sector that we are operating in and this is creating value for the company direct on their profit line.

Back to the performance of the wind turbine fleet, this year, we have 1.6% warranty consumption of percent of revenue and you can also see here the reduction since 2008 to 2012 and it is very clear that this is more than 200 million euros of savings for Vestas and in addition this also means much better business case for profitability for the customer that has our turbines in operation.

The 200 million euros is very easy to calculate, it’s just 4.4 warranty consumption in 2008 and we deduct 1.6 for 2012, then we have 2.8% and we can move to product with revenue of 7.2 and then we have more than 200 million euros directly saved during this year.

Cash flow statement, we have an increased cash flow from operation. We have lower investments as Ditlev said, we have actually 475 million euros lower investments in 2012 than in 2011 and we are going to keep it on the same low level going forward and this is a significant number.

We see also that we have a stronger Q4 that is actually freeing up cash and we have free cash flow as high as 460 million euros, that’s very close to half the market value of the company for Q4 and this is also a very strong evidence that the picture that Ditlev started with showing that all the initiatives, freeing up cash, reducing inventory, paying our suppliers is going in absolute right direction or what we use to say according to our plan.

Cash flow statement for the full year. We had in the beginning of the year a much higher expectation, but it is very clear that both lower prepayments from new order intake and also that we still have too much net working capital tied up in the company makes that free cash flow still is at the negative level of 359 million euros.

This has very high attention for the year and we will come back to this issue when we present this last part. But we are not satisfied with the situation and we are going to improve the situation gradually now going forward. We will also see an improvement here by lower activity level and also lower investments, so we can free up cash for the company.

The company has concluded and agreed with its lending banks, the nine lending banks the RCF. The company has used in 2012 to revise their business plan together with the nine banks and the two multinationals. We have agreed about the new facility according to the business plan that is calibrated to the operation activities that we have until 2015 and the company is very satisfied that we now have closed this and we hope this will be positive for the company also going forward in discussion with customers and also in discussion with the markets.

Net debt-to-EBITDA ending the year with 1.9 million euros. We foresee that we will be below 2 million euros also for 2013 and this will continue to decrease according to the other initiatives and the plans that the company has going forward. Return on invested capital, this is still not from a company’s perspective and management perspective not at an acceptable level.

We said in Q2 and in Q3 that this will be positive for the year end and it’s slightly positive, it’s actually 0.2%, but it’s positive. And this will now improve going forward. As I mentioned before, a reduction of 475 million euros in investments year-by-year is a very, very large reduction in this yield so that will be now improving the operating profit and the earnings and that will have a positive impact.

We will not give any indication at what kind of level we would like to have return on invested capital but it will improve and we will come back to this, it has special attention for top management. Then I would like to lead the word over to Ditlev. Thank you.

Ditlev Engel

Thank you, Dag. Turning to the order intake situation. Let me start by saying Vestas obviously are very focused on our two revenue streams and let’s start with the order intake on turbines. We fortunately saw an improvement in the fourth quarter 2012 compared to where we were in Q3 where it was significantly down.

However, it doesn’t change the fact that we have seen a significant reduction in order intake in 2012, compared to 2011 down by 49%. There are various reasons for that. The order intake obviously in the United States were down due to the uncertainty in the US market, also China, we have seen a decline there.

And one of the things that we have had a significant focus on is, what we have stated in bullet point number three, managed to keep on a very strict focus on well-balanced projects with respect to profitability, payment terms and risk. One of the things that you cannot find in Vestas accounts for 2012 or previous years for that matter are projects that have gone wrong.

Vestas is obviously in many ways also a project business and therefore Vestas ability to make sure that these things are well-balanced and this is something we pay a lot of attention to. So the fact that the order intake is down has also been then of course when the markets are be under pressure, it can be tempting also to take some orders in where you may not feel that they fully fulfill these requirements and this is something we have been very strict on despite obviously that we will always like to see more orders coming in.

This is also reflected in the development of the average sales price where you can see there is actually up with 3% from 1.04 to 1.07 and we are actually also seeing in the market that the price level that is starting to bottom out in terms of moving forward which again of course is important to recognize. It doesn’t change the fact that we significantly have seen a significant drop, but also that some of it has been a conscious decision and then obviously we hope with the expansion of the peaks we see in the US and others that we will start to see this picking up in 2013.

That has meant, with the increase in revenue that we have had of 24% in 2012 compared 2010 – 2011 was 24% that we have been producing the value of our backlog down from the 9.5 billion euros to 7.1 billion euros on the turbines. We have however seen a different picture on the development within the service business as the backlog has grown from 4.2 billion euros in Q1, 2012 ending at 5.3 billion euros by the end of the year.

And that means that combined – with the combined service, with the turbines we have a total backlog of 12.4 billion euros going into the year 2013. That brings us to the outlook and expectations for the coming year, but before we look into the numbers, let’s look at some, what we believe are important enablers for Vestas execution in 2013.

As everybody is aware of that we every year conduct a very big customer survey in order to rank Vestas just how to see other folks. And in 2011, we had a score of 71. We had higher expectations for this year but it basically landed at 70, which at a benchmarkable level is still a very acceptable score, but we had hoped higher.

When you are then peeling the onion, looking at what it is that people have scored Vestas of, it is very clear that from an operational performance Vestas continues to score very, very high from the clients. Where we have had the most negative have obviously been due to the turbulence that have been surrounding the company is obviously something that also impacted the scores of the clients of the, let’s say the certainty where is Vestas at the moment.

And therefore again, very important rebound made in the fourth quarter, coming back to net debt to EBITDA level below 2 to give people the understanding of where is the company. And there are fortunately good reasons for seeing this operational performance given by the customers which we are very thankful for.

As Dag mentioned in his presentation, the warranty consumption has gone significantly down and it is in an all-time low of 1.6% of revenue on the warranty consumption and that of course was also reflected to – that the LPF is down below 2 which also includes the new technology the V112 and GridStreamer which is performing as good as, let’s say the more well-known turbines has been running for a while.

Looking at the safety side, we have kept on reducing the number of accidents, so we are now down to 2.8 per 1 million working hours at Vestas. It is still too high; we are still striving for 0.5, which is world-class. But despite the fact that we have increased the activity level with 22%, then 2012 was still the safest year ever in Vestas history. And finally, the backlog of 12.4 billion euros going into 2013.

The markets surrounding us has also definitely posted challenges through the wind sector and thereby also to Vestas. If we start in the United states and all the discussions that has been surrounding the development of shale gas and the cost of gas, then you can see here on the left hand side where we were just a few years ago, when Vestas entered the US market.

And obviously when you know that wind is competitive around $6 compared to gas, then when we are now down at a level of $3 has made it of course extremely important that the extension of PTC has taken place because of the huge drop in the gas prices that we have now experienced. How this is going to evolve? Time will tell, but no doubt this have had a significant impact.

But on the other hand also reiterate that if you want to be competitive in the United States, you have to be present over there and we have no doubt that if we had not had our manufacturing facilities in the US, we on one hand, it would not be competitive in the US market and secondly, we would probably not have seen the extension of the PTC if it was not due to the fact that 75,000 people are now employed in this industry in the United States meaning it has become a real US industry.

If we look into Europe and the carbon prices, then when the price of carbon was introduced in 2005, it costed 30 euro per ton. In 2012, this has gone up to 7.4. This of course also had an impact on the development of the wind sector in Europe. And if you look at the impact from the gas situation in United States, into the market, it has also meant that we are now seeing that a lot of coal is being shipped from the US to for instance, Europe.

Actually Europe is now only overtaken by China in the increased consumption of coal and this of course have impacted the whole European energy market significantly as we are now seeing a price level of 7.4 and some are even expected to see the price of carbon go even further down and then maybe a rebound. While these are some of the macro drivers that obviously have had a big impact on the renewable energy sector and wind.

There are however also some very positive developments, the other day Bloomberg New Energy Finance came with an update on the situation in for instance Australia saying that wind was now cheaper than coal and gas and what we see in the wind sector that the cost of energy keeps being lower and you have here all the way back from the 80s the cost as it started out and how we have constantly as an industry reduced the cost of energy year-by-year and when we look into the product roadmap that we are working with and is implementing, we only think we will see from the wind sector is that we will keep on reducing the cost of energy.

And I think if you look at some of the other things on the left hand side of this slide, I think there is good reasons to believe obviously with big regional differences that we will start to see things trending upwards again underlying why wind is keeping on getting more competitive going forward. Even though we are not in any way denying the fact that right now it is tough time for the wind industry.

This brings us to the outlook for 2013 and we had originally anticipated shipments around 4 gigawatts. We have changed this to 4 gigawatts to5 gigawatts and why have we done that? That is particularly related to the regulatory uncertainty that we have seen in some countries and we know that the moment that regulatory uncertainty starts to evolve it immediately impacts the activity level in a market and therefore we have set 4 to 5.

If we look at the revenue, we expect revenues of minimum 5.5 billion euros, of which service is expected to be around 1 billion euros and EBIT margin before special items of minimum 1 billion euros and 17% on service before the allocation of group cost. And finally on the free cash flow a minimum of zero on the free cash flow.

If we look into other important plans to be aware of that Vestas is working on, we will continue the development of the V164 8 megawatt. So the first prototypes will be installed in the second quarter of 2014 here in Denmark and we will continue the upgrade of both the 2 megawatt and 3 megawatt platforms. There are no plans to invest in new manufacturing facilities, property and bonds et cetera, are therefore expected to get to be around 150 million euros.

As I said in the beginning, we had the plan of over this two year period of taking out more than 400 million euros of the cost base and that plan is still in place. And as Dag mentioned, we are well on track. We have delivered more than the 250 million by the end of 2012. And therefore we do expect still to reduce unfortunately 1700 positions at Vestas down to 16,000, but this is all in accordance to the plans that we have previously announced.

So there are no changes to the already announced plans and as I said a little earlier on, we will for sure also during 2013, see huge fluctuations between the quarters concerning of the activity levels and that of course is also very much related to the way we recognize revenues and earnings that every time we handover the entire project, we get the full benefit when it happens and therefore we are seeing some of these big swings between the quarters.

Bonus targets, we have bonus targets for Vestas employees. Unfortunately, we have not been in a position to payout in 2010, 2011 and here in 2012. But we still have the aspiration to do so in 2013 and what are the target levels? The target level is that the low bonus target is an EBIT before special item of 3.7 and a free cash flow of 220 million euros, both have to be fulfilled and it’s capped at an EBIT of 5 with a free cash flow of 500 million euros and you can see that the weight here is 45% on EBIT and 55% of free cash flow.

And of course, if these targets are not met, and starting with the low-end, then there of course will be no bonus in 2013. But those are the targets that are for the organization and as can be seen here we have other than the past had other bonus targets as well. But it has been clearly decided that the performance on EBIT and free cash flow are the centerpieces and the most important pieces for Vestas to deliver on in 2013, lastly the board has decided that those are going to be the two drivers for the bonus in 2013.

Let me wrap up by saying that we have spent 2012, certainly every minute of the year in preparing for a very tough 2013. The three core focus areas have been on reducing cost, lower the investment level and improve capacity utilization. And what we have achieved is to reduce the number of employees to 5,000, improve by more than 250 million euros in terms of the savings.

We have lowered the investments to 62%, we are levering our platforms and utilization of the existing platforms. We have closed and merged factories during the year and we have now started supplying for third-parties. The objectives for 2013 are also equally clear and our own assessment is that, in this two year plan we have now basically reached a level where we do not believe that the glass is half empty.

We actually do believe that after the first of the two years, the glass is half full, while a lot of work needs to be done in 2013 in order to make sure that we have managed to get Vestas through this challenging period for the industry and with this, we will now turn to Q&A so if you we will join me here Dag and then should there be some questions in the room, we will be happy to take them before we turn to the phone.

Question-and-Answer Session

Unidentified Analyst

(Inaudible) First of all relating to your order intake, it seems that you’ve been negatively surprised by – for the past two to three quarters. Is this negative surprise related to your financial situation, that the market we can fully aware of in the end of July, or is it more a question of increasing competition in the marketplace and your strict evaluation of which bucket to take on the books? That’s the first question.

Ditlev Engel

If you look at, there are of course some times we have asked us what’s going on, what happened to the company, no doubt and we of course had dialogues with those specific customers about situations and that is again why it’s been so important to have this rebound in the fourth quarter, because one thing is to chose some people, yes we will deliver according to our plans.

But I think it’s also clear that people of course have to see now that it actually has happened. So those who would have had some concern, I cannot say that I can give you priorities we have lost because over concerns but of course we have received some questions on it.

Having said that, you will see that our order intake is down by 49%. The second largest player in the industry’s order intake is down 47% and they have by the way a balance sheet which is somewhat bigger than ours. So it is not just Vestas that have seen this, also some who are financially much bigger than us have seen the same thing.

So, I would say there are also certain markets whereas I mentioned before where we have decided to say no, because we didn’t feel that the balance of the contracts were there. So, going forward, we are now at a company with a net debt-to-EBITDA below 2.

And I hope that that will give people a good understanding of that we are actually in a better shape, also now with a new banker beginning in place looking forward and that’s where we are going to put our focus. So obviously an important focus point for the organization is to increase the order intake here in 2013. So I think it could be some mixture, but we cannot recognize that it has been as critical as some have reported concerning the financials.

Unidentified Analyst

Okay, now this is the next question concerning your capital structure. Are you satisfied with your current capital structure, your book equity has dropped quite a bit during the past year and your debts are higher than last year?

Dag Andresen

First of all I would like to say that according to the new bank agreement, that is a very important part of the capital structure. We are satisfied as it is today. We have gone through the business run of the company until 2015 with the banks and we have fully aligned what is needed for the company regarding funding for operating with a 5 gigawatt plant as we go forward.

Of course, things has been deteriorating due to the situation the company has been in 2011, 2012, but we also are having a very, very strong plan of reducing the debt if you look into the note we received that we have a plan of reducing debt in 2013 and that will of course improve certain key raises for the company. So going forward, with an asset-light company that is much less investments that also repaying to come out to debt will of course make the company more robust also in 2013. And this was the plans that we draw in 2012 but I would like also to say that everything is actually based on the global demand. If we see the global demand will increase again and we need to – with more capacity, of course then we need also to look into the capital structure to find the most optimal way going forward.

Unidentified Analyst

But no current plans of a rights issue?

Dag Andresen

No current plans for a rights issue.

Unidentified Analyst

Okay, my last question. Your guidance state that you expect an EBIT margin of at least 1% without special items, should we expect any special items in 2013?

Dag Andresen

I would like to say that, management cannot promise anything in 2013. What I would like to say that we have made a very, very thoroughly assessment and executive management with the board and based on the business plan as we should do, they are fully aligned also with the new operating model have been much more asset-light. So I think we have done what is needed to be doing be done in 2012 and the company, if you compare the company with January, February 2012 then January, February 2013, this company that stands from today is a much stronger company as such because we have a better balance between the asset and what we are going to produce.

Ditlev Engel

Any other questions in the room before we turn to the phone? If that’s not the case, then operator, are you ready?

Operator

Yes, thank you. (Operator Instructions) Arnaud Brossard from Exane BNP Paribas is on the line with a question.

Arnaud Brossard – Exane BNP Paribas

Hello everyone, hello gentlemen. First, good you please tell us how much restructuring charges do you expect in your P&L and in your cash flow in 2013? And could you also please tell us how you expect working capital to evolve in 2013? And finally, could you also update us on where your discussion with Mitsubishi stands? Thank you.

Dag Andresen

Hi, I would like to take the two first and what we can say regarding restructuring charges in 2013, we will not guide on any restructuring charge in 2013, but if you look into the special items for 2012 which is one of the key restructuring items that had a cash effect is 119 regarding redundancy of people.

And we had some small other posts that is actually aggregating approximately 130 in direct cash effects regarding restructuring costs. Net working capital, as we said during the presentation we have a plan in the company to improve the net working capital in a positive way by the initiatives and measurements that we said that we do not go out with any measurement for 2013, we have given a guidance that this will improve during 2013.

Ditlev Engel

Yes, that’s a short one. We have no further comments on that compared to what we have already stated to the market back in August.

Arnaud Brossard – Exane BNP Paribas

Okay, thank you. Can I just ask a small follow-up on the first one, the restructuring charges? Why is that, that you don’t want to guide is that because you have limited visibility, some significant uncertainty on the proportion of restructuring you may charge?

Dag Andresen

We have decided that this is not a vital part to guide for the company and as I said before we going to show quarter-by-quarter how much restructuring charges we would be taking that is shipping and has cash effect to say, so that’s nothing more from my part there.

Arnaud Brossard – Exane BNP Paribas

Okay, thank you.

Ditlev Engel

Thank you.

Operator

Claus Almer from Carnegie is on line with a question.

Claus Almer – Carnegie

Yes, hi, just a few questions, the first one is about your order backlog. If you should compare the quality of the order backlog how it looked at 12 months ago and now starting of 2013, you should be also in 2013 your chart is showing a negative product margin development, that’s my first question.

Dag Andresen

I take it that when you say quality, you mean earnings potential?

Claus Almer – Carnegie

Exactly.

Ditlev Engel

Okay, then you will have to say that what we have said all the time concerning the new technology is that the products have not been sold too cheaply but they have been too expensive to product. So you can say that the earnings potential of the backlog has of course improved due to the fact that the cost out initiatives that we have taken are starting to kicking in.

And in particular, if you look in the fourth quarter, you can see that when you have the ratio between the volume and the margins that you are starting to see that it is really having the improvement. So the 30 million euros improvement that we were expected in the fourth quarter on the cost out on the margins have materialized in the fourth quarter and that of course if you compare 12 months ago have meant that the earnings potential of the backlog has a boost.

Claus Almer – Carnegie

Okay, just, when we see the presentation in Q1, Q2, or Q3 and Q3 in 2013, we will not see a negative project margin trends like we saw in 2012 that’s what you are saying?

Ditlev Engel

First we never guide on the quarters and of course there is always a question of which projects of the composition of the projects, my point is that if you look them turbine-by-turbine, the quality of the earnings per turbine has improved not least due to the cost out that has always taken place and which will continue during 2013.

Claus Almer – Carnegie

Okay, and this also stands when you include as you stated in the presentation that the newer turbines are more expensive to manufacture.

Ditlev Engel

We are not satisfied yet with the cost out work where we need to end, but as we mentioned we have started to see the effect of the work being done, but more needs to be done during 2013.

Claus Almer – Carnegie

Okay, and then my final question that goes with cash flow, after Q3, you said that the downgrade of the cash flow was only the matter when some cash flow would come in December or in January, should we still expect that the cash burn you had in 2012 would actually come in Q1?

Dag Andresen

That’s correct, I remember exactly that I said what you quote now and I would like to say that that we still see that some part of the cash flow is of course impacted by – as we get new orders and they get prepayments, but that goes directly into the free cash flow. That has been – as we saw in the last quarter, in Q4 we saw that the new orders was not according to our expectation.

And it’s still too early to give an indication if we will get the full impact in Q1, or it will be spread out during the year. So this is the key denominator of course. And number two is still the capacity for a company that we are on a good way it’s actually to free up cash through the net working capital and the inventories that’s going according to the plan. But we go back to the order intake and the impact that can have for the quarters to come and it can still be to a certain degree volatile of course.

Claus Almer – Carnegie

Okay, thank you so much.

Ditlev Engel

Thank you.

Operator

Patrik Setterberg from Nordea is on line with a question.

Patrik Setterberg – Nordea

Patrik Setterberg from Nordea Markets. I just want some clarification on your 2013 guidance. If you make shipments of around 4 gigawatt in 2013, does that implied that we are going to see revenue of around 5.5 billion and EBIT margin before special items of around 1 percentage point?

Ditlev Engel

The shipments are not necessarily directly related to the revenue because of the accounting principles that we are following. So, the 4 to 5 is one side of the coin and the other part is of course we at the moment have 2 gigawatts under construction that needs to be handed over. So that is hard to say. The only thing we can say is, we expect minimum 5.5 billion euros in revenue.

Patrik Setterberg – Nordea

So we should not expect that margins will improve if your shipments will be in the high end of the range?

Ditlev Engel

Say that again.

Patrik Setterberg – Nordea

We should not expect that the margin could be – we can say better than expected – or if we are going to get 5 gigawatt of shipments it’s not necessarily going to give a higher margin compared if we are going to have shipments of around 4 gigawatts?

Ditlev Engel

No, I mean, the 4 to 5 obviously can have an impact on the utilization rate of the manufacturing facilities. But if you look at the earnings turbine-by-turbine as such, then that is not going to be directly impacted by that.

Patrik Setterberg – Nordea

Okay. Coming back to the previous questions, could you give us an indication of the cash flow profile on the first half compared to the second half of the year? What is your best assumptions at current stage?

Ditlev Engel

We never – as I said before, we never give guidance per quarter on the cash flow profile and I think if you look at the past, the only thing we were saying is, we will see like we’ve seen in 2012, we will see swings between the quarters.

Patrik Setterberg – Nordea

Okay and my last question just relating to these incidents you have been seeing in Germany regarding the service, is that a – are you going to say a one-time related item or is this going to impact the service at the end of first half of 2013 as well?

Ditlev Engel

It is a one-time incident and it’s just important maybe to understand how this works in terms of mechanics. We have one older turbine type that we have under service in Germany. And we can see that in Germany, for various reasons the way that the service has been undertaken with this platform has been into too high consumption for the cost of doing those services and thereby when you look at the potential earnings from that turbine type in Germany during the coming years, we’ll have to reassess what we think we can, what it will cost us. So it is a reassessment of that, we do expect that this particular type of turbine we will have to spend more compared to other places in the world. So it is a one-time specific assessment on one turbine type.

Patrik Setterberg – Nordea

Okay, thank you very much.

Operator

Daniel Patterson from SEB is on line with a question.

Daniel Patterson – SEB

Yes good morning gentlemen, Daniel Patterson here. I have a few questions, want to start off with the fixed cost productions just to be crystal clear on this, you said you had a positive benefit in 2012 on the fixed capacity reductions of 79 million euros, maybe I just want to be clear, those 79 million euros, they relate to the 250 million euros total, so therefore all else equal that should be around 170 million euros extra delta for 2013, is that my correct understanding?

Ditlev Engel

Give or take, you are right, your calculation in terms of the way that you are assessing it is correct because you have obviously a combination of what you can see in the P&L and what you cannot see under the gross margin.

Daniel Patterson – SEB

Okay, good. So that means, you have a positive benefit of these, let’s say 79 million euros on the P&L, could you give some indication of what has been the cash benefit? I must assume it must have been higher than 79 million in 2012, the cash benefit for the lay-offs.

Dag Andresen

The cash benefits in principal is higher than what you see here in 2012. It came so close since it is backlog it come in the end of 2012 and it continues into 2013. Then also I would like to draw your attention that we have also 190 million euros external cost for the redundancy program also that this has a direct cash effect.

Daniel Patterson – SEB

So the benefit is higher, excluding the redundancies but not significantly higher than 79 million euros?

Dag Andresen

Yes, that’s how you like to state it.

Daniel Patterson – SEB

Okay, then on CapEx, you are guiding 150 million euros for tangible CapEx for 2013, but I noticed you didn’t say anything on intangible CapEx, what’s your thought on intangible CapEx for 2013?

Dag Andresen

Yes, as we said we’ll have total investment level going forward with the level that we indicated as it’s actually for 2012 and we will not give any further regarding splits on this because it depends on many factors. So we just say that we keep it at the same level or maybe little lower in 2013, but it depends on several things to say, so I would just give the clear indication that 86 to 90 is an area where we are going to move around in 2013.

Daniel Patterson – SEB

Okay, my next question concerns your margin guidance for 2013. I guess if you are a little bit cynical you could say the 1% margin guidance is mainly driven by the write-downs, the write-downs give you a lower depreciation of about 50 million euros this year, so excluding that the margin will be around zero. So underlying there is still no profit. How should we think about this?

Dag Andresen

You are right, that if you take the effect from the write-downs in 2012, that has around the 50 million euros as you mentioned. So, on the pure math side you are right.

Daniel Patterson – SEB

But what does this mean? I mean, does it mean you are trying to be conservative with your 1% or does it mean that the majority of the benefit will come in 2014 or how should we think about the 1%?

Ditlev Engel

We have just said that, that we have said minimum, we never give feelings to the numbers. We have said minimum 1% in 2013 and then we have said that if we need to get to for instance where we want to go in terms of the bonus area is we have to significantly better and that starts at the 3.7. But again, we have seen huge fluctuations between the quarters. So, that’s how it has played out.

Daniel Patterson – SEB

Okay, one final small question and then I’ll get back in line. You are saying you put some factories up for sale and you have 131 million euros of assets for sale. I just – I have one question, is the Chilean project that you sold here in January to Enel, is that a part of the 131 million euros?

Ditlev Engel

No, the answer is – so if you are still on Daniel, then the answer is no. Shall we move on operator? Or maybe the operator left as well. Are you there operator? Somebody is watching as we see a lot of activity, but…

Operator

Patrick Hummel from UBS is on line with a question.

Patrick Hummel – UBS

Yes, hello everybody. Can you hear me? Hello.

Ditlev Engel

Yes.

Patrick Hummel – UBS

Okay, excellent. Three questions please. First one is regarding what is actually factored in your 2013. Out of the 400 million euros total savings, the incremental savings of 2013 will you spend as of 2012 would be a 150 million euros, how much of the 150 million euros is actually included in the 2013 number, i.e., will the cost savings come through fairly quickly in the new year or will it be more back-end loaded? So what’s the actual savings number is included in your 2013 guidance? That’s my first question.

Dag Andresen

Okay, thank you. As I said, we estimated approximately 250 million euros in 2012 and additional 150 million in 2013 and we are going to stick to the number that in the end of 2013 going to be in total approximately 400 million euros. We have of course internal plans about how much we are going to take out each quarter, but we do not make that public because that can change based on our sequencing on the different programs and operating excellence program and the reduction program. So that’s why I restated we are not giving the quarterly numbers regarding how much it will be say, so. The only thing is that we have a very good speed in 2013. We have done a lot of work and preparation but also executed a lot of these initiatives and they are under full operational execution and that of course gives us a better performance since we started those issues and programs in 2012 we get better performance entering 2013.

Patrick Hummel – UBS

Thank you. Second question in regards to your cost base going forward and your capacity, is it fair that the organization after all the restructuring has been implemented is capable of shipping 5 gigawatt per year? And if so, looking at the order intake run rate I mean, the last 12 months were 3.7 gigawatt of course it remains to be seen whether there is a pick up in the US in the course of this year or not, but still it feels like if the 5 gigawatt is your actual capacity, there might be need for further adjustments if there is no increase in the activity level, is that fair?

Ditlev Engel

The 16,000 employees that we expect to end the year at still stands and you also have to add to the 4 gigawatts to 5 gigawatts that we expect to do ourselves this year that some of the manufacturing facilities are now also producing for third-party which obviously you cannot see in terms of that part of the guidance. So you are right that we have been levering out for around an activity level of 5. But you also have – as I just said, remember that there are also some things that comes on top of this which increase the utilization rates of the facilities.

Patrick Hummel – UBS

Okay, thank you and the third question in regards to the CapEx guidance. Is there going to be a higher R&D charge going forward because of lower rate of capitalization of intangibles CapEx or should we see there any meaningful change going forward?

Dag Andresen

I think, we go for the last one until further notice. The plan is that we have reduced the R&D significantly both regarding the investment and activity and we concentrate on the three platforms that we can show there and also improving the existing platforms and the system solutions that they have. So it means that we will keep to the level that they have today and if there will be some changes, of course then we are going to do it. But until further notice, we have it yesterday and today.

Patrick Hummel – UBS

So just beginning, there is no negative cost or P&L impacts to be expected going forward because of more R&D work going through the P&L rather than in the CapEx line?

Dag Andresen

No, as we have estimated today, no.

Patrick Hummel – UBS

Okay, thank you very much.

Ditlev Engel

You are welcome.

Operator

Sean Mcloughlin from HSBC is on line with a question.

Sean Mcloughlin – HSBC

Yes, good morning. I just want to turn to an earlier question. Did you expect typical seasonality in 2013, I know that high shipments in the first half and higher deliveries in the second half?

Ditlev Engel

Well, we never guide on how it pans out during the quarters. The only thing will stick by to saying, we will always see the volatility during the quarters and again, please understand that it is not because we just would like to teach you. It is also because that there are a lot of these things which are outside of our control. If the customers does not have the good connection really on whatever, a lot of these things impact us whether or not we can take the revenues and the earnings in a given quarter. So we obviously have we believe a view on it, but we know there are lot of things during the year that we are not in control of that can actually impact this. So, we prefer to say that, we’ll have to see how it pans out.

Sean Mcloughlin – HSBC

Okay, and it looks though, you are almost fully drawn on your credit facilities at the end of the year, 1.75. How confident are you that your cash balance is enough to meet working capital requirements at the higher end of your shipment guidance?

Dag Andresen

What we would like to – what is happening or going forward is that we are releasing more and more free cash flow in the company, both releasing net working capital because we have a lower activity level and it means also that we have more flexibility both to repay debt but also to utilize the free cash flow that we have. So we feel comfortable with the situation as it is today.

Sean Mcloughlin – HSBC

Thanks, okay, the final question, just if you could provide a little bit more color on your divestments and outsourcing opportunities and your expectations for 2013?

Dag Andresen

I can speak little about the divestment issues, as you know we have classified several manufacturing areas for and assets held for sale and we are going to do this as we have been doing before that for each time we do divestment we are going to come to the market and we are going to announce the divestment to the second part and how the transaction is done. We cannot do this, not because than we released the negotiations and the counterparts and prices and everything. So we will sequentially to the market according to when we release further and execute the divestment plans. That’s the first issue and regarding manufacturing, maybe Ditlev you would like to say something there.

Ditlev Engel

There is not a lot to say apart from the fact that our view on this is that in particularly to also related to the service business that quality and safety will not be compromised in the divestment process, because our service earnings are extremely dependent on high performance that we are seeing now in 2012 where we had warranty consumption at 1.6% is not being compromised. Both for the business case certainty for the client, but definitely also for the performance at Vestas. So quality will not be compromised in the divestment process. So, one thing is, to divest, the other thing is also to make sure that the future operational model is still 100% adherent to this. So those are going to be apart from the value are going to be very important assessment in the process of the divestment.

Sean Mcloughlin – HSBC

Thanks.

Operator

Mark Freshney from Credit Suisse is on line with a question.

Mark Freshney – Credit Suisse

Good morning. Just a question on the EBIT guidance and relating that to the bonus targets. There seems to be a bit of gap between the EBIT guidance or the flow of the EBIT guidance of at least 1% and what the target is, can you relate the two to one another? And how achievable do you think the, I think it is a 3.7% target on the EBIT guidance or on the low bonus targets? Thank you.

Ditlev Engel

I think it’s fair that a bonus target is obviously that you need to perform well and that’s why we have said, well we need at least to get to the 3.7% before we feel that it has been a performance that we think is where it should be. So that’s why it has been set at 3.7 and again as I said it’s important that it is both of them, both the cash flow and the EBITDA needs to be achieved, it’s not either on, it’s both.

Mark Freshney – Credit Suisse

Okay, thank you.

Operator

Håkon Levy from DNB Markets is on line with a question.

Håkon Levy – DNB Markets

Yes, good morning this is Håkon Levy from DNB Markets. Following up on your divestment and asset-light strategy, as of the fourth quarter you have classified 131 million euros as assets held for sale. Are these the only assets, or to the value of the only assets that we currently expect to sell or are these assets are classified in this way if they are very close to being divested? Then I have a second question.

Dag Andresen

We have been very clear internally in what kind of assets we would like to keep and what kind of assets we have decided to put on a sale needs to say so for the year. This is a complete list regarding the assets and this is the complete write-down, down towards 2015 it’s an expected sales price for the asset. So this is the full comprehensive package that they have decided and that we will – we launched on the negotiation with some of them of course.

Håkon Levy – DNB Markets

But that this is the complete package include more than a 131 million euros?

Ditlev Engel

Does it, sorry, say it again, does it include what?

Håkon Levy – DNB Markets

Does it include more than 131 million euros that is currently classified as assets held for sale or do you own the assets?

Dag Andresen

This is the asset – this is the number also that is related to the assets.

Håkon Levy – DNB Markets

Okay, and secondly, on the US PTC subsidy that was extended last month, talk to your customers in the US, what kind of activity level are they indicating for 2013 after given a busy 2012?

Ditlev Engel

We haven’t given a guidance for the market in 2013 and 2014. What we know from our US clients is that a number of them had been hoping for expecting that probably would get an extension. So we know of various projects that our customers have been working let’s say up to the wire in terms of being ready in case we would see an extension, but exactly of course how many of them they are going to lift now to actual levels that we don’t know. But I think we have a fairly good view of the kind of projects that people actually have in their pipeline. So we will wait and see whether or not they are going to materialize. I think that the largest player in the US market gave their assessment of it just a few days ago.

Håkon Levy – DNB Markets

Okay, thank you.

Ditlev Engel

You are welcome.

Operator

Klaus Kehl from Nykredit Markets is on line with a question.

Klaus Kehl – Nykredit Markets

Yes, hello gentlemen. Two questions, first of all, could you give us an update on the cost out initiatives, Ditlev you mentioned that we have seen an effect of 30 million euros in Q4. So what would be reasonable to expect for 2013? Would it, for example be reasonable to expect the four times 30 million euros? That’s my first question.

Ditlev Engel

You can say that it of course is very dependent on – if we deliver exactly the same composition of turbines during all of 2013, then you would be right, but now the activity level in 2013 is expected to be lower than in 2012. So you can say per turbine, you could make the calculation, but of course it depends upon the composition of the turbines that are going to be delivered. You can put in another way, the 30 million euros that is now effected is of course now also filtering to the build up material of the turbines that are being produced. So the turbines that we are producing at this moment are cheaper than they were at 12 months ago and we also do expect during 2013 that to keep on lowering the build up material cost as we produced and when that hits the P&L is of course can something go into 2014, some will also get the benefit in 2013. So, everything equal, yes, but 2013 will not be equal to 2012.

Klaus Kehl – Nykredit Markets

Okay, thank you and then my second question is about the competitive landscape, could you give us some comments on what’s going on in the market in terms of prices, competition, et cetera and also compared to the prices that you have seen in Q4 and to be honest, I must say that I am a bit surprised – positively surprised about the prices we have seen in Q4.

Ditlev Engel

I think that there is some very interesting dynamics going on at the moment. We have obviously some of the big traditional markets on one hand and we also have some new markets coming up, in particular in lot of the emerging markets. And so, the competitive landscape of course varies depending on where you are.

You have for instance still in China, it is still a largest market you still have a very, very competitive situation with some very, let’s say a big number of players in that market. If you look in other areas, it’s also very much, not just the pricing issue, it’s also the ability to be able to execute in various geographies and have the people who can go out and develop the projects and can execute them on time.

So, the competitive landscape I would say is still very tough, because the market is under pressure. But it is of course very much also our ability as an organization to capitalize on Vestas global competitiveness and that leads Vestas global organization to get engaged in some of the newer emerging markets whether it is in middle South America, whether it is South Africa and all the places that you need to get in because some traditional markets like for instance Chinese, we do expect that that’s still going to be very competitive also in 2013.

Klaus Kehl – Nykredit Markets

Okay, a follow-up question, would it then be reasonable to maybe to assume that some of the competitive pressure perhaps in Europe has stopped as most of you guys are losing money?

Ditlev Engel

I think you can – I think as I also said earlier in the presentation, I would think, it’s fair to say that I think it has basically bottomed out in terms of the price pressure per megawatt and of course you are also seeing an effect of that as you enhance your offerings to the market with more sophisticated machines going forward will of course also hopefully improve both the customers business case but hopefully also in Vestas business case as you introduce new technologies into the market. Like for instance the V126.

Klaus Kehl – Nykredit Markets

Okay, thank you very much.

Operator

Lars Heindorff from ABG is on line with a question.

Lars Heindorff – ABG

Yes, hello gentlemen, I promise I won’t ask you about the seasonality in 2013, but a couple of other questions that you may be able to help me with. First of all, about the order backlog, can you give us an indication for how much do you have in order backlog for 2013 alone, not the entire order backlog? That’s the first question please.

Ditlev Engel

We never give the maturity of the backlog on to the total value.

Lars Heindorff – ABG

All right, second question is about the CapEx level now, I mean, you are aiming for more scalable platform, also sort of more asset-light business. Can you give an indication about sort of future CapEx level, which obviously is bound to somewhat lower compared to where that have been historically?

Ditlev Engel

It’s clear that, as I said the V164 is a very heavy investment, also in 2013 so that of course will consume a lot of the investments in this year and with the plans of putting that into testing and the prototypes in Q2 2014. Then obviously that is going to have that effect. The key question of course then is, will there be set up of manufacturing facilities et cetera which will then obviously drive more CapEx, but then our – we have all the time said, we are only going to do that if we have firm and unconditional orders to back it up. So, how that is going to pan out, time will tell, but no doubt making a new platform and particular like the V164 is a huge drag on investments here in 2013.

Lars Heindorff – ABG

Thank you.

Ditlev Engel

Okay, operator, I think we have to close here. I would like to thank everybody who have taken the time to come and see us here in Aarhus today. Everybody who decided to watch it on the web and we look forward to be back with the Q1 update when we get to May. Thanks everybody. Thank you.

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