Jason Liu

Wind Turbines: The New Renewable Bull Market

I was just wondering where you got your source for market share figures as I've seen vastly different numbers.

I'm a strong supporter of wind energy but I think a lot of the wind turbine manufacturers seem over-valued.

1. Their growth isn't decided by the demand, but by their manufacturing capacity. So the projected growth in the wind industry won't directly correspond to Vestas' fortunes.

Many smaller manufacturers are eating to Vestas' market share because the firm can't keep up with demand. And if Vestas does ramp up production, earnings will take a hit from the capital investment.

2. Growth is mostly going to originate from India, China and the U.S. where GE, Suzlon and Goldwind/Sinovel are strongly entrenched. In fact Chinese law decrees that 70% of hardware used in wind farms must be sourced from domestic manufacturers making it difficult for foreign companies to break in.

This will hurt Gamesa more than Vestas. Gamesa has benefited from the strong home market with 54% of revenues originating from Spain. However it'll have to really ramp up production elsewhere to keep growing and as you said, they've secured their first order from China in 2 years, despite China building 5.6 GW of wind energy capacity in that time.

Both Vestas and Gamesa are great companies. Unfortunately that doesn't mean they're great investments.