Vestas Wind Systems A/S

Smed Sorensens Vej 5
Ringkobing DK-6950
Telephone: +45 96 75 25 75
Fax: +45 96 75 24 36
Web site:

Public Company
1928 as Dansk Staalvindue Industri
Employees: 9,504
Sales: EUR 2.54 billion ($2.9 billion) (2004)
Stock Exchanges: Copenhagen
Ticker Symbol: VVS
NAIC: 333611 Turbine and Turbine Generator Set Unit Manufacturing

Vestas Wind Systems A/S is the world leader in the design, engineering, and manufacturing of aeolian power generation systems—in other words, windmills. The company develops and manufactures its own proprietary wind turbine technologies, selling a range of products from the bare turbine components to complete turnkey systems, and even entire wind farms. Vestas has been riding the winds of change since the end of the 20th century, as the reduction of global pollution has taken on a greater urgency, and as more and more governments have begun mandating the installation of clean and renewable energy sources. Vestas is also a global manufacturer, with headquarters in Ringkobing, Denmark, and production facilities in the United States, Australia, Germany, Sweden, India, and elsewhere. In 2005, the company began construction on a production facility in Tianjin, China, marking its entry into that market. The company is the world leader, with a 40 percent market share. More than 70 percent of revenues, which topped EUR 2.5 billion in 2004, are generated in Europe, and the United States accounts for most of the rest. Vestas is one of the wind turbine industry's primary innovators, with projects including the development of turnkey offshore wind platforms. In 2003, the company handed over its first major offshore platform, at Horns Reef, in the North Sea off the Danish coast. Although Vestas stems from a blacksmith business founded at the beginning of the 20th century, its entry into wind turbines came in the late 1970s, and only became its core operation in the mid-1980s. Vestas is listed on the Copenhagen Stock Exchange.

Forging Origins at the Beginning of the 20th Century

Vestas started out as a small blacksmith shop in Lem, Denmark, when H.S. Hansen set up for business there in 1898. Hansen was said to have inspired the creation of the blacksmith industry in Lem, which became a center of the Danish smithy market in the early part of the century. By 1928, Hansen, joined by son Peder, had entered industrial production, producing window frames for factories and other industrial buildings, founding Dansk Staalvindue Industri.

Following World War II, Peder Hansen led a team of nine fellow employees from Dansk Staalvindue in setting up a new business to produce household appliances. Founded in 1945, that company was called Vestjysk Stalteknik, and then became known as Vestas. Before long, however, Vestas added the production of farm trailers, which became the company's chief product by 1950. Almost from the start, Vestas produced for the export market.

Vestas's introduction into engineering came in 1956, when it agreed to design and manufacture an intercooler for the ship engines built by the Danish B&W shipyard, where Hansen's brother Soren served as deputy chief executive. Intercoolers became the group's core product line in 1959 when Hansen bought out his partners, and then sold off its noncore operations to another of the original founders.

Vestas showed its willingness to transform itself yet again in the late 1960s, when it launched production of truck-mounted hydraulic cranes in 1969. That product line was a success, especially on the import market. Yet the oil crisis of the early 1970s and the resulting slump in the international transport industry placed sales of the company's hydraulic cranes under pressure. Vestas once again began looking for a new product line.

By the end of the decade, Vestas had hit on the product that would bring it into the next century. As a new oil crisis plunged Denmark and much of Europe into a new recession, Vestas became convinced that a future lay in the development of renewable energy sources, especially in harnessing the power of wind. The company's background in engineering enabled it to begin developing its first wind turbine, initially focused on the Darrieus turbine. By 1979, however, Vestas had designed its own three-blade turbine, which it introduced in 1979. The three-blade turbine quickly became an industry standard and helped stimulate the creation of the early wind turbine market.

Vestas launched full-scale production of its turbine in 1980 as the wind farm market entered its first boom phase. Demand for the company's turbines grew strongly on the basis of government policies, which included subsidies and other incentives, both in Denmark and in the United States. With large-scale orders arriving, in particular from the United States, Vestas began to vertically integrate its production, launching the manufacture of fiberglass components in 1981. By 1983, the company's capacity had expanded enough for the company to begin producing its own turbine blades. In that year as well, the company established its first overseas subsidiary, in the United States. By then, the United States had become the company's major customer. The company also quickly added new employees, boosting its payroll to 800 by the middle of the decade.

New Life in the 1980s

A breakthrough came in 1985, when the company developed turbines with pitch regulation, which adjusted the angle of the turbine blades to the direction of the wind, optimizing their efficiency. The innovation helped boost the company's sales, and by the end of that year, the company's total turbine sales to the United States alone had topped 2,500. Wind turbines also had become Vestas's primary source of growth, despite its continued production of its legacy products.

Yet the wind turbine industry remained at the mercy of government policy. In 1986, the company slipped into financial crisis when the United States failed to renew the legislation that had provided special tax benefits for the wind turbine market. The company's heavy exposure to the U.S. market plunged the company into financial disarray. By the end of that year, Vestas was forced to declare bankruptcy.

Nonetheless, Vestas's problems were recognized as legislative; the company's turbine technology remained an industry leader. In particular, Vestas had begun experimenting with the concept of developing large-scale wind "farms." The new concept was immediately promising, pointing to the company's technological viability. The promise held by Vestas's wind turbine business led to the company's reorganization in 1987. A new management led by Johannes Poulson now took over operations of the company, and refocused Vestas as a wind turbine specialist. The company's payroll by then had been reduced to just 60 employees.

Vestas immediately turned toward the international market. In 1987, Vestas set up a subsidiary in India; by 1988, the company had won a bid to build six wind farm projects for Danida in India. Back at home, Vestas, encouraged by the Danish government, began to grow externally. As H.S. Hansen had inspired the creation of a blacksmith market in Lem at the beginning of the century, Vestas had helped stimulate a buoyant market for wind turbine production in Denmark in the 1980s. By the end of the decade, however, the Danish government had begun to promote a consolidation of the industry's many small players in order to create a smaller number of internationally competitive wind turbine leaders. As part of that process, Vestas took over rival Danish Wind Technology in 1989, boosting its production capacity, as well as its sales and marketing reach.

Vestas also sought to expand its international network. In 1989, the company created a German subsidiary, followed by the establishment of new production subsidiaries in Sweden and the United States in 1992. Other buoyant new markets at the beginning of the 1990s included the United Kingdom, Australia, and New Zealand. New government legislation, particularly in Germany, helped boost the company's fortunes into the early 1990s. By 1993, the company's German subsidiary had nearly tripled its production. The company also carried out an expansion of its Danish production facilities.

Vestas continued to develop new models and innovative new features, helping it to resist the tide of a steadily increasing array of new competitors. The company added to its production capacity through the acquisition of Volund Stalteknik, based in Varde, Denmark, in 1994. In that year, as well, Vestas entered Spain, forming a joint venture with that country's Gamesa, with Vestas's stake at just 40 percent. The partnership started strongly, and by the end of the decade, Spain had become one of Vestas's fastest-growing markets.

Global Wind Turbine Leader in the New Century

Vestas went public in 1998, listing its stock on the Copenhagen Stock Exchange. The highly successful initial public offering signaled the beginning of a new era for Vestas as its growth went into overdrive into the new century. By the end of that year, Vestas had opened a new production facility in Italy in a joint venture partnership with that country's Wind Energy System Taranto S.p.A. By the end of its first year, the Italian venture had produced more than EUR 35 million in revenues. The company also expanded its production capacity in Denmark, building a new blade factory in Nakskov in 1999. The following year, Vestas boosted its international presence with a distribution partnership agreement with Japan's Vestech, owned by Toyota, Kawasaki, and other major Japanese companies.

During this time, Vestas had begun developing new turbine technologies for a new and highly promising market—that of offshore wind farms. In 2001, the company was chosen to supply the turbines for the world's first major offshore wind farm being constructed on Horns Reef in the North Sea off the Danish coast. The company delivered the completed platform in 2003.

Company Perspectives:

Vision and mission

Vision: Wind, Oil and Gas. By being the best and most trustworthy provider of wind energy in the world, Vestas and wind will be perceived as an energy source on par with oil and gas.

Mission: At Vestas, failure is not an option.

Johannes Poulson resigned as company CEO in 2002, replaced by longtime CFO Svend Sigaard. In the meantime, the company had pulled out of its joint venture with Gamesa in Spain, after that company began to position itself as a major competitor in the wind turbine industry. Vestas faced another new rival in the United States, when General Electric Corporation bought up the wind farm operations of failed energy giant Enron in 2002.

Despite a downturn in the global wind turbine market, amid a generalized economic slowdown, Vestas's longstanding expertise and market-leading position enabled it to solidify its international standing. The group's work on the Horns Reef project helped it attract a significant number of new orders for offshore wind farm platforms, such as an order to supply the turbines for the first major British offshore wind farm in 2002. In support of its growth, Vestas opened two new factories that year, in Cambeltown, Scotland, and in Lauchhammer, Germany.

A major milestone in Vestas's growth came at the end of 2003, when the company announced its acquisition of rival Danish wind power producer NEG Micon. The merger, completed at the end of 2004, established Vestas as the clear global leader, with a market share of some 40 percent. The completion of the merger process also signaled the departure of Svend Sigaard, who turned over the CEO position to former Hempel A/S executive Ditlev Engel.

Into the mid-2000s, Europe remained Vestas's dominant market, representing more than 70 percent of its sales at the end of 2004. Most of the remainder of the group's revenues was generated by the North American market. However Vestas launched a new strategy to step up its presence in the Asian markets, where the renewable energy market was expected to grow strongly through the end of the decade. After setting up a sales and marketing office in Beijing, Vestas scored its first major order on the mainland in February 2005, with an order for 50 turbines for the Rudong Wind Power Concession project. By July of that year, Vestas announced its intention to build a new factory in Tianjin to supply the blades for that project, and to support the company's further growth in China and elsewhere. Vestas appeared to be soaring toward a strong future as the world's wind turbine leader.

Principal Subsidiaries

Eissengiesserei Magdeburg GmbH (Germany); Global Renewable Energy Partners A/S (GREP); NEG Micon A/S; Vestas – American Wind Technology, Inc.; Vestas – Australian Wind Technology Pty. Ltd.; Vestas – Canadian Wind Technology, Inc.; Vestas – Celtic Wind Technology Ltd.; Vestas – Danish Wind Technology A/S; Vestas – Italian Wind Technology S.R.L.; Vestas – Nederland Windtechnologie B.V.; Vestas – Scandinavian Wind Technology A/S; Vestas Americas A/S; Vestas Argentina S.A.; Vestas Asia Pacific A/S; Vestas Assembly A/S; Vestas Blades A/S; Vestas Blades Australia Pty. Ltd.; Vestas Blades Deutschland GmbH; Vestas Blades Italia S.R.L.; Vestas Blades UK Ltd.; Vestas Brasil Ltda.; Vestas Central Europe A/S; Vestas China Ltd.; Vestas Control Systems A/S; Vestas Deutschland GmbH; Vestas Eólica SAU; Vestas France S.A.S.; Vestas Hellas S.A.; Vestas Japan KK; Vestas Machining A/S; Vestas Mediterranean East A/S; Vestas Mediterranean West A/S; Vestas Mexico S.A.; Vestas Nacelles A/S; Vestas Nacelles Australia Pty. Ltd.; Vestas Nacelles Italia S.R.L.; Vestas Nacelles Spain S.A.; Vestas New Zealand Wind Technology Ltd.; Vestas Northern Europe A/S; Vestas Poland Sp. z.o.o.; Vestas RRB India Ltd.; Vestas Svenska AB; Vestas Technology UK Limited; Vestas Towers A/S; VestasPor – Servicos de Technologia Eólica Ltda.; Wind Power Invest A/S; Windcast Group A/S.

Principal Competitors

General Electric Corporation; Abengoa S.A.; Azure Dynamics Inc.; Domnick Hunter Group PLC; Gamesa Corporacion Tecnologica S.A.; Solarworld GmbH.

Key Dates:

H.S. Hansen sets up a blacksmith shop in Lem, Denmark.
Hansen and son Peder establish Dansk Staalvindue Industri in order to produce window frames.
Peder Hansen and others launch Vestjysk Stalteknik at first to produce appliances, later producing farm trailers, intercoolers for ship engines, and hydraulic cranes.
Vestas begins developing wind turbines in response to the oil crisis and growing environmental concerns.
Vestas introduces the first three-blade turbine.
After a change in legislation in the United States, Vestas collapses into bankruptcy.
Vestas is reorganized as Vestas Wind Systems A/S, specialized in wind turbines.
The company acquires Danish Wind Technology and establishes a subsidiary in Germany.
The company forms a joint venture with Gamesa in Spain.
Vestas goes public with a listing on the Copenhagen Stock Exchange.
The company is chosen to supply turbines for the world's first major offshore wind farm at Horns Reef in the North Sea.
Vestas delivers the Horns Reef platform.
Vestas acquires Danish rival NEG Micon.
Vestas receives its first large contract in China and announces plans to build a factory in Tianjin.

Further Reading

"Danish Wind Turbine Maker Vestas to Build Factory in Tianjin," AsiaPulse News , July 8, 2005.

Dolan, Kerry A., "Clean and Green," Forbes , July 25, 2005, p. 111.

"European Wind Power Giant Expands in US," Natural Life , May-June 2002, p. 21.

"Giant Windmill Manufacturers Combine," Modern Power Systems , January 2004, p. 3.

Passariello, Christina, "Where the Blackout Was Happy News," Business Week , September 15, 2003, p. 32.

"Vestas CEO Resigns," Modern Power Systems , December 2004, p. 3.

Wustenhagen, Rolf, "Sustainability and Competitiveness in the Renewable Energy Sector: The Case of Vestas Winds Systems," Greener Management International , Winter 2003, p. 105.

—M.L. Cohen

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