Gamesa attained all its targets for 2010, ending the year with a net cash position of 210 million euro, after generating 472 million euro in net free cash flow during the year. This was attained through a combination of two management strategies: strictly controlling costs and capex, and aligning manufacturing to the schedule for delivery to customers and collections.
The upswing in order intake in the final months of 2010 and the expansion of sales efforts during the year led to an order book of 1,414 MW for delivery in 2011 (+25% with respect to 2009 year-end), i.e. 48% of the wind turbine sales guidance for the year (2,800-3,100 MW).
Gamesa's consolidated sales amounted to 2,764 million euro in 2010, affected by the impact of the financial crisis on demand in 2009 (which slowed the pace of activity in the industry, particularly in the first half of 2010) and the strategy of adjusting manufacturing to delivery schedules. The wind turbine division sold 2,405 MW, i.e. within the guidance for the year (2,400-2,500 MW), including a growing proportion of international business, which accounted for 93% of total MW sold, up from 73% in 2009.
In 2010, Gamesa continued to focus on maintaining profitability and a solid financial position through the Cost Improvement Plan, which enabled it to save more than 100 million euro in 2010, resulting in an EBIT margin of 4.9% in this division (guidance for the year: 4.5%-5.5%) and a working capital/revenues ratio of -1%, well below the expected 20%.
This performance, plus the revival in the wind farm development and sale business, which contributed 10 million euro in EBIT in the second half, raised consolidated EBIT to 119 million euro. EBITDA amounted to 328 million euro and net profit to 50 million euro.
Despite the climate of uncertainty and the difficult economic situation in the industry, Gamesa expanded its workforce by 14% in 2010, to 7,262 employees. Gamesa created jobs in all markets, particularly India (where the workforce expanded 5-fold), China (+23.6%) and the US (+18.5%).
Cash flow in 2010 and the trading situation at the beginning of 2011 enable Gamesa to undertake its Business Plan 2011-2013 from a solid position. Consequently, it has decided to adjust some of its initial guidance for this year: the target ratio of interest-bearing debt to EBITDA is 2x (vs. 2.5x initially), and the target ratio of working capital/revenues is in the 15%-20% range (previously 20%-25%).
Wind turbines. Revived demand, and new markets and customers
During the year, Gamesa sold 2,405 MW and signed firm orders for a total of 1,996 MW in the second half of 2010, responding to a revival of demand and the success of the commercial expansion strategy introduced late in 2009. Deliveries increased by 11% to 2,685 MW, of which 80% were made in the second half, again confirming the seasonal fluctuations in this business.
The company continued to pursue its internationalisation strategy: international markets accounted for 93% of MW sales in 2010, compared with 73% in 2009.
Countries with greater wind resources and the fastest-growing countries increased their share of sales: the US continued to gain in importance, accounting for 28% of sales in 2010 (15% in 2009) despite the sharp reduction in new installations in that country during the year; China also contributed 28%, up from 15% in 2009; and India accounted for 8% of sales in the company's first year in that market. Spain accounted for just 7% of sales, down from 27% in 2009; the rest of Europe accounted for 22%, and the rest of the world for 7%.
In 2010, the Group expanded its commercial efforts into new countries and market segments, with the result that Gamesa entered 10 new countries and diversified its portfolio with 20 new accounts, including electric utilities, IPPs, financial investors and industrial groups. During the year, Gamesa strengthened its sales network by opening offices in Glasgow (offshore), Lyon, Athens, Gdansk, Mexico City, Sao Paulo and Singapore.
The company continued its policy of optimising capital expenditure, which amounted to 128 million euro in the wind generator division, focused on: manufacturing the new G9X-2.0 MW platform in China and commencing construction of two new production plants in the Chinese provinces of Jilin and Inner Mongolia; building new capacity in India (G5X-850 kW); and manufacturing the G10X-4.5 MW unit in Spain.
During the year, Gamesa continued to strengthen its world-leading position as a manufacturer of wind turbines, having sold 20,834 MW in thirty countries on four continents to date. That capacity avoids the emission of 31 million tonnes of CO2 per year.
Production capacity increased in China, India and Brazil
In 2010, Gamesa undertook a review of its production capacity which resulted in the reduction of 500 MW of blades in Spain (Alsasua, and reduction of capacity at Somozas) and increasing capacity in other countries by investing in growth markets such as China, India and Brazil:
——It ended 2010 with 1,000 MW of local capacity in China (G5X-850 kW and G9X-2.0 MW platforms). Additionally, construction commenced on two new plants, in Jilin and Inner Mongolia, which are scheduled to be completed in 2011;
——The process of industrialisation in India that commenced late in 2009 (200 MW in Chennai) advanced much faster than expected given the need to respond to strong demand growth; as a result, assembly capacity was increased to almost 500 MW in 2010. Gamesa plans to open a blade factory (300 MW of G5X-850 kW) in 2011 and continue to localise the G9X-2 MW in 2012;
——In Brazil, construction commenced on the nacelle assembly plant in the state of Bahia (300 MW) after Gamesa landed a contract to supply 42 MW (G87-2.0 MW) to Inveravante and signed a contract to develop 9 wind farms for Iberdrola Renovables, with a total capacity of 258 MW (G9X-2.0 MW).
Revenues from services increased by 39%, and MW under operation & maintenance contracts increased by 10%
During 2010, Gamesa continued to strengthen its O&M services area, which increased revenues by 39% to 312 million euro.
This area, which has over 13,600 MW under O&M contracts (10% more than in 2009), contributed 12% of the Wind Generator division's total revenues.
Wind farm development: profitability and monetisation
The wind farm development division experienced an upswing in construction and sales in Europe, the US and Latin America, with the result that it contributed 10 million euro to Group EBIT in the second half of the year.
In 2010, the division delivered a total of 593 MW and entered new markets such as Poland (32 MW) and Mexico (20 MW); it also landed new customers, such as Edison, Ikea and RWE.
At year-end, Gamesa had a pipeline of 22,661 MW in wind farms worldwide. It also had 396 MW in the final stages of construction and commissioning, as it progressed with the development of the pipeline with greatest visibility.
The wind farm business revived in the US and the first wind farm (38 MW) was commissioned there after two years of inactivity; additionally, joint development agreements with China's leading electric utilities totalled 2,426 MW at year-end. Under those agreements, wind farms with a total capacity of 256 MW were commissioned in the Shandong, Liaoning and Inner Mongolia regions.
Business Plan 2011-2013 and commitment to playing a significant role in the offshore market
On 7 October, Gamesa presented its Business Plan 2011-2013, which focuses on three strategic vectors: Cost of Energy (CoE), growth and efficiency. Gamesa will reduce its customers' CoE by 20% by 2103 and by 30% by 2015 by enhancing reliability, efficiency and availability of its product portfolio, both present and future. Gamesa aims to double R&D staff by 2013 and open five new engineering and R&D centres: Virginia, Glasgow (both focused on offshore wind power), Brazil, India and Singapore.
The company expects to progressively regain growth and sell 4,000 MW of wind turbine generators in 2013 (+15% compound annual growth rate). This division's EBIT margin will be 6%-7%.
The Business Plan 2011-2013 envisages a period of intense investment aimed at expanding operating capacity around the globe and at attaining a leading position in the technology (5 new onshore/offshore product families); it also plans to increase its local presence by opening up 24 new offices and expand in the main growth markets (India and Brazil) and those with considerable wind resources (China and US).
Gamesa has announced plans to make the UK its world offshore wind technology hub, with plans to invest over 150 million euro by 2014 in the installation of an offshore technology centre as well as developing manufacturing, port logistics and O&M capabilities in a number of UK ports (it is considering locations in Scotland). Gamesa's global offshore wind business will have its headquarters in London.
Gamesa is currently developing two families of offshore turbines (5 MW/6-7 MW) based on proven technology that was validated in the G10X-4.5 MW platform. The first two prototypes of the G11X-5.0 MW platform will be tested in the fourth quarter of 2012, and the pre-series will be ready in 2013. Gamesa is also working on offshore wind technology with Newport News Shipbuilding, a division of Northrop Grumman Corporation, which is a leading US defence contractor and America's largest shipbuilder.
In Spain, Gamesa has applied to the Catalan Institute for Energy Research (IREC) to set aside four positions for it to install its wind turbines in the ZÈFIR Test Station offshore wind testing plant (Tarragona), and it has just reached an agreement with E.ON to supply an offshore prototype in 2012.
