10. Vestas Wind Systems A/S (OTC:VWSYF) is a Danish company that has installed wind systems for more than 30 years and has installed more than 41,000 turbines worldwide. The company’s market cap is about $7.82 billion. The company is on track to have its best year ever in terms of new orders, taking $5.45 billion in orders for the first half of 2010. The downside is that Vestas’s gross margins for the first half of the year were a meager 5%, down from nearly 22% in 2009.
Vestas has opened an R&D center in Beijing and already has its largest manufacturing operations in China. But China has not been good to the company. Non-Chinese-owned companies, including Vestas, claimed 71% of China’s wind power market in 2005. In 2010, that number has fallen to just 14%. The good news is that China’s market is so large that Vestas will still sell more turbines in China than anywhere else.
11. Siemens AG (NYSE:SI), a German conglomerate with a market cap of about $98 billion, offers products and services in a wide range of renewable technologies, including wind. The company has installed about 9,000 megawatts of wind turbines globally and is also a major player in solar thermal plants and transmission and distribution technology.
Siemens does not have the same level of exposure in China as do GE and Vestas. At the end of its third quarter in June, Siemens reported new orders from China of $5.57 billion compared with new orders worth $16.22 billion from the US. Siemens still generates more than twice the revenue in its fossil power division as it does in renewables, but fossil revenue is falling slightly and renewables revenue is rising dramatically. Much of that rise is due to the company’s success with offshore wind projects. Not surprisingly, the company’s power transmission division is contributing significantly to revenue as Siemens wins orders to connect offshore wind farms to the electricity grid.
12. China Longyuan Power Group Corp. Ltd. (Hong Kong) is not strictly a wind power company, but that is the company’s original and largest business. It nearly doubled its installed base to more than 4,500 megawatts of wind power in 2009, putting it among the top five wind energy companies in the world. The company completed its IPO on the Hong Kong exchange in December 2009, raising $2.26 billion.
China Longyuan, like other Chinese wind turbine makers Sinovel and Xinjiang Goldwind, stands to profit handsomely from the government’s plan to spend more than $700 billion in the next ten years to build cleaner energy supplies. In its 2009 annual report, the company noted that it planned to install another 2,000 megawatts of wind power in 2010. In the first half of 2010, earnings jumped nearly 60%.
Wind and Solar Farm Construction
As solar PV, solar thermal, and wind generation scale up, each confronts one of the hardest nuts to crack with alternative energy: how to get the electricity onto the grid? The sun typically shines brightest and the wind blows hardest where the population tends to be low. The distances that the power must travel to reach consumers are sometimes vast, and there are few points of convergence with the existing electricity grid.
Building these connections is expensive, but that may not be the biggest problem. Most people don’t want to have to look at the massive towers, and many property owners have banded together to oppose any development of power lines. A solution to this opposition will have to come from governments, and given how dysfunctional some governments are, we may have to wait a long time for a solution.
The number of companies that can tackle this kind of construction project is limited. Those that have experience doing this work are even fewer, but they are likely to be crucial to the development of large, utility-scale solar and wind projects.
13. ABB Ltd. (NYSE:ABB) is a Swiss company that manufactures all kinds of gear for the transmission of electricity. It also provides design and construction for the facilities needed to get wind and solar power onto the grid. The company has been around for more than 120 years and has a market cap of around $50 billion. As of December 2009, ABB had more than $7 billion in cash and about $2 billion of long-term debt. It generated over $3 billion in free cash flow in 2009. It’s solid.
Connecting alternative generation sources to the electricity grid and making the grid smart will generate billions of dollars in projects. Goldman Sachs has estimated that upgrading the global electricity transmission and distribution network will drive $750 billion in incremental spending over the next 30 years. ABB will be near the head of the line for a nice chunk of that.
If you’re looking for the next big thing in transmission and distribution, keep an eye on high voltage direct current (HVDC) transmission. This high-cost, complicated technology reduces energy lost to heat in electricity transmission, which in turn reduces the amount of electricity that has to be generated in the first place. This technology is already being used in some places, but widespread adoption remains in the future.
14. Iberdrola Renovables SA (OTC:IRVSF) is a spin-off of Spain’s giant Iberdrola SA electric utility company. Iberdrola retains more than 80% ownership in IR which is the world’s largest owner/operator of wind farms. Slightly more than half IR’s 10,752 megawatts of installed capacity at the end of 2009 was located outside Spain. Installed capacity growth year-over-year was roughly 16%.
IR posted 2009 revenue of about $1.2 billion in Spain and $1.1 billion in the US, the company’s two largest markets. IR will partner with Sweden’s Vatenfall to construct a 7,200 megawatt windfarm in the North Sea, currently scheduled to start construction in 2015. The company expects to install 1,000 megawatts of new capacity in the US in each of the next two years. IR is the second largest operator of wind farms in the US, with 41 facilities and more than 3,800 megawatts of capacity. IR’s focus on the US is its big gamble.