Saturday, February 02, 2008


Nordex is a German company that constructs and services wind power systems. In 2006 their production capacity was 584 MW which is about 3% to 4% of the industry’s global capacity. Nordex manufacture wind turbines primarily for onshore use. 99% of new wind installations are onshore. They have a range of turbines, the largest generating 2.5 MW of electricity. Rostock, Germany is the site for Nordex’s main manufacturing facility which currently has an annual capacity of 800 MW of turbine assembly. It is planned to increase capacity to 2,500 MW by 2011. There is also a turbine assembly facility in China which will undergo expansion in 2008 and a production facility is planned for the USA in 2009.


As at November 2007, Nordex had an outstanding order book of €2.5 billion. This is sufficient to keep them operating at full capacity until the second half of 2009. Europe is the dominant sales market for Nordex. Approximately 20% of sales are derived from their home market of Germany. They are market leaders in France and also have strong positions in the UK, Italy, Eastern Europe and Scandinavia. Whilst Europe has dominated sales to date, the USA and Asian markets are the fastest growing. Nordex is looking to capitalise on this with the establishment of manufacturing facilities in the USA and China. Some of the projects in the pipeline include 150 MW of new installations in China and a 640 MW project for Babcock & Brown in France and Portugal.

Margins and profitability

Nordex became profitable in 2006. EBIT margins have been steadily increasing and should be 6% in 2007. Market leader Vestas has an EBIT margin of 9%. Over the medium term (3 – 5 years) management forecast the EBIT margin to widen to 9 – 12%.

Downside risks

The biggest risk Nordex faces, along with most of its competitors, is execution risk. The risk of demand falling away is low. As governments and consumers throughout the world become more conscious of climate change risks, governments are increasingly mandating higher proportions of electricity be derived from renewable energy sources. Wind power is seen as one of the most effective ways to meet these requirements. The risk of price falls for turbines is also minimal given the robust demand environment. But the pressures of a high demand, high growth environment increases the level of execution risk. Nordex’s third quarter 2007 results were not well received by the market. During the quarter projects fell behind schedule due to supply difficulties.

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