Vestas Share Price Jumps as it Agrees Credit Facility with Banks

on Nov 27, 2012

It would seem that the wind has finally started filling the sails of Vestas Wind Systems A/S (CPH:VWS), with the Danish turbine maker securing fresh funding from banks, which in turn sent the company’s shares up in Copenhagen trading on November 26. In addition, Bloomberg reported that the Aarhus-based company was in talks with Mitsubishi Heavy Industries (TYO:7011) to build the biggest offshore turbine in the wind-energy industry.

**Vestas Secures a €900 Million Credit Line**
As noted in a company press release, Vestas agreed a revised €900 million (£727 million) loan facility with the existing group of nine Nordic and international banks to replace the current €1.3 billion syndicated credit facility. Vestas notes that the revised credit line includes a €250 million amortising term loan to be repaid by January 2015, and another €650 million revolving credit facility which could be extended for another two years beyond that date.

“We are satisfied to have reached an agreement with our lenders,” commented Vestas President and CEO Ditlev Engel in the company press release. “It is in the interest of Vestas to reduce our debt and now we look forward to focusing all our efforts on the continuous development of a more scalable Vestas.”
**Shares Up**
The Financial Times reports that the announcement sent the shares of Vestas 22 percent up in mid-afternoon trading in Copenhagen. The shares of the Danish wind turbine maker have lost some 90 percent of their value in the last three years, with Vestas suffering frequent setbacks on account of its ill-timed expansion at the peak of the financial crisis and the unpredictable market for wind turbine manufacturing. Earlier in November, Vestas released its third quarter results, posting a 12 percent quarterly increase in net debt.

Some analysts cautiously note that the company has still a long way to go. “They have fewer (loan) facilities available than at the start of the year, so I don’t think this is saving the company,” notes Sydbank (CPH:SYDB) analyst Jacob Pedersen, as quoted by Reuters. “But seen in the light that the banks could have pulled the rug away from under the feet of Vestas, or forced it to raise capital, this is of course positive news.”

!m[The Danish Wind Turbine Maker Proceeding With Mitsubishi Heavy Talks ](/uploads/story/909/thumbs/pic1_inline.png)The credit line agreement, however, ended speculation that Vestas might need to issue shares, with the company noting in a press release that “the revised facilities are sufficient to support the company’s new operating business model without the need for an equity issue.” In addition, Reuters quotes Michael Jorgensen, an analyst at Alm Brand (CPH:ALMB) as saying that “a potential share issue will not be demanded by the banks now and that is an absolute positive.”

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**Mitsubishi Heavy Talks**
On November 27, Bloomberg reported that Vestas was talking with the Japanese heavy machinery maker Mitsubishi Heavy about developing an 8-megawatt offshore wind turbine, about 30 percent more powerful than the current record holder.
“The revised loan means Vestas is now in a better position to negotiate with Mitsubishi,” notes Haakon Levy, an analyst with DNB Markets, as quoted by Bloomberg. “A joint venture would make sense. Mitsubishi can contribute industrial expertise, a strong balance sheet and access to the Japanese market, and Vestas its technology and experience in the sector.”

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