For full-year 2016, revenue amounted to EUR 10.2bn, EBIT margin before special items was 13.9 percent, total net investments* were EUR 617m, and the free cash flow* amounted to EUR 1,564m – in line with the expectations to revenue of EUR 10.0bn-10.5bn, EBIT margin before special items of 13-14 percent, total net investments* of approx EUR 600m, and free cash flow* of EUR 1,500m-1,600m. The activity level and earnings of the period were driven by the stable execution of strong order books for wind turbines and service, both of which continued to grow during the year as a result of solid execution and a favourable market environment.

The wind turbine order intake increased from 8,943 MW in 2015 to 10,494 MW in 2016 and the value of the service order backlog increased by EUR 1.8bn to EUR 10.7bn.

For 2017, Vestas expects revenue to range between EUR 9.25bn and 10.25bn including service revenue, which is expected to grow. Vestas expects to achieve an EBIT margin before special items of 12-14 percent with the service EBIT margin remaining stable.

Total investments** are expected to amount to approx EUR 350m, and the free cash flow** is expected to be minimum EUR 700m in 2017.

As a result of the strong performance during the year, the Board of Directors recommends to the Annual General Meeting that a dividend of DKK 9.71 per share, compared to DKK 6.82 last year, and equivalent to 30 percent of the net profit for the year, be distributed to the shareholders.

The expected net proceeds from the sale of the office buildings announced yesterday will be distributed to shareholders through a DKK 705m (approx EUR 95m) share buy-back programme to be initiated today.

*) Before investments in marketable securities and short-term financial investments.
**) Before investments in marketable securities and short-term financial investments, and incl. expected proceeds from sale of office Buildings.

High activity levels across the board in 2016

The market environment continues to be very supportive for the wind power industry with regulatory policies generally providing a favourable backdrop for industry stability. Combined with the continuously improving economics of wind energy, the future looks bright for increasing wind energy’s share of the energy mix.

Vestas is a financially strong and operationally effective organisation, delivering solid 2016 performance with strong revenue and earnings growth. Once again, we realised strong cash flows, which are increasingly created by the earnings we generate.

With total net investments of EUR 617m, we are also preparing for the future. We need to continuously introduce new and effectively integrate proven technologies into our products and services. In 2016, we invested more in R&D than any of our peers and continued launching product upgrades and other innovations that can lower the cost of energy.

We also achieved important safety milestones in 2016, with three factories reporting no lost time injuries and an overall reduction in total recordable injuries across Vestas’ factories of 30 percent. Any injury is unacceptable as it not only affects our daily business but more importantly our families. Safety must always come first and it is an essential prerequisite for world-class operations.

Vestas achieved record-breaking order intake for the year, and amongst others, announced 31 orders in 31 days, across 12 countries, and five continents in the month of December, demonstrating once again the power of Vestas’ global reach.

When listing some of the highlights, one always risks omitting others. The 1 GW Fosen/Hitra order in Norway and the Wind XI project in the US, which has a potential of up to 2 GW, stand out as high points on the order front in 2016. In the coming years, our ambition is to further develop and expand our market position.

During the year, we grew our multi-brand service capabilities by acquiring the Germany-based independent service provider Availon Holding GmbH. Multi-brand built strong momentum in 2016, reaching approx 8 GW of non-Vestas turbines in the service backlog.

The joint venture MHI Vestas Offshore Wind showed major progress during 2016 by announcing four firm and unconditional orders. Based on these levels of order activity, the joint venture finds itself well positioned as one of the strongest players in the offshore market.

In 2016, Vestas continued to optimise its overall manufacturing and supply chain competitiveness in response to evolving market conditions. Unfortunately, we had to reduce the staffing levels at the blade factory in Lem, Denmark. However, the factory remains a very important part of Vestas’ global manufacturing footprint.

Raising the bar

Vestas is now stronger than ever across the business. Our current success, however, is no guarantee for future prosperity. To beat the competition on all parameters, we will build further on our capabilities to integrate new technologies and ensure the lowest possible cost of energy.

To continue leading the industry, Vestas needs to do more in all parts of the business. Towards 2020, three key themes shape Vestas’ approach:

· Raising the bar – Vestas will set even higher, more ambitious targets to push ourselves to stay ahead of competition.

· Refining initiatives – Re-scoping or expanding Vestas strategic initiatives to reflect new market realities.

· Accelerating execution – Accelerating execution of new and existing initiatives to deliver on higher targets.

Global reach, technology and service leadership, and scale remain the foundation for Vestas’ unique position in the market place and will be our key differentiators to secure a leadership position.

On that note, let me conclude by thanking all employees in Vestas for their hard work and dedicated efforts throughout the year. We reached many milestones and set new records, and I thank all of you for your tremendous dedication and efforts during 2016.

Record high activity

Project performance

2016 showed a record strong order intake for our Project business. The order intake during 2016 amounted to 10,494 MW corresponding to EUR 9.5bn. Compared to 2015, the order intake in MW for the year increased by 17 percent.

All regions contributed to the increase in order intake. The US market showed a strong demand especially during December 2016, while the steady growth continued across the markets in Europe, Middle East, and Africa and Asia Pacific.

Final projects delivered to the customers totalled 9,654 MW, which was a 29 percent increase compared to 2015. The growth was in particular driven by increased deliveries to the US market. Americas accounted for 50 percent (2015: 45 percent), EMEA for 41 (2015: 49 percent) percent, and Asia Pacific for 9 percent (2015: 6 percent) of the deliveries in MW.

At the end of the year, the order backlog for the Project business amounted to 9,530 MW equalling EUR 8.5bn. Compared to last year, the order backlog in MW increased by 9 percent. Despite the increase in delivery of wind turbines, the order backlog has developed positively due to the strong order intake.

Service performance

The service activity was at a higher level compared to last year, due to a combination of organic growth and acquisitions. By the end of 2016 Vestas has more than 37,000 wind turbines under service, equivalent to approx 71 GW.

At the end of 2016, we had service agreements with expected contractual revenue of EUR 10.7bn, up 20 percent from 8.9bn in 2015. At the end of the year, the average duration in the service order backlog was approx six years, which was stable compared to last year.

Strong financial performance across the board

The higher activity levels resulted in a revenue increase of 22 percent compared to 2015, while at the same time fixed costs were kept firmly under control leading to a double-digit EBIT margin before special items of 13.9 percent – an increase of 3.7 percentage points – and the highest net profit ever.

The strong financial performance was also reflected in the cash flow generation. Combined with continued well managed operations, as measured by net working capital, free cash flow* amounted to more than EUR 1.5bn. And yet again, as in 2015, the free cash flow was primarily generated by operating earnings confirming the good development of the company.

As a result of the strong financial performance, we are also seeing the balance sheet continuing to improve. The average net interest-bearing position was positive of EUR 2,111m in 2016 compared to EUR 1,721m in 2015, which was an improvement of 23 percent, driven by strong cash flow during the year.

All in all, 2016 was a year well executed which is clearly reflected and summarised in the return on invested capital (ROIC) that increased to 265 percent at the end of 2016 – the highest level ever – and hence, the strong shareholder value generating capabilities of the company continues at a very high level.

Capital allocation priorities

The main priority is to invest in Vestas’ corporate strategy and use capital resources for required investments and R&D in order to realise this strategy. As a player in a market where projects, customers, and wind turbine investors become larger, Vestas aims to be a strong financial counterpart.

Available capital resources may also be used for bolt-on acquisitions in order to accelerate or increase profitable growth prospects.

Any decision to distribute cash to shareholders will be taken in appropriate consideration of capital structure targets and availability of excess cash. The dividend policy reflects the general intention of the Board of Directors to recommend a dividend of 25-30 percent of the year’s net result after tax, which will be paid out following the approval by the annual general meeting. In addition, Vestas may from time to time supplement with share buyback programmes to adjust the capital structure.

*) Before investments in market securities and short term financial Investments.

Global trends

In 2016, global onshore installations is expected to decline to 55 GW compared to 59 GW installed in 2015. The deterioration was mainly caused by a slowdown in the Chinese market, where onshore wind power installations declined to 22 GW in 2016 – a decline of 22 percent compared to 2015. Excluding the Chinese market, global onshore installations is expected to increase by 2 GW in 2016.

Public policies that have supported renewable energy’s growth continue to evolve. Currently, investments in wind power are typically supported through financial incentive schemes remunerating the renewable power production. In some regions, support systems are becoming more market-based and moving towards systems providing support in addition to the market price – not in place of it. As long as such marketbased systems are structured in a way to create a level playing field for the different energy sources, Vestas does not expect this transition to be a disadvantage to the wind power industry.

We believe the future is bright for wind energy. Globally in 2016, wind energy is expected to have accounted for approx 18 percent of new installed electricity generation capacity, and that share is set to continue growing in the future.

Vestas is determined to continue leading the industry, and to working with partners in government and the private sector to realise wind power’s full potential as an affordable clean energy source and key climate change solution.

Vestas’ market development in 2016

Vestas’ installed capacity increased from 74 GW in 2015 to almost 82 GW in 2016 – an increase of 11 percent.

With deliveries across 34 countries in 2016, our wide geographic diversification remains a key strategic strength, allowing us to balance out the inevitable ups and downs in any given market. Our global presence in 76 countries across six continents underlines our ability to provide wind energy solutions anywhere in the world.

During 2016, we continued our focus on early engagement, thereby offering more attractive cost-effective wind energy solutions to the benefit of both our customers and Vestas. By early engagement with customers, for example on site design, we are able to unlock value and offer a more optimised solution.

Combined with the ongoing efforts to build closer and expand already existing customer relationships and partner with new customers in both mature and new wind power markets, we experienced order intake growth across all regions and signed orders in a total of 33 countries in 2016. Demand for wind turbines from Vestas’ 2 MW and 3 MW platforms remains strong. In 2016, approx two-thirds of the order intake was based on the 3 MW platform, while the remaining one-third related to the 2 MW platform.

Regional market Developments

In the USA, an extension of the American Production Tax Credit (PTC) was approved in December 2015, the main element of which was a two-year extension of the 100 percent value followed by a three-year phase-down period. The PTC extension provides the policy certainty necessary for effective business planning and investments. The longer-term certainty, alongside wind energy’s natural competitiveness against other power generation sources, will ensure an expected solid future for wind energy in the USA.

Europe remains a stable core market for Vestas. The German market continues to display its importance as it once again was our largest northern European market in terms of deliveries in 2016. We also entered into the largest single project in the history of the company in 2016 with the 1 GW Fosen/Hitra project in Norway.

In 2016, we continued to grow our presence in emerging markets. Order intake continued in Brazil and China, and Vestas also received orders in e.g. Honduras, Uruguay, Vietnam, Turkey, Morocco, Argentina, and Jordan.

Our ability to maintain a strong market position in countries such as the USA and Germany, our ability to sell large projects (e.g. the 1 GW project in Norway), and the continued focus on order intake in emerging markets clearly supports our strategic ambition to grow in both mature and emerging markets and we are comfortable maintaining our ambition to grow faster than the market.

Outlook and market trends for the service business

The service market is growing faster than the market for wind turbines and is becoming more and more important to Vestas as customers shift their focus from capital expenditure to total cost of ownership. The latest market reports indicate that the service market is expected to grow by 9 percent annually over the next 10 years.

Our service business is a key element in the company’s long-term corporate strategy. With data derived from the world’s largest installed fleet and more than 35 years of technical insight, our goal is to release the full potential of our customers’ wind power businesses. That is why a service partnership with Vestas stands apart.

Changes in customer needs are creating new trends in the market. Vestas is observing a customer trend away from availability towards a greater focus on lifetime service costs and output optimisation. Other general trends that can be observed within wind turbine operations and maintenance are the increased demand for unique offerings as opposed to standard products as well as greater importance of data solutions.

Finally, to succeed in the service market, understanding the commercial needs and the strategies of the asset owners are crucial.

Strategic position and ambitions for the future

More customers choose to build in-house service capabilities while more independent service providers are emerging, leading to increased competition. Thus, to maintain our leading position in the service market, we will continue to invest in our service business.

Vestas’ extensive data processing and asset management capabilities enable anticipating and planning service requirements. This means that we have been able to keep a Lost Production Factor consistently under 2 percent. Vestas’ technology and service know-how are mutually reinforcing elements in maximising wind power plant output and lowering the cost of energy.

As part of our goal to become the leader in the service solutions market, we will grow our multi-brand service solutions. Multi-brand service solutions offer a large opportunity as Vestas turbines cover approx 16 percent of the total installed fleet worldwide.

Vestas’ service business is expanding with an installed base of more than 37,000 wind turbines under service by the end of 2016, and with a revenue increase of 171m from EUR 1,138m in 2015 to EUR 1,309m in 2016. Combined with the global footprint of the service organisation and the unmatched ability to analyse data related to wind and weather conditions, the installed base of wind turbines gives Vestas a distinctive advantage which provides ideal conditions for stable growth going forward.

In 2016, the service business grew by 15 percent – excluding impact from acquisitions and foreign exchange rate developments, the organic growth amounted to 8 percent. Vestas’ service order backlog increased by EUR 1.8bn to EUR 10.7bn.

We will continue to expand the catalogue of service offerings and improve existing solutions to increase our customers’ output and lower the cost of energy. Based on current market opportunities and order intake, we have an ambition towards 2020 to grow the service business organically by more than 50 percent.

Acquisitions support fleetwide partner Growth

In December 2015, we acquired the independent US service provider UpWind Solutions, Inc., followed by the announcement in early 2016 of the agreement to acquire the Germany-based company Availon Holding GmbH. These acquisitions have strengthened our offerings within servicing of both Vestas and non-Vestas wind turbines and are expected to further accelerate the corporate strategy within the service area. The ambition is to become our customers’ preferred fleetwide lifetime service partner globally.

We are currently servicing more than 71 GW of installed capacity, to which the service backlog consist of approx 8 GW of non-Vestas turbines. We will use our unmatched database and analytics capabilities to further accelerate servicing of third-party wind turbines.

Vestas’ technology strategy

Being the global wind power leader requires a long-term line of sight in technology development. We continuously strive to bring commercially competitive products to the market in a profitable way. Vestas’ technology strategy derives its strength from market-driven product development and extensive testing at Vestas’ test facilities in Denmark – the largest test facilities in the wind power industry – and the UK. This enables Vestas to continuously introduce new and integrate proven technologies to create high-performing products and services in pursuit of the overriding objective: lowering the cost of energy.

By building on the existing 2 MW and 3 MW platforms, we secure an ability to grow profitably and deliver highly competitive and reliable products and services for our customers’ projects in all wind classes. For Vestas, industrialisation means moving from a “one-size-fits-all” approach to custom configurations based on modularised building blocks that enable Vestas to offer customers tailored solutions to meet project-specific requirements.

The modularity increases the flexibility of our product range by combining different modules with standardised interfaces, making it possible to optimally configure the wind turbine as well as the wind power plant for the local wind and grid environment. Vestas’ product range can thus match an increasingly wider variety of wind conditions, even within the same wind class, and in this way optimise wind turbine output and strengthen customers’ business case.

The efforts made as part of the technology strategy have resulted in steady reductions in the levelised cost of energy year-on-year.

Committed to remain the technology leader

We continue to be the technology leader in the wind power industry by translating our global reach and industry knowledge into new investments. Vestas combines its superior technical knowledge and insight in how we maximise components and technical systems to deliver the lowest levelised cost of energy for our customers.

From the design of the first wind turbine on the 3 MW platform years back, comprising just one size and suitable for a single type of site, we have now developed a whole family of wind turbines within the same platform, based on relatively few, interchangeable parts. Rotor diameters now range from 105 to 136 metres and cover all wind classes within the wind segment. Using proven technologies like a full-scale converter, the 3 MW platform meets even the most challenging grid requirements providing excellent energy yield in all wind and weather conditions.

The 2 MW platform continues to be a preferred choice for many of our customers. Vestas’ 2 MW platform is one of the most trusted platforms in the industry providing customers with great business case certainty. With many new orders in the USA for the V110-2.0 MW turbine in 2016, the platform once again confirmed its flagship status in the market.

Investing in new technology

Leveraging on our world-class data collection is key when developing new technologies and solutions to our customers. Vestas’ product development, value chain simulation, and operations & maintenance performance and optimisation, are all founded on high performance data computing. Vestas and its external partners utilise big data in all stages of the innovation and implementation process of new technologies.

Investments have contributed to creating the highly data-driven business Vestas is today with an unmatched ability in the wind power industry to create and utilise smart data to lower the cost of energy. Equally important is to use Vestas knowledge to overcome and eliminate risks associated with new technology.

The multi-rotor spins off new knowledge

Continuing to reduce the levelised cost of energy in the long-term will require new solutions and new ways of thinking. In cooperation with the Technical University of Denmark, we have installed a concept demonstrator to test the technical feasibility to operate and controlling a multi-rotor wind turbine.

The multi-rotor concept demonstrator was installed in April 2016 and entered the second test phase mid-September, during an official launch event at the Risø test site in Denmark.

Flexible, asset-light, and low-cost manufacturing footprint

2016 was another busy one for Vestas. The number of MW produced and shipped reached 9,957 MW (4,264 wind turbines), compared to 7,948 MW (3,330 wind turbines) in 2015. A further ramp-up of the production was required in 2016 due to the high activity level.

The increased activity level in 2016 was achieved without adding new factories to our current manufacturing footprint, highlighting the flexibility and strength of the operating model that was introduced during the turnaround years.

The collaboration with our suppliers has generally moved to a new level of maturity, and a supplier account management programme is now being rolled out, similar to the one used for customers.

We are forming close partnerships with large suppliers and involve these in the development of products and processes, as the suppliers often possess many years of knowledge and experience that can be utilised to the benefit of both parties.

During 2016, we took a great step forward with Vestas cost-out programmes in all markets, making our cost set-up even more competitive. Competition remains strong in all markets so further progress on the cost-out journey will have to continue in coming years.

The Lost Production Factor remains at a low level of under 2 percent demonstrating Vestas’ high quality levels and that we have maintained a well-functioning operation throughout the ramp-up.

In 2016, we unfortunately had to reduce the staffing levels at the blades factory in Lem, Denmark by approx 300 employees. The reduction at the Lem factory was necessary due to its high manufacturing costs compared to the market level as well as the need to strengthen Vestas’ overall manufacturing and supply chain competitiveness in response to evolving market conditions. However the factory in Lem remains a very important part of our global manufacturing footprint.

Evolution of manufacturing footprint

To ensure profitability in new markets with high growth potential, we have outlined separate plans for the target markets China, India, and Brazil. Local presence and local sourcing is of great importance in these countries, be it for reasons of proximity to customers, cost-effectiveness, or fulfilling local content requirements in manufacturing.

In 2016, we announced that we will manufacture and intend to sell our largest onshore wind turbine in China, the V136-3.45 MW turbine. Vestas is continuously bringing its latest technologies, products, and service solutions to China and is determined to grow together with its partners in the country while simultaneously leveraging on the continuous supply chain localisation.

We have been present in Brazil since 2000 and announced 371 MW in firm orders in 2016. In addition to the sales office in São Paulo, Vestas inaugurated a hub and nacelle production facility in Aquiraz (Ceará) as well as established successful partnerships for producing blades and generators locally. Vestas is today included in the Brazilian Development Bank’s approved list of suppliers.

Late in 2015, we announced that we would build a blade factory in India, the construction of which is progressing according to plan. This will be the first significant addition to the manufacturing footprint since 2011 and is an example of our ambitions to grow in our strategic focus markets. The new factory will support Vestas’ operations in the Indian market as well as potentially servicing activities in other markets. It is expected to be fully operational by early 2017.

Equally important, during 2016, we started sourcing of blades from third parties in China, Turkey, and Brazil. Integrating external manufacturers into our global manufacturing set-up illustrates the scalability and flexibility of Vestas’ supply chain and our ongoing commitment to providing cost-effective wind power plant solutions for our customers.

In addition to these three specific growth markets, we continue working on establishing supply chains in new markets with growth potential around the world.