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“Going forward, we will continue to deliver solutions with the lowest cost of energy by enhancing our technology and service leadership.”

Bert Nordberg
Chairman of the Board of Directors

Standing strong in a changing market environment

The future looks bright
Although we acknowledge that our market conditions are changing, we continue to look forward to improving our efficiency and competitive position. Renewable energy’s journey to become mainstream energy continues to progress, driving a positive long-term outlook and creating multiple opportunities for the wind energy sector. These are opportunities that we will take advantage of with the right strategic approach and the right management team in place, and I am confident that we will achieve our strategic ambitions.

The route to continuing leadership in sustainable energy
I want to highlight some steps on our journey to becoming the global leader in sustainable energy solutions.

In 2017, we announced a collaboration with Windlab Limited, an Australian-based developer, to create the world’s first utility-scale, fully integrated wind, solar, and battery project. The Kennedy project is designed to shape a path forward for how to integrate more renewable energy into the energy mix and address grid stability challenges that have been a traditional restraint to greater uptake of renewable energy. Learnings from this project ultimately can help accelerate the global transition to an energy mix led by renewable energy.

We have also engaged in a collaborative partnership with battery manufacturer Northvolt AB. This initiative, like Kennedy Energy Park in Australia, is about leveraging Vestas’ core, wind expertise, as a strong base for creating smart, sustainable energy solutions.

Inevitably, short-term results are impacted by current market challenges, but we strongly believe that successful execution of our strategy will lead us to new growth opportunities and sound profitability. Our financial performance in 2017 allowed the Board to increase cash returns to our shareholders, as demonstrated by our dividend and the completion of two share buy-back programmes during the year.

I would also like to take this opportunity to thank our customers, shareholders, and employees. You all make the company successful, and you enable Vestas to be a key driver in the world’s transition from fossil fuels to renewable energy.

Bert Nordberg
Chairman of the Board of Directors

Quick links to annual report 2017 (pdf)

Annual report 2017 (full report)

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“Vestas is financially strong and well prepared to meet the opportunities and challenges of the ever- evolving energy market.”

Anders Runevad
Group President & CEO

Strengthening our leadership position in a transitional market

The route to continuing leadership in sustainable energy
I want to highlight some steps on our journey to becoming the global leader in sustainable energy solutions.

Quick links to annual report 2017 (pdf)

Annual report 2017 (full report)

Download specific sections

Corporate strategy

The decarbonisation of the energy sector is underway, and estimates show that renewable energy will dominate future power generation. Wind energy is becoming a mainstream source of energy, and the long-term outlook for renewable energy creates multiple opportunities for the wind energy sector.

Vestas remains committed to its vision to be the global leader in sustainable energy solutions. Wind power will remain the core of Vestas’ offerings, but at the same time the company envisions that a broadened focus on sustainable energy solutions will enlarge the wind turbine market, enable new revenue streams, and expand Vestas’ presence in the market. In 2017, Vestas showcased what future sustainable energy solutions would look like by combining wind, solar, and battery energy storage in the world’s first utility-scale on-grid hybrid project.

To support its overall vision, Vestas remains dedicated to its four strategic objectives of being the global leader in the wind power plant solutions market and global leader in the wind power service market, while delivering the lowest cost of energy solutions and best-in-class global operations.

At the same time as wind energy is becoming the lowest cost of energy solution in many markets, competition in the industry has become even more fierce, while renewable energy markets are transitioning away from tax and policy support to more competitive tender structures. In this environment, Vestas has delivered on its strategy to grow faster than the market and produce best- in-class margins, and has strengthened its global leadership in all three business areas: onshore, off- shore, and service.

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Outlook

Outlook 2018
Revenue is expected to range between EUR 10bn and 11bn including service revenue, which is expected to grow. Vestas expects to achieve an EBIT margin of 9-11 percent with the service EBIT margin remaining stable.

Total investments* are expected to amount to approx. EUR 500m, and the free cash flow* is expected to be minimum EUR 400m in 2018.

It should be emphasised that Vestas’ accounting policies only allow the recognition of revenue when the control has passed to the customer, either at a point in time or over time. Disruptions in production and challenges in relation to shipment of wind turbines and installation hereof, for example bad weather, lack of grid connections, and similar matters, may thus cause delays that could affect Vestas’ financial results for 2018. Further, movements in exchange rates from current levels may also impact Vestas’ financial results for 2018.

Outlook 2018
- Revenue (bnEUR)	10-11
- EBIT margin (%)	9-11
- Total Investments* (mEUR)	approx. 500
- Free cash flow* (mEUR)	min. 400

*Excl. the acquisition of Utopus Insights, Inc., any investments in marketable securities, and short-term financial investments.

Updated long-term financial ambitions
Vestas envisions market conditions which in the long term will reflect wind power having achieved merchant levels in the vast majority of markets. The wind industry is undergoing a transition towards a more mature, unsubsidised renewable energy industry. This transition leads to a highly competitive market, and will likely drive a further consolidation in the industry. Beyond the transition, a matured market for wind energy creates opportunities for Vestas to leverage and strengthen its leadership position.

Within this context, Vestas is able to present updated long-term financial ambitions that reflect its projection for market conditions and the presumed result of its strategy – including initiatives that are currently being undertaken.

During the transition, revenue in the Service business is expected to grow organically by at least 10 percent annually, with stable EBIT-margins compared to 2017.

Updated long-term financial ambitions
Revenue	Grow faster than the market and be market leader in revenue
EBIT margin	At least 10 percent
Free cash flow	Positive each year
ROIC	Double-digit over the cycle

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How Vestas performed and created value in 2017

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Realised 2017	Guidance 2017
EUR 10bn	EUR 9.5bn-10.25bn	Revenue reflecting high activity levels – albeit a 3 percent decline compared to record-high revenue in 2016
12.4%	12%-13%	EBIT margin impacted by lower volumes combined with lower average project margins in the Power solutions segment, partly offset by higher Service margins
EUR 1,218m	EUR 1,250m-1,250m	Free cash flow* generated from solid results in the underlying business; guidance updated in January 2018
EUR 407m	approx. EUR 400m	Net investments* in line with expectations driven by tangible blade investments and capitalised R&D projects, partly offset by sale of office buildings

* Before investments in marketable securities and short-term financial investments and incl. proceeds from sale of office buildings.

Activities in the Power solutions area

Order intake and financial performance
Vestas’ total installed onshore capacity increased from 79 GW in 2016 to 88 GW in 2017 – an increase of 11 percent.

In a rapidly changing market, Vestas achieved an increase in order intake compared to 2016, with a record-high 11,176 MW. This also resulted in an order backlog of 11,492 MW. Activity levels remained at a high level with more than 11,237 MW produced and shipped and 8,779 MW delivered to the customers.

Revenue from Power solutions decreased by 6 percent to EUR 8,431m. The EBIT margin for the segment was 13.5 percent in 2017, down 2.4 percentage points from 15.9 percent in 2016.

Global trends in the onshore wind energy market
As a result of an improved economics of wind power, several markets adopted auctions in 2017, and the trend is expected to continue.

The transition towards market-based solutions has increased the competitive pressure, but is a long-term positive for the industry, and the ability for wind power to compete directly with other sources of energy is what the industry has been striving for all along.

Technology development and optimisation of the production
The ability to continue to grow faster than the market requires a constant development of more efficient wind turbines as well as a continuous optimisation of the manufacturing setup.

During the year, several upgrades were made to Vestas’ product portfolio. New rotor sizes were introduced to both turbine platforms in the portfolio. The 3 MW platform was upgraded to 4 MW with the introduction of three new variants, including the V150-4.2 MW™, Vestas’ largest onshore wind turbine, offering an increase of up to 56 percent in annual energy production since the launch of the platform in 2010 (comparison based on V112-3.0 MW™ vs. V150-4.2 MW™).

A lean and scalable manufacturing setup remains a top priority for Vestas in order to meet the requirements of a market environment in constant change. In 2017, Vestas expanded its global footprint with the opening of the blade factory in India. Besides supporting a stronger presence in the Indian market, the factory will be utilised in the entire Asia Pacific region.

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Social and environmental performance

Vestas strives for driving social and environmental sustainability in operating the business and its impact on the communities where the company plays a role. This approach strives to achieve the company’s mission of benefitting the planet in delivering best-in-class renewable energy solutions for Vestas’ customers.

Vestas acknowledges that producing solutions to harness wind energy makes a small negative impact on the environment. Together with its suppliers and customers, Vestas is committed to reducing this impact to the greatest extent possible, and believes that it is a corporate obligation.

Minimising Vestas’ environmental impacts include those manifested over the operational lifetime of a wind turbine. Progress was made in 2017, with the product carbon footprint target set for 2020 – a reduction of 5 percent versus 2015 – reached three years ahead of schedule, and a target for further reduction by 2020 has been set.

Vestas continues to increase the share of renewable energy consumption and has joined the organisation RE100, underlining the commitment to 100 percent renewable electricity. Since end of 2016, Vestas has increased the share of renewable energy of its total energy consumption from 52 to 57 percent.

Vestas’ commitments to sustainability are also reflected in the Code of Conduct and supporting policies on human rights, health, safety and environment. In 2017, the new Code of Conduct was rolled out to employees and business partners.

To support social sustainability, Vestas conducts Social Due Diligence to ensure social risks are mitigated and community development opportunities are identified. Such initiatives are right now ongoing in markets such as India, Mexico, and South Africa.

In 2017, Vestas continued to reduce the number of injuries and managed to stay below the target rate. Despite a continued reduction in injuries, a Vestas employee and a contractor employee suffered fatal injuries. A number of health and safety initiatives were started in 2017, complementing existing initiatives that continue to be rolled out.

Read more (pdf)

Standing strong in a changing market environment

Quick links to annual report 2017 (pdf)

Strengthening our leadership position in a transitional market

Quick links to annual report 2017 (pdf)

Corporate strategy

Outlook

How Vestas performed and created value in 2017

Activities in the Power solutions area

Activities in the Service area

Activities in the Offshore wind power area

Social and environmental performance