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“Wind power has gone from niche to mainstream. The wind sector now needs to progress further - to becoming a baseload energy source.”

Bert Nordberg
Chairman of the Board of Directors

Letter from the Chairman & the CEO

Continued leadership
A remarkable 2018, where both Vestas and the industry reached new milestones, has come to an end and we have entered a new year that could set the industry’s direction for the future. While Vestas continued to lead the industry on key parameters such as sales, profitability, and technology, the industry continued its transition towards more complex and market-based mechanisms. In the coming years, we must build on these achievements and adapt to the new reality in order to realise our vision as the Global Leader in Sustainable Energy Solutions and help create a world powered by sustainable energy.

Together with our customers and partners, we are leading the way in transforming renewable energy into mainstream energy, hereby removing hundreds of millions of tonnes of CO2 from our atmosphere, and helping the world meet its growing energy needs sustainably.

The 100 GW milestone
2018, was a year of many highlights. We broke our order record again; we entered into new markets; we introduced new technology solutions; expanded our footprint and ramped up manufacturing; and we took a leap within digitalisation with the acquisition of Utopus Insights. To us, the biggest highlight in 2018, which we are very proud of, was that we became the first company to install 100 GW of wind turbines when we completed the 250 MW Arbor Hill project in the USA for MidAmerican Energy Company. Vestas pioneered wind energy 40 years ago and to install 101 GW in around 80 countries across six continents is something we should be proud of. The 100 GW has been made possible through our relentless commitment to design and deliver wind energy solutions all over the world. A commitment that everyone in Vestas has shown throughout the years. A well-deserved congratulation to everyone, past and present, who has helped Vestas reach this important milestone.

Looking ahead
Today, wind energy has manifested itself as the cheapest source of electricity in many markets, which through increased efficiency has helped wind and solar energy reach 1,000 GW of installed capacity by 2018. This highlights the tremendous progress the industry has made in the last 40 years, but also why it is more important than ever that we continue to lead the industry.

With more than 100 GW of installed wind turbines, Vestas has installed around 20 percent of all wind capacity in the world, but with the next 1,000 GW of wind and solar energy expected to be installed by 2023, we need to remain focused on executing our commitments and priorities in the short term. By doing so, we sustain and strengthen the foundation that enables us to develop the sustainable energy solutions our customers and stakeholders need in the future.

From this foundation, we can strengthen our core within wind energy products, services, and solutions that combine wind with other renewable technologies; build on our industry-leading wind and weather data to introduce new digital solutions; leverage our unique global reach, scope and size to enter and win new growth markets; as well as understand and work with new and existing customers to deliver best-in-class sustainable energy solutions.

The 100 GW milestone proves that we have the innovative spirit, the persistence, the boldness and the aspiration to solve big challenges, enabling us to be the global leader in sustainable energy today and in the future.

Shareholder value is a top priority
Our financial performance in 2018, allowed us to continue returning value to our shareholders, as demonstrated by our dividend pay-out and completion of two share buy-back programmes. The ambition is to continue to provide value to our shareholders by balancing our capital resources for investments into innovating and industry leading sustainable energy solutions and as well returning excess cash through a combination of dividends and share buy-back programmes.

On that note, we want to thank all our stakeholders for your hard work and support in 2018, and we look forward to continuing our journey together.

Bert Nordberg, Chairman of the Board of Directors

Anders Erik Runevad, Group President & CEO

Quick links to annual report 2018 (pdf)

Annual report 2018 (full report)

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Corporate strategy

The global energy market is primarily faced with two major challenges: Meeting the growing global energy needs in a way that is sustainable while at the same time addressing climate change by decarbonizing existing energy systems. Consequently, estimates continue to show that renewable energy will dominate future power generation.

Creating the energy system for future generations
By developing wind power to become a mainstream and cost-efficient source of energy, Vestas has been and continues to be a cornerstone in making the world’s energy mix more sustainable. Vestas wants to take an active part in driving the necessary change of the existing energy system and create a sustainable energy system for future generations.

Vestas’ vision
Vestas remains committed to its vision: to be the Global Leader in Sustainable Energy Solutions, which, among other things, entails leading the wind power industry in terms of volume, revenue, and margins.

This vision sets a clear purpose and direction for Vestas’ employees and fuels its ambition to lead the global energy transition. To reap the benefits of this transition, Vestas continues to consolidate and expand its strong position within all three business areas: Power solutions, Service, and Offshore, while investing in the solutions and commercial capabilities needed to meet future market demand.

Mid-term objectives – Global leader in wind solutions
Technologies, policies, and markets are maturing and demand from customers are adapting to more market-based mechanisms. To reflect this reality, Vestas has updated its mid-term objectives of being Global leader in wind power plant solutions and Global leader in wind service solutions to include:

Leading in innovating products, services, and digital solutions that deliver the lowest cost of energy, increase the penetration of renewables, and help customers fully optimise value from renewable power solutions.
Being the preferred solutions provider and partner to the customers.
Leading by market share in established markets and competing for leadership in emerging markets.
Leading in profitability to enable us to reinvest into Vestas’ future innovation and competitiveness.

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Outlook

Outlook 2019
Revenue is expected to range between EUR 10.75bn and 12.25bn, including service revenue, which is expected to grow by approx. 10 percent. Vestas expects to achieve an EBIT margin before special items of 8-10 percent with a service EBIT margin of approx. 24 percent.

Total investments* are expected to amount to approx. EUR 700m in 2019.

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 2019. Further, movements in exchange rates from current levels may also impact Vestas’ financial results for 2019.

Outlook 2019
Revenue	EUR 10.75bn-12.25bn
EBIT margin before special items	8-10%
Total Investments*	approx. EUR 700m

*Excl. any investments in marketable securities and short-term financial investments.

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 power 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 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.

In the coming years, revenue in the Service segment is expected to grow faster than the market with an EBIT margin of approx. 24 percent. Return on Capital Employed has replaced Return on Invested Capital.

Long-term financial ambitions
Revenue	Grow faster than the market and be market
EBIT margin	At least 10 percent
Free cash flow	Positive each year
ROCE	Minimum 20 percent over the cycle

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Financial performance in 2018

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Realised 2018	Guidance 2018
EUR 10.1bn	EUR 10.0bn-10.5bn	Revenue
9.5%	9.5-10.5%	EBIT margin before special items
EUR 418m	approx. EUR 400m	Free cash flow*
EUR 603m	approx. EUR 600m	Total investments*

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

Activities in Power solutions

Highlights 2018	Americas	Europe, Middle East and Africa	Asia Pacific
Revenue	EUR 3,903m	EUR 3,354m	EUR 1,208m
Order intake - firm and unconditional orders	6,271 MW	5,599 MW	2,344 MW
Deliveries	4,996 MW	4,128 MW	1,723 MW
Order backlog – firm and unconditional orders	6,038 MW	7,023 MW	2,585 MW
Installed wind turbines in	10 countries	23 countries	6 countries

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Order intake and financial performance
The revenue for the offshore joint venture, MHI Vestas Offshore Wind A/S (MHI Vestas Offshore Wind), amounted to EUR 1.1bn in the calendar year 2018, which is in line with revenue in 2017. The net profit for the joint venture amounted to EUR 26m, which entails a contribution of EUR 13m in Vestas’ “Income from investments in joint ventures and associates”.

The intake of firm orders reached 3,180 MW in 2018, compared to 702 MW in 2017. Consequently, the firm order backlog increased to 3,838 MW by the end of 2018.

Well positioned to benefit from future growth
2018 was a year where the offshore wind power industry solidified its position as an affordable part of the mainstream energy mix. Furthermore, Taiwan and the USA announced the winners for their first offshore projects in both markets, as they lead the expansion of offshore wind power outside the countries around the North Sea.

MHI Vestas Offshore Wind has in 2018 secured a solid position to benefit from the strong growth that is expected in the next decade. Close to 2 GW of projects in the UK have been secured as firm orders. In Taiwan, 900 MW of preferred supplier agreements have been secured with two customers. In the US, the joint venture took a major step forward as it was named preferred supplier for the 800 MW Vinyard Wind project and is thereby well positioned for the build-up of offshore power in USA.

Financial ambitions
The V164 offshore wind turbine continues to be a success in the marketplace and as a result of a strong order intake, factories are ramping up production in anticipation of the increasing volume of new installations.

Accordingly, MHI Vestas Offshore Wind expects to double its revenue over a four-year period from a base of its completed financial year 2017/2018, while continuously improving profitability. In addition, the ambition is to build a leading offshore service business from the growing installed base.

Social and environmental performance

Highlights 2018	Global
Total recordable injuries (No.)	210
Emission of direct CO₂	69
Number of employees	24,648

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Highlights 2018	Americas	Europe, Middle East and Africa	Asia Pacific
Revenue	EUR 541m	EUR 956m	EUR 172m
Share of region’s total revenue	12%	22%	12%
Under service	32,549 MW	44,201 MW	9,594 MW
Order backlog – future expected contractual revenue	EUR 4,426m	EUR 8,477m	EUR 1,416m
Provides service in	17 countries	39 countries	11 countries

Highlights 2018	Global
Revenue	EUR 1,112m
Order intake – firm and unconditional orders	3,180 MW
Order backlog - firm and unconditional orders	3,838 MW
Order backlog – conditional orders and preferred supplier agreements	1,700 MW
Total installations	945 MW

Letter from the Chairman & the CEO

Quick links to annual report 2018 (pdf)

Corporate strategy

Outlook

Financial performance in 2018

Activities in Power solutions

Activities in Service

Activities in Offshore

Social and environmental performance