Forty years of progress, challenges, and opportunities
In 1979, Vestas delivered and installed its very first wind turbine for a customer in Jutland, Denmark. Around the same time, at the first World Climate Conference in Geneva, Switzerland, 50 scientists gathered to discuss climate change. Unaware of what was being installed just over 1,000 km away to the north, the scientists agreed that urgent action was needed to counter the alarming climate change trends they could observe around the world.
Today, 40 years on, wind energy and renewables have evolved tremendously, multiplying turbine output significantly to the benefit of Vestas’ customers and the global environment. In fact, the technological leaps witnessed in the last ten years, along with the sharp decline in the Levelised Cost of Energy, have made renewables the cheapest electricity source in two-thirds of the world’s countries. As a result, the technology required to make the transition to renewable energy is available here and now; and this availability, combined with climate targets, will continue to drive global demand for renewables long into the future.
Manifesting our leadership in a tough market
In this environment, in 2019, Vestas continued to push itself and the industry to higher levels, including breaking our order record again, launching a new modular platform, achieving record high profitability in Service, expanding our footprint and scaling up manufacturing. With a record order intake of 17.9 GW, continued growth in Service, the highest order backlog of EUR 34bn and an unprecedented volume of deliveries, 2019 was our busiest year to date. Compared to 2015, we doubled our order intake and, once again, delivered market-leading profitability. This performance enabled us to create value for our shareholders, as demonstrated by our dividend pay-out and completion of a share buy-back program.
However, alongside Vestas’ results in 2019 and the technological and competitive milestones, the industry still faces major challenges and impediments caused by trade wars and tariffs. In 2019, industry rules changed, the cost of raw materials and transport went up, and capacity became limited. Combined with the industry’s continued competitiveness, these factors led to an increase in the profitability required to sustain technological development, causing many competitors to struggle and, in some cases, close down and leave the industry.
Leading the industry, building new partnerships
For Vestas, the reality of the climate crisis shapes, informs and motivates our business at every level. Every day, we go to work knowing that what we do supports the global transition from traditional energy sources to renewables, helping to make the world a better and more sustainable place. First and foremost, this entails designing, delivering and servicing sustainable energy solutions that help our customers’ businesses thrive, while reducing CO2 emissions from their energy mix. And we are pleased to say that Vestas is doing well; so well, that in 2019 we sold, delivered, and serviced record amounts of wind energy solutions, consolidating our leadership position and, most importantly, working to ensure a healthy planet for future generations. We embrace our leadership role within the industry, and we are inspired to continue driving our solutions to provide excellence for our customers.
To exploit present and future growth, we must constantly consider how to leverage our size, scale, and volumes. Advantages of scale will underpin our future success, from designing and building turbines, to expanding our digital and multi-brand capacities, to establishing partnerships with suppliers willing to take on larger volumes. Such efforts will enable us to serve a truly global and growing marketplace for sustainable energy solutions.
Our commitment to help address the climate crisis also means taking on more responsibility. To this end, with this annual report we are launching our new sustainability strategy, called “Sustainability in everything we do”. This strategy sets out a range of commitments, such as achieving carbon neutrality by 2030 and producing zero-waste turbines by 2040. As an example, we started converting our benefit and service cars to electric vehicles on 1 January 2020. In combination, these initiatives will have a significant positive impact on Vestas’ sustainability performance, while driving improvements across the entire wind energy value chain to the benefit of our global customers and wider stakeholders.
To engage more actively in global conversations on the electrification of the energy system, in 2019 we entered a partnership with Mercedes-Benz EQ Formula E team. Through this partnership, we will raise awareness of Vestas and the need for electrification, with the aim of bringing sustainable energy into the mainstream. As energy-based sectors such as mobility and heating become electric, increased demand for electricity will drive wind energy’s penetration of the energy system.
Maintaining our strategic focus
The backbone of our expansion remains our winning strategy, which is based on our three core business areas: onshore wind, offshore wind, and service solutions. To sustain our success, we continue to leverage our technology leadership, scale and reach, while also working even more closely with our customers and partners. And through our passion and accountability, we aim to deliver what we promise – or speak up early to address challenges and avoid unexpected costs.
In 2019, Vestas once again pushed the boundaries of technology further, having invested EUR 729m, more than any other company across the industry. We introduced the EnVentusTM platform architecture, taking a big leap into modular product development. We also invested heavily in localisation and scale in order to meet growing demand for our sustainable energy solutions. At the same time, we continued to invest in the technology that will be essential to achieving full decarbonisation, such as hybrids, grid integration and Power-2-X.
During the year, as wind energy became increasingly competitive, new markets opened and others re-opened, which meant that all regions contributed to our overall results. Once again, the USA was our largest market, and while traditionally strong markets such as Germany and India remained in a state of temporary uncertainty, others such as Brazil, Poland, and Australia showed great progress in order intake, localisation and execution.
Preparing for the future
Unlike 40 years ago, it is clear today that renewable energy is the future. To ensure Vestas can maximise the opportunities and benefits arising from the growth of renewables, in 2019 the Board and Executive Management made changes to the company’s leadership. These changes were designed to support strategic continuity, value-based leadership and long-term succession planning. Underlining our Service business’ importance, the Head of Service was appoined to Executive Management, while our emphasis on value-based leadership was highlighted when People and Culture were elevated to fall under the remit of Executive Management as well.
The year ahead will be even busier than 2019. It is therefore vital that we live by our values of simplicity, accountability, collaboration, and passion. Only in this way will we find efficiencies across the value chain that support our success; efficiencies that will help us further lower the Levelised Cost of Energy for the benefit of our customers, while ensuring our profitability and future investments in technology.
Almost everything in wind energy and renewables has changed since 1979, but one thing remains the same: urgent action is still required to divert our climate trajectory. Whether the scale of this challenge is articulated by 50 scientist in 1979 or 11,000 scientists, who in 2019 endorsed the “World Scientists’ Warning of Climate Emergency”, we continue to work as relentlessly today as we did 40 years ago to develop solutions for a carbon-free energy system. By doing so, we provide decision makers with one of the strongest tools to address the climate crisis, and the opportunity to access one of the world’s most efficient energy sources.
We want to thank Vestas’ employees for all their ongoing passion, hard work and dedication. We also want to thank our customers, partners, and other stakeholders who continue to help us overcome challenges and achieve impressive results. Through our collaboration in 2019, we created strong foundations that will enable us to execute our demands and responsibilities in an even busier 2020.
Chairman of the Board of Directors
Group President & CEO
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