Wind industry M&A well underway
April was a landmark month in the wind industry, with the completion of two mega-deals. GE Renewable Energy acquired the world’s largest turbine blade maker, LM Wind Power, for $1.65 billion. Meanwhile, Siemens Wind Power merged with Spain’s Gamesa creating the world’s largest turbine manufacturer in a deal valued at about €10 billion.
The two transactions underscore growing industry concentration within wind power manufacturing, as the industry scrambles to remain profitable amidst a maturing marketplace. That’s especially true in Europe where “there’s been a lot of consolidation in the past few years,” said Feng Zhao, FTI senior director.
Gamesa, for example, counts the fast-growing India market as a major destination for its equipment, as well as in Latin America and China. It provides a good counterpoint to Siemens, which is strong in Europe. The combined company had a €20 billion order backlog as of April. It now boasts of the broadest product offering in the business.
In 2016, Denmark’s Vestas was the top ranked wind turbine manufacturer, according to a report issued by FTI Consulting. GE Renewable was second.
Siemens and GE aren’t alone in using acquisitions to gain ground. Last year, Germany’s Nordex acquired the Spanish company Acciona Windpower for €785 million, creating the world’s seventh ranked wind equipment manufacturer.
Vestas, for its part, has made smaller acquisitions to boost business, including last year’s €88 million purchase of the German wind energy service provider Availon and the late 2015 acquisition of San Diego-based service provider UpWind Solutions for $60 million.
China’s Goldwind Science & Technology Co. came in third in the rankings. The Chinese wind market is the world’s largest by far, with installed capacity of 168.7GW at the end of last year, according to FTI, about double that of the US. Goldwind is China’s dominant manufacturer. However, Goldwind must compete with seven other major Chinese manufacturers, including United Power, ranked eighth; Envision, ranked ninth; and Mingyang, ranked tenth.
China now has 22 turbine manufacturers. That’s down from more than 80 in 2008.
That crowded field leads some to believe China will undergo a wave of consolidation as well in the coming years. “The wind turbine industry will follow other maturing industries,” said Feng. “But it’s not going to happen immediately or overnight, particularly in China where the small and medium-size turbine [original equipment manufacturers] have strong relations with local governments that will protect them.”
One indicator that consolidation is coming: In March, the DunAn Group acquired China Creative Wind Power from China Datang Group, one of the country’s largest power generation enterprises. Both are relatively minor players, however, in wind.
Wind turbine installations in China peaked in 2015 and dropped significantly last year, with this year showing decreases as well, according to FTI. The consultancy believes China’s wind market won’t likely bounce back before 2020. “They will not reach the same levels as seen in 2015 until 2025,” FTI wrote in a recent intelligence report.
Many Chinese manufacturers want to capture overseas business to keep production lines humming. In the past two years, leaders Goldwind and Envision have bought wind development projects in the US, Mexico and France to help them with their efforts. So far, however, only about 2% of Chinese components have been sold overseas historically.
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