This morning Vestas Wind Systems (OMX: VWS) said it has concluded internal analysis suggesting continued low market demand for kilowatt platform and thus has decided to close production at Hohhot, Inner Mongolia, China. Back in 2009 when the said factory opened, Vestas said that its analysis and customer discussions showed that the new almost entirely China-made V60-850 kW was the best response to the land use and wind capacity challenges in China. Hohhot facility lies near important wind power development region, where Vestas just last week landed a new contract for larger turbines. The production area is about 45 000 square metres with blades and nacelles production and 300-350 people will lose their jobs.
Vestas will continue to honour existing contracts for kilowatt turbines including V52-850 kW and still expects considerable service revenues. Vestas expects about 10 million Euros in annual savings from the move. The closing is expected to come to force over the summer. Its costs are covered within the annual special items guidance of 50-100 million Euros. Following the action, Vestas will maintain production in Tianjin and Xuzhou and offices in Beijing and Shanghai. It foresees total number of employees at around 2600 following the current optimization program. Vestas’ competitor Shuzlon (BSE: 532667, NSE: SUZLON) agreed to sell its manufacturing subsidiary Suzlon Energy Tianjin to China Power (Tianjin) New Energy Development Company for 60 million USD over the weekend.
Last week Vestas said it has given up on its plans for a factory in Sheerness, Kent, UK since it was unable to land orders for the new V164-7.0 MW turbines that were to be produced there. The plant would have created around 2000 jobs in the area in total. Vestas had indicated the willingness to acquire land for the facility just couple months ago. Other firms still have plans to enter the sector in the UK but large offshore wind farms are currently facing political headwinds in Great Britain.
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