The competitiveness of wind energy is taking a toll on profits, according to Vestas Wind Systems A/S, whose share price took the biggest hit in six years after missing analysts’ estimates.
Vestas shares sank as much as 21 percent to 416.60 krone in Copenhagen. More than 5 million shares changed hands so far today, about five times more than the full-day average. The company, the world’s biggest wind-turbine maker, reported earnings before interest and tax that trailed analysts estimates.
The results were largely driven by shrinking prices for wind energy as more markets switch to competitive tenders from feed-in tariffs. Developers compete with one another for projects and the lowest bids for clean electricity prices win. This has resulted in price pressure throughout the supply chains for wind and solar, particularly for equipment manufacturers such as Vestas.
“An increasingly competitive environment and emerging trend of aggressive capacity auctions is resulting in price and margin pressure at Vestas,” wrote James Evans, a Bloomberg Intelligence analyst. Before today, Vestas was a stock-market darling, with 16 out of 23 analysts covering the stock recommending it as a buy. The loss today wiped out the company’s year-to-date advance.