Siemens' purchase of Bonus Energy marks the German company's entry into the global wind power market and is a further signal of the growing importance of the wind power industry. Siân Green reports.
German power equipment manufacturer Siemens Power Generation has entered into an agreement to acquire Bonus Energy A/S, Denmark's second largest wind turbine manufacturer. The move marks Siemens' entry into the growing global wind energy business and an expansion of its conventional thermal product portfolio.
Bonus Energy is one of the world's five largest suppliers of wind energy systems, with a workforce of 750 and annual sales of approximately g300m ($381m). Headquartered in Brande, Denmark, it has installed more than 5000 turbines with an aggregate capacity of around 3300 MW in over 20 countries.
Bonus Energy produces wind turbine generators in the 600 kW-2.3 MW range and is a leader in the offshore sector. While financial terms of the acquisition have not been disclosed, Siemens expects the deal to close in early December.
Siemens' move into the wind energy industry had been widely anticipated. The company has doubtlessly been watching its main rival, GE Energy, forge ahead in the industry following its 2001 acquisition of Enron Wind. GE Wind now employs 1700 personnel and has installed some 6700 MW of capacity around the world. Crucially, GE has been able to leverage its global service and financing capabilities as well as its customer base to compete effectively with 'traditional' suppliers such as Nordex and Vestas.
According to Andreas Nauen, vice president of communications and strategy at Siemens Power Generation, Siemens looked for about a year to find the right company to take it into the wind energy industry. "We wanted to find a company that has the same business approach as us and that would complement our business," noted Nauen. "Bonus has a superb reputation, is very risk aware and its technology is a good fit."
Bonus Energy A/S has a seven per cent overall market share for wind turbines but is responsible for over 18 per cent of the market for larger wind turbines
In buying Bonus, Siemens has acquired a strong product line as well as industry expertise, customer pipelines and an order book. With these under its wing, it will be able to hit the ground running in what is a rapidly growing industry. There are currently 39 000 MW of wind capacity installed world-wide, with 8133 MW of capacity installed in 2003 – an 18 per cent increase over 2002. Growth rates are expected to remain at this level, with Europe and North America dominating the market. The extension of the Production Tax Credit in the USA is expected to provide a welcome boost for this market (see page 13).
The wind sector is therefore the fastest growing segment of the power generation market, while sales in Siemens' traditional core market – gas and steam turbine plants – are expected to decline over the next five years, according to market analysts Emerging Energy Research (EER). Siemens expects the total power plant market to shrink from 158 GW/year in 1998-2002 to 138 GW/year on average for 2003-2008. Wind will capture about ten per cent of the total power plant market by 2007-2008, according to EER. Like GE, Siemens should be able to offset declining revenues in power generation equipment with growing sales in the wind sector.
In addition, the wind sector is a maturing market, marked by falling costs, increasing project/unit scale and industry consolidation. Earlier this year saw the merger of two of the leading suppliers, Vestas and NEG Micon, and further consolidation among manufacturers is likely over the next few years as the smaller players struggle to keep up with the might of GE Wind, Vestas, Gamesa, Enercon and now Siemens.
Manufacturers and utilities alike are putting downward pressure on the cost of wind energy by increasing the scale of projects and of individual units. Canada's Hydro-Quebec recently placed an order for some 990 MW of capacity to be installed by 2012 (see page 13), while large-scale offshore schemes are being implemented in Europe. The onshore market is now dominated by the 1-2.5 MW unit size range, and the offshore sector, where unit sizes of 3-5 MW are being used or developed, is increasing in importance.
It is likely, therefore, that Bonus Energy's strength in the offshore sector was a key factor for Siemens. In 1991, Bonus supplied the world's first offshore wind farm, and in 2003 supplied the world's largest offshore wind farm – the 166 MW Nysted project in Denmark. This latter order made the company the second largest supplier of wind turbines of 2 MW or more in 2003.
Key to Siemens' success in the wind industry will be the development of a larger-scale model, capable of competing with GE's 3.6 MW and Vestas' 4.5 MW offshore units. According to Nauen, Bonus has already made strides into this crucial area and in October began onshore testing of a new 3.6 MW model for the offshore sector.
In the European market, which accounted for about 67 per cent of the total global market in 2003, Siemens should be able to build on Bonus' strong presence in the UK, Ireland and Denmark, and perhaps capitalize on Vestas' current difficulties, to achieve growth. The US however, which accounted for about 22 per cent of the market in 2003, will be a tougher nut to crack.
Bonus Energy has installed some 442 MW of capacity in the US, but recently retreated from this market to focus on Europe. "Bonus held back from this market, but it is a key market and one that we want to contribute to," says Nauen. "We will be able to leverage our presence and capabilities in the USA – through Siemens-Westinghouse, for example – to compete."