Vestas Wind Systems — M&A Activity 2013

Sep 27, 2013

Vestas and Mitsubishi Heavy Industries form a joint venture dedicated to
offshore wind energy

Aarhus, Denmark, 2013-09-27 07:49 CEST (GLOBE NEWSWIRE) --

Vestas Wind Systems A/S (Vestas) and Mitsubishi Heavy Industries Ltd. (MHI)
have agreed to form a joint venture (JV) dedicated to offshore wind energy
(ref. company announcement No. 33/2012 of 27 August 2012).

The JV will combine Vestas’ and MHI’s current capabilities within offshore wind
turbines. Vestas will transfer the development of the V164-8.0 MW, the V112
offshore order book, existing offshore service contracts and approx 300
employees to the JV. MHI will inject EUR 100m in cash into the JV and will
inject another EUR 200m based on certain milestone achievements reflecting the
natural early product life cycle of the V164 turbine. As part of the JV it has
been agreed between the parties that Vestas is contracted by the JV to finalise
the planned development of the V164-8.0 MW on behalf of the JV. In addition,
Vestas and MHI will provide various services to the JV. The JV will start its
business with the current V112 offshore and the V164-8.0 MW turbines. At a
later stage, the JV will explore the possibilities of integrating the MHI
hydraulic DDT technology into the 8 MW platform which would make the JV
positioned to offer a product line-up variety that best suits customer demands.

Leveraging on the respective strengths of each organisation, the JV will be
well-positioned to win an expanding share of the offshore wind turbine market
and become a global leader in this attractive and high-growth market; with
Vestas’ comprehensive technological capabilities and long-standing track record
within the overall wind power market, and the offshore wind segment
specifically, and MHI’s strong and long-standing presence in global power
markets and related technologies, the JV will benefit from significant
synergies.

The head office of the JV will be located in Aarhus, Denmark, from where the
company will handle all aspects from design, further development, procurement
and manufacturing related to the V164-8.0 MW turbine as well as all marketing,
sales and after-sales service related to offshore wind. Vestas will continue to
manufacture and supply the V112 turbines which the JV will offer for offshore
projects.

Masafumi Wani will become Chairman of the Board of Directors (Executive Senior
Vice President and Head of Power Systems of MHI), Anders Runevad Vice Chairman
(Group President & CEO of Vestas) and Jens Tommerup CEO of the JV (currently
President of Vestas Asia Pacific & China). Equity ownership ratios will be 50
per cent for each of MHI and Vestas with an option for MHI to change the
ownership ratio to 51 per cent for MHI and 49 per cent for Vestas in April
2016.

The transaction is subject to customary closing conditions including approval
from relevant competition authorities in Europe and Asia and closing is
expected to take place around the end of March 2014.

From a financial perspective, the establishment of the JV will not have any
impact on Vestas’ annual accounts for 2013 and is only expected to have a
marginal impact on Vestas’ 2014 revenues and earnings due to the
deconsolidation of the offshore wind division. An expected gain on the JV
transaction of around EUR 40m will be booked as a special item at closing. Any
capex related to the development of the V164-8.0 MW turbine after 1 September
2013 will be reimbursed to Vestas by the JV following closing.

At the time of closing, Vestas expects the following balance sheet impacts:

-- a decrease in development projects in progress of approx EUR 270m as the
V164 project is transferred to the JV,
-- an increase in investments in associates of approx EUR 200m as the JV will
be treated as an associated company in Vestas’ accounts from the time of
closing,
-- an increase in cash at bank and in hand of approx EUR 60m as Vestas will be
reimbursed for capex conducted from 1 September 2013,
-- an increase of net working capital of approx EUR 50m as a result of the
offshore service projects being transferred to the JV and
-- an increase in retained earnings of approx EUR 40m due to the expected gain
on the JV transaction.

The main markets for offshore wind turbines are the North Sea coastal
countries, particularly the UK and Germany. In these and all other markets,
today, measures are being taken to support the introduction of wind power
generation equipment to supersede outdated coal-fired and nuclear plants, and
solid growth in this area is expected to continue going forward. The
establishment of the JV between MHI and Vestas is the two partners’ joint
response to this market’s robust growth potential.

Vestas and MHI will work closely with the new company and offer their total
support to the development of its business operations.

Goldman Sachs International, Nordea Investment Banking and SEB Corporate
Finance acted as joint financial advisers to Vestas.

Press and analyst meeting
For analysts, investors and the media, an information meeting will be held
today, Friday 27 September at 10.00 a.m. CEST/9.00 a.m. BST at the Bella Sky
Comwell Hotel, Center Boulevard 5, Copenhagen S, Denmark. The information
meeting may be attended electronically via vestas.com and a replay of the
meeting will subsequently also be available from vestas.com.

About Vestas
Today, Vestas has delivered wind energy in 73 countries, providing jobs for
around 17,000 passionate people at service and project sites, research
facilities, factories and offices all over the world. With 62 per cent more
megawatts installed than the closest competitor and more than 50,000 wind
turbines equivalent to 57,000 MW of cumulative installed capacity worldwide,
Vestas is the world leader in wind energy.

About MHI
MHI is one of the world’s leading manufacturers of machinery within power
systems, nuclear energy and commercial aviation and aerospace. The company has
approx 68,000 employees and consolidated sales of JPY 2,818bn in the fiscal
year of 2012. Since delivering Japan’s very first wind turbine for commercial
use in 1982, MHI has supplied a total of more than 4,200 units worldwide,
having a combined output of almost 4,400 MW. Presently, MHI is undertaking
development of a 7 MW wind turbine (known as the “Sea Angel”) adopting the
world’s first digitally controlled hydraulic drivetrain. The company is also
taking part in a floating wind power plant demonstration and research project
being conducted offshore in the Fukushima Prefecture in Japan.

Contact details
Vestas Wind Systems A/S, Denmark
Lars Villadsen, Senior Vice President, Investor Relations
Tel.: +45 9730 7201

Morten Albæk, Group Senior Vice President, Global MarCom & Corporate Relations
Tel.: +45 2256 7437