Given booming demand for wind power in a world consumed by fears of climate change, you would expect the head of the world’s biggest turbine builder to be happily rushed off his feet.
Ditlev Engel, chief executive of the Danish group Vestas Wind Systems, gives a good impression of being rushed all right, providing rapid-fire answers to questions while gobbling down a sandwich lunch and then literally running out the door.
But happiness does not seem to emanate naturally from this green revolutionary, even though he is in London to announce a fourfold increase in his company’s quarterly profits and predicts a surge in sales in 2008.
And there are plenty of calls for an increase in wind power capacity. The United Nations climate change conference in Bali this week has been calling for tougher targets on carbon producers. The European Union has also recently committed itself to providing 20% of electricity from renewables by the end of the next decade.
But Engel is frustrated at the time and effort it takes to build a wind farm. “It is, of course, very encouraging that the EU has gone for the 2020 rules and binding targets, but on the other hand we all must make sure that we can make the necessary investment in grid infrastructure and obtain planning permits, which are huge issues, which people keep debating because there are differences of opinion,” he warns.
“A lot of countries are talking about 2020 and the coming years, but for us there are 52 Qs [financial quarters] before 2020 and we need to deliver Q on Q. So our reality is the three-month delivery cycle, whereas the political cycle is full of commitments to look into this and do that in the coming years.”
Engel is pleased at the prospects for wind power. But he is also deeply frustrated that despite all the wind farms that are operating, the case for the industry’s benefits still needs to be fought over and over again.
“There is no difference from what it was like in the early days of the North Sea, when there had to be long-term planning for the necessary investments. That is what we are advocating: to go from ‘yes, it would be nice,’ into ‘what is the road map and how are we going to execute this’,” he argues.
“We know there is a huge debate on ‘do you like the wind turbine or do you not like the wind turbine? Should they be in the countryside or not in the countryside?’ but what we are saying is that there are a lot of possibilities if you dare to set out the right framework.”
An intensely private man, he is adamant that he will not provide details of his personal interests or family life. One of the few things that does emerge is this tall and angular man used to be a competitive, though amateur, jockey.
Given his size that is hard to imagine, but his passion and competitive instincts are easy to detect. Engel is proud that Vestas is the most traded firm on the Copenhagen stock exchange.
He is also well known in political circles, given the government’s desire to position Denmark at the cutting edge of the fight against global warming. The Danes have recently appointed the world’s first “climate minister”.
But while the public continues to debate the long-term merits of wind, the industry is grappling with other problems, many of which are a result of its recent success. Demand for wind turbines has led to a shortage of components and quality-control issues.
Vestas is having to provide larger and larger financial guarantees to its increasingly blue-chip customers, worried that a shortage of components could lead to lower standards.
Contrary to public perception, almost every single wind farm needs its own made-to-measure turbines of very high quality and performance. The arrival of major utilities such as Centrica and energy firms such as Shell has brought big money to wind power – but also higher expectations from customers.
“It’s fine to say the industry needs to become more professional but what are we going to do about it?” Engel asks. “We have said to all our suppliers that by the end of 2008 us and all our suppliers must reduce the variation [in standards] and increase the quality of what we are doing because if we don’t perform up to this level in future, it will be impossible to reach the goals and aspirations that we all have for the industry. It’s a natural part of the maturing of the industry.”
Vestas has warned that it is taking up to 15 months to source vital equipment due to low manufacturing capacity. It expects this supply and demand imbalance to persist for “several years”.
The company has been able to pass some cost increases on to clients. While sales have risen, it points out that part of the reason for the rise in its third quarter pre-tax profits from €25m (£18m) to €98m was the result of an efficiency drive inside the organisation.
Vestas delivered equipment with a capacity of 93 megawatts in the UK in the third quarter – up from 43 – while deliveries to the US and China in the last quarter were much higher. The high demand has encouraged the company to expand. It is increasing the scale of a blade factory in Colorado, establishing a wind tower production plant elsewhere in the US and constructing an engineering facility in China, bringing the total number of plants there to 10.
Vestas builds towers on Scotland’s Kintyre peninsula and carries out research into turbine aerodynamics on the Isle of Wight to exploit local knowledge of the glass fibre used on yacht hulls for its propellers.
Although the Danes are expecting a major increase in sales next year, they are lowering their market share expectations from 35% to about 30% to retain their current 12% profit margins.
The company is being forced to scale back partly because of the difficulties in obtaining some of the 8,000 separate components it needs for each single turbine. This is a problem Engel is happy to lay at the door of politicians rather than the business community.
“There is obviously a shortage of certain components but if governments go out and say we really want to do this, then investments will follow. I mean, how did we manage to get oil in from the North Sea? Someone said there are not enough pipelines. OK, so we made a 20-year plan that we bring in this number of barrels of oil and the pipelines were made,” he says.
Engel has further good reason to be cautious because although the turbine maker is enjoying good times now, his company has a chequered history.
Vestas began making farm equipment in 1898 and became one of the first engineering firms to realise the potential of wind as Denmark tried to shield itself from the oil price shock of the 1970s.
It got off to a good start serving the nascent domestic market but international expansion went horribly wrong. Vestas went into receivership in 1987 when it put too much faith in an earlier Californian wind boom and then got caught up in the tech bubble, which turned its $10bn market valuation to $2bn in double-quick time.
Engel was brought in as a new broom in May 2005, when the share price was at a low point. He has since steered Vestas’s valuation through the $12bn (£6bn) mark on the back of carbon restrictions and $100 a barrel oil prices.
Meanwhile, the firm’s staff numbers have also grown, up 80% in the last four years with 1,300 of the 4,000 employees now based once again in the US where the industry is thriving on subsidies from George Bush, despite his opposition to the Kyoto protocol.
Even with the current torrent of work, Vestas is concerned about future demand. It wants to end the debate over whether a greater commitment to renewables should be made, launching a new initiative to promote wind power and noting that the debate is sterile unless people look at the alternatives.
“If we don’t want to do this, then what do we want to do? Do we want to have nuclear power? Safe nuclear – whatever that means – or do we want to have clean coal, whatever that is? People finally have to make their choice. And apart from the fact that wind power is both competitive and clean, people tend to forget there is no waste, no water consumption. We feel even now people are still not aware of the benefits.”
It is clear that Engel is particularly concerned about a potential renaissance of atomic power, helped by support from governments, which could drain money away from renewables.
“If you look at the total amount of investments that the EU is advocating into nuclear – so-called safe nuclear versus what we are doing – then it is simply because we have not been good enough in explaining to people what are the real benefits … I am not so sure when people say ‘not in my back yard’ [to wind farms] that they say ‘but put up a nuclear plant, that would be lovely’.”
With that parting shot, Engel spins like a turbine and leaves the room.
Born May 24 1964
Education Diploma in Business Economics, Copenhagen Business School, 1990. General management programme, Insead, Fontainebleau, France, 1997
1990-92 Vice-president of Hempel Hong Kong Ltd
1992-95 Vice-president of Hempel Hai Hong Ltd (Hong Kong)
1995-97 President of Hempel Norge (Norway)
1997-99 President of Hempel Hai Hong Ltd (China)
1999-2000 Executive vice-president of Hempel (Denmark)
2000-05 Group president and chief executive of Hempel (Denmark)
2005-present President and chief executive, Vestas Wind Systems
By Terry Macalister
The Guardian (UK)
7 December 2007
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