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Solutions and Services – Our second revenue stream
by John Nielsen, SVP, Global Solutions and Services
Keith Grassi, SVP, Plant Products & Technologies
Agenda
1. Shareholder value 2007-2012
The financial impact of our commitment to flawless turbine performance.
2. Customer value 2007-2012
The journey from reactive to predictive service
provider.
3. Growth drivers
Service business opportunities and challenges
4. Unique revenue enablers Boosting sales and delivering project specific optimisation
Vestas’ capital markets day 2012 2
CONTINOUS DEVELOP,
COST OUT,
EXPAND ON RETROFITS,
UPGRADES AND NON-
VESTAS TURBINES.
Vestas Solutions and Services covering the entire value chain
3 Vestas’ capital markets day 2012
Shareholder value
2007-2012
1
Growing revenue and earnings
Vestas’ capital markets day 2012 5
Translating into shareholder value
*Service EBIT before allocation of Group costs.
850
705
504
396
298
0
100
200
300
400
500
600
700
800
900
0
2
4
6
8
10
12
14
16
18
2012 (outlook) 2011 2010
623
2009 2008 2007
EBIT margin % *
Revenue (mEUR)
EBIT margin %* Revenue
(mEUR)
Where we came from
Not recognised as a business
Service revenue of EUR 298m resulting in loss
Customer loyalty index alarmingly low
Baseline 2007
6 Vestas’ capital markets day 2012
Where we are today
Vestas’ capital markets day 2012 7
Service recognised as a business opportunity
<2% Lost Production Factor (2009: 4.5 per cent)
90% Renewal rate of service contracts (year-to-date)
94% Orders with service agreement (year-to-date)
55% Reduction of warranty work (from 2009)
95% Improvement of revenue per technician by (from 2007)
69 Customer loyalty index for service (2007: 46)
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Customer Value
2007-2012
2
The journey from reactive to predictive A cultural change has created sustainable customer and shareholder value
Vestas’ “virtual” service business was established in 2007.
Clear performance targets set with data derived from SAP and SCADA.
A performance driven journey.
9 Vestas’ capital markets day 2012
Investments in processes, tools and training Integrated and global operational model in place
Vestas
Central
WTG Components
Wind Turbine Generator
VMP Controller
WTG Operation
Set Points
WTG Control
Operators
Technical
validation &
recommendation
Vestas Data Center Condition Based Operation
CBO
CBO
CBO
CBOGenerator
Gearbox
Pitch
Blades
WTG Health
Reports
Sales Business Unit
Vestas’ capital markets day 2012 10
Prevention of severe damages through monitors Predictive intelligence and condition monitoring enabled prevention of severe generator failures
Cost reduction Changed motor instead of whole bearing or worst case, entire generator (reduced cost by factor 7)
Minimised lost production Optimal planning (reduced downtime by a factor 5)
Monitoring generator slip ring suction system
Problem solved – Replace suction motor
Damage detected
Business impact
11 Vestas’ capital markets day 2012
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Investment in supply chain with global footprint
Vestas’ capital markets day 2012 12
High delivery performance while reducing inventory and driving cost out
Drop-off warehouse
Repair facility
Parts and repairs
provider
Operations
In-house Repair Distribution
Vestas
central
parts setup
Local
sourcing
Central
sourcing Regional Warehouse
Parts
Depot
New parts
New parts
Parts exchange
Wind turbines End-customer
Kan ban of ready
components
We are committed to flawless turbine performance June 2012: Performance of all turbines covered by performance guaranteed contracts
13 Vestas’ capital markets day 2012
Monthly LPF and contractual availability for Vestas’ fleet
95%
96%
97%
98%
99%
1.5%
1.0%
0.5%
0.0%
Jan.
2010
Jan.
2009
2.0%
Jan.
2012
Jan.
2011
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
Availability (RHS)
LPF (LHS)
Lost Production Factor
1% of LPF
=
EUR 1,840 MW/Year* ×
30,000 MW ×
2.5% improvement
=
EUR 138m
14 Vestas’ capital markets day 2012
* Based on CF 30 per cent and a PPA of 70 EUR/MWh
Total annual customer value from improving LPF
Industry leading full scope service contracts
Time based
availability
Energy based
availability
= 1 - (energy lost / total possible production) = total available time / calendar time
Technically reliable turbine
Supply chain efficiency
Troubleshooting efficiency
Effective planning and bundling
Drives high performance Drives high performance
with enhanced planning
Technically reliable turbine
Supply chain efficiency
Troubleshooting efficiency
Effective planning and bundling
Weather based planning
AOM4000 AOM5000
15 Vestas’ capital markets day 2012
0,0
100,0
200,0
300,0
400,0
500,0
600,0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Wind speeds
Hours
0,0
100,0
200,0
300,0
400,0
500,0
600,0
700,0
800,0
900,0
MW
h
Energy based availability incentives ensures availability when the wind is there
In a typical European wind farm 50 per cent of annual energy production is obtained in
21 per cent of available time
Distribution of hours in a year
at different wind speeds Energy produced in a year at
different wind speeds
21%
50%
Source: V112-3.0 MW turbine; noise mode 0; air density 1,225; Wind distribution estimated with a A = 8 and k 2.2.
16 Vestas’ capital markets day 2012
Growth drivers
3
Several market growth drivers Vestas’ market potential within maintenance service is extensive
52
211
263*
3rd party
turbines
Vestas
turbines
43
9
MW under
service
AOM2000+
MW not
under service
52*
Total service market
30 June 2012 (GW)
*Calculated as 2011 installed base + 0,5*expected market size for 2012 based on BTM figures
Sources: BTM and Vestas track record as per 30 June 2012.
Vestas MW installed
30 June 2012 (GW)
Shipments of
6.3 GW in 2012
Renewal rate of
90 per cent
Upgrades
Order backlog of
EUR 4.8bn with
average contact
length ~ 6-7 years
~20 per cent of
this potential is
realistic and
meaningful to
capture
18 Vestas’ capital markets day 2012
Several market growth drivers Vestas market potential within maintenance service is extensive
Total service market
30 June 2012 (GW)
*Calculated as 2011 installed base + 0.5* expected market size for 2012 based on BTM figures.
Sources: BTM and Vestas track record as per 30 June 2012.
Vestas MW installed
30 June 2012 (GW)
52Vestas
turbines
3rd party
turbines
263*
211
43
9
MW under
service
AOM2000+
MW not
under service
52*
Growth rate of
35-43 GW/year
2013-2015
Opportunity of
servicing third-
party turbines
19 Vestas’ capital markets day 2012
New WTG orders
with service
agreements
Business opportunities and challenges towards 2015
Opportunities:
• Reduce service cost per MWh
• Develop upgrade solutions
• Develop repair solutions
• Recapture service contracts
• Service and maintenance of third-party turbines
Challenges:
• Experienced WTG owners insourcing or commoditising maintenance.
• Increased competition from OEMs, independent service providers and upstream suppliers.
• Emerging market with no or small infrastructure and footprint.
Achievable within our
current business model
Our current business
model must adapt
20 Vestas’ capital markets day 2012
To sum up
Shareholder value
Customer value
Growth drivers
Service earnings more stable and
higher than turbine earnings.
Lower LPF generates higher revenue
for Vestas and more cash and
certainty for the customer.
New WTG sales, renewals and
upgrades.
21 Vestas’ capital markets day 2012
Unique revenue
enablers
4
My role at Vestas
Past experience
Microsoft Corporation, USA:
Delivered key component of largest
product and services release in the
company’s history.
Xcel Energy, USA:
Delivered business solutions that
combine wind and traditional
generation assets for maintenance
optimisation and energy market
participation.
23
Today’s value
Global delivery of quality products
and services, on-time and in-full.
Deliver products and services that
bring direct value to our customers
and boost sales.
Keith Grassi
Vestas’ capital markets day 2012
Vestas’ capital markets day 2012
Pre-sales services
and solutions Plant operations
related services
and solutions
Solutions and Services Covering the entire customer value chain
Vestas’ capital markets day 2012
Solutions and Services
This is about enabling Vestas projects
=
revenue
Global, high resolution library – Faster time to market
Unique sales enablers
Optimised plant layout drives optimised business case.
Early grid compliance analysis and cost certainty
Fast responding plant control for on-going grid compliance
Platform integrating monitoring, reporting and data
Vestas’ capital markets day 2012
4.9 GW
27 Vestas’ capital markets day 2012
Capex light solutions and services
28 Vestas’ capital markets day 2012
Customer benefits
5.8 GW – new customer project pipeline identified SiteHunt
4.8 per cent – additional annual energy generation SiteDesign
EUR 750k – cost savings on substation Electrical PreDesign
EUR 4.2m – recovered energy production Power plant controller
29
Lower cost of energy and improved business case certainty
Vestas’ capital markets day 2012
Concrete examples:
Macarthur
420 MW wind power plant
a business case
30 Vestas’ capital markets day 2012
Macarthur wind power plant
31
Pre-sales challenges
Commercially
• Meeting aggressive investment hurdle
rates.
• Meeting low cost of energy targets.
Technically
• Creating technical solutions to meet
plant reliability requirements.
• Providing strong technical due
diligence.
Operationally
• Creating customer specific, long term
service & maintenance package
Vestas’ capital markets day 2012
Macarthur wind power plant
32 32
Pre-sales solutions and benefits
Energy production optimised to lower
cost of energy and improve project IRR
Optimised use of wind turbine electrical
capabilities to minimise cost
Using existing platforms for project
specific optimisation
Minimising risk of down-time through
enhanced reliability
Minimising risk of loss of plant revenue
through integrated stand-by solution
Benefits
Winning package:
• Wind turbines
• Advanced
solutions and
services
• EPC
(Engineering,
Procurement &
Construction)
• Long-term service
Vestas’ capital markets day 2012
Offering
Potential cost of
EUR 3m avoided
33 Vestas’ capital markets day 2012
What’s in the pipeline?
Vestas’ capital markets day 2012 34
35
New and coming unique solutions and services
OCAS OCAS
Site specific optimisation Site specific optimisation
New & pending releases
Vestas’ capital markets day 2012
To sum up
Unique revenue enablers
• Boost sales
(4.9 GW)
• Capex light
(based on unique existing Vestas
knowledge and competencies)
• Lower Cost of Energy
(avg. 4.8 per cent improved annual
energy production)
• Better Business Case Certainty
(grid compliance and operating
reliability)
• More offerings in the pipeline
(OCAS®, Site specific optimisation
and more)
36 Vestas’ capital markets day 2012
Vestas’ capital markets day 2012 37
This presentation contains forward-looking statements concerning Vestas' financial condition, results of
operations and business. All statements other than statements of historical fact are, or may be deemed to be,
forward-looking statements. Forward-looking statements are statements of future expectations that are based on
management’s current expectations and assumptions and involve known and unknown risks and uncertainties
that could cause actual results, performance or events to differ materially from those expressed or implied in
these statements.
Forward-looking statements include, among other things, statements concerning Vestas' potential exposure to
market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections
and assumptions. There are a number of factors that could affect Vestas' future operations and could cause
Vestas' results to differ materially from those expressed in the forward-looking statements included in this
presentation, including (without limitation): (a) changes in demand for Vestas' products; (b) currency and interest
rate fluctuations; (c) loss of market share and industry competition; (d) environmental and physical risks; (e)
legislative, fiscal and regulatory developments, including changes in tax or accounting policies; (f) economic and
financial market conditions in various countries and regions; (g) political risks, including the risks of expropriation
and renegotiation of the terms of contracts with governmental entities, and delays or advancements in the
approval of projects; (h) ability to enforce patents; (i) product development risks; (j) cost of commodities; (k)
customer credit risks; (l) supply of components from suppliers and vendors; and (m) customer readiness and
ability to accept delivery and installation of products and transfer of risk.
All forward-looking statements contained in this presentation are expressly qualified by the cautionary
statements contained or referenced to in this statement. Undue reliance should not be placed on forward-looking
statements. Additional factors that may affect future results are contained in Vestas' annual report for the year
ended 31 December 2011 (available at vestas.com/investor) and these factors also should be considered. Each
forward-looking statement speaks only as of the date of this presentation. Vestas does not undertake any
obligation to publicly update or revise any forward-looking statement as a result of new information or future
events others than required by Danish law. In light of these risks, results could differ materially from those stated,
implied or inferred from the forward-looking statements contained in this presentation.
Disclaimer and cautionary statement
39 39 Vestas’ capital markets day 2012
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