Vestas and Mitsubishi Heavy Industries Ltd. (MHI) have agreed to form a joint venture (JV) dedicated to offshore wind energy. The announcement comes after Vestas confirmed it was in talks with MHI about a ‘potential strategic partnership’ in August 2012.
According to Vestas, the JV will combine the companies' 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 approximately 300 employees to the JV. The company is also contracted to finalize the planned development of the V164-8.0 MW on behalf of the partnership.
Meanwhile, MHI will inject EUR 100 million in cash into the JV and will add another EUR 200 million based on certain milestone achievements regarding the V164 turbine. Both companies 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, it will explore the possibilities of integrating the MHI hydraulic DDT technology into the 8 MW platform.
The head office of the JV will be located in Aarhus, Denmark, 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, MHI's executive senior vice president and head of power systems, will become chairman of the JV's board of directors, and Anders Runevad, Vestas' group president and CEO, will become vice chairman. Jens Tommerup, currently president of Vestas Asia Pacific and China, will become CEO of the JV.
Equity ownership ratios will be 50% each for MHI and Vestas, with an option for MHI to change the ownership ratio to 51% for MHI and 49% for Vestas in April 2016. Goldman Sachs International, Nordea Investment Banking and SEB Corporate Finance acted as joint financial advisors to Vestas.
The transaction is subject to customary closing conditions, including approval from relevant competition authorities in Europe and Asia. Closing is expected to take place around the end of March 2014.
At the time of closing, Vestas says it expects the following balance sheet impacts:
– a decrease in development projects in progress of approximately EUR 270 million as the V164 project is transferred to the JV;
– an increase in investments in associates of approximately EUR 200 million, 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 approximately EUR 60 million, as Vestas will be reimbursed for CAPEX conducted from Sept. 1, 2013;
– an increase of net working capital of approximately EUR 50 million as a result of the offshore service projects being transferred to the JV; and
– an increase in retained earnings of approximately EUR 40 million due to the expected gain on the JV transaction.
