Alsvej 21 DK-8940 Randers SV Denmark Tel: Fax: vestas.com vestas.com

Transcription

1 Annual report 2009 vestas.com

2

3 Vestas annual report Strong foundation for Triple Financial highlights for the Group 007 Non-financial highlights for the Group 009 Overview 014 Management report 030 Corporate governance 050 Non-financial issues 064 Consolidated accounts 120 Annual accounts for Vestas Wind Systems A/S 131 Shareholders and the stock exchange 136 Information about the company 138 Index This annual report is available in Danish and English. In case of doubt, the Danish version shall apply. Vestas Wind Systems A/S Consolidated accounts Non-financial issues Management report Vestas annual report 2009

4 Strong foundation for Triple15 In 2009, Vestas increased its revenue by 10 per cent to EUR 6.6bn, recording a 28 per cent EBIT increase to EUR 856m; this was the best financial performance ever. The improvement was achieved in a very difficult market, in which the credit squeeze affected not only the headlines, but also Vestas' day-to-day opera tions and, not least, our order intake, which will make 2010 an even greater challenge than 2009 turned out to be. On 27 October 2009, Vestas defined the financial targets Triple15 for its No. 1 in Modern Energy strategy; Vestas aims to achieve an EBIT margin of 15 per cent and revenue of EUR 15bn no later than This translates into an average annual growth of at least 15 per cent and a substantial improvement of the EBIT margin. Strong growth and a higher EBIT margin are prerequisites for Vestas to retain its market-leading position in wind power and thereby create the world's strongest energy brand as the No. 1 in Modern Energy. Having a much more efficient and customer-oriented organisation with new wind turbines and service products is the foundation from which we aim to achieve the targets, and we have already taken a number of steps: The alignment of our production and sales business units is underway, we are adopting a more regional structure in Vestas and we have announced new wind turbines for the onshore and offshore segments. We retain a high level of investment in development activities around the world because wind power is a high-technology race in which day-byday competition is becoming more and more fierce. In the years ahead, large, experienced and financially strong companies will join the race, having realised that Vestas' vision, Wind, Oil and Gas, is about to become a reality. Retaining our market leadership and the position as a pure play spokesperson for modern energy will only be possible through close relations and collaboration with our existing and new customers around the world. Consequently, dramatically improved customer satisfaction is paramount for us to accomplish Triple15. COP15 did not turn out to be the global and supranational climate breakthrough that Vestas had hoped for. On the other hand, the large number of heads of states and governments from around the world attending the conference clearly showed that the climate and the environment, or clean air, water and energy, are now at the very top of the international agenda, underpinned by the many national targets and initiatives. This is good news for Vestas and wind power because modern energy is one of the keys to the solution for generations to come. No other form of renewable energy is currently able to match wind power, for which the price of MWh will continue to fall.

5 Furthermore, Vestas will continue to promote a fixed price of CO 2, which would give the energy sector the predictability required to carry out the large-scale investments in infrastructure. Over the next 25 years, an increase in the global population of two billion people will raise the price of fossil fuels, thereby adding further strength to the competitiveness of modern energy. Also in the short term, the price of fossil fuels will go up, to the benefit of wind power proliferation. The year's order intake was significantly lower than originally planned, and orders were received much later in the year than expected. It is only now at the beginning of 2010, that the market for bank funding truly appears to be approaching a normal trend, although the banks are now far more critical and require much more documentation than they did previously. We appreciate this trend, although it prolongs the contract negotiation process considerably, as it is clearly to the advantage of financially strong quality manufacturers such as Vestas and thus helps to mature our industry. The present entry barriers are considerably higher than they were a few years back, even though more banks and financial institutions will enter the wind power market in the future as knowledge of wind power increases. A wind power plant is a green bond with a predictable cash flow provided that the turbines are in the Triple 15 EBIT right location, are handled correctly and given optimum service. Our wind power track record of more than 30 years and our will to constant improvement and change are the building blocks for Triple15. Vestas is intensifying its efforts to enhance safety, reduce our environmental footprint and use of Earth's resources in order to strengthen our reputation as a responsible employer and competitive collaboration partner. In addition to more MWh per kilo wind power plant, more energy-friendly buildings and vehicles are the way forward. Vestas must have world-class safety at its sites; our customers demand it, and our employees are entitled to it. Failure is not an option is Vestas' mission and that applies also to Triple15. Bent Erik Carlsen Chairman of the Board of Directors 15 REV 15 year Ditlev Engel President and CEO Vestas Wind Systems A/S Consolidated accounts Non-financial issues Management report Vestas annual report 2009

6 Financial highlights for the Group meur Highlights Income statement Revenue 6,636 6,035 4,861 3,854 3,583 Gross profit 1,441 1, Profit before financial income and expenses, depreciation and amortisation (EBITDA) 1, Operating profit/(loss) (EBIT) (116) Profit/(loss) of financial items (48) 46 0 (40) (42) Profit/(loss) before tax (158) Profit/(loss) for the year (192) Balance sheet Balance sheet total 6,435 5,308 4,296 3,654 3,085 Equity 3,364 1,955 1,516 1, Provisions Average interest-bearing position (net) (55) (299) (560) Net working capital 1, (68) Investments in property, plant and equipment Cash flow statement Cash flow from operating activities (34) Cash flow from investing activities (808) (680) (317) (144) (137) Cash flow from financing activities 1,075 (91) (54) (101) (46) Change in cash at bank and in hand less current portion of bank debt 233 (494) (35) Ratios Financial ratios 1) Gross margin (%) EBITDA margin (%) EBIT margin (%) (3.2) Return on invested capital (ROIC) (%) (13.2) Solvency ratio (%) Return on equity (%) (18.1) Gearing (%) Share ratios 1) Earnings per share (1.1) Book value per share Price / book value P / E-value (12.7) Cash flow from operating activities per share (0.2) Dividend per share Payout ratio (%) Share price 31 December (EUR) Average number of shares 197,723, ,204, ,204, ,722, ,911,173 Number of shares at the end of the year 203,704, ,204, ,204, ,204, ,911,173 1) The ratios have been calculated in accordance with the guidelines from Den Danske Finansanalytikerforening (The Danish Society of Financial Analysts) (Recommendations and Financial ratios 2005), refer to note 1 to the consolidated accounts. 006 Vestas annual report 2009

7 Non-financial highlights for the Group Key figures 1) Occupational health & safety Industrial injuries (number) of which fatal industrial injuries (number) Products MW produced and shipped 2) 6,131 6,160 4,974 4,313 3,900 Utilisation of resources Consumption of metals (tonnes) 202, , , , ,170 Consumption of other raw materials, etc. (tonnes) 126, , ,541 93,983 82,592 Consumption of energy (MWh) 537, , , , ,907 of which renewable energy (MWh) 263, , , , ,603 of which renewable electricity (MWh) 238, , , , ,603 Consumption of water (m 3 ) 521, , , , ,410 of which water of non-drinking water quality (m 3 ) 102, ,066 14,809 14,954 0 Waste disposal Volume of waste (tonnes) 97,471 96,632 89,643 82,739 67,313 - of which collected for recycling (tonnes) 34,303 30,254 28,422 27,593 17,266 Emissions Emission of CO 2 (tonnes) 50,523 41,832 32,798 28,396 18,406 Local community Environmental accidents (number) Breaches of internal inspection conditions (number) Employees Average number of employees 20,832 17,924 13,820 11,334 10,300 Number of employees at the end of the year 20,730 20,829 15,305 12,309 10,618 Indicators 1) Occupational health and safety Incidence of industrial injuries per one million working hours 3) Absence due to illness among hourly-paid employees (%) Absence due to illness among salaried employees (%) Products CO2 savings over 20 years on the MW produced and shipped (million tonnes of CO 2) Utilisation of resources Renewable energy (%) Renewable electricity for own activities (%) Employees Women at management level (%) N/C 4) N/C N/C Non-Danes at management level (%) N/C N/C N/C Management system 5) ISO (%) OHSAS (%) ) Accounting policies for non-financial highlights for the Group, see page 60. Comments on non-financial issues for the Group, see pages ) To be able to better illustrate the connection between physical production and resource consumption, products are now calculated as MW produced and shipped in stead of as previously MW delivered. 3) Please note that accounting policies have been changed as from 2009, see page 101 in the annual report ) Not calculated (N/C) for the year. 5) The production facilities in Hohhot, Inner Mongolia, China, are expected certified by the end of first half-year Vestas Wind Systems A/S Consolidated accounts Non-financial issues Management report Vestas annual report 2009

8

9 Overview Vestas annual report 2009 Vestas realised a revenue of EUR 6.6bn an increase of 10 per cent. Profit for the year was EUR 579m an increase of 13 per cent. Vestas reported an EBIT of EUR 856m an increase of 28 per cent. +28% Vestas shipped wind turbines with an aggregate capacity of 6,131 MW a reduction of 0.5 per cent. The incidence of industrial injuries per one million working hours was 8.1 a reduction of 48 per cent. +10% +13% -0.5% 2009 at a glance -48% +2% -0.5% The number of employees was 20,730 a reduction of 0.5 per cent. Vestas shipped a total of 3,320 wind turbines an increase of 2 per cent. Vestas annual report Vestas Wind Systems A/S Consolidated accounts Non-financial issues Management report

10 Full year 2009 Vestas recorded revenue of EUR 6,636m in 2009, an increase of 10 per cent relative to The Group reported an operating profit, EBIT, of EUR 856m in 2009, equivalent to an EBIT margin of 12.9 per cent, against 11.1 per cent in The improved EBIT margin was the result of more efficient operations and better prices and contractual conditions. Revenue in the service business amounted to EUR 504m with an EBIT margin of 15 per cent. The gross profit amounted to EUR 1,441m in 2009 corresponding to a gross margin of 21.7 per cent. This is an increase from EUR 1,179m and 19.5 per cent in 2008 At the end of 2009, the Group's net working capital amounted to EUR 1,235m, which corresponds to 19 per cent of revenue, against 5 per cent in The large increase is due to lower prepayments caused by the delayed order intake. The Group achieved a return on invested capital of 23.9 per cent in 2009, against 34.1 per cent in In 2009, Vestas shipped 3,320 wind turbines with an aggregate capacity of 6,131 MW, against 6,160 MW and 3,250 wind turbines in A total of 4,764 MW was delivered to Vestas' customers. The intake of firm and unconditional orders for the year was 3,072 MW, against 6,019 MW in The backlog of firm and unconditional orders amounted to 1,747 MW at the end of Europe accounted for 75 per cent, Americas for 21 per cent and Asia/Pacific for 4 per cent. The value of the backlog of firm and unconditional orders amounted to EUR 2.2bn at 31 December 2009, against EUR 5.2bn at year-end Fourth quarter 2009 Vestas generated revenue of EUR 2,506m in the fourth quarter of 2009, corresponding to 38 per cent of total revenue and an increase of 1 per cent relative to the fourth quarter of Fourth-quarter revenue fell short of expectations which is primarily due to the delayed order intake. Europe accounted for 83 per cent of revenue in the fourth quarter. The Americas and Asia/Pacific accounted for 6 per cent and 11 per cent of revenue, respectively. Service revenue amounted to EUR 140m in the fourth quarter. Vestas reported an EBIT of EUR 458m, equivalent to an EBIT margin of 18.3 per cent, against 15.4 per cent in the fourth quarter of The gross profit was EUR 625m, against EUR 524m in the yearearlier period. Vestas shipped 1,233 wind turbines with an aggregate capacity of 2,439 MW in the fourth quarter of The quarterly order intake was 1,022 MW, of which 55 per cent has been announced publicly. The Group generated a cash inflow from operations of EUR 346m, and net investments amounted to EUR 165m. The free cash flow amounted to EUR 185m. Warranty provisions in the fourth quarter amounted to EUR 89m, corresponding to 3.6 per cent of revenue. The incidence of industrial injuries was 4.0 per one million working hours in the fourth quarter. In the fourth quarter, the number of employees rose from 20,256 to 20,730. Vestas' total assets increased from EUR 5,308m in 2008 to EUR 6,435m in Revenue and EBIT (meur) Net working capital (meur) 7,000 1,400 6,000 5,000 6,035 6,636 1,200 1,000 1,235 4,000 4, ,000 3,583 3, ,000 1,000 (116) (68) , Vestas annual report 2009

11 Non-financial issues In 2009, Vestas intensified its efforts to ensure the lowest cost per MWh produced, Cost of Energy, measured not only in euro and cent, but also in terms of the impact on the local communities and society in general, including the environment, the climate and Earth's resources as well as the number of industrial injuries. Safety first Vestas is building a world-class safety culture. As green as it gets Vestas' production and products must be as green as possible. Code of Conduct Vestas' employees and collaboration partners must know what is correct Vestas behaviour. In 2009, Vestas markedly improved on the incidence of industrial injuries, thus registering 8.1 injuries per one million working hours, which is 48 per cent lower than in In 2009, the share of renewable energy was 49 per cent and the share of renewable electricity was 85 per cent. Compared to 2008, this marks an improvement of 11 and 17 percentage points, respectively. In 2009, Vestas' updated Code of Conduct was made available to all employees via e-learning, information material in 18 languages, presentations, etc. In September 2009, Vestas joined the UN Global Compact initiative and follows the ten generally recognised principles in respect of human rights, labour standards, the environment and anticorruption. Revenue and EBIT - fourth quarter (meur) 2,700 2,400 2,100 1,800 1,500 1, ,472 (46) Q , Q , Q , Q , Q % Outlook for 2010 In 2010, Vestas expects to achieve an EBIT margin of per cent and revenue of EUR 7bn against previously expected per cent and EUR 7-8bn, respectively. The narrowing is due to the fact that the year's expected order intake of firm and unconditional orders of 8,000-9,000 MW is anticipated to materialise so late in the year that it is considered unlikely that revenue will reach EUR 8bn. Adjusted for input prices, in general Vestas expects that prices and conditions remain unchanged in 2010 relative to The slowdown in profitability improvement is due to Vestas having excess capacity and the far majority of revenue, and especially profit, being expected in the second half of the year. Net working capital is expected to fluctuate heavily in 2010 and is expected to amount to 15 per cent of annual revenue at the end of the year. Investments in property, plant and equipment and intangible assets are expected to be EUR 250m and EUR 350m, respectively. The completion in 2010 of recent years' large investments in the USA and China will lead to lower investments in property, plant and equipment than in Guidance for 2010 (EURm) Order intake, firm and unconditional orders (MW) 8,000-9,000 Revenue 7,000 - of which service revenue 600 EBIT margin (%) EBIT margin, service (%) 15 Financial items, net (25) Tax rate (%) 28 Net working capital (%) 15 Investments, property, plant and equipment 250 Investments, intangible assets 350 Warranty provisions 3,0 Incidence of industrial injuries 7.0 Customer loyalty (index) 70 Share of green energy (%) 55 Quality level, year-end (Sigma) 5 Incidence of industrial injuries (per one million working hours) In 2009, Vestas achieved an EBIT margin of 12.9 per cent Vestas annual report Vestas annual report 2009 Vestas Wind Systems A/S Consolidated accounts Non-financial issues Management report

12

13 Management report 015 No. 1 in Modern Energy 015 Wind, Oil and Gas 015 Failure is not an option 015 The Willpower 016 Management focus 019 Business development 021 Risk management 025 Vestas' financial performance 027 Outlook for Events after the balance sheet date Corporate Governance 031 Management structure 033 Remuneration 034 Danish corporate governance recommendations 040 Competencies and fiduciary positions of the members of the Board 045 Competencies and fiduciary positions of the members of the Executive Management 046 Presidents of the Group's business units Vestas Wind Systems A/S Consolidated accounts Non-financial issues Management report

14 Management report Vestas' product programme 6 MW The 6.0 MW offshore turbine, which is under development, must dramatically reduce the Cost of Energy price per MWh compared with all known competing products. V MW V MW onshore V MW offshore V90-1.8/2.0 MW V MW V kw V kw V MW V MW Through significantly improved customer insight and open customer dialogue, Vestas aims to achieve a sharp improvement in customer loyalty, which is a prerequisite for Vestas to accomplish Triple15. Ditlev Engel, President and CEO Index 64 Vestas achieved a customer loyalty index of 64 in 2009 an increase from 52 in % of Vestas' energy consumption in 2009 was green an increase of 11 percentage points. 014 Vestas annual report 2009

15 1. No. 1 in Modern Energy Vestas' strategy is called No. 1 in Modern Energy. To Vestas, being No. 1 means being the best, and being the best means maintaining world class safety standards at all Vestas' sites, having the most satisfied customers, the best performing wind power plants and the greenest production. Being the market-leader in wind power, Vestas aims to create the world's strongest energy brand. Wind power is modern energy because it is financially competitive, predictable, independent, fast and clean. Vestas aims to provide its customers with the lowest cost per MWh produced, Cost of Energy, and optimum security for the capital invested in a wind power plant, Business Case Certainty Vestas delivers as promised. Under the Easy to work with principle, Vestas also endeavours to become a more flexible and knowledgeable business partner because significantly improved customer loyalty is a prerequisite for Vestas to retain its marketleading position. A large number of initiatives aimed at optimising internal processes and sharply enhanced focus on collaboration with customers and suppliers, will support the above-mentioned improvements, and combined with new products this will help build the foundation for strong growth in revenue and profitability in the years ahead. Thus Vestas must achieve an EBIT margin of 15 per cent and revenue of EUR 15bn no later than 2015 Triple15. Being the industry's leading player and a pure-play spokesperson, Vestas aims to ensure that wind power remains at the top of the political agenda. This is achieved through dialogue with politicians, public servants, interest groups and NGOs the world over and through advice and information to the public about the potential of wind power, both in individual markets and worldwide. Vestas' financial priorities reflect its constant focus on profitability. 1. EBIT margin 2. Net working capital 3. Revenue In spite of the financial crisis, Vestas improved its EBIT margin in 2009, continuing the streak that began in The Group reported an operating profit, EBIT, of EUR 856m in 2009, equivalent to an EBIT margin of 12.9 per cent, against 11.1 per cent in At the end of 2009, the Group's net working capital amounted to EUR 1,235m, which corresponds to 19 per cent of revenue. At the end of 2008, net working capital amounted to EUR 299m, or 5 per cent of revenue. Revenue in 2009 amounted to EUR 6,636m, an increase of EUR 601m, or 10 per cent relative to Wind, Oil and Gas Wind, Oil and Gas is Vestas' vision, which expresses the ambition of making wind an energy source on a par with fossil fuels. At the end of 2009, wind power accounted for less than 2 per cent of the world's combined electricity production. Wind power is currently the best means among renewable sources of energy of ensuring that global temperature increases caused by CO 2 emissions are kept at a maximum of two degrees. The necessity of limiting temperature increases was recognised by the UN member countries at the COP15 conference on climate change in Copenhagen, Denmark, in December Vestas expects that, if the necessary political decisions on a national and international level to expand the power grid and appoint sites are made now, wind power can make up at least 10 per cent of total electricity production by That translates into installed wind power capacity of at least 1,000,000 MW, as compared with approx 150,000 MW at the end of Failure is not an option Vestas' mission, Failure is not an option, expresses the organisation's commitment to constantly seeking improvements and to consistently following up on and rectifying errors in a structured manner. The mission also mirrors Vestas' uncompromising stance on safety, which is given top priority no matter what the context. The ambition to attain a 6 Sigma quality level throughout the value chain no later than in 2015 underlines this commitment to constant improvement. At the end of 2008, Vestas and the vast majority of its suppliers had reached 4 Sigma. The target for the end of 2010 is 5 Sigma. The improvements are to be achieved through massive investments in training and facilities for the devel opment and testing of wind turbines and components. Vestas therefore works closely with all suppliers to deliver optimum quality and reliability to its customers and, by extension, the lowest Cost of Energy and highest Business Case Certainty. Owing to Vestas' systematic approach to risk management relative to customers and suppliers, all identified risks are costed, and decisions are made on the basis of facts. As a result of the dedicated effort by many suppliers, the quality and ability to supply has been significantly improved in recent years. However, customer returns and Vestas' reputation continue to suffer under unsatisfactory quality management by a few suppliers. As a result, quality-enhancing endeavours are being scaled up through the establishment of a group staff function in charge of Vestas' quality measures. The willpower Vestas' employees have used their willpower, imagination and ability to constantly develop the wind turbine technology and the Vestas organisation to maintain Vestas' leading position in the industry. This is expressed by the sculpture entitled the Willpower, which has been placed at a number of Vestas' locations. Vestas seeks to promote a culture characterised by independent initiative and collaboration in which the dynamics and sense of responsibility that usually characterise a small company are retained. The solid foundation of the sculpture also expresses the reliability, common sense and trustworthiness that is the cornerstone of all Vestas' activities. The updated Code of Conduct that Vestas introduced in 2009 is to ensure that all employees and others persons acting on behalf of Vestas know what is correct Vestas behaviour. Vestas' Code of Conduct can be downloaded from vestas.com under About Vestas/Principles/Sustainability. Vestas' Code of Conduct has been made available to all employees via e-learning, information material in 18 languages, presentations, etc. Furthermore, all employees have been informed about Vestas' EthicsLine, which may be used to report any violation of the company's policies and to seek guidance if an employee faces a dilemma. Furthermore, e-learning modules have been tailored >> Vestas annual report Management report Vestas Wind Systems A/S Consolidated accounts Non-financial issues

16 >> and are mandatory for selected employee groups and available to everyone. All new employees will be introduced to the Code of Conduct as part of the induction programme. Vestas' standards and goals build on recognised framework agreements established by international organisations such as the UN, ILO and OECD. In 2009, Vestas joined the UN Global Compact initiative and follows the ten generally recognised principles in respect of human rights, labour standards, the environment and anti-corruption. At least once a year, Vestas will submit a progress report, Communication on Progress, on Global Compact developments. The progress report for 2009 is shown under the section Non-financial issues on pages Management focus Vestas' management's overall focus is on customers, colleagues, Cost of Energy and shareholders. Success in these areas is a prerequisite for retaining the leadership position in fierce competition with some of the world's largest corporations. Customers Vestas expects that large customers will come to represent a larger proportion of the new capacity in the future, especially in mature markets. Revenue in 2009 was distributed among 201 customers, against 228 in The generally higher degree of professionalism among its customers places ever greater demands on all parts of Vestas. By establishing the independent group staff function Group Marketing & Customer Insight in 2009, Vestas intensified its efforts to build a strong customer-oriented culture throughout the organisation. Through significantly improved customer insight and open customer dialogue, Vestas aims to achieve a sharp improve ment in customer loyalty, which is a prerequisite for Vestas to accomplish Triple15. Group Marketing & Customer Insight is to provide support to the sales business units and standardise customer-related activities so that the most expedient work methods and processes are applied throughout Vestas, making the company a better partner to its customers. Furthermore, the function is responsible for product launches and progressive accumulation of knowledge about customer needs to ensure faster and better follow up on collaboration with each customer and that customer's satisfaction with Vestas. In order to ensure uniform, high quality in all parts of the collaboration with Vestas' largest international customers, a Key Account Management programme was launched in 2009, comprising all sales business units. In addition, customers will become more involved in product development and will generally have better access to information and data relating to business and tech nology. Customer loyalty survey As in previous years, Vestas conducted a loyalty survey among its customers in A total of 684 persons from 155 customers participated in the survey. With a loyalty index of 64, Vestas' almost achieved its target index of 65 an improvement from 52 in The improvement proves that Vestas' continuing focus on enhancing customer relations and delivering better turbine performance and service has produced results. Vestas aims for a customer loyalty index of 70 in 2010, and the target index for 2012 is a minimum of 75. Colleagues Since 2005, Vestas has recruited 10,112 employees, net, and at 31 December 2009, the 20,730 employees had an average seniority of 3.7 years, with 48 per cent of the employees having less than two years' seniority. The training and retention of new and existing employees is therefore a key priority area. Vestas employees at 31 December 2009 Asia/ Europe Americas Pacific Total Production units 7, ,109 10,315 Sales and service units 4,170 1,404 2,013 7,587 R&D 1, ,490 Others 1, ,338 Total 14,161 2,193 4,376 20,730 R&D 7% Sales and service units 37% Others 6% Production units 50% To that end, Vestas has expanded its management development programmes and given greater priority to in-house recruitment of future managers. The in-house recruitment of managers is supported by initiatives such as Vestas' High Potential programme, which selects and supports employees with the potential to take a managerial position in the organisation within a few years. A prerequisite for sustaining progress is for Vestas to become a more international business with a much higher number of non-danish employees in management positions. Furthermore, Vestas aims to have more women executives. At the end of 2009, Danes held 54 per cent of the positions in top-2,500, and 19 per cent were women. In addition, Vestas aims to have many nationalities at all locations in order to create a truly global business, which also has extensive local insight and understanding. Due to the capacity build-up in the USA and a lack of growth in demand in a number of markets in Northern Europe, regrettably Vestas was compelled to adjust its factory capacity in As a result, Vestas had to lay off 1,567 employees in Denmark and the UK. In spite of the lay-offs in 2009, the headcount was approximately the same as in 2008 due to the expansions in the USA and China. Going forward, Vestas expects its headcount to rise at a lower rate than its business volume because of enhanced efficiency, improved turbine performance and economies of scale. Vestas will continue to recruit employees under the People before megawatt principle, because the costs of well-educated excess capacity are lower than the costs of remedying faults due to a rushed staff inflow caused by strong MW growth. Lay-offs will be a measure of last resort for Vestas due to the substantial loss of know-how and experience associated with such lay-offs. Employee satisfaction survey As in previous years, in November 2009 Vestas conducted a satisfaction survey among all employees in order to identify and select priority areas both locally and at Group level. 17, Vestas annual report 2009

17 employ ees, equal to a world-class response rate of 92, participated in the survey. In 2008, the response rate was 86. Although the results show areas which can be improved, the main conclusion is that Vestas' employees are very loyal and dedicated, as also witnessed by the high response rate. To follow up on the survey, action plans are drawn up with specific improvement initiatives at all levels of the organisation to ensure that everyone knows both the overall targets and priorities and the local action plans for Triple15. Safety culture In accordance with Vestas' mission, Failure is not an option, the ultimate goal is to reduce the number of industrial injuries to zero. For the fourth year running, in 2009 Vestas again achieved the lowest incidence of industrial injuries ever. The incidence of industrial injuries per one million working hours was 8.1, declining from 15.6 in The target for 2010 is to achieve an incidence of 7.0 industrial injuries per one million working hours and for 2012 the target is 3.0 or less. This ambition calls for dedicated management of the safety initiatives, not only at Vestas but also at Vestas' business partners. Vestas must have world-class safety at all of its sites, and to achieve that Vestas will continue its comprehensive management training programme. The training programme is based on five safety principles that will guide the employees in their everyday work: All industrial injuries can be prevented. Every hazard can be managed. Management is accountable for safety. People are the most important component in a safety effort. Working safely is a condition of employment at Vestas. An important part of the training programme is "safety walks, in which Vestas focuses on safety at the workplace as part of the day-to-day management to demonstrate visible involvement in safety aspects and increase safety awareness throughout the Group. To emphasise the priority given to safety, the incidence of industrial injuries is one of the criteria in the global employee bonus scheme. Vestas' global bonus scheme All Vestas employees are covered by a bonus scheme aimed at consolidating a performance-based corporate culture. The disbursement of bonus in Vestas' global bonus programme depends on a number of targets: In Vestas' 14 business units, the disbursement of bonus depends on the performance of each individual unit (30 per cent weighting) and the Group's performance (70 per cent weighting). For employees of the parent company, bonus is calculated exclusively on the basis of the Group's performance. For 2009, the following targets applied at Group level: An EBIT margin of 13 per cent (50 per cent weighting), a net working capital of a maximum of 10 per cent of revenue (20 per cent weighting), revenue of EUR 7.2bn (10 per cent weighting) and a customer loyalty index of 65 (20 per cent weighting). Vestas expects the bonus paid out for 2009 to be approx EUR 60m. In the measurement of bonus in 2010, the Group targets have the following weightings: An EBIT margin of 10 per cent (40 per cent weighting), a net working capital of 15 per cent (20 per cent weighting), revenue of EUR 7bn (20 per cent weighting) and a customer loyalty index of 70 (20 per cent weighting). In the longer term, bonus payments will be more closely linked to the day-to-day performance of each employee. The bonus disbursement is based on national legislation and is subject to local adjustments. In 2010, Vestas will extend its option scheme to comprise about 250 employees. The new participants include a number of managers, senior specialists and project managers. Until now, the option programme has only covered the Executive Management, Presidents of the business units and Senior Vice Presidents of the group staff functions. Cost of Energy Vestas is making a dedicated effort to reduce the Cost of Energy measured both as the price of MWh and the environmental footprint. Vestas must consistently manufacture and service more robust and reliable wind power plants, thereby increasing the competitive strength and the value of wind power. The future growth is underpinned by the fact that the price of fossil fuels and CO 2 emissions is set to rise dramatically. Vestas has a broad product portfolio, which is optimised regularly to ensure the best possible output and return from wind power plants under any wind and transmission conditions. In February 2009, the Group began to market its two new wind turbines; the V MW and the V MW, which will be ready for delivery to sites with medium and low winds in 2010 and 2011, respectively. The prototype of the new V kw turbine from Vestas' Hohhot factory in Inner Mongolia, China, was presented in April 2009, and the first order for this turbine was received in December The 6 MW offshore turbine, which is currently being developed, must dramatically reduce the Cost of Energy compared with all known competing products. Combined with the launch of the V MW offshore turbine, the new 6 MW offshore turbine underpins Vestas' commitment to offshore operations, in which Vestas had an estimated accumulated market share of 40 per cent at the end of Of Vestas' total installed MW at the end of 2009, offshore accounts for 2 per cent. Wind power plants generate power without emitting CO 2, NO x and SO x and without consuming any water. In 2008, Vestas resolved to step up its environmental efforts under the As green as it gets principle. Vestas will make wind turbine production as green as possible, partly in order to save money, partly to maintain the industry's most sustainable production and thereby strengthen its competitiveness. Vestas has subsequently joined common initiatives such as the UN Global Compact and the World Business Council for Sustainable Development and implemented a green electricity policy, a green car policy and a green building policy. In 2010, these initiatives are intended to contribute to increasing Vestas' share of renewable energy to 55 per cent through an increase in the share of renewable electricity to at least 90 per cent. The original target for 2010 was 50 per cent. The targets are ambitious because renewable electricity is not currently accessible at all Vestas' units. In 2009, the share of green energy was 49 per cent and the share of renewable electricity was 85 per cent. Further details are provided in the section Non-financial issues on pages >> Vestas annual report Management report Vestas Wind Systems A/S Consolidated accounts Non-financial issues

18 >> Interest rate risk Liquidity risks Exchange rate risks Internal control risks Vestas' organisational structure Executive Management Group Staff functions Vestas People & Culture Vestas Americas Vestas Spare Parts & Repair Vestas Asia Pacific Tax risks Credit risks Commodity risks Supplier risks Product risks Sales risks Reputation risks Risk management Vestas Technology Vestas Central Europe Vestas Blades Vestas China Organisational structure in a sales business unit Vestas Control Systems Vestas Mediterranean President Vestas Nacelles Vestas Northern Europe Communications Government Relations Vestas Towers Vestas Offshore Vestas Quality Management & Process Excellence Marketing & Customer Insight Organisational structure in a production business unit People & Culture Legal & Contract Review President Key Account Management Sales Operations Finance Process Excellence Finance & IT People & Culture Vestas Quality Management Supply Chain Management Production Engineering Production Unit 1 Production Unit Vestas annual report 2009

19 For more than ten years, Vestas has systematically applied life cycle assessments to identify the environmental footprint of the wind turbines throughout their lifetime, including manufacture, transport and dismantling of the turbines. The assessments identify, evaluate and focus on the potential environmental improvements. Over a turbine's lifetime, it only emits 5-8 grams of CO 2 per kwh produced, including the energy-intensive production of steel, which represents the biggest proportion of raw materials used in a wind turbine. sales business unit focuses exclusively on China and the huge growth potential in that market. The Vestas Spare Parts & Repair business unit will help consolidate Vestas' service and spare parts activities. The unit is to support Vestas' service organisation in all markets and help to ensure improved quality and greater reliability, while also making Vestas a more flexible and fast-responding business partner to all customers. The assessments show that the relationship between consumption of materials for manufacturing a wind turbine and the energy subsequently generated by the turbine is pivotal for the environmental impact. Vestas' large-scale investments in development and research must therefore lead to more MWh per kilogram turbine in order to reduce Vestas' impact on the environment, the climate, Earth's resources and its surroundings in general. Measured using these parameters, Vestas' new V MW turbine outperforms the V MW turbine, which has also been developed for low winds, by more than 20 per cent. At the same time, Vestas endeavours to ensure that as much of the product as possible can be recycled. Approx 80 per cent of a V MW turbine on an 80-metre tower can be recycled, thus significantly reducing the wind turbine's overall environmental impact. In 2009, five group staff functions were established: Group Marketing & Customer Insight, Group Forecasting & Planning, Group Engagement Office, Group Quality and Vestas Excellence. Group Marketing & Customer Insight is to help build a strong customer culture in Vestas. Closer customer relations and insight into their needs combined with improved wind turbine performance are expected to pave the way for significantly improved customer loyalty. The aim of Group Forecasting & Planning is to ensure close collaboration between the sales and the production business units. Group Engagement Office is to implement executive management's strategy at the tactical and operational levels by identifying and executing in-house initiatives. Management report For further details, see the section Non-financial issues on pages or vestas.com, where all the lifecycle assessments are available. For further information about targets for factories and sales units, reference is made to the 50 site descriptions, which are also available on vestas.com under About Vestas/Principles/ Sustainability. Shareholders Vestas aims to give its owners a long-term competitive return on investment and openly inform its stakeholders about the develop ments in Vestas with due consideration to the limitations applicable to a listed company and the company's commercial competitiveness. Vestas intends to have an increasingly international circle of owners that reflects the geographical diversification of its operations. Business development Organisational changes In order to safeguard the company's competitive strength in the years ahead, it is essential that the Vestas organisation can ef fect ively handle future growth and avoid a corresponding increase in costs and complexity. Consequently, Vestas is in the process of aligning the Group's business units to ensure consistency of structure, departments, job descriptions and work procedures across the Group. The changes are being made to increase transparency, ensure a clear distribution of responsibilities, reduce Vestas' response time and lower the cost level. In 2009, these changes were made in Vestas' four production business units, while the new structure will be implemented in all sales business units during the first half of 2010, at which time a similar change process will be launched in the group staff functions and in Vestas Technology R&D. Concurrently with the alignment, a number of changes will be made to Vestas' governance structure; a number of forums will be closed down and others will be established, each with clearly defined responsibilities and duties. At 1 January 2009, two new business units were established: Vestas China and Vestas Spare Parts & Repair. The Vestas China The group staff function Group Quality is to ensure enhanced focus on quality, including the use of Six Sigma, in all parts of Vestas. The necessary improvements are to be achieved through close collaboration with local quality functions, which have been strengthened in connection with the alignment of the business unit structure. The Vestas Excellence function consists of eight centres, which in a combined effort with the business units are to identify, organise and optimise work methods and procedures at Vestas to ensure that the best solutions are consistently applied across the Group. The centres are also responsible for ensuring a constant focus on improving profitability throughout Vestas. The eight centres are: Sales Excellence Sourcing Excellence Production Excellence Quality Excellence Transport & Logistics Excellence Construction Excellence Service Excellence Process Excellence In 2009, the centres helped lift Vestas' earnings, demonstrating the continued potential for substantial savings in all parts of the value chain. Knowledge resources In order to ensure that Vestas' combined knowledge resources are developed and exploited in the best possible way, in 2009 Vestas implemented a clear structure for the Group's business procedures, including distribution of responsibilities. Global process owners of the Group's key processes have been appointed to map and harmonise business processes to ensure business continuity. This will help break down silos and increase transparency. Efforts aimed at increasing transparency and improving knowledge-sharing are anchored in Process Excellence. Vestas annual report >> Vestas Wind Systems A/S Consolidated accounts Non-financial issues

20 >> In 2009, Vestas also developed guidelines and tools that support the alignment and process improvement efforts, based on Lean and Six Sigma methods. These initiatives aim to ensure continuous improvement of all processes in Vestas and that best practice is consistently shared across the organisation with a view to meeting Vestas' strategic goals. Also, in 2009 Vestas further intensified its collaboration with leading universities and other educational institutions. In this way, Vestas aims to retain its technological leadership position in the industry. Suppliers Vestas works closely with its suppliers to improve the professional level of the supply chain, enabling the supply of com ponents at competitive prices that reflect the quality and timeliness of the delivery. Against this background, in 2005 Vestas launched Six Sigma as the Group's key quality improvement tool. The system has been implemented at Vestas' own factories and at its suppliers and is aimed at reducing variances in processes and, by extension, harm onising the quality level. Six Sigma provides a common and uniform approach to in novation and process design, focusing on continuous improvements that build on the systematic collection of data. In close cooperation with each supplier, Vestas identifies central specifications that are crucial for product reliability and performance. These parameters are monitored in an ongoing process with a view to launching improvement initiatives. Vestas has stationed some of its own employees with many suppliers in order to adjust relevant processes early and costeffectively. In 2009, a number of suppliers became more deeply involved in Vestas' product development for the purpose of reducing costs and improving quality. Efficiency improvements Optimised resource utilisation and greater productivity are prerequisites for Vestas to retain its competitive strength, minimise the environmental footprint of its own production and retain its market-leading position. During the first quarter of 2010, Vestas will adjust its production completely to a make to order process, which requires that all suppliers can always deliver on time. The objective is to manufacture with a minimum of inventories without increasing the time from receipt of order to shipment and installation. Production Excellence must ensure a common approach to production based on the Lean and Six Sigma productivity systems. A uniform approach to production, including joint processes for improvement initiatives, facilitates the identification of synergies and exchange of best practice experience between factories and business units. The goal is to achieve world-class production. A key prerequisite for achieving best practice and synergies was accomplished when the new organisational structure in Vestas' production business units was implemented in In order to ensure the necessary employee involvement, both factory management and employees receive Lean and Six Sigma training. In 2009, around 3,000 employees participated in training courses, thus contributing to building a corporate culture in which all employees consistently endeavour to improve the quality and reduce lead times, costs and errors. In 2009, Vestas continued to build on the improvements achieved in the preceding years. For example, Vestas Spare Parts & Repair implemented a full Lean conversion, which led to significantly improved lead times for Vestas' key components. At all future factories, operations will be planned according to the new principles from the onset of production. Common optimisation principles and similar organisations improve the possibility of communicating across the organisation, leading to greater mobility among Vestas' employees. Service Focusing on maximum output and return from the wind power plants through meticulously planned service inspections, Vestas' service organisation helps ensure more satisfied customers. This was achieved concurrently with the Group building a more profitable service business. Since the beginning of 2008, Vestas has invested substantial resources in enhancing the service organisation's efficiency and, by extension, the reliability of the wind power plants. The mean time between service inspections of each turbine was improved in 2009 compared to 2008, when the mean time was doubled. Vestas Performance & Diagnostics Centre regularly monitors more than 15,500 turbines, or about 26,600 MW, allowing the service organisation to make preventive retrofitting and repairs. Meticulous planning of service inspections produces enhanced operations and higher production output and thereby stronger earnings for the customers and Vestas. Every day, Vestas increases the number of wind turbines monitored. At the end of 2009, these turbines accounted for 69 per cent of Vestas' total installed capacity. Analyses of data from the wind turbines which combined represent the world's largest wind power plant by far also provide input for the design of upgrade packages which, subject to service contracts concluded, are implemented or offered in connection with software upgrades for installed turbines. The recently established business unit, Vestas Spare Parts & Repair, supports all of Vestas' operational service units and will contribute to further operational improvements and better lead times for spare parts and repairs. Responsible for the global supply of spare parts and repairs of key components to Vestas' service organisation, this unit is headquartered in Randers, Denmark, and in 2009 it opened departments in Bristol, UK, and in Barcelona, Spain. In 2010, Vestas plans to open a service department for repairs in Colorado, USA. Vestas expects that in future, the service business will grow at least as fast as the other activities. Implementation of SAP Vestas has now launched the Enterprise Resource Planning system SAP in all seven sales business units, in all group staff functions, in Vestas Technology R&D and in Vestas People & Culture. The implementation of SAP has made Vestas better capable of adapting to a constantly changing world and market. Uniform and valid data have improved transparency between the departments, increased the retention of knowledge resources, and made Vestas able to act faster and more safely. 020 Vestas annual report 2009