Thesis Valuation of Vestas Wind Systems

UNIVERSITY OF COPENHAGEN
FACULTY OF SOCIAL SCIENCES
Bachelor Thesis
Gustav Ebbe Goth & Patrick Rennemo-Henriksen
Valuation of Vestas Wind Systems A/S
Advisor: Søren Hovgaard

Characters: 71,366
Faculty of Economics
University of Copenhagen
Denmark
th
24 of November 2022
Abstract
This thesis applies an indirect Discounted Cash Flow (DCF) model to determine the ordi-
nary equity value of Vestas Wind Systems A/S as of 26.08.2022. This is achieved through
identifying Vetsas’ fundamental value in a strategic analysis, reformulating the financial
statements and budgeting the financial expectations of Vestas. This thesis estimates the
ordinary equity value of Vestas to be EUR 26,168m, which is equivalent to a share price
of EUR 25.91 (DKK 192.74). This result differs 1.31% from the ordinary equity value at
the date of valuation and 1.74% from the average of 11 acknowledged financial institu-
tions. This result is based on a weighted average cost of capital (WACC) of 7.82% and a
terminal growth rate of 3.80% for Vestas.
Section distribution
Gustav Ebbe Goth: 2, 3.1.1, 3.2.3, 3.2.2, 3.2.4, 4, 4.1.1, 4.1.3, 4.2.1, 4.3.2, 4.4.1, 4.4.3,
5.1.1, 5.1.3, 5.2, 5.4, 6, 6.1.1, 6.1.3, 6.3, 7.2
Patrick Rennemo-Henriksen: 3, 3.1.2, 3.2.1, 3.2.3, 3.3, 4.1.2, 4.1.4, 4.3.1, 4.4, 4.4.2,
5, 5.1.2, 5.1.4, 5.3, 6.1, 6.1.2, 6.2, 7, 7.1, 7.3
Combined: 1, 8, 9, 10
Bachelor Thesis ctj173 & dzj622 November 2022
Contents
Abstract 1
Section distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Introduction 1
1.1 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Vestas Wind Systems 2
3. Strategic analysis 3
3.1 PESTEL analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1.1 Political and Environmental politics . . . . . . . . . . . . . . . . . . . 4
3.1.2 Economical factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1.2.1 GDP growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1.2.1 Monetary policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1.3 Technological factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Porters Five Forces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2.1 Competition in the industry & potential of new entrants . . . . . . . 9
3.2.2 Power of suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2.3 Power of customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2.4 Threat of substituting products . . . . . . . . . . . . . . . . . . . . . 12
3.3 Concluding SWOT analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Analysis of the accounts 13

4.1. Reformulating the balance sheet . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1.1. Other receivables & liabilities . . . . . . . . . . . . . . . . . . . . . . 14
4.1.2. Investments in joint ventures and associates . . . . . . . . . . . . . . 15
4.1.3. Leasing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.1.4. Cash with disposal restrictions . . . . . . . . . . . . . . . . . . . . . 15
4.2 Reformulating the equity statement . . . . . . . . . . . . . . . . . . . . . . . 15
4.2.1 Share-based payments . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Reformulating the income statement . . . . . . . . . . . . . . . . . . . . . . 17
4.3.1. Income from investments in joint ventures and associates . . . . . . 18
4.3.2. Special items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 Analysis of Vestas’ profitability . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4.1 Return on invested capital and financial gearing . . . . . . . . . . . . 19
4.4.2 Decomposing ROIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4.3 Analyzing the profit margin and ROA . . . . . . . . . . . . . . . . . 21
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5. Budget 23
5.1 Budgeting the revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1.1 Vestas’ market share . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1.2 Industry CAGR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1.3 Future sales price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1.4 Revenue growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2 Budgeting EBIT-margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Determination of the terminal growth rate . . . . . . . . . . . . . . . . . . . 27
5.4 Check for the terminal period criteria . . . . . . . . . . . . . . . . . . . . . . 27
6. The Weighted Average Cost of Capital (WACC) 28

6.1 Return on equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1.1 Risk-free asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.1.2 Beta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.1.3 The Market Risk Premium . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Estimating the WACC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.3 WACC sensitivity analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7. The Discounted Cash Flow Model 33

7.1 The valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Sensitivity analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Alternative valuation models . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8. Conclusion 36
9. Bibliography 36
9.1 Books and scientific articles . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 Online sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.3 Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10. Appendix 44
1. Introduction
The motive of this thesis is to investigate if the value of renewable energy firms is overval-
ued. The assumption that they may be overvalued is based on the expectation that the
economy will be more reliable on renewables than what is reflected in the actual revenue
generation in the sector.
This is examined by estimating the ordinary equity value of Vestas Wind Systems A/S by
identifying the correct share price of one Vestas share as of 26.08.2022. The share price at
the valuation date was EUR 25.58 (DKK 190.24) and will be set relative to the estimate
of this paper, which is EUR 26.29 (DKK 192.74).
Vestas is analysed strategically and financially to determine the ordinary equity value of
Vestas through an indirect Discounted Cash Flow model (DCF). Based on these analyses,
this paper aims to answer the following thesis statement:
What is the ordinary equity value of Vestas Wind Systems A/S as of 26th
of August 2022, and is the share correctly priced?
The purpose of the strategic analysis in section 3 is to highlight which macro and micro
tendencies affect Vestas’ operation. The results from the analysis are used to budget
Vestas’ key financial figures in section 5. The strategic analysis is based upon a PESTEL-
analysis, Porter’s Five Forces and a concluding SWOT analysis. It is concluded from the
PESTEL-analysis that the macroeconomic tendencies have both a positive and negative
influence on Vestas, but with the positive influence weighing highest. The analysis of
Porter’s Five Forces portrays that no new competitors will enter the wind turbine market
and become a threat to Vestas and that Vestas will gain a 2%-point extra market share.
The SWOT analysis concludes the PESTEL and Porter’s analyses.
The financial analysis in section 4 and 5 is conducted in order to determine the value
drivers of Vestas. This analysis includes reformulations of Vestas’ financial statements in
section 4 and budgeting Vestas’ key figures in section 5. The reformulations are created
to ensure that there are no misplaced entries and therefore no dirty-surpluses, as this
would yield a misleading valuation. The reformulations are used to identify the key value
drivers of Vestas by using the Du-Pont model. The budgeting contains a projection of
Vestas’ Future Cash Flows’s (FCF) and other key figures, which are used in section 7 to
identify the enterprise value of Vestas using the DCF model.
In section 7, the FCFs are discounted by Vestas’ Weighted Average Cost of Capital
(WACC), which is found in section 6. The WACC is calculated to be 7.82%, which is low
compared to the current estimate on Vestas’ WACC used at Nykredit.
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Based on the results from the strategic and financial analyses it is concluded that the
estimate of this thesis differs 1.31% from the ordinary equity value at the date of val-
uation. The ordinary equity value of Vestas Wind Systems A/S in this paper is EUR
26,168m (DKK 194,639m) and an average of 11 acknowledged financial institutions yield
an ordinary equity value of EUR 26,624m (DKK 198,026m), which is a 1.7% difference
from the estimate of this thesis. 1 .
1.1 Limitations
The following will not be included in the analysis due to a strict page limit:
• Accounting practices. Therefore it is anticipated throughout this paper that the

accounting practices of Vestas are appropriate.
• Trend analysis in the financial analysis
• The social and legal factors in the PESTEL analysis
• Benchmark and multiple analysis with peers
• Case scenario for Vetas.
Including these analyses in the model would make the valuation more accurate and yield
a more representative image of Vestas.
2. Vestas Wind Systems

Vestas was established in 1898 by Hans Jørgen Hansen in Lem. Hans Jørgen made
it a family business and named it ”Dansk Staalvindue”. The Hansen family were all
blacksmiths dedicated to create steel window frames for industrial buildings. It was a
growing business up until the outbreak of World War II. The war was a difficult time
to run a business, and as a consequence hereof, Peder Hansen, the son of Hans Jørgen,
decided to merge with peer companies after the war. Together they established VEstjysk
STaalteknik A/S, which was abbreviated to Vestas. Vestas began shifting focus from
the blacksmith industry towards renewable energy in 1978 when the two blacksmiths Karl
Erik Jørgensen and Henrik Stiesdal called upon Vestas’ help to build a wind turbine. In
1979, Vestas distinguished themselves by building the first successful wind turbine that
could generate 30 KW. Vestas could call themselves a wind turbine manufacturer.
Vestas saw significant growth and became a big player within wind energy. In 1998 Vestas
was listed on Nasdaq Copenhagen to raise capital for further growth.
1
Appendix, table 16
2 af 51
Figure 1: Vestas Wind Systems A/S share price development since 2000
Source: Bloomberg (VWS DC Equity).
Annot: Adjusted stock price which has accounted for stock splits
Vestas’ stock price has been volatile since 1998. It has been influenced by crises such as
the dot-com bubble in 2002, the Financial Crisis in 2008-2009, the Covid-19 crisis in 2020
and the current economic circumstances in 2022. Vestas’ all time high was in January in
2021 with a stock price of EUR 41.6 (DKK 312) and is from the date of valuation trading
at EUR 25.58 (DKK 192.24). Vestas’ compound annual growth rate (CAGR) has been
15.7% from 1998-2022.
Vestas has remained a market leader within wind energy. Their strategy has consisted
of merging with other companies to gain knowledge and obtain greater market share,
and through technological advancements. In 2004 Vestas merged with the Danish wind
turbine manufacturer, NEG Micon, which increased Vestas’ market share to 32%. Vestas’
market share has since decreased to 18% due to increased competition, but they remain
market leader in 20212 .
3. Strategic analysis
A strategic analysis is the first step towards identifying the fundamental value of a firm3 ,
which is essential towards an accurate valuation. The strategic analysis examines the
macro- and microeconomic factors that affect Vestas. This is achieved through an internal
and external analysis using a PESTEL analysis, Porter’s Five Forces and a concluding
SWOT.
2
GWEC Global Wind Report 2022
3
Sørensen, O. p. 67
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3.1 PESTEL analysis

A PESTEL analysis focuses on the macroeconomic parameters that influence a firm.
The analysis examines Political, Economic, Social, Technological, Environmental and
Legal factors. The PESTEL analysis is used to determine how Vestas are affected by
external factors, which will be included in the budgeting. This thesis solely focuses on
the political, economical, technological and environmental factors due to limitations cf.
section 1.1.
3.1.1 Political and Environmental politics
Sustainability and energy independence are current political themes in the Western World.
Politicians are addressing the climate changes by setting ambitious objectives towards a
more sustainable future. As a result, 196 nations entered the Paris Agreement at COP21
in 2015 with the ambition of limiting the temperature increase to below 2 degrees celsius4 .
In order to achieve this objective, countries have committed to decrease their use of fossil
fuels to limit their CO2 emissions, as fossil fuels constitutes 87% of all human-produced
CO2 emissions5 .
Both the US and EU have set ambitious targets to accelerate the green transition. The
US created a subsidy, Production Tax Credit (PTC), in 1992 with the purpose of acceler-
ating green energy. The PTC is a ten year tax credit for each kilowatt hour of electricity
generated by a certain renewable or zero carbon emission project 6 . This subsidy was
originally to expire in 2002, but has been prolonged ever since and most recently to 2032.
Additionally, the US has set an objective of reducing CO2 emissions by 50-52% by 2030
compared to 2005 level. Their aim is to receive net-zero carbon emissions by 2050 through
increased investments in clean energy 7 . The focus on green transition varies in the US
depending on the Government. The US formally withdrew from the Paris agreement
in 2020 under the Donald Trump regime. Their withdrawal removed USD 3 billion of
funding to innovations within renewable energy, which makes the renewable energy mar-
ket dependent on the participation from the US 8 . The current Biden Administration
established a target in 2021 of producing 30GW of offshore wind by 2030, which triggers
an investment of USD 12 billion in constructing offshore wind turbine sites9 .In order to
accelerate the process, the US Government introduced the Investment Credit Tax (ICT)
subsidy in 2022. This provides a 30% tax credit for offshore wind projects that begins
construction prior to 01.01.2026 10 .
4
UNFCCC
5
Climate Watch
6
Practical Law
7
The White House (2021)
8
NPR
9
The White House (2021)
10
Congressional Research Service
4 af 51
The EU share this objective of net-zero carbon emissions no later than 2050 through
the European Green Deal. Additionally, the EU has set an interim goal of reducing the
net-emission of carbon dioxide by 55% by 203011 . In relation to Vestas, the European In-
vestment Bank has issued a EUR 425m loan to Vestas to fund their research, development
and innovation department.
The Danish government has initiated the development of an energy island in the North
Sea, VindØ, which is expected to deliver 10GW of energy. The government has in-
vested DKK 11 billion, which is equivalent to 50.1% of the total expected costs12 . The
government has chosen Copenhagen Infrastructure Partners (CIP) as their financial rep-
resentative and issued a tender to identify the correct supplier of wind turbines for the
project. Vestas is considered to be the favourite candidate to win the tender, as they
own 25% of CIP Holding P/S. Additionally, the tender description highlights that the
company chosen must have high scale production13 . Vestas is the largest wind turbine
manufacturer globally14 , which makes them an obvious candidate.
Besides the climate change, the current geopolitical tensions have increased the focus on a
green transition. This is a result of Russia’s invasion of Ukraine in February 2022. Russia
supplies respectively 29% oil, 54% coal and 43% gas of EU’s total spend. This has created
an urgency within EU and the rest of the Western World to become energy independent.
As a result, the EU commission has established the REPowerEU plan, which contains
a strategy to become independent of Russia’s fossil fuels before 2030. Delivering this
objective requires a EUR 210 billion investment from EU between 2022 and 2027 15 . The
plan contains three initiatives where one of them focuses on the production acceleration
of solar and wind systems.
The climate changes and geopolitical tensions are considered to have a positive effect
on the wind turbine market. Vestas is considered to benefit from the increased political
attention due to their maturity and scalability. As a result, Klaus Kehl, Chief Analyst at
Nykredit, expects Vestas to gain market shares in the years to come 16 .
3.1.2 Economical factors
3.1.2.1 GDP growth
The global economic landscape has been volatile the past few years due to Covid-19 and
the described geopolitical tensions. According to economists, the world is approaching a
global recession due to increased inflation and increased interest rates.17 .
11
European Commission
12
Bloomberg
13
Ministry of Climate, Energy and Utilities, tender agreement
14
Bloomberg
15
The European Comission (2022)
16
Interview with Klaus Kehl, Chief Analyst at Nykredit
17
Reuters
5 af 51
Figure 2: Real GDP Growth in Europe and North America (2012-2027).

Source: International Monetary Fund.
Annot: The expected GDP growth from 2022-2027 are projections made by the International Monetary Fund
Figure 2 illustrates that the North American and European GDP has decreased in 2020,
which was a direct result of Covid-19. Covid-19 also resulted in a significant decrease
in Vestas’ stock price cf.. figure 1. This shows that Vestas is strongly dependent on
the market development in the Western world. As shown in figure 2, the International
Monetary Fund projects that the GDP growth rate of both Europe and North America will
decrease in 2022 and 2023 and slowly reach a steady annual growth rate of approximately
2%. This decrease is expected to have a negative impact on Vestas’ growth in 2022-2023, as
the GDP growth of the Western World and Vestas’ growth are positively correlated.
3.1.2.1 Monetary policies
The inflation has increased significantly in 2022 as a result of increased energy prices and
a global supply chain issue. The Russia-Ukraine conflict, broad geopolitical complications
and Covid-19 lockdowns have compounded an already bleak global supply chain situation.
Russia has decreased their gas supply to Europe, which have made energy prices across
Europe increase heavily. In addition, freight prices have increased due to limited access
to Russia and Ukraine, Covid-19 lockdowns and aerospace restrictions18 .
18
JP Morgan
6 af 51
Figure 3: Inflation and interest development in EU and USA .

Source: Rate Inflation, ECB, Bloomberg (GT 10 Govt) & Economic research
As illustrated in figure 3, the Federal Reserve System (FED) and European Central Bank
(ECB) have reacted to this increase in inflation by increasing the interest rates in respec-
tively the US and EU19 . Investments and interest rates are negatively correlated. This
means that when the interest rate increase, then the level of investments decrease and
vice versa. The decrease in investments is considered to have a negative impact on Vestas
in the coming years, as their future earnings are likely to decrease20 . Additionally, the
increase in inflation also has a negative impact on Vestas’ earnings through increased
material costs. This is due to the fact that Vestas negotiate their prices two years in
advance from the actual beginning of the project. If prices increase in the meantime, then
Vestas will have to cover the majority of the extra costs21 . However, Vestas increased
their MW/h price by 22% in Q2 2022 compared to Q2 202122 .
3.1.3 Technological factors
Research and development within technological advancement in the renewable energy sec-
tor has risen due to increased political attention and focus. One possible technological
invention that can lead to a key advancement in this sector is the Power-to-X. Power-to-X
is considered a key component in accelerating the green transition. The technology focuses
on the process of utilizing electricity for renewable energy sources to produce hydrogen,
which can be converted into electrofuels. This can result in the replacement of fossil fuels
in industries where direct electrification is difficult to storage, such as shipping23 .
Vestas has entered a partnership with Topsoe and Skovgaard Energy to build a Power-to-
X demonstration plant in Lemvig, which will produce green ammonia based on renewable
19
Forbes
20
Forbes
21
Casper Blom, Senior Equity Analyst, Danske Bank
22
Reuters (2022)
23
Sustainability, DTU
7 af 51
power and electrolysis of water. This project will give Vestas a unique position to integrate
and optimize renewable energy with other technologies in order to develop Power-to-X
cost-effectively and at scale 24 . This project and the Power-to-X technology is considered
to have a positive effect on Vestas in the future. The North Sea has eminent conditions
for build offshore wind parks construction sites due to a shallow sea and high winds. This
makes Vestas an attractive partner for such projects due to their demographics.
A wind turbine project typically costs EUR 200-250m and for investors to gain a positive
Net Present Value (NPV) on their investment, then the wind turbines need to operate
for approx. 20 years25 . Companies must deliver high quality wind turbines in order to
win tenders. As a result, Vestas has focused on their technological development in order
to remain competitive on price and maintain the high quality of their products. This has
resulted in developments such as the EnVentusT M platform in 2019 and the V236-15.0T M
offshore wind turbine in 2022. The EnVentusT M platform is a standard platform solution
for Vestas’ onshore wind turbines that is independent on grid conditions. The develop-
ment of the EnVentusT M is a significant progression in the efforts towards lowering the
levelized cost of energy, as Vestas will be able to achieve economics of scale. This will
enable the acceleration of global transition to a more sustainable world26 . This solution
enables Vestas to gain a competitive edge within onshore energy and secure high quality
on their existing wind turbines portfolio. The V236-15.0T M is the largest wind turbine in
the Western World with a rotor diameter of 236 meters. It is an offshore wind turbine
that is capable of generating enough energy to power 20,000 European homes and has an
expected lifetime of 25 years depending on the site conditions27 . These innovations and
developments are considered to have a positive impact on Vestas’ earnings and market
share in the future.
From the PESTEL analysis it is concluded that Vestas will benefit from the increased
focus towards energy independence and the climate. Additionally, the technological ad-
vancements will benefit Vestas and give them a competitive edge. However, Vestas are
expected to be influenced negatively by the economic factors through the high inflation
and interest rates.
3.2 Porters Five Forces

Porters Five Forces is a model that analyses and identifies five forces that highlights the
competition, weaknesses and strengths in an industry28 . This analysis is used to identify
24
Topsoe
25
Klaus Kehl, Chief Analyst at Nykredit
26
Windpower, Engineering & Development
27
Vestas
28
Investopedia
8 af 51
the competitors in the wind turbine industry and Vestas’ bargaining power in relation to
suppliers and customers. This analysis has merged the competition and potential of new
entrants in the industry into the same subsection.
3.2.1 Competition in the industry & potential of new entrants
Within the last ten years the wind turbine industry has consolidated into having fewer
but larger actors. The market shows the same characteristics of an oligopoly meaning
there are few players with homogeneous products. This is a result of high scale-ability
demands from customers, high production costs and strategic mergers and acquisitions29 .
Therefore, it is considered unlikely that new entrants will enter the market and gain
market shares in the future. As shown in figure 5, Vestas was the largest supplier in 2021
with 18% of the total 93.6GW globally.
Figure 4: Top 15 wind turbine suppliers in annual global market in 2021 .

Source: GWEC Market Intelligence (May 2022) and own calculations
In oligopolies, companies tend to compete through price regulations and innovation lev-
els, which is also the case for the wind turbine market. For the past year, the Western
World has experienced an increase in inflation, which has decreased the profit margins
of the companies. The Chinese market has not experienced as high an inflation, making
them more price competitive 30 . However, as mentioned in section 3.1.1, the Western
World wish to become energy independent. Hence, it is considered unlikely that the
29
Recharge
30
Recharge
9 af 51
Chinese manufacturers will gain market shares in the Western World as well as Vestas
gaining market shares in China. All due to the geopolitical tensions, security of supply
and national security issues 31 . Vestas’ number of installations in the Asia-Pacific region
decreased by 25% in 2021, which primarily was caused by the supply chain issues 32 .
23% of the global 93.6GW installed in 2021 was offshore wind turbines. The global
CAGR of offshore wind from 2022-2026 is estimated at 8.3%, whereas the CAGR for
onshore wind is 6.1%. The reason that offshore wind is set to grow more than onshore
is due to the expected technological advancements and the benefits of offshore wind 33 .
Vestas constituted 12.19% of offshore installations in 2021 and was placed fourth in the
annual installation behind Chinese manufactures 34 . Vestas issued the largest amount of
offshore MW by any western company, which is illustrated in figure 5.
Figure 5: Top 15 wind turbine suppliers in annual global market in 2021 .

Source: GWEC Market Intelligence (May 2022) and own calculations
According to spokesmen from ABO WIND AG and PNE AG, the quality of wind turbines
in the western world is higher compared to Asia-Pacific, as the technology of Chinese
31
Casper Blom, Senior Equity Analyst, Danske Bank
32
Vestas Annual Report 2021
33
34
GWEC Market Intelligence (May 2022)
10 af 51
turbines are ”one-to-two development cycles older ”35 . This has led to Chinese suppliers
struggling to become relevant in mature wind markets, as the lifetime of their turbines
are insufficient for an investor to gain a profit 36 .
3.2.2 Power of suppliers
Wind turbines are made of 66-79% steel, 11-16% fiberglass, resin or plastic, 5-17% iron,
1% copper and aluminum 37 . Steel, iron, copper and aluminum are all raw materials
that are traded on global exchanges and is produced at large scale globally by multiple
manufacturers, which makes the market circumstances similar to perfect competition.
This gives the wind turbine manufacturers a bargaining strength in relation to their
suppliers. Vestas’ trade payables have increased by 10% annually from 2017-2021 38 . This
indicates that Vestas has used their bargaining power to obtain lucrative payment and
delivery terms, as payment is postponed until the wind turbine is sold. Therefore, it is
concluded that the bargaining power of suppliers is minimal.
3.2.3 Power of customers
It is expensive to invest in wind turbines. Large companies or institutional investors

who intend to purchase wind turbines conduct lots of research to gain the appropriate
knowledge and to find the cheapest solution to fit their needs and existing technology.
The customers gain a bargaining power through their knowledge of the industry, which
makes them capable of demanding a lower price 39 . Additionally, the majority of wind
turbine projects are settled through an auction or tender. This gives the manufacturers
an incentive to set the lowest price possible, at a given quality, as otherwise they will not
remain competitive.
The wind turbine industry has been characterized by poor conditions for the manufactur-
ers, as the majority of the value creation has benefited the customers. This has resulted
in negative EBIT-margins for the majority of the wind turbine manufacturers in 2021.
It was solely Vestas who had a positive EBIT-margin. The manufacturers entered deals
with negative profit margins in order to keep their productions sites running and cover
their fixed expenses. This can be considered sunk cost. These synergies gives customers
a strong bargaining power in the industry 40 .
35
SP Global
36
Klaus Kehl, Nykredit
37
USGS
38
Appendix, table 17
39
Sørensen, O. p. 76
40
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3.2.4 Threat of substituting products
There exist multiple energy sources that are used globally to generate electricity. These
sources issues individual levels of carbon dioxide when generating electricity, which is
illustrated in table 1.
Hydro Ocean Wind Nuclear Biomass Solar CSP Geothermal Solar PV Natural Gas Oil Coal
g CO2eq/kWH 4 8 12 16 18 22 45 48 469 840 1.001
Table 1: The carbon intensity of electricity generation

Source: IPCC
As discussed in section 3.1.1, the Western World is diverting into focusing solely on re-
newable energy. Therefore, this section only focuses on other renewable energy sources
that have experienced a similar technological development as wind. The most direct sub-
stituting product for wind energy is solar energy. These two energy sources share many
of the same characteristics such as instability and they both require lots of space to build.
However, wind energy release less CO2, consume less energy, is a more cost-effective and
can produce and deliver more energy41 .
Nuclear energy also produces low levels of CO2 per kWH produced. This is a stable form
of energy and does not require a lot of space to construct. Nuclear is a much more costly
alternative. The cost of electricity per MW/h for solar and wind is respectively USD 36.49
and USD 40.23, whereas nuclear is USD 88.2442 . Therefore, the threat of substituting
products is considered to be low. However, these energy sources are considered to be
complementary products. It is therefore viewed as a positive factor for the wind turbine
industry and thus Vestas.
From Porter’s Five Forces it is concluded that Vestas were the market leader in 2021
measured in installed MW. Vestas is the largest onshore manufacturer and fourth largest
in the offshore market. Further, it is concluded that Vestas will not operate in the Asia-
Pacific region and that the Chinese manufacturers have difficulties in penetrating the
Western market due to lack of quality. The bargaining power of suppliers in the industry
is minimal, whereas the bargaing power of customers is strong. It is concluded that there
is no threat of substituting products.
3.3 Concluding SWOT analysis

A SWOT analysis identifies a firms internal strengths and weaknesses along with their
external opportunities and threats. Vestas SWOT-analysis is based on the above inter-
nal (PESTEL) and external (Porter’s Five Forces) analysis. Figure 6 summarises the
conclusions from section 3.1 and 3.2.
41
Elemental Green
42
US Energy
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Figure 6: Vestas’ strenghts, weaknesses, opportunities & threats.

Source: Own assessment based on the strategic analysis
4. Analysis of the accounts

To determine the value triggers and drivers of Vestas, one must conduct reformulations of
the reported balance sheet, changes in equity and income statement. The reformulation
removes and highlights potentially misreported income to ensure that the company’s re-
tained earnings are correct and to avoid any dirty surplus 43 . The reformulations of this
thesis are made by using accounting practices from ”Regnskabsanalyse og Værdiansæt-
telse” by Ole Vagn Sørensen, 6th edition. If different methods had been implied, then the
financial results might have differed and yielded a different ordinary equity valuation of
Vestas.
4.1. Reformulating the balance sheet

A balance sheet is a financial statement that focuses on a company’s assets, liabilities and
equity and represents the financial state of the company to share-and stakeholders. The
overall purpose of reformulating a balance sheet is to separate the financial activities from
the operating activities to identify how the company generates value from its operating
activities44 . The operating activities refer to how the company uses the available capital
to generate value and the financial activities refer to the firms ability to raise or obtain
capital.
43
Sørensen, O. p. 200
44
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mEUR 2021 2020 2019 2018 2017

Total operating assets 16,715 14,596 10,901 8,221 7,355
Total operating liabilities 13,129 11,710 9,982 8,174 7,233
Net operating assets 3,586 2,886 919 47 122
Total financial assets 2,997 3,564 3,430 3,678 3,516
Total financial liabilities 1,502 1,747 1,004 621 526
Net financial assets 1,495 1,817 2,426 3,057 2,990
Total equity 5,068 4,654 3,293 3,092 3,112
Table 2: Summary of reformulated balance sheet for Vestas Wind Systems A/S
Source: Own calculations based on Vestas Wind Systems’ annual reports from 2017-2021
As illustrated in table 2, Vestas has had net-operating and financial assets throughout
the analyzed period from 2017-2021. The net operating assets of Vestas has increased
from EUR 122m in 2017 to EUR 3,586m in 2021, as a result of increased contract assets,
goodwill and inventories. The net financial assets has decreased from EUR 2,990m in
2017 to EUR 1,495m in 2021, as a consequence of increased financial liabilities. This is
driven by an increase in financial derivative instruments and leasing, where the latter was
introduced to the balance sheet through the implementation of IFRS 16 in 2019. The
fact that Vestas has net-operating and financial assets means that they have generated
an operating and financial surplus.
Reformulating the balance sheet requires some separation of entries that are justified
below.
4.1.1. Other receivables & liabilities
”Other receivables” contains prepayments, supplier claims, VAT, derivative financial in-
struments and other receivables. This entry will be split into operating and financial
assets. Prepayments, supplier claims and VAT are all categorized as operating assets, as
they are part of the daily activities. Other receivables are an operating asset, as it refers
to supplier claims that Vestas have made for faulty deliveries. The derivative financial
instrument is categorized as a financial asset as it regards the different hedges that Vestas
has performed to manage the risks they face against foreign currency and commodity risk
exposure.
Other liabilities contain staff costs, taxes and duties, other liabilities, and derivative finan-
cial instruments. Staff costs and taxes and duties are placed under operating liabilities
whereas other liabilities and the derivative finanical intrument are financials assets.
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4.1.2. Investments in joint ventures and associates
This entry is split into investments in joint ventures and investments in associates. Even
though both subcategories are operating assets, the split is conducted to specify the
entry. The associate investments are mainly from two companies that Vestas has invested
in: Copenhagen Infrastructure Partners Holding P/S (25%) and Blakilden Fäbodberget
Holding AB (40%). This gives Vestas a big influence in the companies but not full control.
The investment in Copenhagen Infrastructure Partners Holding P/S was made in 2021
and the complete prize will be EUR 500m where EUR 180m was an upfront payment and
the remaining EUR 320m is a performance contingent consideration, to be paid in the
period from 2023 to 2029.
4.1.3. Leasing liabilities
Through the implementation of IFRS 16 in 2019, Vestas began to report the leasing of
several assets including properties, vehicles and equipment on the balance sheet. Leases
are normally considered part of the operating activities of the company. However, the lia-
bilities included in the leasing is considered a financial activity. Therefore it is categorized
as a financial liability in the reformulated balance sheet.
4.1.4. Cash with disposal restrictions
For a company to ensure it can meet the daily expenses, it often sets aside operating
liquidity. Vestas’ ”Cash and cash equivalents” are split into cash equivalents with and
without disposal restrictions. This will convey how much cash Vestas are capable of spend-
ing in the operating activities. The cash with disposal restriction includes cash pledged to
guarantee providers as security for guarantee obligation to obtain lower commission rates
and can therefore not be used to invest in the operating activities45 . Thus, this entry is
categorized as an operating asset in the reformulated balance sheet.
4.2 Reformulating the equity statement

The official equity statement shows the development in equity from the beginning of
the year (BOY) to the end of the year (EOY), which can be illustrated by the below
equation:
EquityEOY = EquityBOY + T otal income − Dividends
Hence, the equity EOY is affected positively by the equity at BOY and the total income,
which is defined as net prof it ± other total income. Total income covers income and
returns along with expenses and losses that are reported on the equity statement, but
45
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not on the income statement. This could for instance be currency regulation of foreign
affiliated companies and an appreciation of tangible assets46 .
The purpose of reformulating an equity statement is to identify how the firm creates equity
growth and whether the growth is a result of further investments in the operating activities
of the business47 . Additionally, the reformulation focuses solely on the equity from the
ordinary shareholders perspective. This means that the reformulation has corrected any
entries that are not allocated to the ordinary shareholders. These entries are considered
”dirty surplus entries” and are considered a liability for the ordinary shareholders.
mEUR 2021 2020 2019 2018 2017

Equity as of 1 January 4,654 3,293 3,092 3,112 3,190
Total transactions with owners - 240 652 - 398 - 652 - 971
Total comprehensive income for the year 338 693 574 614 875
Share based payments 13 16 25 18 18
Equity as of 31 December 4,765 4,654 3,293 3,092 3,112
Minority interest 13 49 52 12 -
Equity as of 31 December incl. minority interest 4,778 4,703 3,345 3,104 3,112
ROE 7.2% 17.4% 18.0% 19.8% 27.8%
Table 3: Summary of reformulated equity statement for Vestas Wind Systems A/S
Reformulating the equity statement allows for the calculation of the return on equity
(ROE) of the firm. The ROE measures the profitability of the owners investment and the
growth in equity from the company’s profit generating activities48 . As illustrated in the
above table the ROE for Vestas has decreased annually over the period. The 10%-point
decrease in ROE from 2020 to 2021 is a result of a 51.2% decrease in ”total comprehen-
sive income for the year”. This decrease is driven by a -78.2% decrease in the ”retained
earnings” in 202149 . This decrease is partly a result of the EUR 180m investment in
Copenhagen Infrastructure Partners Holding ApS.
4.2.1 Share-based payments
The official equity statement includes ”share-based payments” under ”transactions with
owners” and refers to restricted performance shares (share-based payment) granted to
the Executive Management and other executives50 . The reformulated equity statement
46
47
48
Sørensen O. p. 207
49
50
Vestas Annual report 2021, note 1.4/1.5
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is viewed solely from the ordinary shareholders perspective, which means that the share-
based payments to Executives are considered a liability until the options are exercised.
Therefore the share-based payments are placed in ”acquisition liabilities” in the reformu-
lated equity statement and subtracted from the ordinary equity statement.
4.3 Reformulating the income statement

The purpose of reformulating the income statement is to identify a firms total income
by separating it into total operating profit and net financial expenses. This separation
is important to calculate key figures and examine the historical profitability of operating
and financial activities of a company. Further, a separation of the operating activities
has been split into core and non-core activities where core activities are permanent and
non-core are recurrent. The total income contains net profit from the income statement
and other total income from the equity statement. Reporting other total income directly
on the equity statement instead of the income statement is considered ”dirty-surplus ac-
counting”, as the profit from the income statement will be incomplete. This will result in
the reported total income to be incorrect and the historical profitability of the company
will be misleading51 .
mEUR 2021 2020 2019 2018 2017

Core revenue 15,587 14,819 12,147 10,134 9,953
Core operating costs - 14,240 - 13,453 - 10,591 - 8,740 - 8,320
EBITDA 1,347 1,366 1,556 1,394 1,633
Net Operating Profit After Tax (NOPAT) 300 613 780 730 928
Non-core other operating activities (abnormal entries), after tax 7 188 - 62 - 81 - 182
Total operating profit 335 754 720 681 715
Net financial expenses, after tax 3 -64 -149 -68 160
Total income before minorities 332 690 571 613 874
Minority interest 9 3 3 1 0
Total income to ordinary shareholders in Vestas Wind Systems A/S 341 693 574 614 874
Table 4: Summary of reformulated changes in income statement for Vestas Wind Systems A/S
As portrayed in table 4, the total income to ordinary shareholders in Vestas has decreased
significantly. The difference from 2017 to 2021 is -65.9%. The main reason for this
significant decrease is that the core operating costs has increased relatively more than
the core revenue. Vestas has throughout the period from 2017-2021 had net financial
expenses, resulting in the company gaining a tax-shield52 .
51
Sørensen, O. p. 226-227
52
Tax-shield = net financial expenses ∗ company tax
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Reformulating Vestas’ income statement identified two misplaced entries, which are listed
below.
4.3.1. Income from investments in joint ventures and associates
Income from investments in joint ventures and associates is split into two categories:
”Income from investments in joint ventures and associates” and ”gain from disposal of
joint ventures and associates”. The gain from disposal is categorized as a non-core other
operating activity whereas the income from investments in joint venture and associates
is categorized as core other operating activities. These are placed differently, as the gain
from disposal is an abnormal entry and not recurrent.
In 2020 Vestas reported a profit of EUR 383m as gain from disposal of joint venture. This
is a result of Vestas’ acquisition of MHI Vestas Offshore Wind A/S, which was a joint
venture between Vestas and Mitsubishi Heavy Industries, Ltd. (MHI)53 The income from
joint ventures and associated companies is considered part of the core operating income,
as these will be recurring in the future.
4.3.2. Special items
Special items contains impairment loss on intangible and tangible assets, staff costs and
other. The use of special items entails management judgement in separation from other
items in the income statement. According to the management, it is crucial that the
special items entry is significantly unusual and/or infrequently occurring in Vestas’ income
statement, as it is not a part of the normal operations. Therefore the special items entry
is considered a non-core other operating activity and an abnormal entry.
4.4 Analysis of Vestas’ profitability

The profitability analysis of Vestas is based on the reformulated statements and the
extended Du-Pont model. This model decomposes the return on equity (ROE) and its
financial underlying value drivers to identify the most significant value creators. The ROE
can be calculated as follows:

Avg. N F O
ROE = ROIC + ∗ (ROIC − RON F A) ∗ M IA (1)
Avg. Equity + Avg. minority
Where ROIC is return on invested capital, NFO are net financial obligations, RONFA is
the average return on net financial assets and MIA is the minority shareholders share of
the company. The structure of the model separates the value drivers into three different
levels where the deeper levels are dependent on the above levels.
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4.4.1 Return on invested capital and financial gearing
The first level of the extended Du-Pont model decomposes the ROE into ROIC and the
return on financial activities. These two components measure the profitability of a firms
operating and financial activities. The ROIC measures a firms efficiency to generate profit
from its investments54 . The ROIC is calculated by:
T otal operating prof it
ROIC = (2)
Avg. net operating assets
A company’s assets are financed through either financial obligations or equity. A firm
obtains financial gearing (FGEAR) when it finances operating activities using financial
obligations. FGEAR measures the relative proportions of equity and net financial obliga-
tions and their effect on ROE.
Avg. net f inancial obligations
F GEAR = (3)
Avg. ordinary equity
2021 2020 2019 2018 2017

ROE before min 7.1% 17.1% 17.7% 19.7% 27.8%
ROE 7.2% 17.4% 18.0% 19.8% 27.8%
ROIC 10.3% 39.6% 149.2% 805.7% 298.1%
FGEAR -0.35 -0.53 -0.85 -0.97 -0.92
RONFA 0.2% -3.0% -5.5% -2.2% 5.5%
SPREAD (%-point) 10.2 42.7 154.6 807.9 292.6
MIA 1.03 1.02 1.02 1.00 1.00
Table 5: Summary of key figures of Vestas Wind Systems A/S

As illustrated in table 5, the ROIC has been volatile. Vestas’ ROIC has been abnormally
high from 2017-2020. A benchmark for the Green/Energy Renewable sector has been
calculated by Aswath Damodaran and estimated to be 5.91% in January 2022 across
Europe, US, Australia, New Zealand and Canada.55 Thus Vestas’ ROIC of 10.3% in
2021 is 4.39%-point greater than the weighted average of the sector. The ROIC has been
high due to a relatively large operating profit compared to the net operating assets. The
main reason the ROIC has been decreasing in the period is due to increased inventories,
contract assets and goodwill. Additionally, the operating profit has decreased by 50.8%
from 2018-2021, as the core operating expenses has increased relatively more than the core
revenue. This is primarily due to a 65% increase in production costs in this period.
The ROIC has been greater than the ROE in the entire period. This relation is represented
by the spread in table 5. The spread is calculated as:
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Appendix, table 20
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Spread = ROIC − RON F A (4)
The spread has been positive throughout the period, which means that the return on the
net operating assets exceed the return on net financial assets.
The financial gearing has been fluctuating in the period from -0.97 to -0.35. This is
a result of decreased financial obligations and increasing ordinary equity. Vestas has
throughout the analyzed period had net financial assets. The Return On Net Financial
Assets (RONFA) is calculated using the following formula:
N et f inancial income
RON F A = (5)
Avg. net f inancial assets
Vestas’ RONFA fluctuated between -5.5% and 5.5% in the period. Vestas has had a neg-
ative RONFA from 2018-2020, which means that Vestas has had a negative net financial
income, despite having net financial assets in the entire period. This is possible, as the
majority of Vestas’ financial assets are placed in cash and cash equivalents and financial
derivatives. These assets focus on reducing the financial risk of the company by hedging
foreign currencies, commodity prices and interest rates. Per se, these assets do not gener-
ate any returns as such, however, they require large expenses, as Vestas has to constantly
conduct fair value adjustments on the financial derivatives.
4.4.2 Decomposing ROIC
The second level of the Du-Pont model decomposes the ROIC into the profit margin and
the return on assets (ROA) of a company. The profit margin and ROA are respectively
given as:
T otal operating prof it

P rof it margin = (6)
Revenue
Revenue
ROA = (7)
N et operating assets
The profit margin measures a company’s profit for selling one EUR from the operating
activity. The ROA represents the sales per one EUR invested in net operating assets.
The inverse of the ROA measures how much capital a company has invested in order to
generate one EUR worth of sales56 .
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2021 2020 2019 2018 2017

ROIC 10.3% 39.6% 149.2% 805.7% 298.1%
Profit margin 2.1% 5.1% 5.9% 6.7% 7.2%
ROA 4.8% 7.8% 25.1% 119.9% 41.5%
1/ROA 0.21 0.13 0.04 0.01 0.02
Table 6: Decomposition of ROIC of Vestas Wind Systems A/S

As illustrated in the above table 6, the ROA is the primary explanation of the develop-
ment in ROIC. For a manufacturer, such as Vestas, a ROA of 6% is considered to be
adequate 57 . Thus, Vestas’ ROA has been adequate in the period from 2017-2020. The
ROA peaked in 2018 due to relatively high revenue compared to Vestas’ low net financial
assets. The ROA has since decreased from the abnormally high ROA of 119.9% to 4.8%,
as the average net operating asset has increased significantly from EUR 85m in 2018 to
EUR 3,236m in 2021, which is a 3,730% increase. In the same period the revenue has
increased by a total of 54%, which corresponds to an annual increase of 9.4% . This is also
illustrated in the increase of the inverse ROA. This has increased by 0.19 in the period,
which means that it requires greater investments for Vestas to generate one EUR worth
of sales.
The profit margin has decreased steadily throughout the entire period with at total drop
of -5.0%-point. This decrease is caused by a relatively larger drop in the total operating
profit compared to the core revenue. The operating profit has decreased by 14.1% annually
in the given period primarily as a result of a 75.6% increase in production costs.
4.4.3 Analyzing the profit margin and ROA
The third level of the Du-Pont model analyzes the profit margin and ROA in further
depth. The analysis of the profit margin focuses on the EBTIDA, EBIT and NOPAT-
margin, which are respectively given as:
Revenue − operating expenses
EBIT DA = (8)
Revenue
Operating prof it, bef ore tax
EBIT = (9)
Revenue
Operating prof it, af ter tax
N OP AT = (10)
Revenue
These margins are frequently used to analyse the profitability of the company and to
identify value drivers. As highlighted in the below table, the margins have decreased
steadily throughout the period. This is primarily a result of increased productions costs.
Vestas’ production costs are equivalent to 90% of the revenue. The productions costs
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increased by 4.1%-point from 2019 to 2020, as a result of the Covid-19 crisis and the
supply chain issues that rose58 .
2021 2020 2019 2018 2017

Revenue 100% 100% 100% 100% 100%
Production costs -90.0% -89.6% -85.5% -83.9% -80.3%
Research and development costs -2.3% -1,8% -2.2% -2.3% -2.4%
Distribution costs -2.4% -1.9% -1.8% -1.9% -2.3%
Administration costs -2.4% -1.6% -2.2% -2.5% -2.7%
Other costs 5.7% 4.2% 4.5% 4.3% 4.0%
EBITDA-margin 8.6% 9.2% 12.8% 13.8% 16.4%
Amortization -2.5% -1.7% -1.7% -1.8% -1.6%
Depreciation -3.4% -2.6% -2.7% -2.4% -2.4%
EBIT-margin 2.7% 5.0% 8.3% 9.6% 12.4%
Tax of EBIT 0.6% 1.1% 1.8% 2.1% 2.7%
NOPAT-margin 1.9% 4.1% 6.4% 7.2% 9.3%
Core other operating profit 0.2% -0.3% 0.0% 0.3% -0.3%
Abnormal operating entries 0.0% 1.3% -0.5% -0.8% -1.8%
Total profit margin 2.1% 5.1% 5.9% 6.7% 7.2%
Table 7: Decomposition of profit margin in Vestas Wind Systems A/S

The NOPAT-margin represents the profitability of engaging with clients and suppliers, as
it reflects all operating activities that are related to the core activity of the firm59 . The
NOPAT-margin has decreased by a total of 7.4%-point in the period. The total profit
margin has been greater than the NOPAT-margin in both 2020 and 2021. In 2020 this was
due to high abnormal operating entries as a result of the acquisition of MHI Vestas where
Vestas gained EUR 383m as disposal of joint venture. In 2021 the core other operating
profit was high, as Vestas gained EUR 131m from financial derivatives through exchange
rate adjustments relating to foreign entities.
The ROA is split into operating assets and operating liabilities. The difference between
these entries is equivalent to the inverse of the ROA. 60 As illustrated in the below table,
the inverse of the ROA has increased by a total of 18.4%-point in the period.
58
Vestas 2021, Q2 report
59
60
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2021 2020 2019 2018 2017

Total operating assets 100.4% 86.0% 78.7% 76.9% 69.4%
Total operating liabilities 79.7% 73.2% 74.7% 76.0% 67.0%
Inverse of ROA (1/ROA) 20.8% 12.8% 4.0% 0.8% 2.4%
Table 8: Decomposition of the ROA in Vestas Wind Systems A/S

This is because the total operating assets of Vestas has had an annual growth rate of 17.8%,
whereas the operating liabilities has increased 12.7% annually. The significant increase in
the operating assets comes from increased goodwill as a result of the acquisition of MHI
Vestas in 2020 and from ”investments in joint ventures”, which represents the investment
in Copenhagen Infrastructure Partners Holding in 2021. The increase in the operating
liabilities is primarily a result of increased contract costs and trade payables.
5. Budget
The purpose of this section is to forecast key financial figures for Vestas in order to
calculate the FCFs. The forecast period is usually 5-20 years depending on the maturity
of the firm and the expected development of the industry. A 10-year forecast period
has been applied in this thesis, as Vestas is a mature firm, but the industry has large
unfulfilled potential cf. section 3.2.3. The budgeting is split into two periods; forecasted
period and the terminal period. The terminal period is added to the forecasted period and
is included due to the assumption of going concern, which refers to an infinite investment
horizon. The terminal period starts when the growth in revenue, the EBIT-margin, ROA
and financial gearing has reached a constant long-term growth rate61 .
5.1 Budgeting the revenue

Vestas’ future revenue is depending on multiple macro- and microeconomic parameters.
This section focuses on the development in Vestas’ market share, the industry’s compound
annual growth rate (CAGR), and the future MW price.
5.1.1 Vestas’ market share
As illustrated in figure 5, Vestas is the market leader within wind turbine installations with
a market share of 18%. As discussed in section 3.1.1, the Western World has increased
the focus on renewable energy and have pronounced ambitious goals. To reach these
goals, production at large scale is demanded, which will increase the total amount of
global installations. Vestas is the largest wind turbine manufacturer in the world, which
suggests they will be involved in the largest projects in the future such as VindØ in 2024.
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Therefore, it is anticipated in this thesis that Vestas’ market share will increase from 18%
to 19% in 2024 and from 19% to 20% in 2025. This market share will remain at a constant
level throughout the period, as a result of competitors up-scaling their production.
5.1.2 Industry CAGR
The global wind turbine industry is expected to grow by a CAGR of 6.6% from 2022-2026.
This CAGR is primarily driven by the increased political focus, discussed in section 3.1.1,
and the diminishing effects of the supply chain issue. Since it is considered unlikely that
Vestas will operate in the Asia-Pacific region, a CAGR excluding this region is calculated.
The global CAGR in this period excluding Asia-Pacific is 8.2% compared to Asia-Pacfic’s
CAGR of 4.0%, as shown in figure 7.
Figure 7: New Wind Installations and CAGR by region (2022-2026)

Source: CWEG Global Wind Report 2022 and own calculations.
This relatively low CAGR for Asia-Pacific is a result of a 45.6% increase in installations
from 2021 to 2022 in the region62 .
5.1.3 Future sales price
The future sales price is important when budgeting Vestas’ future revenue. The sales price
for Vestas is calculated by setting the order intake in mEUR relative to the order intake
in MW. Table 9 shows the development in the MW price for Vestas from 2013-2021.
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2021 2020 2019 2018 2017 2016 2015 2014 2013

Order intake (mEUR) 11.60 12.70 13.80 10.60 8.90 9.50 8.20 5.80 5.80
Order intake (MW) 13.90 17.25 17.88 14.21 11.18 10.49 8.94 6.54 5.96
Price (mEUR) 0.83 0.74 0.77 0.75 0.80 0.91 0.92 0.89 0.97
Annual change (%) 13.4% -4.6% 3.5% -6.4% -12.0% -1.3% 3,5% -8.9% 5.7%
Average annual change (%) -0.8%
Table 9: Development in sales price for Vestas Wind Systems A/S

Source: Vestas Wind Systems’ annual reports from 2012-2021 and own calculations
As illustrated in table 9, the average annual change for the period was -0.8%. This is
not considered a significant change in the past 10 years. As a result, price levels in this
budgeting have remained a constant factor. However, one can argue that the anticipated
restructure in the auction-scheme within the industry, as discussed section 3.2.2, will have
a positive impact on sales price. It is unknown when and if such a restructure will be
implemented, and as a result, this factor is not included in the analysis63 .
5.1.4 Revenue growth
In this thesis, Vestas’ future revenue is based on a constant price and a 2%-point increase
in market share in a growing industry, cf. sections 5.1.1 and 5.1.3 respectively. This has
resulted in a CAGR for Vestas of 11.4% from 2022-2026 compared to the global CAGR
excluding Asia-Pacific of 8.2%. The annual development in revenue growth is illustrated
in figure 8.
Figure 8: Revenue development and Year-on-Year growth in revenue for Vestas Wind Systems A/S
Source: CWEG Global Wind Report 2022 and own calculations.
As shown in figure 9, Vestas’ revenue is assumed to drop by 16.0% in 2022 and by 8.5%
in the following year as a result of the global supply chain issues and the high level of
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inflation. The effect of these parameters is assumed to diminish in the following years.
This combined with a total of 2%-point increase in market share results in a positive
development for Vestas’ revenue in the future. 2025 is an outlier with an increase of
34.5%. This significant increase is a result of diminishing effects from the supply chain
issues, a low revenue level in the previous year and deadlines for political objectives 64 .
Additionally, it is assumed that Vestas gains 1%-point market share from 2024 to 2025,
cf. section 5.1.1. From 2025 and onwards the growth rate is expected to decrease slightly
on an annual basis, as a result of a maturing market.
5.2 Budgeting EBIT-margin

The EBIT-margin is driven by the revenue and the operating costs of a firm. The EBIT
margin of Vestas has decreased since 2017 and is expected to become negative in 2022
and 2023. This decrease is primarily a result of increased commodity and material prices,
which will increase the production costs. As illustrated in figure 10, the operating cost
share of revenue has increased from 2017 and will exceed 100% in 2022 and 2023 in this
thesis.
Figure 9: Development of EBIT-margin and operating cost share of revenue

Source: Vestas Annual Reports 2017-2021 and own calculations.
From 2024 and onwards it is expected that the effects from high inflation, supply chain
issues and interest rates will diminish, which will reduce costs 65 . This will result in
operating costs constituting a smaller share of the total revenue. This combined with
expected technological advancements discussed in section 3.1.3, will lead to an increase
in the EBIT-margin and decrease the operating costs share of the revenue. It is expected
in this thesis that the EBIT-margin will reach a constant level of 10.1% in 2031.
64
65
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5.3 Determination of the terminal growth rate

The terminal growth rate is determined by identifying future GDP growth in Europe,
Middle East, Africa (EMEA) and the Americas. 12.6% of Vestas’ revenue originated
from the Asia-Pacific region in 2021, but it is anticipated that Vestas’ market share in
Asia-Pacific will decrease significantly in the coming years due to increased competition
from China. Therefore, the growth rates of Asia-Pacfic have been excluded from the
forecast.
Avg. GDP growth Avg. share of revenue for Weighted GDP growth
Real GDP growth (%)
(2022-2031) Vestas (2017-2021) of Vestas’ revenue
EMEA 1.9% 52.1% 1.0%
Americas 1.8% 47.9% 0.9%
Real GDP growth (%) 1.8%
ECB inflation target 2.0%
Nominal GDP terminal growth rate 3.8%
Table 10: Determination of the terminal growth rate

Source: International Monetary Fund, Vestas Annual Reports from 2017-2021 and own calculations
Table 10 illustrates, that Vestas has penetrated EMEA and Americas almost evenly from
2017-2021. The average annual GDP growth is expected to be respectively 1.9% and
1.8% for Europe and the US from 2022-2031. These predictions are used for the forecast
as Europe and the US are the largest players within EMEA and Americas respectively.
Weighing these growth rates with Vestas’ share of revenue, results in a real GDP growth of
1.8%. Including the ECB’s inflation target of 2%66 , thus gives the nominal GDP terminal
growth rate of 3.8%.
5.4 Check for the terminal period criteria

The terminal period starts when the growth in revenue, the EBIT-margin, ROA and finan-
cial gearing has reached a constant long-term growth rate. From table 11 it can be derived
that the different key figures have reached a constant long-term growth rate. The revenue
converges towards a terminal growth rate of 3.8% whereas the EBIT-margin reaches a
constant level of 10.1%. The ROA converges towards a constant rate of 9.14%.
66
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mEUR 2031E Terminal year

Revenue 26,169 27,164
Revenue growth (%) 3.8%
EBIT-margin (%) 10.1% 10.1%
Operating costs (OC) - 23,529 - 24,423
Growth in OC (%) 3.8%
Net operating assets (NOA) 2,865 2,973
Growth in NOA (%) 3.8%
FGEAR -35.0 -35.0
ROA (%) 9.14 % 9.14 %
Table 11: Terminal period criteria

Source: GWEC and own calculations.
Annot: The terminal period begins from 2032E
In the budgeting it is assumed that Vestas pays dividends of all surplus liquidity in
2022 and onwards. This assumption ensures that the capital structure of Vestas remain
constant, which simplifies the forecast with regards to the WACC. Therefore, Vestas’
FGEAR remains constant from 2021 at -0.35 cf section 4.4.1. Thus all key figures have
reached a constant growth rate and it is confirmed that the terminal period begins in
2032.
6. The Weighted Average Cost of Capital (WACC)

The aim of this section is derive the WACC of Vestas, as this will be used as the discount
factor for their FCF’s and terminal period. WACC is a measure to determine both
creditors and shareholders demand of return in order for them to provide a company with
capital.67 WACC after tax is given by:
VE VD
W ACC = ∗ rE + ∗ rD (11)
V EV V EV
where V E is the value of equity, V D is the value of debt, V EV is the enterprise value of the
firm, rE is the required return for shareholders and rD is the required return for creditors.
Vestas has negative net financial obligations (NFO), which means the firm has higher
financial assets than financial liabilities, and therefore has net financial assets as described
in section 4.1. Therefore, rD is substituted by rf a in the above expression to68 :
VE V NF A
W ACC = EV ∗ rE + EV ∗ rf a (12)
V V
67
Investopedia
68
Sørensen, O. p. 42
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where rf a (effective rate) is the required return on the financial assets of Vestas 69 . 80% of
Vestas’ financial assets are constituted by cash and cash equivalents. The cash and cash
equivalents are invested in highly liquid investments with an original three month matu-
rity, which are subject to an insignificant risk of changes in value and bank overdrafts70 .
In this thesis, an effective rate for a Danish 3 month Government bill will be used as an
estimate for rf a . At the valuation date, the Government bill was 0.206% 71 .
6.1 Return on equity

The rate of return is derived through the Capital Asset Pricing Model (CAPM) formula,
which is commonly used in the world of Finance for pricing expected returns for an asset
given the risk of that particular asset. In other words, it estimates the required return on
an equity investment. It is derived using equation 13.
rE = rf + βi (E(rm ) − rf ) (13)
In the above expression rf is the risk-free asset, βi is a measure for systematic risk and
E(rm ) is the expected market return. Subtracting the risk-free asset from the expected
market return the yields the market risk premium (MRP).
6.1.1 Risk-free asset
The risk-free asset is an interest investors receive, from an investment that holds no risk.
Typically, the risk-free rate used when conducting a DCF valuation for a company, is a
10-year government bond in the country of origin of the company. The financial crisis
resulted in huge government debt loads, which have caused a lot of academic discussions
regarding the risk free rate, and whether or not the government rate should be used as a
proxy for the risk-free rate. Such discussion is beyond the scope of this thesis, and the
10-year Danish Government Bond (DGB) yield will be used throughout the thesis and is
also the rate approved by the Danish Tax Authorities72 .
69
Sørensen, O. p 42
70
71
Bloomberg: DGTB 0 12/01/22 Corp
72
Skat
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Figure 10: Danish 10-year Government Bond since 1992

Source: Bloomberg (GDGB10YR Index) and own calculations
Figure 11 shows the generic 10-year DGB yield. The chart clearly shows that the 10-year
government bond yield is not a static instrument, and since January 2021 the yield has
increased from around -50 basis points up to 1.794% as of 26.08.2022. This is a significant
rate increase, yet historically this is between the average of the last 15/20 years.
DGB 20 year 15 year 10 year 26.08.2022

Average 3.488 2.121 1.482 0.593 1.794
Table 12: Averages of the Danish 10 year government bond yield, since 1992.
Source: Bloomberg (GDGB10YR Index) and own calculations
During the last year the stock market has repriced significantly. One could argue that this
is mainly due to the higher discounting rates, which is why the interest rate of 26.08.2022,
1.794%, will be used as the risk free rate for the WACC calculations throughout this
thesis.
6.1.2 Beta
The Beta value is a measure of a stock’s volatility in relation to the market where the
market beta is one. A stock that is more volatile than the market has a β > 1 and vice
versa. Vestas’s volatility will be set relative to OMX Nordic 40, which in this case has
β = 1. This index was established in December 2001 and represents the 40 largest and
most actively traded stocks in Denmark, Sweden and Finland73 . This index is chosen
instead of e.g. C25 or S&P500, as it is more diversified than C25 and the origin of the
index is in the Nordics. The calculated β value is derived using monthly data through
the duration of OMX Nordic 40’s lifetime, which yields a value of:
Cov(rm , ri ) Cov(rOM X40 , rV W S ) 0.0032

β= = = = 1.15 (14)
V ar(rm ) V ar(rOM X40 ) 0.0028
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Thus, there is more risk involved in investing in Vestas than OMX Nordic 40. As illus-
trated in table 13, this result is common across multiple analyses from different financial
institutions. The β values from different financial institutions differ from 1.01 to 1.64.
Therefore, a β value of 1.23 is applied throughout this thesis, as it is an average of the
sources and thus represents a more nuanced β value.
Source Beta value

Thesis estimate 1.15
Yahoo Finance 1.01
MarketWatch 1.12
Reuters 1.64
Average 1.23
Table 13: Beta values from different sources

Source: Nasdaq, Yahoo Finance, MarketWatch, Retuters and own calculations
6.1.3 The Market Risk Premium
The market risk premium (MRP) is the difference between expected market return E(rm )
and the risk-free rate rf .
M RP = E(rm ) − rf (15)
It describes the additional return an investor requires by undertaking further risk to the
investment compared to the risk-free alternative. The OMX Nordic 40 index development
is illustrated in figure 11. It has since its establishment delivered an average yearly return
of 8.01%.
Figure 11: OMX Nordic 40, since establishment.

Source: Nasdaq OMX Nordic (SE0001809476)
There exists multiple indices that are qualified to act as a proxy for the market return.
Due to the globalized markets in the Western World one could argue that an average of
multiple Western indices will be the most accurate proxy for the market return.
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Index Annual return

OMX Nordic 40 8.01%
S&P 500 7.58%
MSCI Europe 4.58%
Average 6.69%
Table 14: Average annual return for OMX Nordic 40, S&P 500 and MSCI Europe
Source: Nasdaq and MSCI
From table 14 it is illustrated that OMX Nordic 40 has delivered the highest annual
return, where S&P 50074 and MSCI Europe75 has delivered respectively 7.58% and 4.58%
in annual return. This average return of 6.69% is considered low according to Klaus Kehl,
Chief Analyst at Nykredit. However, these three market indices cover the Western World
and it is believed that Vestas will operate on these markets in the future. The MSCI
World Index could have been included, which has delivered an average annual return of
10.94% from 1978 to 2022 76 . However, this is not included in the calculation, as this
index contains the Asia-Pacfic region. Therefore, an annual return of 6.69% will be used
as a proxy for the annual market return. The market risk premium is thus:
M RP = 6.69% − 1.794% = 4.90% − point (16)

which represents the premium an investor expects to receive from taking on additional risk.
The results from section 6.1.1-6.1.3 is inserted into equation 13 to yield the rE :
rE = 1.794% + 1.23 ∗ 4.90% = 7.82% (17)
This number represents the minimum annual required rate of return an investor will
accept for purchasing shares in Vestas, as compensation for the risk associated with the
stock.
6.2 Estimating the WACC

As mentioned in the budgeting, it is assumed that Vestas will pay dividends of all surplus
liquidity in 2022 and onwards, which is the change in equity. The value of equity of Vestas
is calculated as the number of existing shares times the stock price on the 26.08.2022:
V E = 1, 009 billion ∗ EU R 25.58 = EU R 25, 829 billion (18)

74
S&P 500 includes 500 large companies in the US spread across industries
75
MSCI Europe is composed of 429 companies and captures large and mid cap representation across
15 Developed Markets (DM) countries in Europe
76
MSCI and own calculations
32 af 51
Thus, the WACC is derived using equation 12 and is equal to the return on equity.
25, 829 1, 495

W ACC = ∗ 7.82% + ∗ 0.206% = 7.82% (19)
25, 830 25, 830
This WACC of 7.82% is considered to be low according to the estimate of 9% used by

Nykredit in November 2022 on Vestas77 . In comparison, a weighted average from Aswath
Damodaran, professor at NYU Stern School of Business, yields a WACC of 5.36% for the
Green/Renewable Energy sector in Europe, US, Canada, Australia and New Zealand in
January 2022 78 . This value is expected to have increased since, but as this paper values
the ordinary equity of Vestas in August, then the WACC of 7.82% will be used.
6.3 WACC sensitivity analysis

In this thesis, the WACC is primarily impacted through the MRP, the risk-free rate and
β. Theresfore, this section aims to convey how sensitive the WACC is towards changes in
the parameters. As shown in equation (15), the MRP is dependent on the development
of the risk-free rate. Therefore, this relationship does not have a nameworthy effect on
the WACC. Instead, a sensitivity analysis of the MRP and β is conducted in figure 12 to
identify their effects on the WACC:
Figure 12: WACC sensitivity analysis: Market risk premium and Beta
Source: Own calculations.
As shown in equation (13), the β value has a positive influence on the rE . Thus, a large
β value will yield a higher WACC, as there is more risk involved in the asset. If the MRP
was to increase due to a lowering in the interest rate or a higher annual market return,
then the WACC would increase and yield a lower enterprise value for Vestas.
7. The Discounted Cash Flow Model

The discounted cash flow (DCF) model is one of the most common used valuation models
in the field of Finance. The model is intrinsic and solely focuses on a company’s ability
77
Klaus Kehl, Chief Analyst, Nykredit
78
Appendix table 21
33 af 51
to generate positive cash flows. It is used to forecast a company’s FCF for a given period
and discounting the FCFs using its WACC. The model can be illustrated as:
F CFt F CFT +1
V0E = ΣTt=1 + − N F O0 (20)
(1 + W ACC)t (W ACC − g)(1 + W ACC)T
where V E is the equity value and g is the terminal growth rate of the firm value.
The DCF model has advantages and disadvantages. One of the advantages include the
ability to rather easily conduct a sensitivity analysis by examining the effect of WACC
and the terminal growth rate. A disadvantage of the model is that the majority of the
concluded enterprise value is based on the terminal value. This terminal value is highly
sensitive towards changes in the WACC and terminal growth rate and thus the result of
the DCF model varies depending on which assumptions have been used.
7.1 The valuation

The valuation of Vestas’ stock price is estimated based on the terminal growth rate, the
free cash flows and the WACC found in section 6. All these components inserted into the
DCF model derives the following result 79 :
mEUR
NPV of FCF 5,878
NPV of terminal value 21,805
Enterprise value of Vestas 27,683
Net financial obligations - 1,502
Value of equity 26,181
- Minority interests 13
Ordinary value of equity 26,168
# of shares (million) 1,010
Estimated share value (EUR) 25.91
Share price of 26.08.2022 (EUR) 25.58
Difference (%) 1.31%
Table 15: Summary of the Discounted Cash Flow model for Vestas Wind Systems A/S
As highlighted in table 15, the ordinary equity value of Vestas is calculated at EUR
26,168m. The estimated share price as of 26.08.2022 is EUR 25.91 (DKK 192.74), which
is 1.31% higher than the actual share price EUR 25.58 DKK(190.24). This result is
similar to an average of estimates from 11 financial institutions regarding the ordinary
equity value of Vestas. The average yields a share price of EUR 26.36 (DKK 196.09).
79
Appendix table 22: The Discounted Cash Flow model
34 af 51
7.2 Sensitivity analysis

This section investigates how sensitive the result of this thesis is towards changes in the
WACC and terminal growth rate. Figure 13 illustrates the percentage-difference from the
estimated value and the actual share price at the date of valuation.
Figure 13: DCF sensitivity analysis: WACC and terminal growth rate
As shown, the percentage-difference is highly sensitive towards changes in these param-

eters. If a higher WACC was used as a discount factor, then the conclusion would have
differed by decreasing. Additionally, if a lower terminal growth rate would have been
used, then the conclusion would vary as well also by decreasing. Therefore, there is a
high uncertainty involved in the valuation estimate, as it depends on the subjective as-
sumptions made throughout the thesis. This uncertainty is illustrated in table 16 in the
appendix where the difference between the stock price estimates from Citi Bank and JP
Morgan EUR 29.98 (DKK 223).
7.3 Alternative valuation models

Numerous different valuation models exists, which could have been applied in this thesis,
and yield different conclusions. This section will explain why an indirect DCF model was
chosen instead of a direct DCF model. The main difference between the direct and indirect
model is the fact that the direct model is based on dividends instead of FCFs. Vestas’
dividend policy differs depending on the Board Members desired capital structure and
the accessibility to cash 80 . Therefore, it is difficult to forecast future dividends. Similar
to the indirect model, the majority of the estimated enterprise value is determined in the
terminal value. It is assumed that there is a higher uncertainty in the forecast of dividends
compared to FCFs, which is why the indirect model was chosen.
80
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8. Conclusion
This thesis has identified the ordinary equity value of Vestas as of 26.08.2022 by using an
indirect DCF model. The assumption that renewable energy companies are overvalued
due to increased expectations is concluded to be incorrect. In this thesis, the ordinary
equity value is valued at EUR 26,168m (DKK 194.639), which represents a stock price
of EUR 25.91 (DKK 192.74). This differs 1.31% from the ordinary equity value at the
date of valuation and 1.7% from the average estimate from the 11 financial institutions in
table 16 of the appendix. This valuation is based on a strategic, financial and calculation
of the comapany’s WACC and terminal growth rate. This thesis’ rate of return (rE ) and
WACC of 7.82% are considered to be low compared to estimates calculated in November
by Nykredit. The estimate is based on a beta value of 1.23, market average annual
return of 6.69% and a risk-free rate of 1.794%. It is concluded that Vestas are one of
the favourites towards meeting the increased demand for wind energy, as they have the
highest production capacities and operate in the fastest growing region. Therefore, it is
assumed that Vestas will gain a 2%-point market share within the forecasted period.
9. Bibliography
9.1 Books and scientific articles

Edenhofer, O & Madruga, R & Sokona, Y et. al (2012): IPCC Speical Report on Renew-
able Energy
CAMBRIDGE UNIVERSITY PRESS
ISBN: 978-1-107-60710-1
Localized on 15.10.2022 on:
https://www.ipcc.ch/report/renewable-energy-sources-and-climate-change-mitigation/
Lee, J & Zhao, F (2022): GWEC Global Wind Report 2022

Localized on the 13.09.2022 on:
https://gwec.net/global-wind-report-2022
Sørensen, O. (2021): Regnskabsanalyse og værdiansættelse – en praktisk tilgang.

6. edition
Gjellerup/ Gads Forlag.
ISBN: 978-87-13-05112-0
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Vestas (2012): Annual report 2012

Vestas.com

Vestas.com

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Vestas.com

Vestas.com

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Vestas.com

Vestas.com

Vestas.com
37 af 51
Vestas (2021Q2): Interim Financial Report, Q2 2021

Vestas.com

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Bloomberg: Denmark Secures Backing for USD 34 Billion Clean Energy Island
https://www.bloomberg.com/news/articles/2021-02-04/denmark-secures-backing-for-34-billion-
clean-energy-island
Bloomberg: GT10Govt,
Congressional Research Service: Offshore Wind Provisions in the Inflation Reduction Act
https://crsreports.congress.gov/product/pdf/IN/IN11980: :text
Danmarks Nationalbank: Inflationen skal tæmmes

https://www.nationalbanken.dk/da/presse/Sider/2022/09/DNN202230314.aspx
Danmarks Tekniske Universitet: Power-to-X - from green energy to green fuel

https://baeredygtighed.dtu.dk/en/teknologi/power-to-x
Elemental Green: WIND VS. SOLAR — WHICH POWER SOURCE IS BETTER?

https://elemental.green/wind-vs-solar-which-power-source-is-better
European Central Bank: Monetary policy

https://www.ecb.europa.eu/ecb/tasks/monpol/html/index.en.html
38 af 51
European Comission: REPowerEU: A plan to rapidly reduce dependence on Russian fossil

fuels and fast forward the green transition
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European Commission: European Green Deal: EU reaches agreement on national emis-

sion reductions from transport, buildings, waste and agriculture
https://ec.europa.eu/commission/presscorner/detail/en/ip 22 6724
European Commission: Infografik – Hvor kommer EU’s energi fra?

https://www.consilium.europa.eu/da/infographics/where-does-the-eu-s-energy-come-from/
Forbes: Do Higher Interest Rates Hurt The Stock Market? Here’s How Strategic Investors
Adjust As Rates Go Up
https://www.forbes.com/sites/qai/2022/09/20/do-higher-interest-rates-hurt-the-stock-market-
how-do-smart-investors-adjust-as-rates-go-up/?sh=7b92fcf8b0fd
Forbes: Understanding Return On Assets (ROA)

https://www.forbes.com/advisor/investing/roa-return-on-assets/
Forbes: Europe’s Central Bank Joins U.S. Fed’s Aggressive Anti-Inflation Push With
Mammoth Rate Hike
https://www.forbes.com/sites/simonmoore/2022/09/08/ecb-makes-jumbo-rate-hike-following-
feds-lead/?sh=2fe325ae5181
Finans: Vestas-topchef om underskudsplagede konkurrenter: ≫Det hænger ikke sammen≪

https://finans.dk/erhverv/ECE13193589/vestastopchef-om-underskudsplagede-konkurrenter-
det-haenger-ikke-sammen/
39 af 51
GWEC Market Intelligence platform: Wind Turbine Suppliers see record year for deliv-
eries despite supply chain and market pressures
https://gwec.net/market-intelligence/
International Monetary Fund: Real GDP Growth

https://www.imf.org/external/datamapper/NGDP RPCH@WEO/OEMDC/ADVEC/WEOWORLD
Investopedia: Balance Sheet: Explanation, Components, and Examples

https://www.investopedia.com/terms/b/balancesheet.asp
Investopedia: Porter’s 5 Forces Explained and How to Use the Model

https://www.investopedia.com/terms/p/porter.asp
Investopedia: Return on Invested Capital: What Is It, Formula and Calculation, and Ex-
ample
https://www.investopedia.com/terms/r/returnoninvestmentcapital.asp
Investopedia: Weighted Average Cost of Capital (WACC) Explained with Formula and
Example
https://www.investopedia.com/terms/w/wacc.asp
JP Morgen: What’s Behind The Global Supply Chain Crisis?

https://www.jpmorgan.com/insights/research/global-supply-chain-issues
MarketWatch: Vestas Wind Systems A/S

https://www.marketwatch.com/investing/stock/vws?countrycode=dk
Nasdaq: OMXN40, OMX NORDIC 40, (SE0001809476)

https://www.nasdaqomxnordic.com/index/index info?Instrument=SE0001809476
40 af 51
National Public Radio: U.S. Officially Leaving Paris Climate Agreement

https://www.npr.org/2020/11/03/930312701/u-s-officially-leaving-paris-climate-agreement
Skat: 4.1.2.2. Risikofri rente

https://skat.dk/data.aspx?oid=1813218
SP Global Intelligence: China’s increasingly cheap wind turbines could open new markets
https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/china-
s-increasingly-cheap-wind turbines-could-open-new-markets-72152297
ReCharge: ’Why the consolidation of wind turbine makers is not over — and why com-
ponent suppliers are next’
https://www.rechargenews.com/wind/why-the-consolidation-of-wind turbine-makers-is-not-
over-and-why-component-suppliers-are-next/2-1-923332
ReCharge: ’Chinese wind turbine makers in a better place than ever to start displacing
Western OEMs’
https://www.rechargenews.com/wind/chinese-wind turbine-makers-in-a-better-place-than-
ever-to-start-displacing-western-oems/2-1-1196826
Reuters: Global economy approaching a recession, central banks unchained: Reuters poll
Lozalized on the 06.11.2022 on:
https://www.reuters.com/markets/asia/poll-global-economy-approaching-recession-central-
banks-unchained-2022-10-26/
Reuters: Wind turbine maker Vestas says price power improving, shares jump
https://www.reuters.com/business/sustainable-business/wind turbine-maker-vestas-reports-
q2-ebit-below-estimates-2022-08-10/
41 af 51
The Green Market Oracle: Nuclear Power Versus Renewable Energy

https://thegreenmarketoracle.com/2022/07/20/nuclear-power-versus-renewable-energy/
The White House: FACT SHEET: Biden Administration Jumpstarts Offshore Wind En-
ergy Projects to Create Jobs
https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/29/fact-sheet-biden-
administration-jumpstarts-offshore-wind-energy-projects-to-create-jobs/
The White House: FACT SHEET: President Biden’s Leadership to Tackle the Climate
Crisis at Home and Abroad Galvanizes Unprecedented Momentum at Start of U.N. Cli-
mate Conference (COP27)
https://www.whitehouse.gov/briefing-room/statements-releases/2022/11/07/fact-sheet-president-
bidens-leadership-to-tackle-the-climate-crisis-at-home-and-abroad-galvanizes-unprecedented-
momentum-at-start-of-u-n-climate-conference-cop27/
Thomas Reuters: Production Tax Credit (PTC)

https://uk.practicallaw.thomsonreuters.com/0-517-5382?transitionType=DefaultcontextData=(sc.Defa
Topsoe: DANISH POWER-TO-X PARTNERSHIP BREAKS GROUND ON FIRST OF

ITS KIND GREEN AMMONIA PROJECT
https://blog.topsoe.com/danish-power-to-x-partnership-breaks-ground-on-first-of-its-kind-
green-ammonia-project
U.S. Environmental Protection Agency: Global Greenhouse Gas Emissions Data

https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data
Vestas Wind Systems: EnVentus™ Platform

https://www.vestas.com/en/products/enventus-platform/enventus-platform
42 af 51
Vestas Wind Systems: Share information

https://www.vestas.com/en/investor/share-and-capital-structure/share-information
Vestas Wind Systems: V236-15.0 MW™

Localized on the 17.10.2022 on
https://www.vestas.com/en/products/offshore/V236-15MW/V236-15MW
VindØ: Udbudsforberedende delaftale om langsigtede rammer for udbud og ejerskab af en-

ergiøen i Nordsøen
https://www.windisland.dk/
United Nations Climate Change: What is the Paris Agreement?

https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
USGS: What materials are used to make wind turbines?

https://www.usgs.gov/faqs/what-materials-are-used-make-wind turbines
Windpower, Engeneering & Development: https://www.windpowerengineering.com/vestas-

unveils-enventus-a-modular-wind turbine-platform/
https://www.windpowerengineering.com/vestas-unveils-enventus-a-modular-wind turbine-
platform/
Yahoo Finance: Vestas Wind Systems

https://finance.yahoo.com/quote/VWS.CO/
OurWorld in Data: Greenhouse Gas Emissions

https://ourworldindata.org/greenhouse-gas-emissions
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9.3 Interviews
Kehl, Klaus. Chief Analyst, Nykredit. Interview. By Gustav Ebbe Goth & Patrick
Rennemo-Henriksen. 28.10.2022
Blom, Casper. Senior Equity Analyst, Danske Bank. Interview. By Gustav Ebbe Goth
& Patrick Rennemo-Henriksen. 26.10.2022
10. Appendix
Estimated share Estimated share Ordinary equity

Financial institution Date of valuation
price (EUR) price (DKK) value of Vestas (EUR)
JP Morgan 11.08.2022 18.42 137 18,601
SHB 11.08.2022 34.96 260 35,301
Carnegie 11.08.2022 20.17 150 20,366
Morgan Stanley 11.08.2022 21.51 160 21,724
Deutsche Bank 11.08.2022 24.20 180 24,439
Danske Bank 11.08.2022 29.58 220 29,870
DZ Bank 11.08.2022 30.25 225 30,549
SEB 12.08.2022 21.51 160 21,724
Kepler Cheuvreux 15.08.2022 20.84 155 21,045
ABG 01.09.2022 20.17 150 20,366
Citi Bank 02.09.2022 48.40 360 48,878
Average 26.36 196.09 26,624
Table 16: Share price estimates from acknowledged financial institutions

Source: Unge Investorer 2022. Annot: This table only includes share valuations that are within 15 days before and after
the 26.08.2022.
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mEUR 2021 2020 2019 2018 2017

Operating assets
Intangible assets 3,130 2,888 1,208 1,096 901
Goodwill 1,508 1,274 386 379 304
Completed development projects 619 621 374 270 309
Software 140 164 157 118 95
Other intangible assets 437 512 30 52 49
Development projects in progress 426 317 261 277 144
Tangible assets 2,091 2,022 1,671 1,318 1,247
Land and buildings 510 598 653 662 704
Plant and machinery 323 336 338 258 248
Ofter fixtures, fittings, tool and equipment 599 481 345 268 222
Property, plant and equipment in progress 136 169 139 130 73
Right-of-use assets 523 438 196 - -
Ownership in joint venture and associates 609 57 169 233 150
Investments in joint ventures 25 19 112 189 149
Investments in associates 584 38 57 44 1
Contract assets 1,227 775 528 330 82
Contact costs 690 369 418 328 -
Tax receivables 331 322 281 186 104
Trade receivables 1,531 1,538 1,460 967 1,144
Prepayments 151 177 135 74 37
Supplier claims 120 14 17 15 11
VAT 465 399 274 220 138
Other receivables 216 318 229 119 141
Inventories 5,673 5,289 4,098 2,987 2,696
Deferred tax 374 335 324 281 218
Other investments 81 69 65 35 30
Cash and cash equivalents with disposal restrictions 26 24 24 32 456
Total operating assets 16,715 14,596 10,901 8,221 7,355
Operating liabilities
Contract liabilities 6,180 5,613 5,020 4,202 3,082
Tax payables 401 417 424 324 274
Warranty provisions 1,197 1,189 619 546 566
Other provisions 135 87 61 71 65
Trade payables 4,286 3,608 3,119 2,417 2,660
Deferred tax 362 158 147 120 61
Other liabilities 568 638 592 494 525
Total operating liabilities 13,129 11,710 9,982 8,174 7,233
Net operating assets 3,586 2,886 919 47 122
Financial assets
Financial investments 216 211 384 626 203
Derivative financial instruments 387 314 182 166 116
Cash and cash equivalents 2,394 3,039 2,864 2,886 3,197
Total financial assets 2,997 3,564 3,430 3,678 3,516
Financial obligations
Financial debts 571 908 622 498 497
Leasing 545 446 198 - -
Derivative financial instruments 386 393 184 123 29
Total financial obligations 1,502 1,747 1,004 621 526
Net financial assets 1,495 1,817 2,426 3,057 2,990
Minority interests 13 49 52 12 -
Total equity incl. minority interests 5,081 4,703 3,345 3,104 3,112
Total ordinary equity 5,068 4,654 3,293 3,092 3,112
Table 17: Reformulated Balance Sheet of Vestas Wind Systems A/S.

Source: Vestas annual reports 2017-2021
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Balance sheet
Assets
2021 2020 2019 2018 2017
Intangible assets 3,130 2,888 1,208 1,096 901
Propert, plant and equipment 2,091 2,022 1,671 1,318 1,247
Investments in joint ventures and associates 609 57 169 233 150
Other investments 81 69 65 35 30
Tax recievables 229 201 156 98 51
Deferred tax 374 335 324 281 218
Other receivables 234 241 85 79 72
Financial investments 100 100 2,011 204 196
Total non-current assets 6,848 5,913 3,889 3,344 2,865
Inventories 5,673 5,289 4,098 2,987 2,696

Trade receivables 1,531 1,538 1,460 967 1,144
Contract assets 1,227 775 528 330
Contact costs 690 369 418 328
Tax receivables 102 121 125 88 53
Other receivables 1,105 981 752 515 371
Marketable securities 7
Financial investments 116 111 173 422
Cash and cash equivalents 2,420 3,063 2,888 2,918 3,653
Total current assets 12,864 12,247 10,442 8,555 8,006
Total assets 19,712 18,160 14,331 11,899 10,871
Liabilities
2021 2020 2019 2018 2017
Share capital 27 27 27 28 29
Other reserves 22 - 146 - 67 22 37
Retained earnings 4,699 4,773 3,333 3,042 3,046
Equity attributable to Vestas 4,748 4,654 3,293 3,092 3,.112
Non-controlling interests 13 49 52 12
Total equity 4,761 4,703 3,345 3,104 3,112
Provisions 686 696 459 491 483

Deferred tax 362 158 147 120 61
Financial debts 732 867 661 498 497
Tax payables 326 331 296 212 166
Total non-current liabilities 2,251 2,225 1,639 1,390 1,226
Financial debts 704 487 159

Prepayments from customers 2,923
Construction contracts in progress 159
Contract liabilities 6,180 5,613 5,020 4,202
Trade payables 4,286 3,608 3,119 2,417 2,660
Provisions 646 580 221 126 148
Tax payables 75 86 128 11 108
Total current liabilities 12,700 11,232 9,347 7,405 6,533
Total liabilities 14,951 13,457 10,986 8,795 7,759

Total equity and liabilities 19,712 18,160 14,331 11,899 10,871
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Table 18: Reported Balance Sheet for Vestas Wind Systems A/S (2017-2021)
Source: Vestas Wind Systems Annual Reports (2017-2021)
2021 2020 2019 2018 2017

Equity as at 1 January 4,703 3,345 3,014 3,112 3,190
Effect of initially applying IFRIC 23 -43

Profit for the year 176 771 700 683 984
Other comprehensive income for the year 197 - 67 -92 -25 -24
Transfer of cash flow hedge reserve to the initial

- 26 - 21 4 10 -
carrying amount of hedged items, net
Transactions with owners:

Transaction with non-controlling interest - 53 - - 13 -
Capital increase 861
Reduction of share capital
Dividens distributed - 230 - 213 -205 -267 -289
Dividends distributed related to treasury shares 2 4 8 17 11
Acquistion of treasury shares - 12 43 -402 -694
Share-based payment 13 16 25 18 18
Sale of treasury shares - - - - 1
Tax on equity transactions -9 7 2 -1 5
Total transactions with owners - 289 675 -328 -622 -948
Equity as at 31 december 4,761 4,703 3,345 3,104 3,112
Table 19: Reported equity statement for Vestas Wind Systems A/S (2017-2021)
Source: Vestas Wind Systems Annual Reports (2017-2021)
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2021 2020 2019 2018 2017

Revenue 15.587 14.819 12,147 10,134 9,953
Production costs - 14.027 - 13.281 - 10,386 - 8,503 7,990
Gross profit 1.560 1.538 1,761 1,631 1,963
Research and development costs - 364 - 265 - 268 - 229 - 235
Distribution costs - 367 - 281 - 222 - 189 - 229
Administration costs - 368 - 242 - 267 - 254 - 269
Operating profit (EBIT) before special items 461 750 1,004 959 1,230
Special Items - 139 - 52 - 38
Operating profit (EBIT) 322 698 1,004 921 1,230
Income/(loss) from investments in joint ventures and associates 36 331 3 40 - 40
Financial income 21 18 40 17 45
Financial costs - 122 - 113 - 138 - 68 - 43
Profit before tax 257 934 909 910 1,192
Income tax - 81 - 163 - 209 - 227 - 298
Profit for the year 176 771 700 683 894
Profit is attributalte to
Owners of Vestas Wind Systems A/S 167 765 704 684
Earnings per share (EPS)

Earnings per share (EUR) 0.17 0.78 3.57 3.41 4.23
Earnings per share (EUR), diluted 0.17 0.78 4.2
Table 20: Reported equity statement of Vestas Wind System A/S

Source: Vestas Annual report 2017-2021
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mEUR 2021 2020 2019 2018 2017

Equity as of 1 January 4,654 3,293 3,092 3,112 3,190
Transactions with owners
Dividens distributed - 230 - 213 - 205 - 267 - 289
Dividends distributed related to treasury shares 2 4 8 17 11
Acquistion of treasury shares - 12 - - 201 - 402 - 694
Reduction of share capital - - - - 1
Capital increase - 861 - - -
Transactions with owners (total) - 240 652 - 398 - 652 - 971
Total reported comprehensive income for the year 373 707 611 659 870
Transfer of cash flow hedge reserve to the initial
- 26 - 21 4 10 -
carrying amount of hedged items, net
IFRIC 23 - - - 43 - -
IFRS 15 - - - - 54 -
Tax on equity transactions -9 7 2 -1 5
Acquistion liabilities
Share-based payments 13 16 25 18 18
Equity as of 31 December 4,765 4,654 3,293 3,092 3,112
Minority interest 13 49 52 12 -
Equity as of 31 December incl. minority interest 4,778 4,703 3,345 3,104 3,112
ROE (%) 7.2% 17.4% 18.0% 19.8% 27.8%
Table 21: Reformulated Equity Statement of Vestas Wind Systems A/S

Source: Vestas’ Annual Reports 2017-2021.
Green/Renewable Energy Sector

Location # of companies ROIC Cost of equity WACC ROE
Australia, NZ and Canada 25 5.87% 6.12% 4.81% 3.96%
US 20 5.73% 8.24% 7.32% -24.12%
Europe 63 5.99% 5.93% 4.96% 8.39%
Weighted average 5.91% 6.40% 5.36% 1.34%
Table 22: Aswath Damodaran’s estimates by global region

Source: Aswath Damodaran. Annot: The estimates are calculated in January 2022
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mEUR 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E Termnial
Revenue 15,587 13,096 11,979 13,639 18,340 20,151 21,509 22,786 24,025 25,211 26,169 27,164
EBIT 426 - 537 - 60 559 1,137 1,592 1,968 2,210 2,378 2,521 2,640 2,741
NOPOAT 290 - 403 - 45 419 853 1,194 1,476 1,658 1,784 1,891 1,980 2,056
Total operating income 324 - 454 - 92 366 781 1,115 1,392 1,569 1,690 1,793 1,878 1,950
Turnover rate 4.82 3.13 2.04 3.44 4.64 5.74 6.74 7.54 8.14 8.64 9.14 9.14
1/turnover rate 0.21 0.32 0.49 0.29 0.22 0.17 0.15 0.13 0.12 0.12 0.11 0.11
Net operating assets 3,586 4,182 5,885 3,970 3,956 3,513 3,193 3,024 2,953 2,920 2,865 2,973
Free cash-flows - 376 - 1,050 - 1,794 2,281 795 1,558 1,712 1,738 1,761 1,826 1,933 1,841
Discount factor 1.08 1.16 1.25 1.35 1.46 1.57 1.69 1.83 1.97 2.12
Present value of FCF - 974.1 - 1.543.6 1,820.1 588.3 1,069.5 1,089.8 1,026.2 964.1 927.3 910.5
Terminal value of FCF 49,918
NPV of FCF 5,878
NPV of terminal value 21,805
Enterprise value 27,683
Net financial obligations - 1,502
Equity value 26,181
Minority interests 13
Ordinary value of equity 26,168
# of shares (million) 1,010
Estimated value of one share (EUR) 25.91
Share price of 26/08/2022 (EUR) 25.58
Estimated value of one share (DKK) 192.74
Share price of 26/08/2022 (DKK) 190.24
Diffrence (%) 1.31%
Table 23: The Discounted Cash Flow model

Source: GWEC Global Wind Report 2021 and own calculations
Budget on income statement 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E Termnial
Effective tax rate 25% 25% 23% 17% 32% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Revenue 9,953 10,134 12,147 14,819 15,587 13,096 11,979 13,639 18,340 20,151 21,509 22,786 24,025 25,211 26,169 27,164
- Operating costs - 8,320 - 8,740 - 10,591 - 13,453 - 14,240 - 13,633 - 12,039 - 13,080 - 17,203 - 18,559 - 19,541 - 20,576 - 21,646 - 22,690 - 23,529 - 24,423
EBIT 1,235 968 1,010 736 426 - 537 - 60 559 1,137 1,592 1,968 2,210 2,378 2,521 2,640 2,741
-Tax - 309 - 242 - 232 - 125 - 136 134 15 - 140 - 284 - 398 - 492 - 553 - 595 - 630 - 660 - 685
NOPAT 926 726 778 611 290 - 403 - 45 419 853 1,194 1,476 1,658 1,784 1,891 1,980 2,056
Other operating profit, after tax -213.2 -49.4 -59.7 140.6 34.7 - 51 - 47 - 53 - 72 - 79 - 84 - 89 - 94 - 98 - 102 - 106
Total operating income 713.1 676.6 718.0 751.5 324.3 - 454 - 92 366 781 1,115 1,392 1,569 1,690 1,793 1,878 1,950
Net financial costs, after tax 160 - 68 - 149 - 64 3 - 45 - 63 - 43 - 42 - 38 - 34 - 32 - 32 - 31 - 31 - 32
Total income 873 609 569 687 328 - 499 - 155 324 739 1,078 1,358 1,536 1,659 1,761 1,848 1,918
Table 24: Budgeted income statement

Source: Own calculations
Budget on cash flow 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E Termnial
Total operating income 713.1 676.6 718.0 751.5 324.3 - 379.9 - 80.7 299.3 662.1 943.4 1,196.8 1,433.2 1,639.7 1,804.2 1,915.8 1.988,6
Diff. in net operating assets - 75 872 1,967 700 - 84 1,681 - 1,939 109 - 381 - 226 - 112 - 44 - 29 - 48 95
Free cash flows (FCF) 752 - 154 - 1,216 - 376 - 296 - 1,762 2,238 553 1,325 1,423 1,545 1,684 1,833 1,964 1,893
Table 25: Budget on cash flow

Budget on balance sheet 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E Termnial
Net operating assets 122 47 919 2,886 3,586 4,182 5,885 3,970 3,956 3,513 3,193 3,024 2,953 2,920 2,865 2,973
Net financial obligations - 2,990 - 3,057 - 2,426 - 1,817 - 1,495 - 1,744 - 2,454 - 1,655 - 1,649 - 1,465 - 1,331 - 1,261 - 1,231 - 1,217 - 1,194 - 1,240
Table 26: Budgeting on the balance sheet

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Value drivers 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E Termnial
Revenue growth (%) -2.80% 1.82% 19.86% 22.00% 5.18% -15.98% -8.53% 13.86% 34.46% 9.88% 6.74% 5.94% 5.44% 4.94% 3.80% 3.80%
EBIT-margin (%) 12.41% 9.55% 8.31% 4.97% 2.73% -4.1% -0.5% 4.1% 6.2% 7.9% 9.2% 9.7% 9.9% 10.0% 10.1% 10.1%
Effective taxrate (%) 25% 25% 23% 17% 32% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Other opearting profit in % of revenue (%) 0.2% 0.9% -0.5% -0.5% -2.1% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39% -0.39%
FGEAR 16.9% 20.1% 30.5% 37.5% 31.5% 31.52% 31.52% 31.52% 31.52% 31.52% 31.52% 31.52% 31.52% 31.52% 31.52% 31.52%
ROA 41.5% 119.93% 25.15% 7.79% 4.82% 3.13% 2.04% 3.44% 4.64% 5.74% 6.74% 7.54% 8.14% 8.64% 9.14% 9.14%
1/ROA 0.02 0.01 0.04 0.13 0.21 0.32 0.49 0.29 0.22 0.17 0.15 0.13 0.12 0.12 0.11 0.11
NFO/NOA -24.51 -65.04 -2.64 -0.63 -0.42 -0.42 -0.42 -0.42 -0.42 -0.42 -0.42 -0.42 -0.42 -0.42 -0.42 -0.42
Table 27: Budgeting on value drivers

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Thesis Valuation of Vestas Wind Systems

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UNIVERSITY OF COPENHAGEN

FACULTY OF SOCIAL SCIENCES

Valuation of Vestas Wind Systems A/S

Advisor: Søren Hovgaard

2. Vestas Wind Systems 2

4. Analysis of the accounts 13

6. The Weighted Average Cost of Capital (WACC) 28

7. The Discounted Cash Flow Model 33

• Accounting practices. Therefore it is anticipated throughout this paper that the

• Trend analysis in the financial analysis

• The social and legal factors in the PESTEL analysis

• Benchmark and multiple analysis with peers

• Case scenario for Vetas.

2. Vestas Wind Systems

3.1 PESTEL analysis

3.1.1 Political and Environmental politics

3.1.2 Economical factors

3.1.2.1 GDP growth

Figure 2: Real GDP Growth in Europe and North America (2012-2027).

3.1.2.1 Monetary policies

Figure 3: Inflation and interest development in EU and USA .

3.1.3 Technological factors

3.2 Porters Five Forces

3.2.1 Competition in the industry & potential of new entrants

Figure 4: Top 15 wind turbine suppliers in annual global market in 2021 .

Figure 5: Top 15 wind turbine suppliers in annual global market in 2021 .

3.2.2 Power of suppliers

3.2.3 Power of customers

It is expensive to invest in wind turbines. Large companies or institutional investors

3.2.4 Threat of substituting products

Table 1: The carbon intensity of electricity generation

3.3 Concluding SWOT analysis

Figure 6: Vestas’ strenghts, weaknesses, opportunities & threats.

4. Analysis of the accounts

4.1. Reformulating the balance sheet

mEUR 2021 2020 2019 2018 2017

4.1.1. Other receivables & liabilities

4.1.2. Investments in joint ventures and associates

4.1.3. Leasing liabilities

4.1.4. Cash with disposal restrictions

4.2 Reformulating the equity statement

mEUR 2021 2020 2019 2018 2017

4.2.1 Share-based payments

4.3 Reformulating the income statement

mEUR 2021 2020 2019 2018 2017

4.3.1. Income from investments in joint ventures and associates

4.3.2. Special items

4.4 Analysis of Vestas’ profitability

4.4.1 Return on invested capital and financial gearing

2021 2020 2019 2018 2017

Table 5: Summary of key figures of Vestas Wind Systems A/S

Spread = ROIC − RON F A (4)

4.4.2 Decomposing ROIC

T otal operating prof it

2021 2020 2019 2018 2017

Table 6: Decomposition of ROIC of Vestas Wind Systems A/S

4.4.3 Analyzing the profit margin and ROA

2021 2020 2019 2018 2017

Table 7: Decomposition of profit margin in Vestas Wind Systems A/S