Gerry van der Sluys, Emergya Wind Technologies
Release Date: 2009-03-19
Based on your career we can safely say that you are the typical serial entrepreneur. Did you immediately realize that you were given a golden opportunity when you discovered the opportunity to acquire the intellectual property of Lagerwey, one of the pioneers of the wind industry?Entrepreneurs always have a mixture of feelings between magic and realism when they feel that they have found something that is worth basing a new business activity on. We discovered the magic behind the technology of Lagerwey, mixed with the pragmatic realism of how we should develop it and the recognition that it would take quite some time until we would be successful. Undoubtedly, it was a mixture of being charmed, being intrigued, and realizing the golden opportunity that was in my hands.
Acquiring another company’s intellectual property does not necessarily guarantee the continuation of successful R&D activities. How did you approach this challenge and what are your R&D priorities today?
Emergya Wind Technologies is developing based on a long term plan. We have divided our development into different phases. Until last year, we actually were still in the start-up phase. Today we find ourselves in the second phase of development which will encompasses the sale of a larger volume of turbines. Therefore, we are now really moving into the consolidation phase. This year will be a critical year, because this is the moment when we have to deliver. We are working on a strong order and prospect pipeline which, of course, will be challenging because some of our customers have experienced problems in finalizing financing of project due to the current financial and economic crisis. Nevertheless, we believe that this is a rather temporary thing that will last probably one or two years. We believe that we will be very successful because there are enough projects in the pipeline that are not affected by the current economic climate. We look ahead to this year and the following years with a lot of confidence.
Has the current financial and economic crisis redefined your customer focus?
Partly it did affect our focus in the short term, but the change in focus was primarily related to targeting a different customer profile. We increased our focus on governmental customers and the community park business. Of course, we keep servicing and developing the key core markets that we originally have defined as strategic markets, which are the markets for smaller and medium-sized wind parks as well as the community wind park business. However, several of our geographic markets, have already been heavily affected by the current crisis, especially the US where financing is now extremely difficult.
In hindsight, does that mean that your joint venture with the Chinese Academy of Launch Technology came at the exact right moment?
Absolutely. That was part of the growth path we have set out for Emergya, and we are actually copying this model for international expansion in other markets as well. We can develop a territory faster by working with strong joint venture partners that not only have financial muscle but also the experience in these new markets that enables us to grow faster than we would be able to do on our own.
Past statements indicated that Emergya Wind Technologies has the ambition to develop over 1 GW of wind capacity in China in the coming five years. Is that still the target?
Roughly speaking that is still our target and we think that it is feasible given the fact that the market will continue to develop as anticipated. We don't believe that a temporary change in oil prices will have a major effect on the size of this market, but we are planning based on the condition that the financial markets will be restored within one year. Otherwise, we would have to reset our objectives. We believe that this crisis, in terms of a financial crisis, will be just a temporary one. The economic crisis will most likely last longer, but it will not affect our business significantly.
This year, China will become the world’s largest turbine manufacturer with rapidly growing supplier base. Taking into account that EWT’s business model is based on outsourcing does this there is an important future for EWT in China in terms of sourcing components and manufacturing turbines?
Well, in that respect, the future is already here today, because we are sourcing from China. It will remain the case and we will further grow it. Our principle is very much to source locally wherever possible, and China will be one of our major markets in the future. We will do quite some sourcing there, and we will partly source from China for business activities in other areas of the world.
Currently our delivery time is eight to twelve months after the contract has been signed. We source from different places around the world. For instance, bulky items such as generators or blades are normally manufactured and sourced locally, whereas other items can be sourced anywhere where it is convenient and where we have the most appropriate sort of products or conditions available. This also allows for a certain extent of localization of our turbines. For example, we deliver wind turbines for Inner Mongolia in China where the temperature conditions require a cold weather version of our turbine. When we would supply wind turbines for a desert area such as the Sahara then we would supply a desert version. The configuration of our turbines is designed to be different, but it is never of course and uncontrolled difference that could affect the quality of our product.
Would you consider the room for customization to be one of the competitive advantages that you have compared with other big players like Vestas, Gamesa or Siemens?
I believe that is one of the advantages. The other advantage is that we are generally more flexibility to deliver to smaller wind parks which normally would not be interesting for larger manufacturers. For us small wind parks are interesting and that is a distinguishing selling point that we have apart from our technology. Our technology offers a number of different advantages that also distinguish us from the competition and allows the turbines to be used under certain conditions where conventional technology will not work.
Some of the large turbine manufacturers are considering expanding their business with direct drive turbines. Would that be a market changer in the negative or positive sense for EWT?
The more acceptance of direct drive technology there is in the marketplace, as well as among turbine suppliers, the better that is for us. Siemens’ development of a new 3.6 MW turbine is an important step in our favour I believe. Gradually more and more suppliers will implement this technology because they will see its advantages. Consequently, customers will see its advantages and will therefore force the market into our direction. Especially in for offshore wind turbines there is only one technology with distinct advantages, and that is direct drive technology.
So you believe that direct drive wind turbines, in the long run, will dominate the market?
Yes, I believe that gradually that will become the case. The advantages are so prominent and so clear that it will happen, but it will take quite some time. You can compare this with the introduction of CD technology and the iPod. Everybody knew already that when CD technology was developed that it was an outdated technology, but the R&D investments were so high that nobody wanted to stop it's introduction. Everybody knew that in some years there would be iPods and other music player using similar technologies that would be more capable than CDs. The laser is basically a weakness that is required for CD technology, and there are a lot of similarities in the wind industry between direct drive technology and gearbox driven wind turbines.
Emergya Wind Technologies is currently developing a 2 MW wind turbine. How does this fit in your strategy and what are your growth ambitions?
With our present product we can cover our current target markets. With the 2 MW turbine we indeed intend to enter also the more mainstream type of market and gain overall market share. Basically, there are different scenarios for the coming five years but most importantly we expect to reach €1 billion turnover within this period of time. Of course, the exact amount will depend on how the world and its economy will develop, and how we will able to be on time and on schedule with our new product introductions. This is our ambition, but we always have believed in values that go beyond revenue generation and shareholder value. So we are not in a cramped condition with respect to these financial numbers. We want to be a successful manufacturer that satisfies all stakeholders. In that respect, we are not under pressure to generate this level of revenues by a certain date.
EWT has indicated that its 2MW turbine will be available on the market in 2010. How important is it to meet this target in order to take advantage of the opportunities that the market offers today?
Well, first of all, we have made certain commitments to our Chinese friends with respect to the introduction of this our 2MW turbines. Therefore, we are committed to having this product available next year.
Why have you chosen CALT as your joint venture partner in this strategic market, and which role will China play in the growth of EWT in the coming years?
We took quite some time to look for a suitable partner in the Chinese market, and I think that CALT did the same thing. We selected CALT because of its experience in the wind industry, its solid experience in engineering and manufacturing and because it is a financially very strong partner. At the same time, I think that CALT selected us because they are convinced that our technology has many advantages over what was available so far in the Chinese market. This created a win-win situation.
The growth of the company will be dominated by China and the US. Our partner in China is a governmental organization, and we are determined together with our partner to become a major player in China. Any support that we can get in China is always welcome, but I cannot complain because we are making very good progress in the Chinese market. I can only advise Chinese customers to buy our product. I think that's the best support that we can get.
China has a very attractive project financing system, and I wish that in the rest of the world we would have a similar sort of system. I am really not a believer in subsidies for the renewable energy market, especially not for the wind energy sector. I rather think that governments should support this industry by providing guarantees for financing. Governments should recognize that the renewable energy sector is indeed one of the few growth areas on which they can base the recovery of the economy. They should help customers by providing the necessary sort of securities and guarantees. As far as China is concerned, we believe in this market, we're happy with our partner, and we're confident that we'll be successful.
If the company lives up to its potential it might become an interesting takeover candidate. Is this your ultimate objective as a serial entrepreneur, or would it be difficult to let EWT go?
It's always difficult. For example, babies grow up and at some point they leave the home. Every parent should know that it is better for the children to find their own way, so that is probably the case here too. In my particular case, I will step down from my CEO function in the near future since any good entrepreneur will at some point in time transfer the real operational responsibility to somebody else. I will remain to be a member of a supervisory board rather than company management. There might also be a change in ownership in the future which could bring in relevant experience that will be of benefit to the company. I am the father of three grown up daughters, and specifically in that case you want them to leave the house and find an appropriate partner that presents a good fit. Likewise, that is the case with EWT.
When you sit down with the new CEO, what will be the main thing that you would like to emphasize to him as being essential to make this company successful in the coming years?
I think that the major lesson that I have learned throughout my career is to keep focused but be flexible at the same time. Every company must have a focus on the one hand, and on the other hand must have the flexibility to move into other directions if the market dictates so. We need to focus on the strategic markets that we want to serve as a first priority, and we should be reliable company for our partners in these markets. On the other hand, if the development of our strategic markets deviates from our expectations then we must be flexible enough to move into other directions. In my view, all companies should be able to reinvent themselves and companies in the wind industry even more.
| Company: | Emergya Wind Technologies |
| Position: | CEO |
| Country: | Netherlands |