Newsletter No. 4

Release Date: 2009-07-15 00:00:00

Oceans of Opportunity: The 2009 European Offshore Wind Conference and Exhibition

Over 3,000 representatives of the offshore wind, oil and gas industries, plus policy makers, business people and scientists are expected to gather in Stockholm from 14 to 16 September for the world’s largest offshore wind event. They will celebrate the major developments taking place for this massive energy resource and discuss the key next steps. This year’s edition of the European Offshore Wind Conference and Exhibition (Offshore 2009) is once again being organised by the European Wind Energy Association (EWEA), this time with the support of the Swedish Energy Agency and the Swedish Wind Energy Association.

Europe needs to exploit its vast offshore wind resource in order to achieve the 20% renewable energy target set in the 2009 Renewable Energy Directive. Offshore wind energy is making the transition from a concept with massive potential to a fast-evolving industry, and Europe is the global sector leader. In 2008, 357 MW of offshore capacity was installed, taking the global total to 1,471 MW – all in European waters.

Offshore wind offers an indigenous, clean energy supply for Europe that comes at a knowable price, creates jobs and strengthens the economy. The importance of the sector is now being recognised at EU level. In 2008, the European Commission declared that a blueprint will be developed for a North Sea offshore power grid, and earlier this year the EU institutions dedicated €565 million to offshore projects in the EU’s Economic Recovery Plan to help extricate Europe from the economic crisis.

The European Wind Energy Association (EWEA) is the voice of the wind industry, actively promoting the utilisation of wind power in Europe and worldwide. It is situated in the Renewable Energy House in Brussels ensuring close proximity to European decision-makers. EWEA now has over 500 members from over 50 countries including manufacturers with a 90% share of the global wind power market, plus component suppliers, research institutes, national wind and renewables associations, developers, contractors, electricity providers, finance and insurance companies and consultants. EWEA coordinates international policy, communications, research and analysis, provides various services to support members’ requirements, and also organises high-profile industry events. EWEA analyses, formulates and establishes policy positions for the wind industry on key issues, cooperating with industry and research institutions on a number of market development and technology research projects. In addition, the lobbying activities undertaken by EWEA help create a suitable legal framework within which members can successfully develop their businesses. Due to a growing need to raise the wind industry’s profile, EWEA produces a large variety of information tools and manages campaigns aimed at raising awareness about the benefits of wind, dispelling the myths about wind energy and providing easy access to credible information.EWEA is a founder member of the European Renewable Energy Council (EREC) which groups the eight key renewable industry and research associations under one roof, and of the Global Wind Energy Council (GWEC).

Vestas Offshore Sets its Sights on China

Global Wind Energy Leader Proud to Sponsor China’s Premier Offshore Wind Energy Event Shanghai, June 29 – Vestas, the global wind energy leader, intends to play an active role in China’s offshore wind energy sector, as underlined by being the lead sponsor of Offshore Wind China 2009 Conference and Exhibition.

The exhibition, held in Shanghai at the Regal International East Asia Hotel, is a major wind energy industry event in China and will feature major players in the Chinese and global wind energy industry as well as key government and industry decision makers.

Vestas Offshore President Anders Søe-Jensen will speak to the conference on the opening day on 29th June 2009.

“Everyone knows about the incredible growth and development of China’s onshore wind energy sector,” says Lars Andersen, President of Vestas China. “But China also has great offshore wind energy resources which can be an important source of clean energy for China for the future. That’s what this conference is about and we look forward to participating in this important event and in playing a key role in supporting the development of China's offshore wind energy sector.”

For China to make the most of its development in offshore wind it is of great importance that competent and experienced partners are involved.

“Being the first mover in building offshore power plants and a global leader in offshore wind energy, Vestas is a very experienced player in this field,” says Anders Søe-Jensen. “We see the Chinese offshore market as one of most important future wind energy markets in the world. Offshore wind requires very specific skills and knowledge, something that Vestas has gained through years of experience”

Søe-Jensen says Vestas Offshore will establish an office in China this year and hopes to play a leading role in the offshore wind sector: “We are committed to help develop the wind energy industry in China and will be happy to share our experience through partnerships with interested parties. Vestas is already talking to potential partners in China and is open to talk to any potential partners about offshore wind energy in China.”

Novozymes urges Beijing for green transportation system

President of Novozymes China Michael Fredskov Christiansen met with the Mayor of Beijing to highlight the benefits of using second-generation biofuels in the Chinese megacity.

With the potential to replace more than 25% of the world’s gasoline, bioethanol is currently the only viable alternative to fossil fuels within transportation. Bioethanol reduces CO2 emissions from transport, reduces dependency on oil, and creates a vast number of jobs.

In 2010, Novozymes will be ready for large-scale production of the enzymes necessary to make bioethanol out of agricultural waste material. If China decides to pursue second-generation biofuels, the dream scenario is a 10% reduction in imported gasoline, corresponding to a 90 million tons reduction in annual CO2 emissions, and 6 million direct jobs boosting the Chinese economy.

Beijing should promote flex-fuel vehicles

Those were some of the arguments presented by Michael Fredskov Christiansen, President of Novozymes China, as he and other representatives from a group of selected multinational companies recently met with Beijing’s municipal government.

“The Beijing municipal government should take proactive measures to promote a green transportation system including, among other things, flex-fuel vehicles,” said Michael Fredskov Christiansen. His proposition was echoed by Volkswagen's China President, Zhang Suixin.

With approximately 18 million inhabitants, Beijing is the second largest city in China, and a commitment by the city to biotechnological solutions in transportation would mean significant benefits for both the environment and the Chinese economy.

Great potential for the Chinese waste-to-fuel industry

In April 2009, Novozymes presented a new roadmap for development of second-generation bioethanol in China. Basing its calculations on China-specific costs, including raw material collection and transportation, ethanol production, midstream logistics, and downstream distribution, the report states that second-generation bioethanol is economically favorable compared to other CO2 abatement technologies in the transport sector.

“We believe bioethanol is a significant step towards a world that is not dependent on diminishing fossil oil reserves,” said Michael Fredskov Christiansen. “We call it the biobased society.”

Interview with Dion Metzemaekers, CEO of NKT Cables

Since you took over as CEO of NKT Cables seven years ago the industry climate has been favourable for your company, and the underlying long term trends are positive, but the financial and economic crisis undoubtedly has had an effect on business. What are the priorities on your short and long term agenda?

Top of the agenda is surviving the crisis. Quite clearly, the current economic climate is causing difficulties but we are happy to see the banking sector finally picking up again. We have been struggling with the situation directly and indirectly. If you doubt when your customers will be able to pay their bills, then that is not a good situation to be in. We have seen more and more customers struggling with that and therefore we are very pleased to observe that it seems that the banking sector is picking up again. That should ultimately lead to us having more confidence again that our customers will be able to pay their bills, because that is a very important aspect of running the business. We see growth opportunities and have undertaking large investment projects. We are building a new factory in Cologne, we are setting up a joint venture in China focussed on the high voltage cable side, and we have invested massively in the production of railway equipment. Basically, all of that costs money and is a burden on your financial capabilities. Therefore it is very important that our customers are able to pay their bills; that my top priority right now.

As you observed, 2005, 2006, 2007 and the first half of 2008 have been good years for cable companies like NKT Cables. Electricity infrastructure and railway infrastructure have been very good segments, and to an extent these sectors are still good. If you take a long term perspective, for example the next thirty years, then I am convinced that we are positioned quite nicely to see huge growth in that arena because of rising electricity consumption. Perhaps that growth will not be as large as everyone has predicted, because the crisis will have an impact there, but then we will see changes in the infrastructure and the growth of alternative energy sources. We believe that in the next thirty years the total infrastructure for electricity infrastructure will undergo a major makeover. This will affect the infrastructure, it will affect the connections, and it will affect the transmission and distribution of electricity. We have to be very well positioned to participate. We are helping our customers to be more efficient in the transmission and distribution of electricity, which means reducing the losses that always occur when you transport energy from A to B. The way we set up our cable systems gives our customers the opportunity to halve those losses. Therefore, we believe that this approach is very favourable in the current circumstances and we believe that we have a good future in front of us. Right now, 2009 is a year of staying on top of our game and making sure that we will survive. We believe, by the way, that we can manage to do that.

You stated that you can reduce energy losses by 50%, what is the benchmark you use for this statement?

If a traditional connection causes 20% losses then halving that means that we reduce it from 20% to 10%. We are looking at traditional historic performance of the existing solutions in the market.

What are your ambitions on the product innovation side in order to meet your customers’ needs of tomorrow?

Our focus is on helping customers to become more efficient in transmitting and distributing energy. This means that we are focussing not just purely on the cable but also on the importance of truly understanding how the cable is operated. The generation capacity of the power plant, the setup of the network, the number of connections, and the daily variance in the load all affect the solution that we will eventually offer the customer to live up to our promise to help reduce losses. More than ever before it is essential to understand the application of the product rather than just consider the product as a specified element. That is our approach. We are not only talking about the cable, but also about the connecting devices and monitoring software that follows the temperature development in the cable and then sends signals to the user that the temperature development suggests that certain actions have to be taken to minimize the losses in the cable. We have developed this software solution in-house.

The European market is very mature and competitive, but the rise of renewable energy is destined to change market dynamics. To which extent do you believe this to shake up the competitive balance and how are you planning to take advantage of this opportunity?

For example, we understand the implications of developing a large offshore or onshore wind farm. We look beyond the immediate requirements of that wind farm, and try to define what will happen when the wind farm is linked to the grid. We identify potential bottlenecks, highlight the existence of these bottlenecks to our customers, and work together to develop solutions to minimize the impact of these bottlenecks. It creates a total new ballgame in communicating with your customers and understanding what they need. We want to offer cable solutions based on our understanding of the problems that our customers are facing. This is the name of the game we are trying to play right now.

How different are the problems that your customers in Europe and China, your two main markets, are facing?

Physics is the same everywhere in the world, so eventually the problems will be the same everywhere in the world, but there is a difference in the understanding of the problems and way of responding. If budgets are virtually unlimited and growth is the primary objective, then this might lead to a different approach compared with a situation where budgets have to be optimized. Indeed 2008 and 2009 have been a wake-up call, and finding the most economic solutions has become a priority. This difference of view between Europe and China is about to evaporate very soon, if it has not already evaporated. Everybody is now fully aware that energy is costly, that budgets are limited, and everybody tries to be as efficient and economic when creating the infrastructure that country or city needs.

We also need to transfer this understanding that we have developed in Europe to our company in China. It is a local business with local people that does business with local customers. We have to make sure that our local people are equipped with the information, tools and arguments that they need to bring this story as convincing in China as we are able to do in Germany or Denmark.

A couple of years ago we have made the principal decision to operate with a Chinese management team which will have full access to our technology that has been developed in Europe. We have transferred our technology to China and have put it in the hands of our Chinese people. At the same time we say to our German people that this technology has been transferred and that it is up to them to develop the next technology. This is how we make our internal life interesting and competitive.

You were already in charge of NKT Cables when the company obtained full ownership of its subsidiary in Changzhou. What are the lessons that you personally learned as the CEO of this company from working with China?

The main lesson was to have a local management team that is meeting two main requirements. First of all, a management that understands and accepts the western mentality, our way of working, thinking, and doing business. Secondly, Chinese management has to be embedded in the Chinese structure and therefore can be successful in China. Basically, we need Chinese people who can be guided from Europe to act on our behalf in China because it is NKT Cables that they are bringing to China. It is our brand and our reputation that they represent in China. We are very pleased that we have made the decision to go for a Chinese management team five years ago and we believe we have a very good team in place there. Being successful in business is to a large extent influenced by having the right people with the right motivation and the right capability, and that is the case in China.

What would you like to be the reputation of NKT Cables in China?

We want to be considered as striving for excellence in everything we do. We want to be seen as offering excellent cable solutions that do in reality meet the expectations of the customer. Excellence in offering the cable solutions that the market needs is what we want to ultimately achieve. Of course, the ultimate vision is that you achieve this in every project for every customer. This may be a very utopistic idea, but as long as we see progress on that trajectory then we believe that we are on our way to fulfilling our ambition.

Achieving critical mass is another prerequisite for the future success of NKT Cables in China. What level of market share do you need to realize in China in order to have critical mass in the different market segments in which you operate?

In the railway business we are the market leader for materials - electrification conductors - that we supply, so we have critical mass. We have a joint venture in this area and are very satisfied with our positioning in this business. In the high voltage business we are just starting in China, and critical mass would be 10-15% market share which is something that we strive to achieve five years down the road, coming from zero in 2008. The medium voltage market is so fragmented and competitive that we do not have a market share target; our goal is to find the market niches that are more in need of our solutions than the commodity part of the market. We are not in the business of selling cable by the meter; we are in the business of selling cable solutions. In medium voltage that is harder than in high voltage, therefore our focus will be on high voltage.

Having been the CEO of NKT Cables for the past seven years, what is the main goal that you will be working towards in the coming years?

Looking into China, my goal would be to get going in the high voltage market in the next two years by really getting the mindshare of some of the highly visible customers who place their trust in our high voltage cable solutions. We have a factory in Changzhou and have started a joint venture in Hejian City, Hebei Province, so we have the manufacturing infrastructure in place. We have people with the knowhow, knowledge and capability to sell our cable solutions, and I want to see the success. We have great ambitions and a high level of technological capabilities. We will convince the Chinese market that what we have on offer will meet the expectations. Mindshare comes first and market share will follow automatically, that is my goal for the next year and a half in China.