China's Ming Yang Wind Power Group Looks to Buy Vestas Wind Systems

According to an inside source, China’s Ming Yang Wind Power Group Ltd has plans to offer $1.72 - $1.97 billion to buy the Danish based Vestas Wind Systems A/S, the largest wind turbine manufacturing company in the world. It is likely that this takeover is part of a plan to diversify into other markets due to the decline of wind power in China.

Growth in China’s wind sector has started to slow this year, and as a result revenues have also started to drop. The Chinese government introduced a stricter approval process which has reduced the amount of new projects being installed, and therefore demand is falling. At the same time supply is increasing which, according to Zhang Chuaiwei, chairman and CEO of Ming Yang, is reducing profit margins in the industry. In the first quarter of this year Ming Yang’s revenue has dropped by more than 70 percent.

Zhang expects “that the wind power industry in China will continue to face difficulties and will see further reductions in newly installed capacity in 2012. Nevertheless, the unusually demanding conditions now prevalent in the industry may prompt further market consolidation, which we believe we will benefit from as a leading market player.”

As well as difficulties at home, Chinese wind turbine manufacturers are now facing 26 percent taxes on exports to the US.

In response, Chinese wind energy companies have been establishing bases in Europe and India, hoping to access other foreign markets and avoid the duties on turbines sold in the US market.

Ming Yang also has plans to move into India by buying a significant stake in the Reliance Group unit Global Wind Power Ltd.

By. Charles Kennedy of Oilprice.com