WIND POWER

Denmark has long been in the forefront of wind power. And in the forefront of that forefront, so to speak, has been Vestas, still the world's biggest producer of power windmills. The company's charismatic boss, Ditlev Engel, has been a constant at world climate conferences, Davos, and similar meetings of the great and the good. Wind is good for the world, was the message.

Yet Vestas is in trouble. Roughly four years ago its market value was kr.130 billion; today it is just kr.7.7 billion. Part of that fall can be attributed to the financial crisis; but a large part is due to the company's own problems. It made an operating loss of kr.447 million in 2011, and a staggering kr.1.2 billion in the first quarter of 2012. That is despite having an order book worth some kr.75 billion.

There are three basic problems. First, wind power is still uneconomic when compared with that from other fuel sources, so orders are heavily dependent on subsidy regimes in different countries. Secondly, Danish production costs, particularly labour, are some of the highest in the world. Thirdly, what was once a technologically difficult product to make is no longer so, meaning that there is fierce competition from Chinese and Indian producers. The result is that sales are just not profitable.

Vestas is shedding expensive Danish jobs - fast - and trying to get a better grip on costs. But foreign investors who once thought that Mr. Engel walked on water are selling out in droves; the proportion of shares held by foreigners has fallen from 70% in 2008 to less than 50% today. Unless somthing radical happens, it would not surprise me if one of Denmark's flagship companies is gobbled up by a supposedly third world producer within the next five years.  

Walter Blotscher