Siemens sets billions: Ørsted must repair hundreds of turbines

Ørsted is in danger of having to repair the blades on more than 600 offshore wind turbines.

Ørsted must repair up to 2,000 wind turbine blades because the leading edge of the blades has worn down after just a few years at sea.

The company has a total of 646 wind turbines from Siemens Gamesa each of which may be affected at different degrees, confirms Ørsted to Finans.

The wind turbine owner will not disclose the bill, but says that the financial significance is "small".

Siemens Gamesa also does not want to comment on the cost, but the company's Danish subsidiary has just provided 4.5 billion. kr. or 16% of its revenue to guarantee its commitments. [ed. note: these commitments relate to assurances that the turbines will be available to generate electricity when the wind is blowing.]

By comparison, Vestas provides less than 2%. of revenue. Over the past four years, Siemens Gamesa has provided nearly 20 billion euros. kr.

"There are serious provisions in the turbine purchase contracts that are based on what's considered the norm in this industry. There is an expectation that these components could be used for the next 20 years," says Jacob Pedersen, equity analyst at Sydbank.

While Ørsted may get off cheap in the short run since many of the turbines are still under the manufacturer's guarantee, the question is what happens if new problems arise.

"We do not know the contracts and do not know how long Siemens Gamesa will continue to pay the bill," says Gert Nielsen, a partner in Bedstpension, who closely follows investment funds' position in, among other things, offshore wind farms.

"It can of course be unpleasant for them when the manufacturers' guarantees expire," he says.

Ørsted's problems mean that almost 300 blades at the record-size Anholt offshore wind facility will have to be removed, shipped to shore and transported to Siemens Gamesa's factory in Aalborg. This is only after a few years of operation. 

There they will be repaired and fitted with a rubber strip on the front so they can better withstand the tough weather. At the same time, the blades will be fitted with a smal modification to make them more effective.

However, it is far from just the Anholt Park that is affected. The blades at several British Ørsted parks must also require repair after just a few years on the water.

The total bill is uncertain, but according to Finans's information, the manufacturer's warranty typically covers the first five years. However, there has been disagreement between Ørsted and Siemens Gamesa as to whether the problems are covered by the guarantee or whether they fall into the category of ordinary wear and tear.

In a letter to the company, Ørsted states that a solution reached with the turbine manufacturer "overall has little financial significance for us".

"The specific conditions may differ at other wind parks so we've agreed to assess the repairs at each of the other facilities with Siemens Gamesa. Siemens Gamesa is conducting the repairs at Anholt," writes Nicolaj Mensberg, head of 'operations technology' at Ørsted, in an email to Finans.

Peder Riis Nickelsen, Technical Manager at Siemens Gamesa, stated in an email that he was unwilling to comment on the financial details or the billions the repair will cost the Danish company. 

Translation via Google Translate