Good morning and welcome to this historical press and investor conference. My name is Morten Albæk from Vestas Wind Systems, and it's my task to try to facilitate this day in the most effective manner. The agenda for the press investor conference is as follows, namely that the CEO and Group President of Vestas, Anders Runevad, will give an explanation to the global leadership inside offshore wind that we believe that this new joint venture is going to represent. After that, Mr. Kato, deputy head of Power Systems and senior general manager in Mitsubishi Heavy Industries, will tell about why Mitsubishi Heavy Industries have chosen to team up with Vestas and also Mitsubishi Heavy Industries' increasing focus on offshore wind.
After that, the new CEO of the joint venture, Jens Tommerup, will talk about and elaborate over the strengths of the joint venture before Anders Runevad will talk about the next steps from today and until the JV is formally established in the beginning of 2014. After those short presentations, I will manage questions from the floor, and we will approximately use 20 minutes on that before we break up. But yet again, a warm welcome, and then I'll leave the floor to you, Anders.
Thank you.
Okay. So good morning. Thank you for coming. This is, really a great day, a great day for Vestas, a great day for Mitsubishi Heavy Industries. I would say a great day for the offshore industry too altogether, and also, a great day for Denmark. So why is that? Yeah, because today, of course, is the day that we announced the joint venture with Mitsubishi. We have a clear strategic intent that we share with Mitsubishi to become a global leader in the offshore wind industry. And if you look at the competencies that both parties bring to the table, I think it's unique. We have Mitsubishi with a very longstanding presence in the global power generation and related technologies, a company known for their large scale, their industrial knowledge, their innovative product offering.
And we have Vestas with that is the world leader in the wind industry that has pioneered this industry as well as the offshore industry, and also have a groundbreaking technology for the offshore wind market. So together, it's truly a strong partnership. I said that we share the same vision, and I think that is very important when you create a joint venture, that you have that you are aligned on the objectives, where you want to go, and we have clearly spelled out that, what the ambition is for the joint venture. I'm also convinced that we jointly can address a much larger market than we would have been able to do, by standing alone.
I said that it's good for Denmark, and that is, of course, because the JV will be-based in Denmark, and the majority of the employees working for the JV will come from Vestas' operation in Aarhus. If we look a little bit ahead to the next few days, and then, of course, when the joint venture will be approved and established, the focus now is for Vestas is business as usual. That means we continue to develop the V164-8.0 MW turbine, according to the plans that we have previously communicated. We deliver on the ongoing projects that we have in offshore, and of course, we engage and continue to engage with customers in order to bring in more sales. I already talked about the game-changing turbine, the V164, and this is really going to be the foundation of the joint venture.
It's a product specifically designed to reduce offshore cost of energy. It's built on existing, proven components, reliable technology. We have communicated before the time schedule we have, and we just confirmed that today. So this turbine is going to be the base of the joint venture. A bit more details then on the cooperation. It will be split 50/50% ownership, and Mitsubishi Heavy Industries has an option to change their ownership to 51% as of April 2016, which, of course, means that Vestas, in that case, would get 49%. The board is equally split between Mitsubishi and Vestas and will be shared by Mr. Wani, and I will be the vice chairman. The CEO will be Jens Tommerup, that you will hear more from a bit later.
As I also said, we estimate that the joint venture will have approximately 300 to 400 people, the vast majority of those people coming from the Vestas offshore division as of today. Going a little bit more into details also about the contribution from the different companies into the joint venture, I think it's very clear that we both contribute with experience, with technology, with capital, and with competencies. So basically, Vestas' input into the joint venture is our existing offshore business, the development of the V164 and related technologies, the order book for V112, and the ongoing service business that we have around the V112 offshore business. Mitsubishi Heavy Industries' input is the majority of the existing offshore activities within Mitsubishi, cash to EUR 300 million euro divided between EUR 100 million euro in cash now, and another EUR 200 million based on certain milestones achievements.
And those milestones are common milestones in the early development of a new turbine. And of course, the very broad know-how and experience from global power markets, both from a market point of view but, of course, also from a technology point of view. So again, I feel that Vestas have found the perfect match or the perfect partner in Mitsubishi Heavy Industries, a partner that shares our aspiration of becoming a global leader in the offshore wind industry, a partner which complements our skills. And, and I'm convinced that together we can address a much larger part of this interesting and expanding offshore market. So in Mitsubishi, we have found a partner who shares Vestas' dedication for taking a leadership role, who has proven advanced technologies, solutions, known for their innovations, a very large standing presence in the global power markets, and a very strong financial base.
So again, it's a good day for Vestas. It's a good day for Mitsubishi Heavy Industries. It's a good day for the offshore industry, and it's a good day for Denmark. Thank you very much, and now it's my pleasure to introduce Mr. Kato. Please.
Thank you. Yeah, thank you.
Thank you. So ladies and gentlemen, good morning. First of all, I have to thank you very much for you coming here today. It's a good day for us and for Vestas and for all the Danish people. First, I will explain a little bit why we decided to make a joint venture. MHI has manufactured and supplied more than 4,000 units of the wind turbine until now, mainly to the United States. In addition, MHI has a variety of the production technologies and know-how, for example, shipbuilding, aircraft constructions, chemical plant, and power generations. In my business sections, power generations, we are not supplying equipment such as a gas turbine, boiler, or a steam turbine, but also we construct the power plant on a full-turnkey basis, including balance of plant.
So all such technologies and the know-how are very much compatible to the offshore wind industry. To catch up with the growing offshore market in the fast track, we decided to form a joint venture with someone having sufficient experience in this market. And of course, to enhance the renewable energy business is one of the most important missions of MHI or MHI means Mitsubishi Heavy Industries, to contribute and materialize the low-carbon emission society in the future. So now, we explain why we selected Vestas. Although we have relevant technologies, offshore wind business is our new field of the business, particularly in European areas. There are lots to do for us, such as production facilities, supply chain, logistics, installation, and operation and maintenance. So Vestas is no doubt the pioneer in this market and having the vast experience and the track record.
Through the various discussions, we came to conclude Vestas is a professional wind turbine supplier and the ideal partner to integrate our numerous technologies and the competence of global power generation. So next, what is our expectation to these joint ventures? We are very happy to be able to announce this joint venture today. As mentioned before, this joint venture is the best match to become a global leader in the offshore wind turbine industry. Combining the company's experience and capabilities, joint ventures can continue to improve the performance of the turbines and the supply competitive equipment to the market. Thanks to the successful conclusion of joint ventures, joint ventures, for example, get a pole position of the Formula One race. Now everything is ready, so we do believe and confident JV will win the race. Thank you very much. Thank you. Good morning, everybody.
We are strong believers in the future of the offshore wind segments. If we look at it today, nearly 90% of the installed capacity in offshore is in Europe. Short term, we also expect a strong development in Europe. We see a very strong development in Germany, a strong development in the U.K. If we look a little bit further out to 2020, we also see many other countries, areas, Scandinavia, Benelux, having a strong growth in Europe. We expect a combined growth. We expect a growth rate in Europe of more than 20% to 22%. If we look a little bit further out, we believe that offshore wind will also become a global business and that we will see strong growth in, for instance, Japan, China, and many other areas. The joint venture will have a very strong pipeline of existing wind farms.
We will have more than 1.1 GW of turbines in service. This gives us a very strong knowledge base. We will have a lot of experience in surveillance of turbines, planned maintenance of turbines, and a lot of very motivated and very skilled technicians working on the turbines every day. We also have basically projects under construction which also bring a lot of experience to the joint venture. We believe this is a very strong foundation to build the future leader in offshore wind. We believe that the V164-8.0 MW turbine will be a game changer for the offshore industry. The development of the V164 is going according to plan. It's progressing very well. We expect the first prototype to be installed in Denmark, in Østerild, by Q1 2014. We also expect the first V164 to go into serial production Q1 2015.
This will, of course, depend on the development of the market but also depend on what orders we have received at that time. The joint venture will also have a very strong portfolio of other offerings to our customers. We will be able to sell the V112-3.3 MW with its proven technology, very strong track record. We will be able to supply all the service concepts which have been developed by Vestas over the years. We can mention the AOM system, which is the service system which is used on all turbines in operation, managed, and serviced by Vestas. We will also be able to bring many other offerings related to the offshore sector, both from Mitsubishi but also from Vestas. This will together give us a very strong value proposition which we believe will be able to fulfill the requirements for our clients.
The joint venture will base its business on V112-3.3 MW, the V164-8.0 MW. The joint venture will cover the full value chain starting from design to sourcing, manufacturing, marketing, sales, and after-sales service. On a later timescale, we will also be able to introduce more technologies. We could mention as an example the hydraulic drivetrain Mitsubishi is working on right now. There's many, many other things to mention, but we would like to emphasize that we will be very careful when we introduce new technologies to the offshore segments, that it's tested, it's proven technologies, and we will bring it to market in very close cooperation with our customers.
So, based on this, we believe we have a very strong value proposition which will be able to fulfill both the present but also the future requirements from our clients, bringing us in a very good position to become the future market leader in the global offshore wind segment. Thank you very much. Anders. Thank you.
Thank you, Jens. So last slide. A bit about the next steps then. The transaction is subject to normal closing conditions including approval from relevant competition authorities in Europe and Asia, and we expect then that the closing will be around 1st of April 2014. In the meantime, Vestas Offshore will continue business as usual, delivering products and services, serving our customers, continue the development of the V164, and of course, that is important. In parallel, we will now set up a joint project team between Vestas and Mitsubishi Heavy Industries to start the preparation to get the joint venture operational. So with that, the formal presentation ends, and again, thank you for coming, and I hope you agree with me that this is a great day. Thank you.
We will start the Q&A precisely 20 minutes past 10:00 as planned. The persons that get the opportunity to ask a question, please say who you are and which organization or company you represent. Nina, you're welcome to start.
Thank you. Is it on? Does it work?
We can hear you.
I can hear you.
Yeah. All right. Thank you. Nina Munch-Perrin from Danish Broadcasting Corporation. I have two questions. The first one for Anders Runevad in combination with Mr. Jin Kato. I'd like to know which of you made the better deal. And then I also have a question for Jens Tommerup, the new CEO. What do you know about offshore? You pointed yourself that it hasn't exactly been, like, the Asian hotspot for offshore, and that's where you are coming from. Thank you.
I think, Anders, if you start.
Yeah. No, thank you for the question. We are both very happy with the deal, and I think that's what I talked about. The true partnership is really a win-win combination. So Kato-san, you will have to step in as well, but I'm pretty sure that we're that's how you reach a deal when you we have two parties that are happy with reaching a deal together. So we are both happy.
Yes.
Good. Then there was also a question to you, Jens Tommerup.
Yeah. I'm very pleased when I look at all the competences we get into the new joint ventures. We have a lot of experience from Vestas. We have 300 staff coming from Vestas which has a lot of experience, a lot of offshore experience. We have a lot of other competences, and I don't need to be the expert in offshore. I have been four years in the wind business, and I think I have a good understanding. And I actually have more than 10 years experience also from working in joint ventures. So us as a team with the vast experience we have in offshore, I'm very confident we have the right competences.
Great. Yes.
Hello. My name's Nikolaj Rytgaard. I work for the newspaper Jyllands-Posten. I have a couple of questions for Vestas. First of all, why is this joint venture necessary? Why not try to go it alone and use the benefits of the offshore markets yourself? And is this related in any way to any difficulties in managing the financial burden of the market and the new V164? Second question is, the option for Mitsubishi to take the 51% of the joint venture. That looks like, at the point where the market could take off, you are looking to lose control of the joint venture. Why have you made this part of the agreement? The last question is for Mr. Kato. If Mitsubishi actually takes the 51%, do you still plan to maintain Mr. Tommerup as CEO of the joint venture?
Thank you very much. And this is one new golden rule: maximum two questions, and then you have to prioritize. The first two questions, you'll take, Anders.
Yeah. Is the joint venture necessary, or could we do it ourselves? As I said, I'm, I'm convinced that with the joint venture, we can address a much, much larger market in offshore than we had, could have done by doing this ourselves. So the joint venture brings the oppo makes the opportunity so much larger. And I think I, I rather have a 50% share of a very big cake than 100% of a much smaller cake. So, f-for me, I'm 100% convinced of the market logic and the industrial logic behind the joint venture. You asked if these projects were difficult. I think we see in the market, of course, that the offshore project tends to be larger and larger. We see customers also pooling together, competitors in, in normal cases, but pooling together in, in offshore projects.
I think it's prudent to do, and I think it makes a lot of business sense. On the option in April 2016 to take 51%, from Vestas' point of view, the governance, we are confident with the governance of the joint venture. The governance will not change if Mitsubishi so elects to take a 51%. So we are comfortable with that.
Thank you.
Cheers.
Sorry. There was also a question for Kato-san. So before the next question.
[Foreign language]
[Foreign language]
Well, it has just been answered by Anders. Joint ventures' governance and operation will not change.
Thank you. Yes?
The statistics guy from Ritzau. I wanted to ask, I guess it's.
For Mr. Runevad, Mr. Kato, what are the conditions for the milestone payment, and is it one single milestone?
No, it's a number of milestones. It's very generic milestones, normal milestones in the development of a new turbine and bring it to market. Exactly what it is, there are several milestones. I will not reveal those details of the joint venture agreement. But it's normal milestones that you would expect when you develop a new turbine.
Yes. We have a question over here.
Daniel Patterson from SEB Equity Research. I have two questions. The first one is for Anders Runevad. As far as I understand it, the R&D employees will stay with Vestas, and the joint venture will then, let's say, buy R&D from Vestas. So my question is, what happens to the intellectual property in this situation? Does that and the technology go to the joint venture, or does it stay with Vestas? And then my second question is for Mr. Kato. On the Japanese market, obviously, there's a lot of political movement to go anti-nuclear in Japan at the moment. How important is the Japanese offshore market for Mitsubishi Heavy to do this joint venture?
Okay. So let me start then. You're right. The development engineers of the V164 remains with, within Vestas, but of course, the responsibility and the ownership of the product goes over to the, the joint venture. And the joint venture will have sufficient, intellectual property rights on the product to sell, market, produce the turbine. But the detail of the whole intellectual property rights agreement, I will not, go through.
Mr. Kato-san?
Yes, may I speak in Japanese, so that she can translate?
Yes, of course.
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
Well, the market for the offshore wind turbines in Japan, that is, the situation is probably well known to you. It is not very transparent at the moment.
[Foreign language]
Especially in relation to what is going to happen about the nuclear power. Well, the government's position has not been clearly clarified yet.
[Foreign language]
My company is also engaged in the nuclear power generation, or therefore, I'm not going to go into the details about this question.
[Foreign language]
But the size of the market in Japan for the wind turbines, it will be broaden, and that is also part of the very clear intention of the government.
[Foreign language]
As the Japan is very limited as far as the area size of the area is concerned, or therefore, it is quite evident, apparent, that the market for, for the offshore wind turbine will be is present.
[Foreign language]
Thank you.
Thank you. Is there a question down there on third row? Yes?
Klaus Kehl from Nykredit Markets. I have a question for Mr. Kato. And first of all, welcome to Denmark. And then my question would be, there's no doubt that the offshore market is very interesting, and there's no doubt that this joint venture looks like a strong start. But you also have to compete against some very large European companies in, for instance, Germany. So what should really change this situation given that Vestas has lost a lot of market share on the offshore market the last couple of years? That would be my question.
[Foreign language]
As we have disclosed now?
[Foreign language]
We believe the path to become the global leaders within this field, it is to work together with Vestas.
Is that okay for my reply?
You have a follow-up question, or? Klaus?
No, thank you.
Nope. Good. We have one here on the front row.
Yes. Hello. Patrik Setterberg from Nordea Equity Research. I have two questions. The first one is actually a follow-up to the past question. It is about this mentioning about global leadership. Could you please elaborate what you mean by that? Do you want to have a number one position within the offshore industry? And if you want to be the number one, what time frame are we looking at? My second question is, when do you believe this joint venture will be ready to take orders for the V164 turbine? And when should we expect to see the first orders coming for the V164 turbine?
The first question about leadership. Anders, will you?
Yeah.
So, our aspiration for the joint venture, as I said, is clear. We aspire to be a global leader in the offshore wind segment. And, I think we should let the joint venture give them some time to first get established and then come out, of course, with their communication on the timing, the market share ambition, and so on. But the aspiration from the founding parents there is very clear to be a global leader in the offshore wind segment. And we respect all competition, and competition drives the industry forward. And we feel that we have a setup where we will compete really well in this market. But when it comes to the details and so on, I think, let us come back when the joint venture actually has started.
I think also when it comes to orders and so on, we will follow our normal disclosure of orders, and we will not comment on that here.
Thereby answers to both questions. We have Jakob.
Business Daily Børsen , question for Mr. Kato. What can you bring into the joint venture besides money?
[Foreign language]
As I have already talked about, Mitsubishi Heavy Industries has the technologies not only for the power generation but also building the ships, ships.
[Foreign language]
Especially if you look at the wings of the aircraft, it is made by the use of carbon fibers.
[Foreign language]
This means that, we are in a position of, we are a technology that can support the development of wind turbines. Or therefore, in that way, we expect that we will be able to contribute to this project.
Thank you, Mr. Kato. Then we have a question here on the front row.
Yes. Fasial Ahmad from Handelsbanken Capital Markets. Two questions from my side for Mr. Runevad. First of all, you've talked about serial production from 2015. Will the JV partners have to contribute additional equity for the V164 going into serial production? And the second question is, how will the JV partners actually be handling the potential future warranty liabilities for the V164? Is there a need for additional equity also in that sense?
I mean, of course, the joint venture. We have, of course, a joint business plan for the joint venture, and in that, we feel confident that we don't need to provide more equity to take it to serial production. So, but Lars will be able to answer your question a bit more in detail afterwards. But that's the joint in the joint business plan we have. We don't see a need for that.
Is that your answer to your question?
also the warranty liabilities.
No, of course. I mean, the joint venture will be a standalone company, and of course, we'll be responsible for the sales, the aftermarket, on the turbines.
Good. Thank you. Gentlemen, just besides?
Claus Almer from Carnegie Bank . First of all, congratulations with the JV. I guess that is taking a very long time to get some pen on the paper. My question goes to the V112 offshore turbine. No doubt, the V164 has a very promising outlook, but there are some years before it will be launched in the market. With this JV, do you see that the opportunities for the V112 turbines will increase, or that it's outpaced by this JV? I guess that's for Jens Tommerup.
We actually see that the combination of V112 and the joint venture will give us a very strong business case, also to get some project which is suited for the V112, before we can go into mood of the V164. So to answer your question, yes, we will believe that we will have some very good chances for using, utilizing, selling the V112.
So better than as a standalone?
Yes. We will together as partner be stronger, also in the short term.
Now, one final question from.
The floor. Third row, Jens.
Yeah. Michael Lund from Danish Broadcasting Corporation. I have a question, I guess, for Mr. Tommerup, perhaps. You all said that this was a great day for Denmark. I guess it is on a short term, but on a longer perspective, will the production facilities, the manufacturing facilities remain here in Denmark, and the jobs remain here in Denmark, or is there a risk that these things, the production facilities and the jobs, will be moved out? Can you say something about that?
Right. First of all, I think it's important that we keep all the knowledge-based jobs in Denmark, which we really do by putting the headquarters and remaining all the offshore organization and even adding more jobs to that here in Denmark. Then, where to basically base the production and how much will be in Denmark will very much depend on the business case. But we will hope that we will be able to keep as much as possible in Denmark for production. But it's depend on where will the orders come from, who will be the customers, so it's difficult to ask. But we will do whatever it takes if the business case makes sense to keep it in Denmark.
Thank you.
But then, thank you very much for your questions and your attention, here on this great and historical day. Have a great day. There is a possibility for getting interviews with the panelists, and please go to the media relations persons that is in the room, and then they will make sure that the logistics is handled as effectively as possible. But have a good day and a good weekend. Thank you.
Thank you.