Good morning, and welcome to this presentation for our full year 2020. I think it is timely to say a proper thank you to all our stakeholders for 2020. It's been challenging, but also rewarding for our future journey and not least also for the growth of renewables. So with that, a warm welcome to our presentation here. As it is the full year, we will also do a strategy update as part of our presentation.
And I will now have forward looking here. So to the key highlights. If we look at the key highlights for the year, We met our full year revised guidance that we met on all parameters by our 2020 results. We delivered more than 17 gigawatts in a what was a very challenging COVID-nineteen environment. That's up 34% compared to 2019, and it is up 59% compared to 2018.
We spoke earlier about evidence, and this, I think, is basically an evidence to ourselves of how we have done this year. EBIT margin before special items of 5.1%, clearly impacted by the higher warranty provision earlier in the year and also the execution challenges due to COVID-nineteen. We had a 10% revenue growth in service and a 28% EBIT margin in service, so another stellar performance from the service business. Probably really important here, we had a strong safety performance in the year. We had total recordable injury rate down 15%.
We'll talk more about it, but it's a very important one in a year where we scaled to so much higher activity. And then lastly here, we had a 33% reduction in our own CO2 emissions for the year. And as Ken here, we continue being a leader of replacing CO2 emissions because we displaced SEK 186,000,000 from in 2020 from our installed base. When we then also look at 2020, it was also a fairly busy year in terms of strategy, execution and looking ahead. We acquired full control of the offshore wind activities.
And as of today, you will also see and we'll talk more about that, we have now launched a new platform to also look ahead into the offshore activities. We expanded and we have expanded our development activities And we formed the strategic partnership with the Copenhagen Infrastructure Partners announced in December and closed here in February 2021. We are clearly on track with our sustainability strategy. It works both as a strategy and also on the operational level. We'll talk a lot more about that.
And then again here, thank you to the finance and treasury team. We had the assignment of a BAA1 rating from Moody's. Again, it's just an illustration of how Marieke and the rest of the team work with the prudent thinking of how also to look ahead to have the finance supporting our strategy journey ahead. When we then look into where we are in Q4, this chart you have seen a number of times. I think it is fair saying here, we have shown the evidence of how to perform.
We can also say we confidently came through 2020. We did that without taking any state aid at any point. We also here have performed, 1st of all, with the health and safety of our colleagues as a top priority, but secondly, business continuity throughout the whole year. It is fair saying that has stood us in good shape. And when we look at it right now, we are probably at the max of the lockdowns we have been.
I think in most countries Most countries we hear about, we are having the furthest and the strongest strict lockdowns we have seen. It's in Europe, Americas and India where we still see some of those impacts. Generally, thanks to all our partners and suppliers, we are generally running even though we also see and accept that transport and logistics right now are seeing certain bottlenecks. And we thank our partners for that understanding and also making sure that we have the priority in dealing with that. Then I will say also here, 2020 was 17 gigawatt of delivered to customers in 2020.
That's up 34% compared to 2019, but it is a testament of what it meant throughout the year of saying business continuity. For that. Couldn't be done without now 29,400 colleagues of ours, including the offshore. This has really been one of the evidence to the year. In terms of how we did in terms of order intake In Q4, we had an order intake of 5.6 gigawatt in order intake in Q4.
Ares Selling price was $0.71 And as you can see, it's up 25% compared to Q4 last year. Especially U. S, Brazil, Australia and Colombia were large contributors to the Q4 result. But again, they are very pleasing for us to see. When we look at the ASP, it ended at €0.71 for Q4.
That means it remains stable considering what we know in terms of both geography and scope and of course also the individual offerings offered. Without the FX, The full year ASP would have been EUR 0.77, so we are satisfied with that. That also leads to that when we look The all time when we look at the backlog, we have an all time high order backlog. And of course, there's 2 things to say about that. First of all, the positive development of the ongoing activities from onshore and also the inclusion of offshore.
So wind turbines now €19,000,000,000 in backlog, onshore €15,000,000,000 offshore €4,000,000,000 So in total, up for €3,000,000,000 compared to year end 2019. In terms of service, incredibly good year in terms of this. So €24,000,000,000 shy of €24,000,000,000 in backlog. Onshore, a bit more than €20,000,000,000 and offshore now comes in with 3 point €4,000,000,000 in Offshore. So that's up €6,100,000,000 compared to year end 2019.
When we talk about the Power Solution, then Power Solution had a really good year. What we see here also, I think the Power Solution, Again, here from a highlight point of view, we have had a second half of the year where basically EU, South Korea, Japan, China And now also the new administration from the U. S. Have changed the So there we have seen all those countries making changes to how they look at carbon and carbon neutrality. Some of the countries putting up targets for 2,050 and other countries putting up targets for 2,060.
And I think it is fair saying We have seen a number of initiatives from the new administration in the U. S. That only sort of talks and support the same underlying macro trend that is let's do the transition towards renewable energy in the decades to come. When we then look at it, we have had increasing deliveries in Americas, not surprisingly with the PTC end in 2020 and also in Asia Pacific. So strong orders secured across U.
S, Brazil, China and Poland. So when you look at the numbers below, really, really encouraging year from all our regional setup and a thanks to all of the regions for doing so. Then when we come to the service, I mean 2020 was the year where we passed the 100 gigawatt milestone. And we're also here looking at how run one service business, including the offshore activities looking forward. We also now look after 113 gigawatt on onshore.
That means in a year where we passed 100 gigawatt, we are already now at 113 gigawatts as such. The 2020 highlights goes without saying. We are now running as one team. We are getting colleagues to sit as one team and also across locations. That gives us a good start to leverage the global supply chain and also the scalability, not only on onshore, but also now on offshore and the best practice is in between.
In 2020, we had more than 3 gigawatt of wind turbines that were added to the multi brand operations of us. And that's now spanning across more than 24 countries and servicing 7 different turbine brands. We also had a new market entry. It was in Colombia with more than 500 megawatt of service agreement, plus 12 years in duration. I think most impressively below, you will see the growth is across all the regions.
And we are really here positive and also thankful to everyone that I keep working so diligently through this 2020. When we look at the offshore, and I think we will talk more about to the offshore later on also as part of the strategy review. But I will just say here as the key highlight, We have now welcomed more than 3,000 employees, new colleagues, most some of them even former colleagues into how to be one team investors. We are integrating onshore and offshore. It started.
We have the operating model and the new organization being announced 1st February, and we are working diligently through that. That means in 2021, we'll be a settling in, but we have done everything possible to make some of the quick integration we can do to make the team execute on what seems to be a very busy year looking ahead. We also completed the installation of Bercelet in the Netherlands in 2020. And below, you can see the projects we have in progress in Q4 2020. And with that, I will hand over to Marika.
Thank you, Henrik. So if we have a look at the income statement For the full year, and I think it's pretty clear what Henrik has said. We have had a record high activity levels. So Obviously impacting the revenue line positively despite a COVID environment. So we saw positive change of 22%.
Gross margin is down 4.1 percentage points and primarily impacted by the increased warranty provision that you saw in Q2, but also the logistical challenges and the supply chain Bottlenecks due to the high activity level and that has just been further amplified by the COVID-nineteen. EBIT margin for obvious reasons also took a step down due to the lower gross profit And also high depreciations. SG and A, I will comment on later on, obviously, having a positive development In particular due to the COVID situation. Income from investments in JVs and Associates is Primarily driven by the revaluation of the 50% ownership in MHI Vestas. And that is resulting in a positive contribution and obviously a positive impact on the net profit.
If we have a look at the Q4, still very busy quarter here in Q4. But as you can see, We see last year, so a slight decrease in the overall on the overall revenue line here in Q4 of 2020. I would say overall good performance in the quarter, but the gross margins here as well. It took a step down and that is driven also by the higher warranty provision And COVID-nineteen related challenges. We saw actually a step up in terms of COVID related cost in Q4.
EBIT as a consequence decreased slightly here in the quarter. And Obviously, the same reasoning due to lower gross margins and also higher depreciations. SG and A costs, as you can see here, well under control. And if you look at the activity level of the company, which we are measuring, we are now at 5.3 percentage points. The absolute number increase has been to cater for the higher activity level.
The depreciation and amortization increased €84,000,000 in 2020 compared to 2019 and that is So primarily due to the new the introduction of new products that we have been referring to earlier. Relative, As I said earlier, we are now at 5.3%, so really good performance on the SG and A side. Service business really good service performance also said by Henrik. You see that the revenue increased Compared to 2019 by 10%, obviously driven by the higher activity level and also very good margin for the full year 27.6 percent approaching 28%. And you see a corresponding margin here in Q4 of 2020.
If we have a look at the MHI Vestas Offshore, I would say pretty stable activity level year over year. And we delivered a revenue of close to SEK 1,400,000,000 somewhat down, but pretty slightly. Net loss of €92,000,000 and that is driven by the changes in our assessment of the need of warranty provision. Without the warranty provision, you would see an EBIT margin of 4% that we have been indicating. That gives an absolute number a net profit of EUR 45,000,000.
Changes in net working capital, it continues to be negative. And here you see that the increased level of inventory It's primarily driven by offshore, but also catering for our own activity level anticipated in 2021. Down in milestone payments to a certain extent offset the increase in inventory, but not to the full extent. Cash flow. You see free cash flow of €84,000,000 more or less in line with €19,000,000 of €94,000,000 And you can see here that cash flow from operating activities is increasing, so very good.
But also the change in net working capital, So obviously impacting negatively on the free cash flow. Net interest bearing position is It's solid around the €2,000,000,000 range. And you see the impact from MVAU's net debt of €198,000,000 Total investments, we are within the range that we have guided for. So we're Down to €659,000,000 The main reason for a lower investment In 2020 is the optimization of the product portfolio that took place at the beginning of the year. And the Acquisition of MHI's 50% share in M Wow were paid by issuing 2.5% Nuvester shares to MHI.
Worried operation and loss production factor. You See here that we consume less than what we provide for, but obviously also mirroring what we expect So, Erawas, provision made in 2021 is expected around the 3% revenue. The lost production factor has gone up during 2020 and that is as a consequence of the extraordinary repair and upgrade level, especially in Q2. Capital structure. Net debt to EBITDA well below threshold.
And our liquidity position remains strong with close to SEK 2,000,000,000 cash at hand. We also were assigned, as Henrik was saying, a Baa1 credit rating from Moody's, obviously to further strengthening our position towards the banks. The dividend of DKK 8 $45 per share is proposed and that would equal a payout ratio of on the maximum side that is 30%. By that Henrik?
Thank you so much, Marika. And we will now do a few overview and strategy slides just to put where we are by end of 2020 and also look a little bit further ahead. I think it's fair saying 2020 was a year of evidence. It was a year of evidence towards our customers. It was also a year of evidence to the wider society and countries we operate in.
It was clearly a statement of that we can be trusted under challenging conditions, and we can also be trusted as one of the most competitive sources of energy both as of today and also looking ahead. I just wanted to share with you on the left side that actually in 2000, we were 12 gigawatt of installed wind capacity. Today that has come to 700 more than 700 gigawatts of wind. And of course, more than 70% of the capacity It's installed in the last decade. Also to the right, it comes actually for a reason because if you look at it, this is sort of the levelized cost of energy ranges.
There are ranges depending on where you are in the world. And this is the late 2020 update. But as you can see, when we look at the onshore wind and we also look at the renewable generally, it is favorable comparing to any fossil based electricity source when we look at the levelized cost of energy. I also think it's fair saying here that when we look at the levelized cost of energy of onshore wind, It has come down with around twothree of the cost over the last decade due to technology, due to the scalability and also due to that we are closer to where it needs to be put up when we enter the projects with our customers. Then Where are we and what do we have ahead of us?
And I think there's still significant decarbonization to be done. I would probably even say some will say probably the best is still to come. Because if we look at it, the energy consumption for 2019, When we look at the wind, it accounts for 70% of the electricity consumption. And we look at the overall energy sort of generation across the world, We are still only 1%. That means we have a lot to go.
So we have come a long way, but we have even further to go. And we believe very much, not surprising when you look to the right side here, we think we talk well about 3 pillars of where it's happening. We see right now that it's an increasing deployment of renewable energy. It's in the replace fossil around industry. It's in heating and it's in transport.
We all see, feel that whenever we look at, for instance, new things to either heating or transporting or in our own factories. When we also look at it, clearly, we are to replace fossil power plants. That goes for fossil. It goes for coal across and it's happening. Those two pillars are happening, and it's happening with increasing speed and increasing commitment from countries and customers across the world.
Thirdly, I will say here, we are talking about something that's to come. We see that there are new industrial solutions being talked about. We talk about the Power2X. Power2X and the hydrogen out there and it's coming, but still also a lot of the projects are here to develop that scalability and also that lower levelized cost of energy when we look towards potentially the next decade as well. That is also a very good set of track to talk about what have we done when it comes to our sustainability.
We launched our sustainability strategy in 2020 as of 1st January. And we had the strapline of saying sustainability in everything we do. We have authorized that and we have made it executionable across our operations in the world. We have 4 buckets, big buckets of what we operate in. So we want to be carbon neutral by 2,030.
That means we look at all our carbon footprint across all our own operations and also how we run our activities across the world. Circularity. So when we look at the wind turbine, how can we get to a 0 waste wind turbine by 2,040? We talked about it before. It gives a little sense of nervousness when you announce a target like that because it involves technologies we don't have readily at hand.
You've seen in the last quarter of 2020, we have included and we have embarked in a number of those projects various places in the world to actually also see how we can recirculate and reuse the blades as part of it. This is about how we decomponize our components in the blades. And that, of course, is a journey ahead. When we look at our employees, our colleagues around the world, We aspire to have the safest, most inclusive and also most socially responsible company environment to work in. That is an aspiration and drives us every day.
And I think we don't benchmark up against industry. We benchmark across all industries, and we like to compare us with that. And last but not least, in the energy transition, we want to take part of that, but we also say some of those initiatives will come as we also launch the Vestas venture in 2020 because there we will Invest in some of the early, probably also leading technologies that are coming and how can that drive the energy transition further on. By the way, in here, you will also see a number of our partners working closely with us to develop some of those new concepts to be worked with in the next decade to come. I think when you have 2 slides and you try to say that much about how much progress we have made.
I think the most important we can say to everyone listening in here, this is how Vestas moves. This is how we also walk and execute on our long term ambition. It is good evidence of how it is when you walk the talk. So the carbon footprint for 2019, we reduced it with 33%. That overall comes in combination with that we displace 186,000,000 tonnes of CO2 every year from the installed fleet we had by end of 2020.
That is an amazing number and probably a number that can't be recorded from any other company. We also, therefore, invite all our key suppliers and partners to start measuring taking part and also accelerate that journey ahead together with us. When we look at the other side, I will say one of the very important one was the recordable injury rate. It is now at an all time low of 3.3%. 3.3% is still too much, but 3.3% and at 15% reduction from 2019 to 2020, onboarding so many new colleagues and scaling up the activities in such a dramatic way.
I just wanted to say thank you for everyone to take good part of each other, but it's not done yet. When we look at the diversity and inclusion, I think it's fair saying we are faced with the same challenges. How do we do more in diversity and how do we become more inclusive. We're working on that one. And we strongly believe that part of it is already happening when you onboard and recruit.
And at the same time, we invest in how are we doing when we are in Vestas as a team Vestas. I would also say on the other side here, we are mentioning that we have the science based targets approved. This is actually something that is a vital and a material step in our journey ahead. Here you talk about how you're going to do it, and we look forward to follow that in the years to come. And as you can hear, we work diligently with it, and it's an important first step.
There are so many more examples of that. So if I could just ask you as a follower and a reader to have the time download the sustainability report as a separate document. It's more 50 pages. It comes as a good readable PDF file. So do that because that gives you a lot more tangible examples of how we work also on the communities around in the world.
So let me just then say, and you're not surprised by this, we have 3 big legs of how we run our strategy and the strategy progress. Onshore, very much still believe in that. We have seen the onshore. We have seen countries, both existing countries, but also new countries coming in and supporting further interest into the onshore market. We believe that that will trigger new installations to still have a positive compounded average growth rate of 1% to 3% in the period here towards 2025.
When we look at the service, it goes without saying we have now 113 gigawatt under in the onshore and another 4 gigawatt in offshore. So we have more to do in service in general. We run, we have a global scale and we invest in a team. And we now have well in excess of 10,000 engineers that are going around. We believe on the growth.
We believe on the growth together with our customers and see a compounded average growth rate of 8% to 10% when we look towards 2025. Then of course, not surprisingly, we are looking at offshore. And as you would expect us to now, we are at Team 1 Vestas, and this is all about now to get offshore as included in our operations as we have had with the onshore in a very long time to that. We also see offshore. And I mean, you have some of the forecast.
And I won't challenge neither the forecast, but some talk about 30 gigawatt annually in 2,030, others will talk about 25. Whatever the number is, it is quite a high compounded average growth rate. And I think whatever we see from trends, from announcements in countries and areas across the world. It seems we are all leaning both towards onshore, but definitely also now to have a much accelerated journey ahead in offshore. That, of course, is a strong one because we then have as a 42 one from our now fully integrated activities from the offshore, which we will work and we'll comment more on.
1 of the conditions to be an active player and a leading player in offshore comes, of course, on this slide. We know and we have talked about it. We said in 29 October that we were going to do an imminent announcement on the technology. So imminent means 10th February. So today, we have announced that we will introduce the VE 236 15 Megawatt turbine.
And for us, that also underlines both our commitment to return full to the offshore wind. It also reminds all our customers about our commitment and also well as an active player and partner in the coming offshore tenders and also how we build activities and the access to renewable offshore energy across the world. This turbine, of course, based on all our modular approaches, both from the onshore but also from the existing offshore. We know that because the technology has been very much driven and also the experience has come through several decades of our design. When we look at it, it is clear that we are going to take best advantage of that.
And not surprisingly in here. Some will say we have evaluated throughout this time what was most for us and the attractiveness of the various things. So this one, to avoid all the questions that otherwise will come, I'll just say upfront, It does include a gearbox and not a direct drive. So at least please take that question away when we come to the Q and A. I think also here, it is leaning into a technology now that, of course, We see that there is a higher technology, but there is also now things to be considered when you talk about the things that are 236, 15 Megawatts.
That also comes with weight. It has also how do we build it, how do we run it and how do we operate that. So wait becomes an important one for customers. We work closely with customers and certain partners on this. And I think right now, the best thing to say is that, that will go into the competitive landscape as of today and probably has been in there for a little bit of time with some of our closest customers to be discussed with that.
Just one little interesting thing. If we compare to our existing V174, 9.5 Megawatt, just the swept area of this new turbine is 84% higher. And so I just want to there illustrate that this is going to give a completely different calculation and also performance for the customers we're going to talk to in some of the tenders. This is also the place where I have to just extend a big thank you. Thank you to the technology and development team inside Vestas.
I'm pretty much aware of that we and investors, by announcing it 29 October, probably increased a little bit the pressure and performance expectations on how we can do the technology side of this. It hasn't been developed since 29 October, so it has been an ongoing one. But to everyone here today, congratulations with that. This is part of your day as well. So enjoy the day, and I'm sure we will have some of the very, very exciting discussions with customers going forward.
When that also means that was the introduction of a turbine and technology, Then I will also just here do a little bit of where are we with the integration of offshore. It is fair saying we have worked very, very focused and very concentrated since we got the final completion mid of December. We also know between mid of and basically end of January, we had to go through the tough part of the integration with us who are going to be on the teams when we come to 1st February. We did that. We did that diligently.
I think most new colleagues also appreciated that it had to be done. And therefore, it was easier to remove the uncertainty at the shortest possible time. We're focusing on the synergies, both the soft and also the hard ones. And therefore, we run a pretty strict and also disciplined integration program. And I think here now that program goes into normal operations, and we can't wait to get going with running the business as a normal business inside us as team investors.
Just to give you a little bit of steer of where do we then look towards 2025. It hasn't been I mean, this is what we also talked about that when we look at 2021 2022, we will run a backlog order from the offshore of around $2,000,000,000 to $2,500,000,000 in revenue both years. When we come to 2023 and 2024, it is the backlog That also reflects that we, for a period of time, especially in 2019 2020, had a less competitive technology. And as such, we also run with a lower revenue in those 2 years unless something else happens. That's the backlog that creates €1,000,000,000 to €2,000,000,000 in each of the years.
And then from 2025 and onwards, Previous slides taking into consideration that is where we established ourselves as one of the leading offshore OEM again. And of course, there, we are just giving a hint of where we expect to be as a minimum. When we then look at also the EBIT margin collecting on this. We are going to spend quite a lot of time in 2021 to get it up and running full as all the activities here. That is not done within 90 days.
And for somebody believing that you move 3,000 employees across just by announcing it, then it's not right. So therefore, we will work with 2021 and 2022. We will have an EBIT margin that is in the low single digit in those two years. And then in 2023 2024, it will be a business activity that runs around breakeven. But in beyond 2024, we to see the offshore activities being on average versus group margins.
We don't see any reason why it shouldn't be. We don't see any reason why it shouldn't return that when you do the technology and the capital investments into it. And I'm pretty sure also customers recognize that technology also has a price when we look in building the offshore wind parks going forward. When we look at CapEx, and don't forget CapEx TIER is not only technology. It is also the whole supply chain and manufacturing.
That also means when we look towards 2025, There is a technology investment and there is also the investment into how we localize part of this manufacturing and supply chain. That is too early to say for part of the manufacturing and supply team because as you would all appreciate, some of these things depends on where you build your backlog and how it all going to be delivered in certain parts of the world. There will be a localization, and we just don't say specifically on where that is. But from a CapEx point of view, we estimate that there will be an average around €250,000,000 in CapEx annually in this period up to 2025. We said it all along.
It requires some investments here in the short term to become that leading player in the long term. But for sure, from a strategy and the long term ambitions here, we wouldn't be without it. That goes without saying. That also then leads us to a look at what are our long term financial ambitions when we look towards the combined of the onshore, offshore and of course, the service. So when we look at onshore, we still see stable pricing to continue.
We see that We're now in a global scalability where new countries can come in and we will also scale existing countries to the same. We have a rollout of new technology combined with existing known technology, and we build more and more on the modular approach into the technology platforms we run. So we still see offshore wind being very much in favor. In many countries around the world. There's plenty of both land and room for it.
And as you saw from my previous slides, when only 1% of the energy generation comes from wind. I think there is still a lot to come also on the onshore and also towards the Power2X. When we look at service, it is definitely growth and investments also into how we can scale that to even higher what we have seen so far. It grows faster than the market and we expect it to keep growing faster than the market. We are investing in it to support both the digitization and also the scale.
But I mean, we also do that to drive out efficiencies both on our own behalf but also on behalf of the customers. So this will be still a competitive edge. And we expect to have best in class margins of around 25% in the coming years. And of course, offshore coming in, not having the scale yet, There we will see that it has initially a dilutive effect in the service, but we work, of course, diligently with both building the scale and also sharing the best practices. When it comes to offshore, as we just talked about, we are about now leveraging the scale from the Vestas Onshore Global, both sales, commercial, customer, but also the supply chain footprint.
So I think one of the imminent advantages here is we can now talk across everyone on exactly the same things with one voice. And that, of course, gives an advantage into the offshore supply chain and also across any other functions at Vestas. We also launched today the V236. And I'm sure that will get a fairly attraction today. And I'm sure we are ready to start talking about that, and we won't hold back on taking orders in that when we also look towards 2024 2025.
It is an area where investments are required. I don't think we have said anything else in the last year or 2, but we also said that the technology was out of the range of what was available elsewhere. And I think we are investing in that. And we'll keep investing in that because as you saw, it goes from 5, 6 gigawatt a year currently to probably 30 gigawatt a year when we look towards 2030. So this is the attractiveness of offshore.
Therefore, that leads us to review our long term financial ambitions. And yes, it is a happy disjavry for many of you. We are the market leader, and we want to be remain the market leader in revenue. That means we grow faster than the market generally. We have a free cash flow every year.
We work diligently with it. In years where we build up, we might use some of that free cash flow, but we also put it to you and we share how we do that with you. The return on capital employed is minimum 20%. That is how it should be in our business. We believe that.
We also have the handles and also the tools to get to that. And then that also results in that we, in the long term, will have a best in class EBIT margin of minimum 10%. We have looked at that, and we have also discussed that and we are not in doubt that we also stick to the 10% EBIT margin because there are all reasons to see that we can get to the 10% for what we can do as Avestis as a consolidated business with the 3 areas here plus the development activities we have done recently. So with that, I would just like to take the last slide before we go to Q and A, and that's the outlook for 2021. So the outlook for 2021, revenue is between €16,000,000,000 to €17,000,000,000 Service is expected to grow by approximately 15%.
Don't forget here, of course, that includes now both on and offshore activities consolidated for the 1st full year. We expect to have an EBIT before special items of 6% to 8%. The service margin is expected to be approximately 24%, all consolidated both on and offshore. And we expect to have a total investment in the year of approximately €1,000,000,000 And that, of course, includes both the on and offshore. We also here say that the warranty provision are expected to be at a level around 3% in the coming year, including both the on and offshore.
The special items are expected to amount to approximate $100,000,000 We don't have anything specifically under that yet, but it is clear to us that when we integrate the business and we scale it globally, there will be a review of how we have the manufacturing footprint across our globe, to also support the growth aspirations and not least also the profit aspirations we have going forward. And last but not least, we have to mention here, the COVID is out here and it's probably worse than it has been ever in terms of lockdown. So we just have to also say here the guidance comes with at least a degree of more uncertainty than it normally would do under the circumstances considering where we are in the cycle. With that, I just want to again thank you again for the support throughout 2020. And as said here, we are full into 2021.
So with that, over to the Q and A.
Ladies and gentlemen, Our first question comes from the line of Christian Johansen of Danske Bank. Please go ahead.
Yes. Thank you. So my first question is around the margin guidance. So looking at your 20 20 margin and adjusting for that extraordinary one, obviously, it was a little more than 6%. So at the lower end, you're guiding for an unchanged margin and Roughly 2% improvement in the upper end.
Can you just elaborate a bit on the key components in the market bridge in 2020 through your guidance in both The lower and upper end, so what headwinds and tailwinds are you including in your forecast? My second question is regarding your Slide 29 and primarily a clarification question. So these numbers and guidance you provide here is that both service and turbines within offshore or is it only the turbine segment? And secondly, the revenue guidance for 2023 to 2024, did you say that is already covered Are your current backlogs of these EUR 1,000,000,000 to EUR 2,000,000,000 in revenue? Thank you.
Okay. Thank you, Christian. So if I start With the margin guidance, the 6% to 8%. I think it's pretty clear What Henrik said at the end of his presentation going through the overall guidance for the company is that the COVID-nineteen, call it, situation or pandemic or headwind is continuing. And if I look at Q4 of last year, it was, if anything, increasing the pressure.
And it for sure hasn't loosened the grip. And that's why we have a guidance of 6% to 8%. And obviously, no one knows how that will pan out, but that is clearly one of the bottlenecks that we see for next year. Then we also see an increasing cost They're both for steel as well as transportation. Having said that, I would say on the steel side, we have been Pretty good, if not okay ish, to secure a lot of the volume for 2021, but it could Still be a headwind for us.
And transportation and the lack of containers, for sure, when it comes to the inbound and Capabilities can definitely hit us. Then obviously also the integration of offshore will have Slightly dilutive effect on the margins in 2021.
Yes. Thanks, Marika. And on the Slide 29, it does include all activities as the offshore coming in. So that's the indication here, Kristian. And secondly, the €1,000,000,000 to €2,000,000,000 are covered by the existing backlog.
So my comment is, as Mats says, The longer you come out to 2024, you still have some of the opening and other discussions going on. So if something changes here, not from a negative point, but probably more from a positive point, there can be adjustments in there. Then some of it might have and an effect there. But that's the assumption we work with and that's the backlog we have. And on your nice question about tailwinds, I still think I have a few tailwinds to find since I joined the 1st August 2019, but There's just a point here to make.
I don't think we find a lot of the tailwinds right now because it is what it is.
But on that, so to get to the 8%, because you primarily mentioned headwinds. So what is it that You see could increase the margin substantially.
The 4th quarter has been a good quarter. And our own means and execution and the handles we have Working diligently towards another level of the margin. So we don't do anything that here sets us to lower the margins at all, Kristian. So it's our own means and our own discipline and our own execution that does that. And therefore, we also have put quite a lot of effort on the stable market conditions and the relationship we have with customers.
But we have a couple of things. And one of the things is we have to address our quality issues internally.
But I think, Christian, not to dwell on your question. But one thing that is important to say is really what Henrik has mentioned, If you look at the underlying run rate for Q4, I would also point to the fact unless we had a lot of improvement effects in Q4. And that is primarily taken were in It's primarily taken place in Q4. So obviously, if that works as anticipated, that will definitely give us A better opportunity to get into the higher range.
Understood. Thank you so much.
Thank you.
Our next question Comes from the line of Gael De Bruy of Deutsche Bank. Please go ahead.
Thanks very much. Good morning, everybody. I have two questions, please. The first one is about the characteristics of this new 15 megawatt offshore machine. So you said it's not a direct drive turbine.
So how do you judge the serviceability of this Turbine, the maintenance cost of this turbine versus orders in the market. And also what sort of market share do you Expect to grab now and that's and what kind of market share is actually embedded in the off Sure. Revenue guidance of CHF 3,000,000,000 for 2025. The second question is on the long term 10% margin target you have. So what are basically the steps needed to get to this 10% mark?
What do you see changing going forward in terms of supply chain, pricing, mix or other things that will help you get to this 10% print. Thank you.
Okay. I think, first of all, Gael, thank you for your questions. I think on the offshore here, when you launch a new technology like this. A very important part of designing and launching the technology is, of course, We look heavily on how we can maintain and service the turbine. That goes without saying, why is that?
Because it leans straight between the two activities of putting the solution in place and servicing. So it has been considered. It has also been considered what are the split between the initial investment and what are the split into also the ongoing OpEx to the solution. There we have been close to a number of the customers. And here we talk from both the legacy of now more than 4 decades and a number of decades having it both on and offshore.
So I think we are confident in the choice we have taken here. But having said that before, we did consider all available alternatives here and has ended in this one. And that has other advantages compared to where we are. So we are confident that's the right thing and that's the technology we are backing. In terms of your 10% EBIT, I will say here, when we look at that, we are fairly confident of that we have the available tools and also handles to get to the 10% EBIT target we have, not only as a 1 a year, but actually as on a more sustainable part.
But it is also when sort of when we look at that, We have to just say what we did a year ago, we scaled to a new level of activities. That level of activities, you can probably also see confirmed and evidenced a little bit with the order intake in 2020. It is a level of activity that is now going to be sustained because we're scaling towards. And don't forget when you then talk about a year where we just we didn't come out of 2020 Now everything is settled down. We grew 59% in deliveries in 2020 compared to 2018.
And we are 46% higher in turnover. I will just sort of say it takes a little bit of time to settling in a new area. And at the same time, we are just integrating 3,000 new employees and colleagues into the offshore. So I think we got the handles, and we can see that. But as you will appreciate, it doesn't happen within a quarter as such.
Thank you. And what about the market share that you implicitly assumed in the €3,000,000,000 revenue guidance for offshore?
That is probably something I will keep together with my customers. So I think here there is a little plus ahead of it. So we just say We'll go for a minimum SEK 3,000,000,000 and then we will see how much when we get closer both in 2021 2022 of how that pans out in terms of pipeline. But right now, it doesn't seem to be the lack of new coming projects and tender interest for it.
Okay. Thank you very much.
Our next question comes from the line of Claus Almer of Nordea. Please go ahead.
You can ask a few questions from our side. The first question goes to the loss production factor. You also mentioned this in or was Maria in the presentation, but it has been increasing for quite a while now. Is the increase only due to the reported quality issue? So if you strip that out, you are back to the 2% level?
That will be the first question. Yes.
Claus, that is a correct assumption.
And this extra provision in Q4, is that Only, only, but that is linked to these 150 turbines where you had some issues from a sub supplier?
Yes, that's correct.
It's not additional turbines. It's the same 150 turbines.
It's the 150. And obviously, it costs something to close it down. And we are addressing those turbines in the first half of this year.
Okay. And then the second question goes to the 2021 guidance. If we try to do the interested revenue guidance for the Onshore division, then it might be slightly disappointing compared to consensus. How should we think about in and out orders in 2021?
I think we have given guidance here. If it's slightly concerning, I'm of course, I can't help you that in so much. We are very transparent in the order and in how we look at it. We are well covered. There are still some infouts to be done in 2021.
But as we would say here, with the range of 2016 to 2017. It's also a fairly good indication of that we feel comfortable of the backlog we're executing on. And also when walking into that year, Claus, We see that as a pretty positive one. And then as you have seen, you've gotten an indication of where offshore comes in. And I think that's I think mainly confirming what we also have said all along that it's the new level of activities we are aiming for.
Okay. And then regarding the Service margin, once again, you are guiding a, let's just say, low EBIT margin For the Service division at year start, then the year performs and then we are all positive surprised. The 24% in 2021, Is that diluted by the offshore business? Or is it the normal, let's just call it, cautious when the year starts?
I won't comment on a degree of cautionness, but I think you have a very successful team of service and a team service in here. And it's just it includes both. And as we said on the slide as well on Slide 29, the service activities in offshore comes in with a dilutive effect from the beginning because they don't have the scale yet.
In the Service division also?
Exactly. I mean that's why it's a consolidated 24% as said in the guidance slide.
Okay. Thanks. Thank you.
Our next question comes from the line of Supriya Subramanian of UBS. Please go ahead.
Yes. Hi, good morning. Thank you for taking my questions. I have one question just specifically on the warranty provisions Again, just to clarify, in the Q4, you booked around €194,000,000 of provisioning. Would it be fair to assume that the normalized rate would have been 3% so the additional around 1.5 And also Given that your guidance just continued sort of 3% into 2021 as well, does that mean that all of the provisions relating to this latest funding issue has been Has already been provided for.
That's part 1. And second is more around the onshore market outlook. And if you could just share your thoughts on what could be the potential opportunities coming up from recovering, especially in the European and U. S. Markets over the next few years.
Thank you.
Okay, So, Priya, if I start with the warranty provision and you are right in your assumptions that it's related to the inserts on the blades primarily here in Q4. And that also means that we have taken Height for the cost of addressing the 150 turbines. And as I said, that will be dealt with here in the first half of twenty twenty one.
Good. And if I to prior, if I take your question on onshore, It has been clear for us when we look at it. And I think also when you look at the both the order intake and also deliveries. We have had deliveries in close to 40 countries on the onshore side. We have taken orders in 30 countries plus in the past year.
And I think Even in that list of countries, we see new countries coming in. We see a general trend of existing countries still doing pretty well. And I think what you just probably saw in the U. S. Is that you also saw the U.
S. Now not going away. I mean, it's one of the points we have discussed and said all along in the last couple of years that we believe that it will be a lower level of activities at a point with the PTC being phased out from 100%. But still, it's also now an indication of that there will happen things both on and offshore going forward. When we then look into the EU, it's obvious for all of us that announcing an EU green deal with a lot of financing and a very positive framework for renewable energy transition.
It now comes down to what are the individual countries going to do under that framework. And even in the EU, you have seen countries suddenly emerging again. You have seen Poland going both on offshore. You have seen Spain going onshore. And in that, I think it's fair fairly obvious that we haven't really seen a movement from, for instance, a known country like Germany, and how they are going to move.
But I'm pretty sure that's also one of the things we can do. And the 2 of it is, In the order intake, we had north of 17 gigawatt in 2020. There isn't particularly any volume from, for instance, Germany and and India in there. So India is another country which we have talked about for a long time. And I'm sure we will keep talking for a long time as well, but hopefully more positively also to see that some of the projects are actually getting a higher traction.
So I think right now, it's fair saying if you look at the various continents. We haven't found a continent that is actually talking about going backwards, not and neither in onshore as well, and we are well positioned from the supply chain. So as we said here, still positive for continuing the order intake. And I think, again, 2020 has been a good year as an evidence to say that the onshore continues both with and, to some extent, with a less degree of U. S.
Great. Thank you very much.
Our next question Comes from the line of Dan Togo of Carnegie. Please go ahead.
Yes, thank you. Just A few questions here on the offshore side, and much appreciated with the slide where you give some indication of how you see this developed in the coming years. Do you in the activity here get any or include any projects That still has preferred supply status or is it all firm orders? That is the one question. And the other question I have is Where you have your margin for offshore to be on par with group average in 2025.
That would indicate That offshore margin is above on offshore margin is above onshore. Can you give some flavor on why that should be?
I'll just here say we work with a confirmed backlog, Dan. So of course, the numbers we are giving here with the ranges we are having is the backlog we're executing on of confirmed order. In terms of your interpretation of what says average Vestas Group margin implying that you think offshore should be well above. That is not what it says. It says average Vestas Group margin.
So can I say to the last decimal that, that will be the same? No, but it will be part of it and there will be around the average of the Vestas Group margin. So if we were in the guidance territory as we are today, that means it would have been between 6% to 8%. And at that point in time, if we are at 10% then it will probably be around 10%. We don't aim to build a business unit that sits with different margins to what we have in the existing Vestas business.
Okay. So I understand it. But when you say average Group margin, you include service here, right?
Sure. And then we will also say here, when you look at that, we as you can see, up until 2020 for it could have or will have a dilutive effect. And that's just what we are saying from 2025 and onwards. It's not necessarily a dilutive effect. It's an average effect, which is positive.
Okay. Thank you.
Our next question comes from the line of Akash Gupta of JPMorgan, please go ahead.
Yes. Hi, good morning, Henrik in America. And maybe just starting with Because on Slide 7, you show offshore equipment backlog at $4,000,000,000 service backlog at $3,400,000,000 So that would give me And SEK 7,400,000,000 is pound backlog for offshore. And your revenue guidance for 2021, 2022, 2023, 2024 would imply a range of €6,000,000,000 to €9,000,000,000 So just to double check, this €6,000,000,000 to €9,000,000,000 is all coming from PAM? Or does that include some of these preferred supply agreements that you have in place.
Yes, it does. And therefore, it's both implied the turbine and the service as well.
Thank you. And then I have 2 as well. My first one is on impact of COVID-nineteen on project development activity of your customers in the course of 2020 and also in early 2021, given all sort of travel restrictions we had. So maybe if you can highlight, Has there been any headwind on project development activity of your customers? And could that be something we should watch out for 2021 orders?
I don't think you can say that as a general trend. I hope you also take a bit of to the sentiment and evidence away from the presentation here because if we look at the second half of the year under answers. The truth of it is when you and I probably came back from a well deserved summer vacation, the activity level for us picked up. But actually the COVID lockdown increased and restrictions increased. And I think when we came into Q4, There were more restrictions than we have probably had the whole year.
And there I'm just there we just say, from an individual project and an individual tight and in the video country perspective, we are just diligently there. I think we are very pleased and very positive over that we are able to have that and we don't leave a natural big backlog that we didn't get executed. But Some of the projects that then didn't get executed in 2020, of course, they will roll into 2021. And those are probably some of the ones that are more difficult to execute on either for accessibility point of view or have had some transport and logistic challenges. So those we are executing on, which also therefore It's a good indication of when you look at the phasing of 2021, we will start with having low activity, but also probably some of the, I will sort of say, challenges into the Q1.
So please don't do what we had a tense discussion around last year that all four quarters will be the same in EBIT because it won't. It will start low and then it will ramp in to a better phasing for the remaining quarters.
Thank you. And my second question is on project development.
Yes. Yes, go on.
And second question is on project development where I was expecting more update, but maybe if you can add. I mean, in the recent years, we have seen development space becoming A bit more crowded with not just utilities, but also oil companies that are also entering in development market. And if I may ask, What are your plans with this dedicated development unit and also taking in one of your customers? And where are the red lines so you don't end up with competing with Thank you.
I think in terms of development, what we are just saying here, we are continuing doing the same. And I think the last Quarter has been very positively with the customer conversation that we develop projects. We develop some of the early stages projects. We help customers generally have access to projects around the world. We see that as a facilitation of moving more renewable projects into countries and also territories where it would otherwise be difficult.
And of course, we are present in more than 80 countries. We are one of the ones that have most local people working. So therefore, as a customer to Vestas, we work diligently with our customers to develop some of those projects. And some of them will have both 3 4 years lead time. We are doing that, but we are also fully aware, as you've seen, we don't have it on our balance sheet.
And therefore, we trade the and develop the projects with customers. And then we sell them to customers, of course, with a technology the right technology agreement on those projects. CIP doesn't change that. But of course, it also leans towards that, of course, if there are areas and there are projects coming up, Then of course, we can do that. But that will have a normal decision making in Copenhagen Infrastructure Partners.
So they will decide if it's attractive to them for the individual projects. And similarly, it's also for us to make an individual decision. There isn't exclusivity on the technology from their side and neither do we have an exclusivity on the project side with CIP. Having said that, We think it's a good partnership, and we will also lean towards that in various parts of the world. But it comes as increasing the activities.
Then I will just say you sort of say like would we compete with our customers. No, I don't think so. But it is also fair saying should this Should we really succeed in doing the transition from all of the fossil energy towards the renewable, then we also rely heavily on that we can all take a more active part. And some of our customers do part of the activities we do today. Do we consider them for that reason a competitor.
No, we are still active members and partners in that transition that is happening right now.
Our next question comes from the line of Martin Wilkie of Citi. Please go ahead.
Yes. It's Martin from Citi. Just a couple of questions. The first one on onshore, just to come back to The pricing and the steel cost and transportation and so forth. And, Monika, you mentioned that you've been pretty good at steel supply agreements and so forth.
Is it fair to say, given the stability Pricing that we saw in Q4, the gross margins in the backlog for onshore have been protected by the pricing plus the Steel supply costs, that was the first question. And the second question, we're just coming back to the offshore business. You've given some timing on the prototype and then the production. Obviously, this year, there's a lot of projects being awarded. We're seeing some capacity rights being awarded in the U.
S. With the U. K. Around 4 later this year. Just to clarify, is your new 15 megawatt, is that able to be included in new projects that are seeing the initial capacity You are being awarded this year.
Just to give some sort of sense as to when the turbine can be involved in those tenders. Thank you.
Okay, Martin. If I start with the onshore pricing, yes, of course, the stable pricing is an enabler. But I would also say that when I'm referring to some of the activities to further improve on the execution side, That is what you see in Q4. And obviously, that has a positive impact on the margin because of the main Sort of discrepancy you see is that if you have deviations from the pre- and post calc. So it is really a lot of activities to further strengthening our execution Preciseness, if you can call it that, with the high activity level that you see here in 2020.
Yes. And I think in terms of including in tenders, Martin, we'll work closely with customers on tender for tender and also the conditions around that. We have a time line put forward. And I think for most customers and the tenders, It is about choosing both the partner and the technology for doing that and to some extent also how you can support the localization of supply chain for winning some of those tenders. But we are cautiously optimistic about that we will take advantage of that in most of the tenders coming up if we can find the right consortium partners to work with.
Great. Thank you very much.
Thank you.
Our next question comes from the line of Sean McLoughlin of HSBC. Please go ahead.
Thank you, and good morning. Firstly, on SG and A. Marieke, if I understood correctly, you said that COVID has actually helped Decrease overall SG and A costs and what we've obviously seen that for many companies. What is your view on this coming back Through 2021 as, let's say, things normalize. And I suppose a broader question on, are there any practices that have effectively changed as a result of COVID, I.
E, more digital, more remote that may actually structurally Contribute to improved costs going forward. My second question is on offshore. Just wondering, given the size of the rotor of this machine, what is the scope for a rating upgrade from An initial 15 megawatts.
Thank you.
Okay. If I start with the SG and A, Sean, I would say that The level we are hovering around 5.3%. If anything, it's extremely low. Absolute numbers, a slight increase. Yes.
We have had some travel impact overall. But also remember that we haven't had any aid On the SG and A side in terms of paying our employees. So we have been doing this with our own effort. I think it's I mean more digital or not I think that is hard to say. It's going to be a big speculation.
Will there be more flexibility going forward? Yes, potentially. But I think it's very hard to see how that will pan out going forward. But I think the combination of COVID is obviously I think the positives in terms of Less spend is eating by more cost on the COVID. So I don't think you can say that you say we're probably mitigating some of the headwinds with the lower spend on in particular traveling.
Yes. And just to give you a good example of that, I had a CEO of one of our customers just 2 days ago and sitting there with him and having that, we probably said we wouldn't have done that if we didn't coming to the digital world as most of our kids have come. So therefore, we actually spend that without traveling to each other. And then on the offshore, it's fair saying, before we start talking about where is it going and what is going, take a note of the especially emphasis on modernization because, of course, that is part of how we will work with this going forward. But I think it is also fair in here with having both 12, 13, 14 and now 15 megawatt out there.
It is also about taking a proper technology in so that we have time to work with the technology with customers and also work with that throughout a full cycle of projects. So this is going to be the interesting one. And then, of course, we now work closely with customers about the rating of the turbine, both today and also in the future.
Thank you.
Our next question comes from the line of Katie Self of Morgan Stanley. Please go ahead.
Hi, good morning. Just one question and then one quick clarification. On offshore, I was wondering if you could just discuss with us how you consider the pricing dynamics in that industry. Obviously, just kind of less mature than the onshore, and you gave a helpful slide on Levelized cost of energy. So just how we should see that going forward?
Should we think about similar annual decline to the pre auction onshore markets around that 2% to 3% per year? And then my second question was just a quick one on the special item, the €100,000,000 related to the offshore integration. Is that cash or noncash? How should we
think about that? Thanks. Okay.
Do you want to go on the cash first, Marika? Yes.
So the
EUR 100,000,000 that we are referring to is So obviously people, but it's also the industrial platform. So it will be a Cash and also to a certain extent on cash. But it will be a mix of the 2.
And I think on the pricing side, we see this as a general trend. The level as cost of energy is going down. We have also seen that. And you can also see some of the technology advancement here. We'll, of course, add to that.
You can probably work with an annualized average, of course, but then you will also see that if we go from one technology with having now different technologies available both on the offshore and nearshore, then I think you will see that There are clearly advancements that comes outside at 1% to 3% on an annual basis when you introduce something like this. So we expect to see some of that. And the positive really here is that it has truly become competitive against most of the other things. And then don't forget, offshore, You can work with different parameters than you can, of course, onshore where you have to take other permitting issues up.
Great. Thank you.
Our next question comes from the line of Ben Heelan of Bank of America. So firstly, on offshore margin, there seems to be quite a hockey stick from 2023, 2024 into 2025. Could you Maybe flesh that out a little bit, talk about what's the key driving force behind that. And secondly, on warranty, we're at 3%, but how should we think about the time line of moving from 3% back down into that 2% range? And then thirdly, on The time line for your long term target of 10% margins for the group, how should we think about that?
Is that 2025 target when offshore margins start to improve. Any color around that would be great. Thank you.
Okay. If I start with the warranty provision because that's probably the shorter one. I would say we start now with 20 21% and there we are at the 3%. Obviously, as you have seen during the last few years, we've been In between 1.5% and 3%. So when it's time to get down to a different level, We will, of course, inform the market.
But for now, we're happy with the 3%.
And then I think here, Ben, if we look at the offshore margins, I think it's fair saying we talked about that when we announced that in end of October, and we spoke more about it later in Q4 as well, and we will hear you will also have an insight on that. If the business operates at an activity level less scale, then it will operate with challenging margins. So What you see here between now and 2024 is basically building the scalability and therefore also getting the synergies right between what is the current platform of Vestas and also the other business. That very much connects to what is in the making with the technology introduction as well. So technology, the whole supply chain connected with it and then it is building a higher activity level.
I think we used the expression we now can see if you try to run a company as a midsized in a business that becomes with global requirements from customers, then you will have a margin dilution and you will potentially end up with a margin that it's close to the breakeven as we're indicating here. That was also one of the strategic reasons why we did what we did. In terms of your 10% question around 2025. You shouldn't read into that it's a 2025 thing because if you do that calculation. Math works both with and against you.
But the dilutive effect of an offshore is not that material to that extent. So this is very much our own internal handles and others. And then probably, as I mentioned before, not always having 1 or 2 headwinds coming towards us. So if 1 or 2 tailwinds also come one day, Then it might come a bit earlier than we otherwise planned. But then I will much talk about the midterm again.
So that means we are leaning towards something earlier than 2025.
Okay, great. Thank you. Our next question comes from the line of Rajesh Singhla of Societe Generale. Please go ahead.
Yes, hi. Thanks for taking my question. On the Slide 13, you have mentioned that your gross margin was impacted by 0.5 percentage points due to higher warranty provisions and COVID-nineteen related challenges. So can you provide us a breakup of between like how much of the warranty provisions during the Q4 How much were the COVID-nineteen related challenges? And if I look at your commentary, then you have been saying that the COVID-nineteen Related challenges still ongoing, whereas if you look at the overall market environment, we expect the COVID-nineteen related challenges to ease out in 2021.
And probably we are behind the worst is behind us. So what makes you a bit more cautious on that front? I would like to ask a couple of more questions after this.
Okay. If I start with why we think that the COVID-nineteen limitations will have an impact here in 2021 as well. I have a very hard time seeing the ease up, if anything. But because if I compare with Q4, Where we certainly saw a step up in COVID-nineteen related challenges. And I would say that from a cost perspective, we have been pretty prudent in not allowing COVID-nineteen to be an obstacle for us delivering.
But It's clear that it's coming more and more lockdowns. It's more and more challenging to travel in between countries. I think all of us have experienced that. So for sure, if I look at the overall guidance that We'll have an impact depending on how it pans out throughout 2021. And in Q4, we're talking about A EUR 40,000,000 impact from the COVID-nineteen.
And yes, and then the warranty provision is In around zebra, the figure is around €60,000,000 on top of what you normally see in Q4. So relating to the inserts that we have been discussing.
Sure. And so with respect to the your warranty issues, what you have been facing in some of the turbines, so are these like design related challenges, which you Because I believe you have 100 percent of your blades outsourced to subcontractors. So are these design related challenges which you could not share or Pass on to your subcontractors. And what gives you the confidence that these issues will not occur in the future? Because this is the second time we had issues With the turbine blades in 2020.
Yes. First of all, I have to correct you. We don't have our blades totally outsourced. So therefore, there is partners that works with us and we have fairly much of that also as part of the inside value chain of both design and manufacturing at Vestas as well. So I think there's a little bit adjustment required there.
And I say here, listen, come on, it's painful. It's painful for any one of our history and legacy to sit here and have to related warranty and quality issues in 1 year. But it is 2 disconnected items. 1 was we talked about to midyear 2020. And the specific one here in Q4 is a specific route related thing and a component into the routing of the blades.
And of course, there it's a component failure, which we just have to address and we're addressing that. We have stopped the turbines. We will do the replacement and repair both of the component and also on the blades in H1 of 2021. So I just ask you there to work with the facts on this one.
Sure, sure. Maybe one more question on your new offshore turbine. So
if you
look at the historical trend, we have seen that the direct drive technology has been gaining traction and market share from the gearbox based offshore turbine. So what gives you confidence that you would be able to gain good market share in the offshore market with Gearbox based turbine.
I think probably we work with closely with the same customers for now more than 4 decades. So I think We don't come out with something that customers probably see as a surprise from our side. So let's work with that one. And that one, I would probably, as an answer, refer and reserve a little bit the conversations with our customers, and then we'll talk about those results and also hopefully the partnership of that coming in the coming quarters, Andreas. I'm fully aware of that this market has only a few players.
So we have chosen this one. We think there are very good reasons for doing that. And also some of the weight balances And also the construction of offshore is very fairly much supported by eitheror. So So we got good technology support for taking that choice. And then maybe I could now just ask for the last question.
Our last question comes from the line of Henry Tarr from Berenberg. Please go ahead.
Hi there, and thanks for taking my question. I think the majority of my questions have now But I will just ask one quick one. Just on the sustainability slides that you included And the circularity part of that slide. Just what's What you're doing at this point in order to try and help on the blade recycling angle, which we sometimes get asked By clients, yes. How is the outlook for blade recycling as we look forward?
As I said here, it's one of those things, Henri, and thanks for that and and also raising it from a sustainability point of view. It's the one where you I don't have the answer to say this is exactly the technology that will sort exactly that point. We are working diligently with it because you can either go can it be used to something else or can it go into concrete or can it go into some of these things. And that we are working with a number of different projects. There is now in Q4, you saw probably that there's now launched a project which has industry wide participants both from a customer and also from other OEMs.
So we will invest in those projects and we will invest in those technologies, rest assured that it will be sold. I'm not so nervous. But of course, it always makes you a bit nervous when you put up a goal for something that is longer out. And we said that all along, we were not sure we could do that in 2030. And therefore, there is the difference between having a carbon neutrality from Vestas' own operations in 2030 and then finding the full recyclability of the turbine.
Having said that, besides that, it's a lot more else than also just the blade. So also the offshore, we look also and how are we using in this, what are we and how are we using less of the precious metals and components in there so we also can have that as a comparison in the discussion with our customers. So everything that can be done to talk also the sustainability throughout the full supply chain is being done.
Thank you very much, Henrik.
Thank you. And with that, last question. So thank you so much for that, and we look forward to speak. And see you again in the virtual room over the coming days weeks. Thank you so much.
Thank you. Bye.