February 8, 2017 / 9:43 AM / 6 months ago

UPDATE 2-After record year, Vestas sees softer 2017 market

4 Min Read

* Vestas says revenue could decline this year

* Market seen moving into more mature phase

* Merger challenges position as market leader (Adds CEO comments)

By Jacob Gronholt-Pedersen

COPENHAGEN, Feb 8 (Reuters) - Wind turbine maker Vestas warned on Wednesday that rapid growth in demand in the industry could be coming to an end after the market leader enjoyed a strong end to last year.

Vestas posted record revenue and order intake for 2016 as the Danish company extended its global reach and saw rising demand in the key U.S. market.

Vestas and its rivals have been benefiting from a new focus on renewables, encouraged by the Paris Agreement on climate change in Dec. 2015 and a five-year extension of a U.S. Production Tax Credit, a key driver for that market.

But the company said softer demand for wind turbines means revenue could fall this year to between 9.25 billion euros and 10.25 billion from 2016's record level of 10.24 billion. ($10.9 billion).

"We see a potential softening in the overall market in 2017," Chief Executive Anders Runevad told Reuters.

"We see signs of increased maturity of the wind market. From a very strong growth, we now see more stable high volumes."

Installations in China fell in 2016 because of changes to the subsidy regime, Vestas said, while business in the United States had been boosted by developers seeking to maximise tax credits for new projects.

Vestas said its board would recommend a dividend of 9.71 Danish crowns per share, compared with 6.82 crowns last year. It also plans a share-buy back programme of up to 705 million Danish crowns ($101 million).

The measures helped to push Vestas shares 1.75 percent higher by 1210 GMT.

Increased Competition

Vestas is set to lose its status as the world's biggest wind turbine maker as Germany's Siemens and Spain's Gamesa have agreed to combine their assets in the sector.

Vestas' share price also came under pressure after it warned in November of a slowdown in the U.S. market in 2017, coupled with the election win by Donald Trump, who had expressed support for conventional fossil fuels.

Runevad said he had no indications that support for the production tax credit had weakened under the new administration. The five-year extension of the tax credit would likely mean that wind project developers will be in less of a rush to buy turbines in 2017, but that activity will pick up towards 2020, he said.

"In the U.S., we're in the first year of a four-year cycle. So if you look at the U.S. in the four year period, it's a very good and stable market, more positive than we've ever seen before," he said.

The wind industry tax credit was the largest for projects that broke ground in 2016. Vestas, General Electric and Siemens account for more than three quarters of the U.S. turbine market.

"Overall in the United States there are still quite a lot of unknowns," Runevad said on a conference call. "How (the U.S. market) will pan out over the years is still very hard to predict."

Operating profit before special items rose 25 percent in the fourth quarter from a year earlier to 504 million euros, bang in line with the figure forecast in a Reuters poll of analysts. ($1 = 6.9832 Danish crowns) ($1 = 0.9393 euros) (Reporting by Jacob Gronholt-Pedersen; Editing by Keith Weir)

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