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Short U.S tax break extension poses problems for Vestas
December 17, 2014 / 2:46 PM / 3 years ago

Short U.S tax break extension poses problems for Vestas

COPENHAGEN, Dec 17 (Reuters) - Danish turbine maker Vestas welcomed an extension of a U.S. tax break on wind production that is crucial for the industry but said the fact that it only lasts until the end of the year gave the company little time to fulfil orders.

The U.S. Senate late on Tuesday renewed the production tax credit (PTC), one of dozens of temporary tax breaks known as “extenders”, most of which expired at the end of 2013.

While this meant the tax break would apply retroactively for all of 2014, the uncertainty in the months before the Senate approval had caused power producers to delay turbine purchases. The extension also offered no guarantee that the PTC would be renewed to cover 2015.

Michael Zarin, head of external communications at Vestas, the world’s biggest turbine maker, said on Wednesday that the company welcomed the extension.

“However, the business reality is this only provides a two-week long window to receive and execute orders,” he said. “This is challenging for our customers, our U.S. manufacturing facilities, and dedicated employees.”

Turbine makers General Electric, Siemens, Gamesa and Suzlon are also active in the United States, home to almost 20 percent of the world’s installed turbines.

The uncertainty about the U.S. tax break has helped push down Vestas’ share price, which has fallen more than 30 percent since a peak in June. The United States accounts for around a fifth of Vestas’s revenue.

Analyst Jacob Pedersen from Sydbank said in a note to clients that the short extension would not mean much for Vestas’s activity in the United States.

He said that the PTC could be extended further but that it would have to be early in 2015 in order to avoid a significant downturn in the U.S. turbine market in 2016.

Zarin said Vestas remained optimistic that U.S. lawmakers would ultimately provide a more predictable and long-term policy mechanism to drive continued investment in clean energy.

The company’s shares were down 1 percent at 1434 GMT on Wednesday, underperforming a 1.1 percent rise in the Danish benchmark OMXC20CAP index. (Reporting by Teis Jensen; Editing by Pravin Char)

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