Is now the right time for Vestas to change its CEO?

“Vestas and the industry have entered a new phase and I believe this is the right time for me to step down.” With these words, Anders Runevad last week announced his decision to leave as chief executive of the world’s leading wind turbine maker, which he joined in 2013.

He is set to be replaced by Henrik Andersen, CEO of coatings supplier Hempel, on 1st August. Runevad is remaining as an adviser to Vestas and chairman of offshore wind joint venture MHI Vestas until mid-2020, to help with the leadership transition.

But why now? And what is this ‘new phase’ that Runevad has alluded to?

Well, on the face of it there is an obvious answer to the first question. Runevad is due to turn 60 in 2020, and has indicated that he wants more control of his spare time. No harm in that. May as well move on when he and the firm appear healthy.

The company is certainly in a stronger state that when Runevad took over six years ago. After being close to bankruptcy in 2012, Runevad led a restructuring process at the company that included redundancies of more than 5,000 employees. This work, though painful, has enabled the company to deliver a profit each year since 2014.

Soon after that process ended we asked the question about whether Runevad and his management team were best-placed to lead the company after the turnaround plan. They achieved great things, no doubt there, but it’s fair to say Runevad looks like a conservative figure, especially in the media. We wondered if Vestas would be dynamic enough to secure big growth.

It’s fair to say they proved us wrong. The restructuring meant that Vestas has been able to unlock exceptional growth over the last five years, in both Europe and North America, and has become the world’s busiest turbine supplier. It supplied 20% of the 50.6GW turbines installed in 2018, according to the Global Wind Energy Council.

But, in our view, the decision to move on now lies in the idea of restructuring. Vestas isn’t in the dire straits as in 2013, but it has big challenges to deal with including the move into new areas including solar, storage and digital technology; and coping with the wind-down of subsidies globally. This means that his move surprised some.

For example, JP Morgan analysts wrote in a note that they were surprised with the announcement of a change of guard at Vestas as they expected Runevad to stay until the transition to competitive auction is fully over. But we can see the logic of leaving now. All of those changes listed above are likely to lead to more structural changes at Vestas, which takes a lot of time, effort, energy and a fresh perspective. This feels like a good time for a change of hands.

And the challenges aren’t just in the wider market.

Vestas last week released its first quarter results, in which it reported a first-quarter operating profit down 66% to €43m year-on-year. This was mainly due to a fall in prices for wind turbines ordered in 2017, as a consequence of a shift to competitive auctions across Europe. Vestas may have been securing a big share of deals – but that has brought challenges.

“We have a big chunk of orders that we took in 2017 where the prices were really low,” chief financial officer Marika Fredriksson told Reuters.

In addition, higher tariffs due to trade tensions between the US – Vestas’ biggest market - and China, and higher raw material prices, have harmed Vestas profits.  

You need only to look at Vestas’ joint ventures to see how complex things could get. It is developing in North America via subsidiary Steelhead Americas, and has invested in companies including battery storage start-up Northvolt, US-based energy analytics company Utopus Insights and, most recently, solar and wind developer Sowitec.

This means that there is plenty for Andersen to get stuck into, and he brings strong experience. He was named CEO of Danish firm Hempel in 2016, and before that he was chief operating officer of facility service provider ISS. He has also been on the board of Vestas for six years. He looks to be bringing good experience.

And as for Runevad, we get it. Sometimes you don’t want to rebuild. Sometimes you just want to get out at a good time and appreciate what you’ve built.