Vestas: Shares Down on Germany’s Potential Slowdown in Renewables Expansion

Key Morningstar Metrics for Vestas Wind Systems

• Fair Value Estimate: DKK 135
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

Vestas’ VWS share price dropped nearly 6% over Sept. 11-12, following comments from German Chancellor Friedrich Merz indicating a potential slowdown in Germany’s renewables rollout as a measure to reduce energy costs.

Why it matters: Germany boasts the largest installed wind base in Europe, with a total of 73 GW (International Renewable Energy Agency), 64 GW of which are onshore. The news raised investor concerns as Germany represents Vestas’ largest market, accounting for 13% of its turbine deliveries in 2024.

The bottom line: We reaffirm our DKK 135 fair value estimate for no-moat Vestas, while closely monitoring Germany’s upcoming review of its energy transition plan, expected later in the week of Sept. 15-19.

• With margins already expected to be weighed down by the ramp-up of offshore wind in the near term, a potential slowdown in onshore wind investments in Germany adds further uncertainty to the company’s outlook.

The long view: The European Union Renewable Energy Directive sets a legally binding minimum of 42.5% renewables in gross final energy consumption by 2030. Germany stood at 22.4% in 2024, which constrains the scope for any major policy slowdown without risking noncompliance.

• Germany’s current National Energy and Climate Plan targets 145 GW of wind installed by 2030, of which 115 GW will be onshore, implying an ambitious 12% compound annual growth rate from the current base. For reference, our model assumes EMEA wind capacity grows at 7% CAGR over the same period.

Big picture: We continue to see Vestas as a key beneficiary of long-term structural trends from the energy transition and rising electricity demand, but note that grid overcapacity and network investment needs can inflate consumer energy costs in the short term.

• Countries with the highest renewable penetration are already experiencing higher retail power prices than peers still reliant on fossil fuels. A downward revision of Germany’s targets could set a precedent for other EU countries.