Vestas, Investors Await U.S Wind Tax Break Decision

Shareholders in Danish wind turbines maker Vestas are anxiously waiting for U.S. lawmakers to decide if a crucial tax break for wind power will be extended, as a favorable decision could send its share price bouncing up by over 10%, according to analysts.

The Production Tax Credit (PTC) is one of 55 expired corporate tax breaks, or "extenders", that Congress has to deal with during its session in November and December.

A PTC extension could be contentious as some Republicans are opposed but there is a reasonable chance it would be passed as part of a broader package at the end of the year, Divya Reddy, director at political risk firm Eurasia Group, said.

"The opposition is not at the level that they would block a bill in its entirety just to kill the PTC," Reddy said.

Vestas said this week it is working with peers to push for an extension. GE, Siemens (SIEMENS.NS), Gamesa and Suzlon are also active in the United States, home to almost 20 percent of the world's installed turbines.

Guggenheim Securities estimated earlier in November there was a 70 percent chance congress would renew all the extenders, but investors are less certain.

The chief reason for a 25 percent drop in Vestas' share price since mid-June is uncertainty over 2016 earnings due to the PTC issue, analyst Jacob Pedersen from Sydbank (SYDB.CO) said.

"I think the share will outperform the market by more than 10 percent if the PTC is extended, if not on the first trading day then within a week or so," Pedersen said.

Vestas has got orders for 2 gigawatts (GW) of generating capacity in the United States out of a total market of just under 5 GW so far this year.

When the PTC was extended the last time in 2013 it made all projects started in 2013 and commissioned before the end of 2015 eligible for the tax credit.

U.S. orders have been volatile, partly due to uncertainty over the future for the PTC. Newly installed capacity last year amounted to about 1 GW compared to a record 13 GW in 2012 and anywhere between 5 and 10 GW in previous years.

Historically around a fifth of Vestas' total business has come from the United States.

Analyst Michael Jorgensen from Alm. Brand said he saw the size of the U.S. market would be 8 to 8.5 GW annually from 2016 onwards with a PTC extension and around 4 GW without, and put Vestas' U.S. market share at around 20 percent.

As a result he estimates the fair value price for Vestas' shares would be 260-280 Danish crowns with a tax credit extension and 170-190 crowns without. The shares closed at 232.60 crowns on Thursday.

By Teis Jensen