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The last quarter of 2008 was one of the toughest trading periods the wind industry has witnessed in years as the turmoil affecting the world's credit markets started to make its presence felt in the wind sector. Shares in the wind turbine manufacturers listed in Europe, having significantly outperformed the wider market throughout most of the year -- helped along by strong earnings momentum and the skyrocketing price of oil -- performed poorly in the closing months of the year, both in absolute and relative terms. For the first time since early 2006, the broader market outperformed the European wind turbine manufacturers. The wind sector's combined share value plummeted 54.7% over the period, while the fall for companies in the FTSE Eurotop 300 was a milder 28.6% in comparison (chart right). In India, Suzlon fared even worse, with its shares plunging 76.2%, compared with a 30.8% fall in the Sensex 30 Index (bottom chart right).

The wind sector's poor performance can, for the most part, be blamed on macroeconomic factors. The collapse of banking giant Lehman Brothers, a major wind investor in the US, on September 15, coinciding with a collapse in commodity prices including oil, sparked a major sell-off of the sector. Cheaper oil has blunted the economic case for alternative energy while the turbulence in the credit markets has made it harder and more expensive for wind developers to secure financing. In a climate of financial fear, the share prices of turbine makers that have issued the poorest results or most pessimistic guidance for the coming year, whether right or wrong, have suffered the most.

American Clipper was the worst performer for the period with its shares, listed in London, falling 83.4%. It announced dismal first half results in September, with net losses more than doubling year-on-year to $211 million. Although it expected to come close to breaking even in the second half of the year, the stock market took a dim view of the company's guidance for lower margins in 2009, pushing the shares 50% lower over the following month. Still worse was to come. On December 10, Clipper reduced its expectations for its year-end cash balance, citing a slowdown in customer payments. Its share price dropped to £92.5, fully 90% below the £922.5 high in May 2007.

At the other end of the spectrum to Clipper is Repower, which put in the strongest performance for the sector. Its shares fell just 12.6%. The stock, however, was extremely volatile, buffeted by concerns that Suzlon's planned acquisition of shares held in Repower by Portugal's Martifer -- increasing the Indian company's Repower stake to 90% in the process -- would fall victim to the crisis enveloping capital markets. After declining by more than 75% between the middle of September and the end of October as a result, Repower's share price then tripled in the space of a week on the back of bullish results and news that Suzlon and Repower were halting talks aimed at a full merger, with Suzlon in control, at the request of a syndicate of banks with which Repower was in advanced negotiations with on financing future growth, involving a doubling of its credit lines.

For Suzlon, the stop-start Repower acquisition saga has negatively hit share value. During the quarter, Suzlon first announced a rights offering to raise capital for buying Martifer's 22.4% stake in Repower, but then scrapped the plan, citing its depressed share price. A new plan for paying Martifer the EUR 270 million it owes in three instalments is now in place, with the first payment made and the last due in May. The price equates to about 22% of Suzlon's current market capitalisation, however, raising concerns about the potential for dilution should the last resort be some form of equity linked financing. The company has also been plagued by a deal of bad press surrounding blade failures in the US, with shares falling by 28% after another incident in late October. A week later, the company posted a 65% drop in net profits, before exceptional costs, to INR 1.38 billion ($27.8 million) for the quarter to the end of September. It also reported a declining order book. The combined result of all the bad news was a severely depressed share price by December.

Nordex, Gamesa, Vestas

A pessimistic outlook also saw Nordex's share price suffer harshly over the three months. In late November, the company told investors it expects sales growth to decline from 50% in 2008 to just 15% in 2009 because customers are likely to delay wind projects due to difficulties accessing capital. At the same time, it predicted reduced profit margins. By the end of the period, its shares were down 73%. Spain's Gamesa, meanwhile, saw its stock price fall by 52%. The company's decision to pause production at two factory sites for an extra week over Christmas exacerbated investors' anxiety about the potential of the credit crunch to curtail future demand for wind turbines.

The only company, aside from Repower, to inspire any firm confidence was Vestas. It turned in a relatively strong performance, with its share price falling by only 25% over the quarter. Investors seemed to take heart from guidance accompanying Vestas' third quarter report, which included a prediction for higher profit margins in 2009 and reassurances that no orders had been cancelled or delayed.

The widely differing guidance for 2009 from the companies seems to go some of the way in explaining the big disparities in stock performance. Analyst sentiment remains mixed and the proportion of buy recommendations on the companies covered in the Windicator declined from 56.5% at the end of August to 53.1% by the middle of December. Bucking the downward trend were Clipper, with its rock bottom price pushing buy recommendations to 40%; Vestas, with buy recommendations rising from 50% to 60%; and Repower with a rise of 25%, up from zero for the previous period. Gamesa, on the other hand, fell out of favour, with buy recommendations falling from 83% to 62% over the period. Meanwhile, valuations are also very much cheaper. The market capitalisation value for each of the companies is more than 50% down on three months ago.