Assets

Type	Time	Amount	Unit

Revenue

Type	Start date	End date	Amount	Unit

XML

See the xml submitted here:

No XML document available for this report.

Separator

The full data:

 

1003234EogSN06670

Ann nnua al repor 2009

3
. jegrnnnerE on RE MENE, .
avs- OG SELSKABSSTY! RELS HS

krave . W | '
23 MES, mm BL , N un.
HSM '

 

DT,
Pl
TP I.
" ! ff
É É
. Vestas Wind Systems A/S

CVR-nr.: 10 40 37 82
Regnskabsår: 2009

Fremlagt og.godkendt på selskabets ordinære
generalforsamling den 17. marts 2010.

Som dirigent:

 

. ØF 2
Å i .
7 SV navotat Klaus Søgaard

Gorrissen Federspiel

 

 

 

 

, Ves Gom

 

 

 

 

Fe Or SEE SE SE DE SE

 

 

 

Vestas annual report 2009

004 Strong foundation for Triple15

006 — Financial highlights for the Group
007  Non-financial highlights for the Group
009 Overview

014 Management report
030 Corporate governance

050  Non-financial issues

064 Consolidated accounts

120 Annual accounts for Vestas Wind Systems A/S
131. Shareholders and the stock exchange

136 Information about the company
138 Index

This annual report is available in Danish and English.
In case of doubt, the Danish version shall apply.

1003234EogsSN06671

Strong foundation for Triple15

In 2009, Vestas increased its revenue by 10 per cent to EUR
6.6bn, recording a 28 per cent EBIT increase to EUR 856m; this
was the best financial performance ever. The improvement was
achieved in a very difficult market, in which the credit squeeze
affected not only the headlines, but also Vestas' day-to-day oper-
ations and, not least, our order intake, which will make 2010 an
even greater challenge than 2009 turned out to be.

On 27 October 2009, Vestas defined the financial targets -
Triple15 - for its No. 1 in Modern Energy strategy; Vestas aims
to achieve an EBIT margin of 15 per cent and revenue of EUR
15bnno later than 2015. This translates into an average annual
growth of at least 15 per cent and a substantial improvement of
the EBIT margin. Strong growth and a higher EBIT margin are pre-
requisites for Vestas to retain its market-leading position in wind
power and thereby create the world's strongest energy brand as
the No. 1 in Modern Energy.

Having a much more efficient and customer-oriented organisa-
tion with new wind turbines and service products Is the foun-
dation from which we aim to achieve the targets, and we have
already taken a number of steps: The alignment of our production
and sales business units is underway, we are adopting a more
regional structure in Vestas and we have announced new wind
turbines for the onshore and offshore segments. We retain a high

level of investment in development activities around the world
because wind power is a high-technology race in which day-by-
day competition is becoming more and more fierce.

Inthe years ahead, large, experienced and financially strong com-
panies will join the race, having realised that Vestas' vision, Wind,
Oil and Gas, is about to become a reality. Retaining our market
leadership and the position as a”pure play” spokesperson for
modern energy will only be possible through close relations and
collaboration with our existing and new customers around the
world. Consequently, dramatically improved customer satisfac-
tion is paramount for us to accomplish Triple15.

COP15 did not turn out to be the global and supranational
climate breakthrough that Vestas had hoped for. On the other
hand, the large number of heads of states and governments from
around the world attending the conference clearly showed that
the climate and the environment, or clean air, water and energy,
are now at the very top of the international agenda, underpinned
by the many national targets and initiatives. This is good news for
Vestas and wind power because modern energy is one of the keys
to the solution for generations to come. No other form of renew-
able energy is currently able to match wind power, for which the
price of MWh will continue to fall.

 

 

 

Furthermore, Vestas will continue to promote a fixed price of CO»,
which would give the energy sector the predictability required to
carry out the large-scale investments in infrastructure. Over the
next 25 years, an increase in the global population of two billion
people will raise the price of fossil fuels, thereby adding further
strength to the competitiveness of modern energy. Also in the
short term, the price of fossil fuels will go up, to the benefit of
wind power proliferation.

The year's order intake was significantly lower than originally
planned, and orders were received much later in the year than ex-
pected. It is only now at the beginning of 2010, that the market
for bank funding truly appears to be approaching a normal trend,
although the banks are now far more critical and require much
more documentation than they did previously. We appreciate
this trend, although it prolongs the contract negotiation process
considerably, as it is clearly to the advantage of financially strong
quality manufacturers such as Vestas and thus helps to mature
our industry.

The present entry barriers are considerably higher than they were
a few years back, even though more banks and financial institu-
tions will enter the wind power market in the future as knowledge
of wind power increases. A wind power plant is a "green bond"
with a predictable cash fiow provided that the turbines are in the

 

TRIPLE FEE EE

right location, are handled correctly and given optimum service.
Our wind power track record of more than 30 years and our will
to constant improvement and change are the building blocks for
Triple15.

Vestas is intensifying its efforts to enhance safety, reduce our
environmental footprint and use of Earth's resources in order to
strengthen our reputation as a responsible employer and com-
petitive collaboration partner. In addition to more MWh per kilo
wind power plant, more energy-friendly buildings and vehicles are
the way forward. Vestas must have world-class safety at its sites;
our customers demand it, and our employees are entitled to it.

"Failure is not an option” is Vestas' mission — and that applies
also to Triplel 5.

Bent Erik Carlsen
Chairman of the
Board of Directors

Ditlev Engel
President and CEO

 

Financial highlights for the Group

 

 

 

 

mMEUR — 2009 — 2008 — 2007 2006 2005
HIGHLIGHTS

Income statement

Revenue 6,636 6,035 4,861 3,854 3,583
Gross profit 1,441 1,179 825 461 84
Profit before financial income and expenses, depreciation

and amortisation (EBITDA) 1,074 803 579 328 9
Operating profit/(ioss) (EBIT) 856 668 443 201 (116)
Profit/(loss) of financial items (48) 46 (8) (40) (42)
Profit/(loss) before tax 809 714 443 161 (158)
Profit/(loss) for the year 579 511 291 111 (192)
Balance sheet ” — 5 — —
Balance sheet total 6,435 5,308 4,296 3,654 3,085
Equity 3,364 1,955 1,516 1,262 962
Provisions 356 274 305 265 239
Average interest-bearing position (net) (55) 395 179 (299) (560)
Net working capital 1,235 299 (68) 122 498
Investments in property, plant and equipment 606 509 265 153 95
MERE —
Cash flow from operating activities (34) 277 701 598 148
Cash flow from investing activities (808) (680) (317) (144) (137)
Cash flow from financing activities 1,075 (91) (54) (101) (46)
Change in cash at bank and in hand less current

portion of bank debt 233 (494) 330 353 (35)
RATIOS ” FE i —
Financial ratios?”

Gross margin (%) 21.7 19.5 17.0 12.0 2.4
EBITDA margin (%) 16.2 13.3 11.9 8.5 0.3
EBIT margin (%) 12.9 11.1 91 5.2 (3.2)
Return on invested capital (ROIC) (%) 23.9 34.1 30.9 11.9 (13.2)
Solvency ratio (%) 52.3 36.8 35.3 345 31.2
Return on equity (%) 21.8 29.4 21.0 10.0 (18.1)
Gearing (%) 10.4 6.3 9.9 13.8 51.2
Share ratios!” FE ——

Earnings per share 29 2.8 16 0.6 (1.1)
Book value per share 16.5 106 8.2 6.8 5.5
Price / book value 26 3.9 9.0 4.7 2.5
P/E-value 14.6 14.8 47.1 52.8 (12.7)
Cash flow from operating activities per share (0.2) 1.5 3.8 3.2 0.8
Dividend per share 0.0 0.0 0.0 0.0 0.0
Payout ratio (%) 0.0 0.0 0.0 0.0 0.0
Share price 31 December (EUR) 42.6 40.7 74.0 32.0 13.9
Average number of shares 197,723,28i1  185,204,103. 185,204,103  182,722,520. 174,911,173
Number of shares at the end of the year 203,704,103  185,204,103. 185,204,103. 185,204,103  174,911,173

 

 

 

1) The ratios have been calculated in accordance with the guidelines from "Den Danske Finansanalytikerforening" (The Danish Society of Financial Analysts)
(Recommendations and Financial ratios 2005), refer to note 1 to the consolidated accounts.

006 | vestas annuet report 2009

Non-financial highlights for the Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2009 2008 2007 2006 2005
KEY FIGURES”
Occupational health & safety
Industrial injuries (number) 306 534 534 525 472
- of which fatal industrial injuries (number) O O O 1 (9)
Products
MW produced and shipped? 6,131 6,160 4,974 4,313 3,900
Utilisation of resources
Consumption of metals (tonnes) 202,624 187,478 170,505 164,413 143,170
Consumption of other raw materials, etc. (tonnes) 126,600 129,207 111,541 93,983 82,592
Consumption of energy (MWh) 537,165 458,296 372,037 330,106 227,907
— of which renewable energy (MWh) 263,611 172,800 139,983 124,841 118,603
— of which renewable electricity (MWh) 238,462 167,311 138,035 124,841 118,603
Consumption of water (m2) 521,005 474,958 554516 343,084 226,410
— of which water of non-drinking water quality (m2) 102,528 103,066 14,809 14,954 0
Waste disposal
Volume of waste (tonnes) 97,471 96,632 89,643 82,739 67,313
- of which collected for recycling (tonnes) 34,303 30,254 28,422 27,593 17,266
Emissions
Emission of COz (tonnes) 50,523 41,832 32,798 28,396 18,406
Local community —… i
Environmental accidents (number) 10 16 15 7 4
Breaches of internal inspection conditions (number) 3 5 5 6 5
Employees
Average number of employees 20,832 17,924 13,820 11,334 10,300
Number of employees at the end of the year 20,730 20,829 15,305 12,309 10,618
INDICATORS”
Occupational health and safety
Incidence of industrial injuries per one million working hours? 8.1 15.6 20.8 25.3 338
Absence due to illness among hourly-paid employees (%) 2.8 3.3 3,6 3.2 4,1
Absence due to illness among salaried employees (%) 13 1.1 1.4 1.5 15
Products
CO2 savings over 20 years on the MW produced and shipped
(million tonnes of CO») 163 164 143 124 112
Utilisation of resources
Renewable energy (%) 49 38 37 38 52
Renewable electricity for own activities (%) 85 68 66 68 75
Employees
Women at management level (%) 19 17 N/C? N/C N/C
Non-Danes at management level (%) 46 42 N/C N/C N/C
Management system?
ISO 14001 (%) 97 100 80 76 75
OHSAS 18001 (%) 97 98 84 77 63

1) Accounting policies for non-financial highlights for the Group, see page 60. Comments on non-financial issues for the Group, see pages 50-59.

2) Tobeable to better illustrate the connection between physical production and resource consumption, products are now calculated as MW produced and shipped instead
of as previously MW delivered.

3) Please note that accounting policies have been changed as from 2009, see page 101 in the annual report 2008.

4) Not calculated (N/C) for the year.

5) The production facilities in Hohhot, Inner Mongolia, China, are expected certified by the end of first half-year 2010.

1003234EogSN06673

 

 

 

 

 

Overview

Vestas realised a
revenue of EUR 6.6bn
- an increase of 10 per cent,

   

Profit for the year
was EUR 579m
- an increase of 13 per cent.

 

 

    
 
      

Vestas reported
an EBIT of

EUR 856m

- an increase of
28 per cent.

2009

AT AGLANCE

+28%
-0.5%

  

The number of
employees was
20,730
- areduction of
0,5 per cent.
Vestas shipped
wind turbines with an
aggregate capacity
of 6,131 MW
- areduction of
0,5 per cent,
cen &%
48 O Vestas shipped a total
of 3,320 wind turbines

- an increase of 2 per cent.

The incidence of industrial injuries
per one million working hours was 8.1
- areduction of 48 per cent.

Vestas annual report 2009 | 009

1003234EogSN06674

FULL YEAR 2009
Vestas recorded revenue of EUR 6,636m in 2009, an increase of
10 per cent relative to 2008.

The Group reported an operating profit, EBIT, of EUR 856m in
2009, equivalent to an EBIT margin of 12.9 per cent, against
11.1 per cent in 2008. The improved EBIT margin was the result
of more efficient operations and better prices and contractual
conditions.

Revenue in the service business amounted to EUR 504m with an
EBIT margin of 15 per cent.

The gross profit amounted to EUR 1,441m in 2009 correspond-
ing to a gross margin of 21.7 per cent. This is an increase from
EUR 1,179m and 19.5 per cent in 2008

At the end of 2009, the Group's net working capital amounted
to EUR 1,235m, which corresponds to 19 per cent of revenue,
against 5 per cent in 2008. The large increase is due to lower
prepayments caused by the delayed order intake.

The Group achieved a return on invested capital of 23 9 per cent
in 2009, against 34,1 per cent in 2008.

In 2009, Vestas shipped 3,320 wind turbines with an aggre-
gate capacity of 6,131 MW, against 6,160 MW and 3,250 wind
turbines in 2008. A total of 4,764 MW was delivered to Vestas"
customers.

The intake of firm and unconditional orders for the year was
3,072 MW, against 6,019 MW in 2008. The backlog of firm
and unconditional orders amounted to 1,747 MW at the end of
2009. Europe accounted for 75 per cent, Americas for 21 per
cent and Asia/Pacific for 4 per cent. The value of the backlog of
firm and unconditional orders amounted to EUR 2.2bnat 31
December 2009, against EUR 5.2bn at year-end 2008.

Vestas' total assets increased from EUR 5,308m in 2008 to EUR
6,435m in 2009.

 

 

 

 

 

 

No
7,000 — 7 7 mg
6,000
5,000
4,000
3,000
2,000 pn

S
1,000 = |
0 >
"1,000 2005 2006 2007 2008 2009
O10 | vestas annual reparr 209

FOURTH QUARTER 2009

Vestas generated revenue of EUR 2,506m in the fourth quarter
of 2009, corresponding to 38 per cent of total revenue and an
increase of 1 per cent relative to the fourth quarter of 2008.
Fourth-quarter revenue fell short of expectations which 1s prima-
rily due to the detayed order intake

Europe accounted for 83 per cent of revenue in the fourth quar-
ter. The Americas and Asia/Pacific accounted for 6 per cent and
11 per cent of revenue, respectively. Service revenue amounted
to EUR 140m inthe fourth quarter.

Vestas reported an EBIT of EUR 458m, equivalent toan EBIT
margin of 18.3 per cent, against 15.4 per cent in the fourth quar-
ter of 2008,

The gross profit was EUR 625m, against EUR 524m in the year-
earlier period.

Vestas shipped 1,233 wind turbines with an aggregate capacity
of 2,439 MW in the føurth quarter of 2009.

The quarterly order intake was 1,022 MW, of which 55 per cent
has been announced publicly.

The Group generated a cash inflow from operations of EUR
346m, and net investments amounted to EUR 165m. The free
cash flow amounted to EUR 185m.

Warranty provisions in the fourth quarter amounted to EUR 89mM,
corresponding to 3.6 per cent of revenue.

The incidence of industrial injuries was 4.0 per one million work-
ing hours in the fourth quarter.

In the fourth quarter, the number of employees rose from 20,256
to 20,730.

 

 

KEE

 

1,400
1,200
1,000
800
600

400 RBR

122
(68)

200

 

 

 

[I

0 [I

-200 N
2005 2006 2007 2008 2009

NON-FINANCIAL ISSUES

In 2009, Vestas intensified its efforts to ensure the lowest cost
per MWh produced, Cost of Energy, measured not only in euro
and cent, but also in terms of the impact on the local communities
and society in general, including the environment, the climate and
Earth's resources as well as the number of industrial injuries.

Safety first
- Vestas is building a world-class safety culture.

As green as it gets
- Vestas' production and products must be as green as possible.

Code of Conduct
-» Vestas' employees and collaboration partners must know what
is correct Vestas behaviour.

In 2009, Vestas markedly improved on the incidence of indus-
trial injuries, thus registering 8.1 injuries per one million working
hours, which is 48 per cent lower than in 2008.

In 2009, the share of renewable energy was 49 per cent and
the share of renewable electricity was 85 per cent. Compared
to 2008, this marks an improvement of 11 and 17 percentage

IL 2) o 12% in 2009, Vestas achieved an
OL () EBIT margin of 12.9 per cent.

OUTLOOK FOR 2010

In 2010, Vestas expects to achieve an EBIT margin of 10-11 per
cent and revenue of EUR 7bn against previously expected 10-12
per cent and EUR 7-8bn, respectively. The narrowing is due to
the fact that the year's expected order intake of firm and uncon-
ditional orders of 8,000-9,000 MW is anticipated to materialise
so late in the year that it is considered unlikely that revenue will
reach EUR 8bn.

Adjusted for input prices, in general Vestas expects that prices
and conditions remain unchanged in 2010 relative to 2009. The
slowdown in profitability improvement is due to Vestas having
excess capacity and the far majority of revenue, and especially
profit, being expected in the second half of the year. Net working
Capital is expected to fluctuate heavily in 2010 and is expected
to amount to 15 per cent of annual revenue at the end of the year.

Investments in property, plant and equipment and intangible
assets are expected to be EUR 250m and EUR 350m, respec-
tively. The completion in 2010 of recent years' large investments
inthe USA and China will lead to lower investments in property,
plant and equipment than in 2009.

 

CERNSSETICEEDE TT
8,000-9,000

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

points, respectively. Order intake, firm and unconditiona! orders (MW)
; . Revenue 7,000
In 2009, Vestas updated Code of Conduct was made available - of which service revenue 600
to all employees via e-learning, information material in 18 lan- EBIT in (% 10-11
guages, presentations, etc. margin (%) i
EBIT margin, service (%) 15
In September 2009, Vestas joined the UN Global Compact initia- Financial items, net (25)
tive and follows the ten generally recognised principles in respect Tax rate (%) 28
of human rights, labour standards, the environment and anti- Net working capital (%) 15
corruption, Investments, property, plant and equipment 250
Investments, intangible assets 350
Warranty provisions 3,0
Incidence of industrial injuries 7.0
Customer loyalty (index) 70
Share of green energy (%) 55
Quality level, year-end (Sigma) 5
Rammer ordren) | adress) ]
2,700 ITT 35 TTT"
—————— ——Ta] i
2,400 ag ra) få
SEE 307. i
2,100 AN
1,800 — -—— 25 "TT FE mA — HEE
ni
1,500 5 mo — i -
Ek! Ik CT |g
1,200 + $1— Å Sj
900 - -— 15— — jo
Fey nm rd n . m,
v N m CO — |
iz ef N] mi
600 | i | | 10 — | d dd
300 | — ' TT ar
1/41] s— — JE
0 |alpernn 7
-300 mm 2 -
Q4 2005  Q42006 Q42007 Q42008  Q4 2009 2005 2006 2007 2008 2009

1003234FogSN06675

Vestas annual report 2009 I 011

 

 

1003234EogSN06676

Management report

015
015
015
015
016
019
021
025
027
027

No. 1 in Modern Energy

Wind, Oil and Gas

Failure is not an option

The Willpower

Management focus

Business development

Risk management

Vestas' financial performance
Outlook for 2010

Events after the balance sheet date

Corporate Governance

031
033
034
040
045

046

Management structure

Remuneration

Danish corporate governance recommendations

Competencies and fiduciary positions of the members of the Board
Competencies and fiduciary positions of the members of the
Executive Management

Presidents of the Group's business units

Management report

   
 
  

VESTAS' PRODUCT PROGRAMME Ø Vi WV

The 6.0 MW offshore turbine,
which is under development,
must dramatically reduce

the Cost of Energy - price
per MWh - compared with all
known competing products.

 
 
  
   

 

i vV52-850kWw — ft v82-1.65MW
V60-850kw — KR V80-2.0MW

  
   
   
 

V90-1.8/2.0 MW
V90-3.0 MW

 

V100-1.8 MW
V112-3.0 MW onshore
V112-3.0 MW offshore

"THROUGH SIGNIFICANTLY IMPROVED CUSTOMER
INSIGHT AND OPEN CUSTOMER DIALOGUE, VESTAS
AIMS TO ACHIEVE A SHARP IMPROVEMENT IN
CUSTOMER LOYALTY, WHICH IS A PREREQUISITE
FOR VESTAS TO ACCOMPLISH TRIPLEL 5!

DITLEV ENGEL, PRESIDENT AND CEO

index 64 49%

Vestas achieved a customer of Vestas' energy
loyalty index of 64 in 2009 consumption in 2009
- an increase from 52 in 2008. was green — an increase

of 11 percentage points.

014 | vestas annuai report 2004

 

1. NO. 1 IN MODERN ENERGY

Vestas' strategy is called No. 1 in Modern Energy. To Vestas, being
No. 1 means being the best, and being the best means maintain-
ing world class safety standards at all Vestas' sites, having the
most satisfied customers, the best performing wind power plants
and the greenest production. Being the market-leader in wind
power, Vestas aims to create the world's strongest energy brand.

Wind power is modern energy because it is financially competi-
tive, predictable, independent, fast and clean.

Vestas aims to provide its customers with the lowest cost per
MWh produced, "Cost of Energy”; and optimum security for the
Capital invested in a wind power plant, "Business Case Certainty”
- Vestas delivers as promised. Under the "Easy to work with”
principle, Vestas also endeavours to become a more flexible and
knowledgeable business partner because significantly improved
customer loyalty is a prereguisite for Vestas to retain its market-
leading position.

A large number of initiatives aimed at optimising internal pro-
cesses and sharply enhanced focus on collaboration with cus-
tomers and suppliers, will support the above-mentioned improve-
ments, and combined with new products this wil! help build the
foundation for strong growth in revenue and profitability In the
years ahead. Thus Vestas must achieve an EBIT margin of 15 per
cent and revenue of EUR 15bn no later than 2015 -» Triple15.

Being the industry's leading player and a pure-play spokesperson,
Vestas aims to ensure that wind power remains at the top of the
political agenda. This is achieved through dialogue with politicians,
public servants, interest groups and NGOs the world over and
through advice and information to the public about the potential
of wind power, both in individual markets and worldwide.

Vestas' financial priorities reflect its constant focus on profit-
ability.

1. EBIT margin
2. Net working capital
3. Revenue

In spite of the financial crisis, Vestas improved its EBIT margin

in 2009, continuing the streak that began in 2005. The Group
reported an operating profit, EBIT, of EUR 856m in 2009, equiva-
lent to an EBIT margin of 12.9 per cent, against 11.1 per cent in
2008.

Atthe end of 2009, the Group's net working capital amounted
to EUR 1,235m, which corresponds to 19 per cent of revenue. At
the end of 2008, net working capital amounted to EUR 299m, or
5 per cent of revenue.

Revenue in 2009 amounted to EUR 6,636m, an increase of EUR
601m, or 10 per cent relative to 2008,

WIND, OIL AND GAS
Wind, Oil and Gas is Vestas' vision, which expresses the ambition
of making wind an energy source on a par with fossil fuels.

At the end of 2009, wind power accounted for less than 2 per
cent of the world's combined electricity production. Wind power
is currently the best means among renewable sources of energy
of ensuring that global temperature increases caused by CO2
emissions are kept at a maximum of two degrees. The neces-
sity of limiting temperature increases was recognised by the UN

1003234EogSN06677

member countries at the COP15 conference on climate change in
Copenhagen, Denmark, in December 2009.

Vestas expects that, if the necessary political decisions on a
national and international leve! to expand the power grid and
appoint sites are made now, wind power can make up at least 10
per cent of total electricity production by 2020. That translates
into installed wind power capacity of at least 1,000,000 MW, as
compared with approx 150,000 MW at the end of 2009.

FAILURE IS NOT AN OPTION

Vestas' mission, Failure is not an option, expresses the organisa-
tion's commitment to constantly seeking improvements and to
consistently following up on and rectifying errors in a structured
manner. The mission also mirrors Vestas' uncompromising stance
on safety, which is given top priority no matter what the context.

The ambition to attain a 6 Sigma quality level throughout the
value chain no later than in 2015 underlines this commitment to
constant improvement. At the end of 2008, Vestas and the vast
majority of its suppliers had reached 4 Sigma. The target for the
end of 2010 is 5 Sigma. The improvements are to be achieved
through massive investments in training and facilities for the
development and testing of wind turbines and components.
Vestas therefore works closely with all suppliers to deliver opti-
mum quality and reliability to its customers and, by extension, the
lowest Cost of Energy and highest Business Case Certainty.

Qwing to Vestas' systematic approach to risk management rela-
tive to customers and suppliers, all identified risks are costed,
and decisions are made on the basis of facts.

As a result of the dedicated effort by many suppliers, the quality
and ability to supply has been significantly improved in recent
years. However, customer returns and Vestas' reputation con-
tinue to suffer under unsatisfactory quality management by a few
suppliers. As a result, quality-enhancing endeavours are being
scaled up through the establishment of a group staff function in
charge of Vestas' quality measures.

THE WILLPOWER

Vestas' employees have used their willpower, imagination and
ability to constantly develop the wind turbine technology and
the Vestas organisation to maintain Vestas' leading position in
the industry. This is expressed by the sculpture entitled the Will-
power, which has been placed at a number of Vestas" locations.

Vestas seeks to promote a culture characterised by independ-
ent initiative and collaboration in which the dynamics and sense
of responsibility that usually characterise a smal! company are
retained. The solid foundation of the sculpture also expresses the
reliability, common sense and trustworthiness that is the corner-
stone of all Vestas" activities.

The updated Code of Conduct that Vestas introduced in 2009 is
to ensure that all employees and others persons acting on behalf
of Vestas know what is correct Vestas behaviour. Vestas' Code

of Conduct can be downloaded from vestas.com under About
Vestas/Principles/Sustainability.

Vestas' Code of Conduct has been made available to all employ-

ees via e-learning, information material in 18 languages, presen-
tations, etc. Furthermore, all employees have been informed about
Vestas' EthicsLine, which may be used to report any violation of

the company's policies and to seek guidance if an employee faces

a dilemma. Furthermore, e-learning modules have been tailored >>

Vestas annual report 2009 | 015

 

>> and are mandatory for selected employee groups and available

to everyone, All new employees will be introduced to the Code of
Conduct as part of the induction programme.

Vestas' standards and goals build on recognised framework
agreements established by international organisations such

as the UN, ILO and OECD. In 2009, Vestas joined the UN Global
Compact initiative and follows the ten generally recognised prin-
ciples in respect of human rights, labour standards, the environ-
ment and anti-corruption At least once a year, Vestas will submit
a progress report, Communication on Progress, on Global Com-
pact developments. The progress report for 2009 is shown under
the section Non-financial issues on pages 50-59,

MANAGEMENT FOCUS

Vestas' management's overall focus is on customers, colleagues,
Cost of Energy and shareholders. Success in these areas is a pre-
requisite for retaining the leadership position in fierce competi-
tion with some of the world's largest corporations.

Customers

Vestas expects that large customers will come to represent a
larger proportion of the new capacity in the future, especially in
mature markets. Revenue in 2009 was distributed among 201
customers, against 228 in 2008. The generally higher degree
of professionalism among its customers places ever greater
demands on all parts of Vestas.

By establishing the independent group staff function Group
Marketing & Customer Insight in 2009, Vestas intensified its
efforts to build a strong customer-oriented culture throughout
the organisation. Through significantly improved customer
insight and open customer dialogue, Vestas aims to achieve a
sharp improvement in customer loyalty, which is a prerequisite for
Vestas to accomplish Triplel 5.

Group Marketing & Customer Insight is to provide support to the
sales business units and standardise customer-related activities
so that the most expedient work methods and processes are
applied throughout Vestas, making the company a better partner
to its customers. Furthermore, the function is responsible for
product launches and progressive accumulation of knowledge
about customer needs to ensure faster and better follow up on
collaboration with each customer and that customer's satisfac-
tion with Vestas.

In order to ensure uniform, high quality in all parts of the col-
laboration with Vestas' largest international customers, a Key
Account Management programme was launched in 2009,
comprising ali sales business units. In addition, customers will
become more involved in product development and will generally
have better access to information and data relating to business
and technology.

Customer loyalty survey

Ås in previous years, Vestas conducted a loyalty survey among its
customers in 2009, A total of 684 persons from 155 customers
participated in the survey.

With a loyalty index of 64, Vestas' almost achieved its target
index of 65 - an improvement from 52 in 2008. The improve-
ment proves that Vestas' continuing focus on enhancing cus- .
tomer relations and delivering better turbine performance and
service has produced results, Vestas aims for a customer loyalty
index of 70 in 2010, and the target index for 201 2 is a minimum
of 75.

016 | Vestas annuat report 2009

 

Colleagues

Since 2005, Vestas has recruited 10,112 employees, net, and at
31 December 2009, the 20,730 employees had an average sen-
iority of 3.7 vears, with 48 per cent of the employees having less
than two years" seniority. The training and retention of new and
existing employees is therefore a key priority area

 

7

 

Asia/

… Europe Americas Pacific Total

Production units 7,471 735 2,109. 10,315
Sales and service units 4,170 1,404 2,013 7,587
R&D 1,182 54 254 1,490
Others 1,338 (.— 0 1,338
Total 14,161 2,193 4,376 20,730
- — - -——— Cthers

RED - ——— R 6%

7%

   

Production units
50%

Sales and service units
37% -

To that end, Vestas has expanded its management development
programmes and given greater priority to in-house recruitment of
future managers. The in-house recruitment of managers is sup-
ported by initiatives such as Vestas' High Potential programme,
which selects and supports employees with the potential to take
a managerial position in the organisation within a few years.

Å prerequisite for sustaining progress is for Vestas to become

a more international business with a much higher number of
non-Danish employees in management positions. Furthermore,
Vestas aims to have more women executives. At the end of
2009, Danes held 54 per cent of the positions in top-2,500, and
19 per cent were women. In addition, Vestas aims to have many
nationalities at all locations in order to create a truly global busi-
ness, which also has extensive local insight and understanding.

Due to the capacity build-up in the USA and a lack of growth in
demand in a number of markets in Northern Europe, regrettably
Vestas was compelled to adjust its factory capacity in 2009. As
a result, Vestas had to lay off 1,567 employees in Denmark and
the UK.

In spite of the lay-offs in 2009, the headcount was approxi-
mately the same as in 2008 due to the expansions in the USA
and China. Going forward, Vestas expects its headcount to rise at
a lower rate than its business volume because of enhanced effi-
ciency, improved turbine performance and economies of scale.

Vestas will continue to recruit employees under the ”People
before megawatt” principle, because the costs of well-educated
excess Capacity are lower than the costs of remedying faults due
to arushed staff inflow caused by strong MW growth. Lay-offs
will be a measure of last resort for Vestas due to the substantial
loss of know-how and experience associated with such lay-offs.

Employee satisfaction survey

Ås in previous years, in November 2009 Vestas conducted a
satisfaction survey among all employees in order to identify
and select priority areas both locally and at Group level. 17,748

 

 

employees, equal to a world-class response rate of 92, partici-
pated in the survey. In 2008, the response rate was 86. Although
the results show areas which can be improved, the main conclu-
sion is that Vestas' empioyees are very loyal and dedicated, as
also witnessed by the high response rate.

To follow up on the survey, action plans are drawn up with specific
improvement initiatives at all levels of the organisation to ensure
that everyone knows both the overall targets and priorities and
the local action plans for Triple1 5.

Safety culture

In accordance with Vestas' mission, Failure is not an option, the
ultimate goal is to reduce the number of industrial injuries to zero.
For the fourth year running, in 2009 Vestas again achieved the
lowest incidence of industrial injuries ever.

The incidence of industrial injuries per one million working hours
was 8.1, declining from 15.6 in 2008. The target for 2010 is

to achieve an incidence of 7.0 industrial injuries per one million
working hours and for 201 2 the target is 3.0 or less. This ambi-
tion calls for dedicated management of the safety initiatives, not
only at Vestas but also at Vestas' business partners.

Vestas must have world-class safety at all of its sites, and to
achieve that Vestas will continue its comprehensive management
training programme. The training programme is based on five
safety principles that will guide the employees in their everyday
work:

+ All industrial injuries can be prevented.

- Every hazard can be managed.

» Management is accountable for safety.

- People are the most important component in a safety effort.
- Working safely is a condition of employment at Vestas.

An important part of the training programme is "safety walks” in
which Vestas focuses on safety at the workplace as part of the
day-to-day management to demonstrate visible involvement in
safety aspects and increase safety awareness throughout the
Group.

To emphasise the priority given to safety, the incidence of indus-
trial injuries is one of the criteria in the global employee bonus
scheme.

Vestas' global bonus scheme

All Vestas employees are covered by a bonus scheme aimed at
consolidating a performance-based corporate culture. The dis-
bursement of bonus in Vestas' global bonus programme depends
on 3 number of targets: In Vestas' 14 business units, the dis-
bursement of bonus depends on the performance of each individ-
ual unit (30 per cent weighting) and the Group's performance (70
per cent weighting). For employees of the parent company, bonus
is calculated exclusively on the basis of the Group's performance.

For 2009, the following targets applied at Group level: An EBIT
margin of 13 per cent (50 per cent weighting), a net working
capital of a maximum of 10 per cent of revenue (20 per cent
weighting), revenue of EUR 7.2bn (10 per cent weighting) and a
customer loyalty index of 65 (20 per cent weighting). Vestas ex-
pects the bonus paid out for 2009 to be approx EUR 60m.

In the measurernent of bonus in 2010, the Group targets have

the following weightings: An EBIT margin of 10 per cent (40 per
cent weighting), a net working capital of 15 per cent (20 per cent

1003234EogSN06678

weighting), revenue of EUR 7bn (20 per cent weighting) and a
customer loyalty index of 70 (20 per cent weighting).

Inthe longer term, bonus payments will be more closely linked to
the day-to-day performance of each employee. The bonus dis-
bursement is based on national legislation and is subject to local
adjustments.

In 2010, Vestas will extend its option scheme to comprise about
250 employees. The new participants include a number of man-
agers, senior specialists and project managers. Until now, the
option programme has only covered the Executive Management,
Presidents of the business units and Senior Vice Presidents of
the group staff functions.

Cost of Energy

Vestas is making a dedicated effort to reduce the Cost of Energy
measured both as the price of MWh and the environmental foot-
print. Vestas must consistently manufacture and service more
robust and reliable wind power plants, thereby increasing the
competitive strength and the value of wind power. The future
growth is underpinned by the fact that the price of fossil fuels and
CO- emissions is set to rise dramatically.

Vestas has a broad product portfolio, which is optimised regularly
to ensure the best possible output and return from wind power
plants under any wind and transmission conditions. In February
2009, the Group began to market its two new wind turbines; the
V100-1.8 MW and the V112-3.0 MW, which will be ready for
delivery to sites with medium and low winds in 2010 and 2011,
respectively. The prototype of the new V60-850 kW turbine from
Vestas' Hohhot factory in Inner Mongolia, China, was presented

in April 2009, and the first order for this turbine was received in
December 2009.

The 6 MW offshore turbine, which is currently being developed,
must dramatically reduce the Cost of Energy compared with all
known competing products. Combined with the launch of the
V112-3.0 MW offshore turbine, the new 6 MW offshore turbine
underpins Vestas' commitment to offshore operations, in which
Vestas had an estimated accumulated market share of 40 per
cent at the end of 2009. Of Vestas' total installed MW at the end
of 2009, offshore accounts for 2 per cent.

Wind power plants generate power without emitting CO», NO, and
SO, and without consuming any water. In 2008, Vestas resolved
to step up its environmental efforts under the ”As green as it gets"
principle, Vestas will make wind turbine production as green as
possible, partly in order to save money, partly to maintain the
industry's most sustainable production and thereby strengthen
its competitiveness. Vestas has subsequently joined common ini-
tiatives such as the UN Global Compact and the World Business
Council for Sustainable Development and implemented a green
electricity policy, a green car policy and a green building policy.

In 2010, these initiatives are intended to contribute to increas-
ing Vestas' share of renewable energy to 55 per cent through an
increase in the share of renewable electricity to at least 90 per
cent. The original target for 2010 was 50 per cent. The targets
are ambitious because renewable electricity is not currently
accessible at all Vestas' units.

In 2009, the share of green energy was 49 per cent and the

share of renewable electricity was 85 per cent. Further details are
provided in the section Non-financial issues on pages 50-59.

Vestas annual report 2009 | 017

>>

 

>>

VESTAS' ORGANISATIONAL STRUCTURE

 
  
 

FEE TEENS

 

ØR ra NE s steel tJE ag i

 
 
 
 

Rk RER NEDE te ER SER

RUSS ESS EINERE

… Vestas Nacelles |

 

BERGENS

porteret gror ergo er rar 777774

ORGANISATIONAL STRUCTURE

   

SVEEESEE

RET SET fe BR
eee es.
BENE e ENE

Eee EST N ret ONDERE

” Vestas Northern Eurape .;

Vestas Arherleds … ”

 

 

| NESEE Fre ene

"”INA PRODUCTION BUSINESS UNIT

President

eee les

NE & Culture

 

Finance &IT

Vestas Quality Management

 

Supply Chain Production
KLETat: tu Je=laie lse

018 | vestas annualtreport 2009

Production
Ute

Production
Bie

 

i t ; 1 1
buen eh ee ae faneme eden eee dermed

 

… ORGANISATIONAL STRUCTURE
IN A SALES BUSINESS UNIT

President

Communications

Vestas Quality Management
& Process Excellence

so ES

Government Relations

Marketing &
Customer Insight

Legal & Contract Review

 

Key Account
Management

(Olsens

 

 

For more than ten years, Vestas has systematically applied life
cycle assessments to identify the environmental footprint of the
wind turbines throughout their lifetime, including manufacture,
transport and dismantling of the turbines. The assessments iden-
tify, evaluate and focus on the potential environmental improve-
ments. Over a turbine's lifetime, it only emits 5-8 grams of COz
per kWh produced, including the energy-intensive production of
steel, which represents the biggest proportion of raw materials
used in a wind turbine.

The assessments show that the relationship between consump-
tion of materials for manufacturing a wind turbine and the energy
subsequently generated by the turbine is pivotal for the environ-
mental impact. Vestas' large-scale investments in development
and research must therefore lead to more "MWh per kilogram
turbine” in order to reduce Vestas' impact on the environment, the
climate, Earth's resources and its surroundings in general. Meas-
ured using these parameters, Vestas' new V112-3.0 MW turbine
outperforms the V90-2.0 MW turbine, which has also been de-
veloped for low winds, by more than 20 per cent.

Atthe same time, Vestas endeavours to ensure that as much of
the product as possible can be recycled. Approx 80 per cent of a
V90-3.0 MW turbine on an 80-metre tower can be recycled, thus
significantly reducing the wind turbine's overall environmental
impact.

For further details, see the section Non-financial issues on pages
50-59 or vestas.com, where all the lifecycle assessments are
available. For further information about targets for factories and
sales units, reference is made to the 50 site descriptions, which
are also available on vestas.com under About Vestas/Principles/
Sustainability.

Shareholders

Vestas aims to give its owners a long-term competitive return

on investment and openly inform its stakeholders about the
developments in Vestas with due consideration to the limitations
applicable to a listed company and the company's commercial
competitiveness. Vestas intends to have an increasingly inter-
national circle of owners that reflects the geographical diversifi-
cation of its operations.

BUSINESS DEVELOPMENT

Organisational changes

In order to safeguard the company's competitive strength in

the years ahead, it is essential that the Vestas organisation can
effectively handle future growth and avoid a corresponding
increase in costs and complexity. Consequently, Vestas is inthe
process of aligning the Group's business units to ensure consist-
ency of structure, departments, job descriptions and work proce-
dures across the Group. The changes are being made to increase
transparency, ensure a clear distribution of responsibilities, re-
duce Vestas' response time and lower the cost level.

In 2009, these changes were made in Vestas" four production
business units, while the new structure will be implemented in all
sales business units during the first half of 2010, at which time a
similar change process will be launched in the group staff functions
and in Vestas Technology R&D. Concurrently with the alignment, a
number of changes will be made to Vestas' governance structure;

a number of forums will be closed down and others will be estab-
lished, each with clearly defined responsibilities and duties.

At 1 January 2009, two new business units were established:
Vestas China and Vestas Spare Parts & Repair. The Vestas China

1003234EogSN06679

sales business unit focuses exclusively on China and the huge
growth potential in that market.

The Vestas Spare Parts & Repair business unit will help consoli-
date Vestas' service and spare parts activities. The unit is to
support Vestas' service organisation in all markets and help to
ensure improved quality and greater reliability, while also making
Vestas a more flexible and fast-responding business partner to
all customers.

In 2009, five group staff functions were established: Group Mar-
keting & Customer Insight, Group Forecasting & Planning, Group
Engagement Office, Group Quality and Vestas Excellence.

Group Marketing & Customer Insight is to help build a strong
customer culture in Vestas. Closer customer relations and insight
into their needs combined with improved wind turbine perform-
ance are expected to pave the way for significantly improved
customer loyalty.

The aim of Group Forecasting & Planning is to ensure close col-
laboration between the sales and the production business units.

Group Engagement Office is to implement executive manage-
ment's strategy at the tactical and operational levels by identify-
ing and executing in-house initiatives.

The group staff function Group Quality is to ensure enhanced
focus on quality, including the use of Six Sigma, in all parts of
Vestas. The necessary improvements are to be achieved through
close collaboration with local quality functions, which have been
strengthened in connection with the alignment of the business
unit structure.

The Vestas Excellence function consists of eight centres, which in
a combined effort with the business units are to identify, organise
and optimise work methods and procedures at Vestas to ensure
that the best solutions are consistently applied across the Group.
The centres are also responsible for ensuring a constant focus on
improving profitability throughout Vestas. The eight centres are:

- Sales Excellence

- Sourcing Excellence

- Production Excellence

- Quality Excellence

- Transport & Logistics Excellence
+ Construction Excellence

- Service Excellence

- Process Excellence

In 2009, the centres helped lift Vestas' earnings, demonstrating
the continued potential for substantial savings in all parts of the
value chain.

Knowledge resources

In order to ensure that Vestas' combined knowledge resources
are developed and exploited in the best possible way, in 2009
Vestas implemented a clear structure for the Group's business
procedures, including distribution of responsibilities.

Global process owners of the Group's key processes have been
appointed to map and harmonise business processes to ensure
business continuity. This will help break down silos and increase
transparency. Efforts aimed at increasing transparency and

improving knowledge-sharing are anchored in Process Excel-

lence. >>

Vestas annual report 2009 | 019

>> In 2009, Vestas also developed guidelines and tools that support

the alignment and process improvement efforts, based on Lean
and Six Sigma methods. These initiatives aim to ensure continu-
ous improvement of all processes in Vestas and that best prac-
tice is consistently shared across the organisation with a view to
meeting Vestas' strategic goals.

Also, in 2009 Vestas further intensified its collaboration with
leading universities and other educational institutions. In this
way, Vestas aims to retain its technological leadership position in
the industry.

Suppliers

Vestas works closely with its suppliers to improve the profes-
sional level of the supply chain, enabling the supply of compon-
ents at competitive prices that reflect the quality and timeliness
of the delivery.

Against this background, in 2005 Vestas launched Six Sigma as
the Group's key quality improvement tool. The system has been
implemented at Vestas' own factories and at its suppliers and

is aimed at reducing variances in processes and, by extension,
harmonising the quality level.

Six Sigma provides a common and uniform approach ta innov-
ation and process design, focusing on continuous improvements
that build on the systematic collection of data. In close coopera-
tion with each supplier, Vestas identifies central specifications
that are crucial for product reliability and performance. These
parameters are monitored in an ongoing process with a view to
launching improvement initiatives.

Vestas has stationed some of its own employees with many
suppliers in order to adjust relevant processes early and cost-
effectively. In 2009, a number of suppliers became more deeply
involved in Vestas' product development for the purpose of
reducing costs and improving quality.

Efficiency improvements

Optimised resource utilisation and greater productivity are pre-
requisites for Vestas to retain its competitive strength, minimise
the environmental footprint of its own production and retain its
market-leading position. During the first quarter of 2010, Vestas
will adjust its production completely to a”make to order” pro-
cess, which requires that all suppliers can always deliver on time.
The objective is to manufacture with a minimum of inventories
without increasing the time from receipt of order ta shipment and
installation.

Production Excellence must ensure a common approach to pro-
duction based on the Lean and Six Sigma productivity systems.
A uniform approach to production, including joint processes for
improvement initiatives, facilitates the identification of synergies
and exchange of best practice experience between factories and
business units, The goal is to achieve wor!d-class production.

A key prerequisite for achieving best practice and synergies was
accomplished when the new organisational structure in Vestas"
production business units was implemented in 2009.

In order to ensure the necessary employee involvement, both
factory management and employees receive Lean and Six Sigma
training, In 2009, around 3,000 employees participated in train-
ing Courses, thus contributing to building a corporate culture in
which all employees consistently endeavour to improve the qual-
ity and reduce lead times, costs and errors.

Q20 | Vestas annua! report 2009

In 2009, Vestas continued to build on the improvements
achieved in the preceding years. For example, Vestas Spare Parts
& Repair implemented a full Lean conversion, which led to signifi-
cantly improved lead times for Vestas' key components.

At all future factories, operations will be planned according to the
new principles from the onset of production. Common optimis-
ation principles and similar organisations improve the possibility
of communicating across the organisation, leading to greater
mobility among Vestas' employees.

Service

Focusing on maximum output and return from the wind power
plants through meticulously planned service inspections, Vestas"
service organisation helps ensure more satisfied customers This
was achieved concurrently with the Group building a more profit-
able service business.

Since the beginning of 2008, Vestas has invested substantial
resources in enhancing the service organisation's efficiency and,
by extension, the reliability of the wind power plants. The mean
time between service inspections of each turbine was improved
in 2009 compared to 2008, when the mean time was doubled.

Vestas Performance & Diagnostics Centre regularly monitors
more than 15,500 turbines, or about 26,600 MW, allowing the
service organisation to make preventive retrofitting and repairs.
Meticulous planning of service inspections produces enhanced
operations and higher production output and thereby stronger
earnings for the customers and Vestas.

Every day, Vestas increases the number of wind turbines moni-
tored. At the end of 2009, these turbines accounted for 69 per
cent of Vestas' total installed capacity. Analyses of data from the
wind turbines which combined represent the world's largest wind
power plant by far also provide input for the design of upgrade
packages which, subject to service contracts concluded, are im-
plemented or offered in connection with software upgrades for
installed turbines.

The recently established business unit, Vestas Spare Parts &
Repair, supports all of Vestas' operational service units and will
contribute to further operational improvements and better lead
times for spare parts and repairs. Responsible for the global sup-
ply of spare parts and repairs of key components to Vestas" ser-
vice organisation, this unit is headquartered in Randers, Denmark,
and in 2009 it opened departments in Bristol, UK, and in Barce-
Iona, Spain. In 2010, Vestas plans to open a service department
for repairs in Colorado, USA.

Vestas expects that in future, the service business will grow at
least as fast as the other activities.

Implementation of SAP

Vestas has now launched the Enterprise Resource Planning sys-
tem SAP in all seven sales business units, in all group staff func-
tions, in Vestas Technology R&D and in Vestas People & Culture.
The implementation of SAP has made Vestas better capable of

adapting to a constantly changing world and market.

Uniform and valid data have improved transparency between the
departments, increased the retention of knowledge resources,
and made Vestas able to act faster and more safely.

 

2) 6 6 (0) (0) YIN Vestas Performance & Diagnostics Centre
SD) L/ monitors about 26,600 MW

Quality

Vestas secures and regularly improves the quality of its prod-
ucts and services. The structure of the quality organisation is
designed with the aim of ensuring that quality is incorporated in
the planning of all Group services and avoiding faults reaching
Vestas' customers. The effort is now strengthened by the estab-
lishment of the new group staff function, Group Quality.

In addition, Vestas' quality management system ensures that the
organisation maintains updated and strong processes. The sys-
tem is audited so that all parts are reviewed at least once every
three years.

Patents

Protecting the large number of technologies developed by Vestas
is paramount for Vestas to retain its technology leadership pos-
ition, and it is therefore a key contributor to retaining operational
freedom.

Ås in the preceding years, in 2009 Vestas once again increased
its patent investments, recording an increase in the number of
new patent applications from 153 in 2008 to 165 in 2009.
Since 2005, Vestas has thus increased the number of annual pa-
tent applications more than tenfold. Vestas expects to maintain
the high level in the years ahead.

Vestas was not involved in litigation concerning patents and/or
other intellectual property rights in 2009.

Development facilities

In order to retain its technological leadership position, Vestas
invests heavily in development facilities and human resources. By
the end of 2010, Vestas will thus have increased the headcount
in Vestas Technology R&D by approx 500 to 2,000. In 2009, the
number of R&D employees rose from 1,345 to 1,490.

The target for Vestas' development activities is to have the low-
est Cost of Energy measured partly as the price per MWh, partly
as the total environmental costs. A green production is consid-

ered an increasingly important strategic competitive parameter.

The extension of the blade technology centre on the Isle of Wight,
UK, commenced in 2009. The centre is expected to become
operational in the third quarter of 2011. In addition, a new devel-
opment centre was established in Houston, Texas, USA, and a
new R&D office was opened in Boston, Massachusetts, USA. The
Boston office has taken over key employees from ePower LLC,
which has three decades of experience in motor and generator
technology.

Furthermore, in addition to blade production and nacelle assem-
bly, Vestas' new facilities in Brighton, Colorado, USA, will also be
housing R&D employees from 2010.

Finally, an expansion of Vestas Technology R&D's headquarters in
Aarhus, Denmark, will become operational in May 2010, at which
time it will be able to house 900 employees.

Atthe end of 2009, Vestas had employees working with research
and product development in the USA, Europe and Åsia.

In 2009, Vestas spent a total amount of EUR 249m on wind
power technology development. Going forward, Vestas will con-
tinue to invest the necessary funds to retain its technological
leadership position.

F=

1003234EogSN06680

New production facilities

An ongoing increase of production capacity is necessary for
Vestas to accomplish its long-term growth targets. This capacity
increase will be achieved partly through enhanced production
efficiency, partly through construction of new production facil-
ities.

Inthe period 2005-2009, Vestas invested a total of EUR 2.3bn
especially in its two largest markets, the USA and China, in order
to fulfil the general rule that ”North America is supplied from

the USA; ”Europe from Europe” and "Asia/Pacific from Asia" This
regional structure gives Vestas more competitive strength, re-
duces the environmental and climate costs and improves Vestas'
currency mix between income and expenses.

Å new foundry is now ready to be commissioned in Xuzhou,
Jiangsu, China. Vestas is now the only wind turbine manufacturer
with its own foundry in China. At the beginning of the year, Vestas
completed construction of the factory in Hohhot, Inner Mongo-
lia, China, for production of the V60-850 KW turbine, which is
tailored specifically to local wind and transmission conditions of
that area.

In Pueblo, Colorado, USA, Vestas has completed the construction
of the world's largest tower factory. In 2010, Vestas will open a
nacelle assembly factory and a blade factory in Brighton, Colo-
rado, USA.

At the end of 2010, the US factories are expected to be able to
generate an annual output of 3,000 MW, contributing to safe-
guarding Vestas' competitive strength in the North American
market. Vestas' total factory capacity willbe 10,000 MW at the
end of 2010.

Closedown of production facilities

In connection with the production capacity adjustments in the
Northern European markets, the blade factory on the Isle of
Wight, UK, was closed down in 2009. The decision was made as
a result of the establishment of Vestas' new factories in the US
market, which had until then been served by the Isle of Wight
factory. Continued transports to other continents were not a
financially or environmentally sustainable solution. In addition,
Vestas expected that sales of onshore turbines in the UK and
other Northern European markets would be insufficient to retain
production facilities on the Isle of Wight. Part of the former blade
factory will henceforth be included in the blade test centre cur-
rently being established on the Isle of Wight.

In April 2009, Vestas completed the sale of its tower factory

in Campbeltown, Scotland. Securing continued production and
retention of jobs in Campbeltown, the sale was effected because
the products which the factory was originally dimensioned to
manufacture were no longer in sufficient demand.

RISK MANAGEMENT

In 2009, Vestas further improved its risk management process
relating to production, sales and financial reporting. Among other
things, Enterprise Risk Management was launched in all business
units, which ensures systematic identification and handling of
relevant risks throughout Vestas' value chain.

The implementation of a Business Continuity Management
programme continued in 2009. The programme is intended to
strengthen the handling of potential unforeseen events in rela-

tion to Vestas' business. >>

Vestas annual report 2009 | 021

 

>> Vestas continuously monitors risk developments and activities

aimed at mitigating such risks. This is achieved by strengthening
the internal reporting procedures of the business units and at
Group level. To this end, a number of risk committees were estab-
lished in 2009 to make Vestas' managers capable of responding
to risks against the background of an updated, giobal overview.
The launch of SAP is & critical factor in this context.

The increasingly standardised approach to risk management
meant that the predicted decline in insurance premiums was
achieved in 2009, whilst Vestas has achieved significantly
improved coverage and insurance conditions. Vestas expects to
retain the level in 2010.

Commercial risks

Supplier risks

Vestas continuously extends collaborations with key suppliers.
Introducing integrated product development with participation
of all production business units and several suppliers and teams
in charge of and with expertise in a limited component category,
Vestas created focus on the procurement process. This allows
Vestas to better control crucial procurement risk components

Supplier limitations are gradually solved through a change of
materials used in main turbine components and continued com-
petence and risk management, which includes monitoring of the
financial position of existing and prospective suppliers.

The credit squeeze has triggered component abundance, but the
abrupt slowdown in growth may represent a financial challenge
to a number of suppliers. Vestas aims to always have at least two
suppliers of all components; in the majority of cases, this goal is
currently accomplished.

Product risks

In recent years, Vestas has spent substantial resources on con-
tinuous improvements of products and processes in its product
development efforts.

In 2009, Vestas focused on launching a management and report-
ing structure that may ensure consistent product improvements
Improvements are achieved through changes to design, produc-
tion, installation and maintenance and, not least, through exten-
sive investments in test facilities.

Furthermore, Vestas dedicated substantial resources to research
and development of new products and technologies to meet
future market needs, Vestas is in the process of intensifying
collaborations with its customers in the development process.
Safety, lowest Cost of Energy and Business Case Certainty are
the cornerstones of all development activities

These initiatives will boost Vestas" future competitive strength
whilst reducing product risks.

Sales risks

The trend towards customers becoming larger and larger is
expected to continue, although the proliferation of wind power

in new markets will lead to a near-term increase in the number of
customers in these regions. Measured in terms of total MW order
intake during the period 2008-2009, the ten largest customers
represented 41 per cent of the total order intake.

The credit squeeze has shifted the balance of supply and
demand, and there is currently excess capacity in the market. On
the other hand, more and more financial institutions are intensify-

022 | vestas annual! report 2009

ing their requirements to the wind turbine manufacturers, which
provides an advantage to the financially strøng quality suppliers.

In 2009, Vestas invested substantial resources in building close
customer relations and in gaining better insight into customer
conditions, the aim being to boost Vestas' competitive strength
and mitigate sales risks. These initiatives comprised the estab-
lishment of the group staff function Group Marketing & Customer
Insight.

As Vestas' gradually improves its ability to identify and manage
project risks, the company is able to undertake larger and more
complex tasks. At the same time, each individual project repre-
sents a smaller proportion of total revenue, thus reducing the
order-specific risk

Vestas retains its strategy of not relying on any single market or
customer.

In spite of the difficult market situation, Vestas has not suffered
any material losses on debtors, one of the reasons being Vestas"
contractual work with its business partners.

In 2009, no orders were cancelled or postponed.

Reputation risks

Unfavourable media coverage of Vestas, whether justified or not,
may be costly to the shareholders in the form of a falling share
price, declining sales and earnings.

A good reputation is a key competition parameter in respect

of recruitment, retention, sales and influence in society in gen-
eral. Vestas" dedication to enhance safety, quality, earnings and
sustainability of its production are all initiatives that strengthen
Vestas' reputation. Similarly, open and disciplined stakehoider
relations are important in order to identify misunderstandings
and align the society's expectations to Vestas, which endeavours
to deliver as promised and thereby to build the all-important
trustworthiness.

Financial risks and internal control environment

The overall responsibility for the Group's risk managernent and
internal control environment in relation to financial reporting
rests with Vestas' Board of Directors and Executive Management,
including compliance with applicable legistation and other finan-
cial reporting regulations.

The Board of Directors believes that the management's state-
ments are crucial to good risk management and internal control!
inrelation to the financial reporting process. The Board of Direct-
ors',the Audit Committee's and the Executive Management's
position on good risk management and internal controls in rela-
tion to financial reporting is therefore regularly emphasised in
Vestas.

Vestas' risk management, including internal controls in relation to
the financial reporting process, is designed with a view to effect-
ively minimising the risk of errors and omissions.

Vestas" Board of Directors, Audit Committee and Executive Man-
agement regularly assess significant risks and internal controls
inrelation to the Group's operations and their potential impact
on the financial reporting Vestas' risk management and internal
control environment is developed and enhanced in an ongoing
process in order to consistently aaccommodating the needs of a
large company undergorng strong globat growth.

 

Control environment
At least once a year, the Board of Directors assesses the Group's
organisational structure and staffing in key areas.

Vestas' Board of Directors and Executive Management establish
and approve overall policies, procedures and controls in key areas
in relation to the financial reporting. This requires a well-defined
organisational structure, unambiguous reporting lines, authorisa-
tion and certification proøcedures and adequate segregation of
duties.

The Baard of Directors has adopted policies, manuals, pro-
cedures, etc. in key areas, including in relation to the financial
reporting and Code of Conduct.

Each year, Vestas' Board of Directors and Audit Committee
assess the need for an internal audit function. Vestas believes
that there is no need for an internal audit function because a
number of the assignments that would normally be undertaken
by internal audit are handled by an internal compliance depart-
ment, which is part of Group Finance & Operations.

The Executive Management monitors compliance with relevant
legislation and other financial reporting regulations and provi-
sions. Findings are reported continuously to the Audit Committee
and the Board of Directors.

Financial risks

Based on Vestas' risk management policy, Group Finance &
Operations prepares a description of the key risks relating to the
financial reporting process as well as measures taken to control
risks either by elimination or mitiqation.

Group Finance & Operations works proactively with anchoring risk
management throughout the organisation, including ensuring
systematic identification and management of all relevant risks.

Ås part of the risk assessment, Vestas' Board of Directors and
Executive Management annually assess the risk of fraud and
the measures to be taken to reduce and/or eliminate such risks,
including assessing any possibility of the general management
overriding controls and manipulating the financial reporting.

Control activities

Group Finance & Operations is responsible for the implementa-
tion and monitoring of Vestas' global financial processes. This
helps to ensure a uniform design and structure of the Group's
internal controls. The objective of the Group's contro! activities is
to ensure compliance with the targets, policies, manuals, proced-
ures, etc. defined by the Executive Management. Furthermore,
the activities help ensure that any errors, deviations and short-
comings are prevented, discovered and rectified.

Vestas continuously implements global financial processes and
controls aimed at further Mitigating the risk of incorrect report-
ing. In 2009, this implementation primarily comprised the sales
business units and group staff functions, but will also cover the
production units going forward. By the end of 2010, Vestas will
thus have implemented updated global financial processes and
controls for all principal units.

Information and communication

Vestas" internal rules, adopted by the Board of Directors, lay
down, among other things, overall requirements on financial
reporting and external financial reporting in accordance with cur-
rent legislation and applicable regulations.

1003234EogSN06681

The information systems are designed to identify, collect and
communicate relevant information, reports, etc. on an ongoing
basis and on all levels to facilitate an effective, reliable workflow
and the performance of controls. This is done with due consider-
ation to the confidentiality required in a listed company. In this
way, Vestas can ensure that the company is consistently able to
report reliably and carry out control in order to effectively man-
age the company operationally, financially and in accordance with
current legislation and regulations.

Monitoring

Monitoring takes place by means of regular and periodic assess-
ments and controls at all levels of the Group. The scope and
frequency of such periodic assessments depend mainly on the
risk assessments and on the effectiveness of the regular controls.

In 2007, Vestas established a whistleblower function, which was
relaunched under the name EthicsLine in 2009. The purpose of
the function is to ensure that no information is suppressed or
remains undisclosed, and it provides access for employees to
report any incidence of neglect, illegal acts or acts that are con-
trary to Vestas' policies and guidelines.

Vestas' Board of Directors and Audit Committee receive reports
from the management on compliance with the guidelines, etc.
and information on any noted weaknesses, omissions or cases of
non-compliance with adopted policies, business procedures or
internal controls.

Other financial risks

Exchange rate risks

The business activities of Vestas involve exchange rate risks
linked to the purchase and sale of goods and services outside
the euro zone. Vestas pursues a policy of hedging exchange rate
risks as soon as a Commitment in foreign currency is agreed.
However, this applies only to net exposure in each individual cur-
rency. Exchange rate risks are primarily hedged through foreign
exchange forward contracts.

Exchange rate adjustment of investments in overseas subsid-
iaries and associated companies abroad is taken directly to
shareholders' equity. Vestas believes that continuous exchange
rate hedging of such long-term investments is not the optimal
solution with regard to balancing total risk against total cost.

Most of Vestas' production units and suppliers are currently lo-
cated in the euro zone, Vestas' expansion in the USA and China
will, however, increase the Group's costs outside the euro zone.
in combination with a higher degree of sourcing from countries
whose currencies are not linked to the EUR, the investments in
the USA and China ensure an improved currency mix between in-
come and expenses, making Vestas less sensitive to fluctuations
in currencies such as the USD relative to EUR.

At the end of 2009, 68 per cent of the employees and 71 per
cent of the non-current assets were located in Europe. Revenue
generated in Europe represented 68 per cent of total revenue in
2009 compared with 60 per cent in 2008. Americas and Asia/
Pacific will come to represent a greater proportion of revenue
going forward.

Interest rate risk

Vestas' primary interest rate risk consists of interest rate fluctu-
ations, which may influence the Group's debt and lease obliga-

tions. Managing the interest risks involves the monitoring of

duration and maximum interest rate risk on Vestas' net debts. >>

Vestas annual report 2009 | 023

>>

MW DELIVERED IN 2009

    
    

Americas

oo

DISTRIBUTION OF ANNUAL REVENUE

Profit for the year 8.7%
- EUR 579m

Corporation tax 3.5%
- EUR 230m

Financial
items 0,7%
- EUR 48m

Administrative
expenses 3.9%
- EUR 261m

Selling and distribution
expenses 3.5%

- EUR 232m
Cost of sales 78.3%
Research and - EUR 5,195m
development costs 1.4%
- EUR 92m

024 | Vestat annual report 2009

Vestas uses hedging instruments to limit interest rate risks.
The average net interest-bearing position was EUR (55)m in
2009, against EUR 395m in 2008. The net interest-bearing
position at the end of 2009 was EUR 137m.

Tax risks

Vestas pursues an active, but not an aggressive, tax policy. Based
on its broad, international production and sales platforms, Vestas
maintains a well-documented transfer pricing system that gives
a true and fair view, ref. international rules based on the OECD
guidelines and local legislation. However, transfer pricing may
always be challenged due to the interpretation of international
guidelines adopted by local authorities.

Credit risks

The financial crisis has sharpened Vestas' focus on customers"
ability to pay. In addition, Vestas is exposed to credit risks in con-
nection with delivering products to customers in certain coun-
tries. Developments in the customer portfolio towards a greater
proportion of large, international enterprises will reduce this risk.
Receivables are typically hedged by payment guarantees.

The use of financial instruments involves a risk that the counter-
party may not be able to meet his obligations at maturity. Vestas
minimises this risk by only using financial institutions with high
Credit ratings. The banks must have a long-term credit rating from
Standard & Poor's (A), Moody's (A2) or Fitch (A). Furthermore,
Vestas has in-house limits as to the size of the Group's balance
with a single bank.

To date, all of Vestas' financial business partners have been able
to honour the contracts entered into.

Liquidity risks

Group Treasury is in charge of ensuring that substantial capital re-
sources are in place at all times through a combination of liquidity
managernent, non-committed and committed credit facilities and
other debt instruments. Vestas manages its liquidity risk through
cash pool systems in various currencies and by using short-term
overdraft facilities in a number of financial institutions. Inthe
longer term, Vestas expects to be able to finance its organic growth
through cash flows from operations, as the credit crisis in 2009,
however, necessitated drawings on the bank facilities. On 28 April
2009, Vestas increased its share capital by 10 per cent receiv-
ing net proceeds of EUR 792m, which gave Vestas the financial
latitude to make acquisitions in order to strengthen its technology
platform, while expanding its facilities inthe USA and China,

Commodity risks

To minimise the potential impact and reduce risks in connection
with fluctuations in prices of commodities such as copper and
nickel, Vestas has entered into long-term agreements with fixed
prices covering parts of Vestas' needs. In general, however, Vestas
seeks to incorporate commodity price developments into its
sales contracts. The final project price typically depends on devel-
opments in a number of key parameters, especially commodity
prices. Where a customer seeks certainty for the final project
price, this is reflected in a premium that compensates Vestas for
the risk undertaken.

VESTAS' FINANCIAL PERFORMANCE

Level of activity

In 2009, Vestas shipped 3,320 wind turbines with an aggregate
capacity of 6,131 MW, against 3,250 wind turbines and 6,160
MW in 2008. A total of 4,764 MW was delivered to Vestas' cus-
tomers.

1003234FogSN0 6682

The order intake for the year was 3,072 MW, of which announced
orders accounted for 65 per cent. In 2008, the order intake was
6,019 MW. The decline in the order intake is due to the credit cri-
sis which has delayed a number of projects. The backlog of orders
amounted to 1,747 MW at the end of 2009. Europe accounted
for 75 per cent, the Americas for 21 per cent and Asia/Pacific for
4 per cent. Longer term, Vestas expects a more even distribution
between the regions. The value of the backlog of firm and uncon-
ditional orders amounted to EUR 2,2bn at 31 December 2009.

Income statement

Revenue

In 2009, revenue increased by 10 per cent to EUR 6.6bn; below
the expected revenue of EUR 7.2bn. The lower revenue is primar-
ily due to the delayed order intake. Accounting for 68 per cent of
revenue, Europe was once again Vestas' largest market overall.
The Americas accounted for 21 per cent of revenue, and Åsia/
Pacific for 11 per cent.

 

[aner FE |

 

 

 

 
  
  

Europe 4,547
Americas 1,372
Asia/Pacific 717
Total i 6,636
Asia / Pacific ——————

11%

Americas Europe

21% 68%

 

Large energy companies and utilities accounted for 58 per cent
of revenue, against 45 per cent in 2008.

Revenue in the service business amounted to EUR 504m in
2009, an increase of 27 per cent relative to 2008. The EBIT mar-
gin was 15 per cent.

Vestas operates with three types of contracts:”supply-only"
”supply-and-installation” and "turnkey" The underlying operating
risk is lowest when dealing with supply-only orders, but they do,
however, increase quarter-on-quarter fluctuations in revenue and
EBIT as this type of order is not recognised as revenue until the
turbines have been delivered according to the contractual terms.

Several banks now require that one supplier is responsible for
the whole project, which means that recent years' trend towards
more supply-only orders has turned. Revenue from supply-and-
installation and turnkey orders, in which Vestas is responsible før
installing and connecting the turbines to the power grid and for
the entire project including all engineering works, respectively,
is recognised as the work is performed, which provides a more
balanced income flow. However, the underlying operating risk

is higher than it is for supply-only orders, The development to-
wards higher complexity, raises the entry barriers. There are no
differences between the contract types in terms of the payment
profile.

Gross profit

Vestas' gross profit amounted to EUR 1,441m in 2009, against
EUR 1,179m in 2008. The gross margin thus increased to 21.7

Vestas annval report 2009 | 025

>>

 

 

 

 

 

 

 

 

 

 

 

 

Europe

Spain 762 650
Italy 419 376
Germany 320 449
Greece 177 152
France 157 253
Poland 145 48
Sweden 144 120
United Kingdom 122 82
Turkey 111 150
Portugal 84 36
Bulgaria 64 9
Denmark 57 22
Belgium 49 10
Ireland 45 9
Romania 43 o
The Netherlands 26 242
Hungary 25 37
The Czech Republic 22 6
Croatia 0 42
Austria 0 14
Total Europe 2,772 2,707
Americas

USA 749 1,345
Canada 380 285
Brazil 51 79
Chile 94 0
Aruba 30 O
Uruguay 0 10
Total Americas 1,304 1,719
Asia/Pacific

China 584 596
India 97 162
Azerbaijan 2 0
Australia 0 159
Japan 0 80
Taiwan 0 76
South Korea 0 73
Philippines 0 8
Total Asia/Pacific 683 1,154
Africa

Kenya 5 0
Total Africa 5 o
Total world 4,764 5,580

 

026 | vestas annual! report 2009

per cent against 19.5 per cent in 2008. The improved gross mar-
gin was the result of more efficient operations and better prices
and contractual conditions.

Research and development costs

In 2009, research and development costs amounted to EUR
92m, a decline of EUR 27m against 2008. The decrease is due
to increased capitalisation of development projects, which more
than offsets the increase in total research and development
costs. Research and development costs are further described in
note 7 to the consolidated accounts.

Operating profit

The Group reported an operating profit, EBIT, of EUR 856m in
2009, an increase of EUR 188m relative to 2008. The EBIT mar-
gin was 1 2.9 per cent in 2009, against 1 1.1 per cent in 2008.

Financial items and tax

Financial items in 2009 represented an expense of EUR 48m,
against a net income of EUR 46m in 2008. Tax for the year
amounted to EUR 230m. The effective tax rate was 28 per cent.
Atthe end of 2009, deferred tax assets deducted by deferred tax
liability amounted to EUR (1 1)m against EUR 52m in 2008.

Tax matters are specified in notes 10, 15 and 20 to the consoli-
dated accounts.

Balance sheet
Vestas' total assets increased from EUR 5,308m in 2008 to EUR
6,435m in 2009.

Non-current assets
Non-current assets amounted to EUR 2,400m at the end of
2009, an increase of EUR 637m relative to the end of 2008.

Inventories
Inventories amounted to EUR 1,663m at the end of 2009, an
increase of EUR 5 Imrelative to the end of 2008.

Net working capital

Atthe end of 2009, the Group's net working capital amounted
to EUR 1,235m, which corresponds to 19 per cent of revenue,
against 5 per cent in 2008. The large increase was due to lower
prepayments caused by the delayed order intake.

The Group achieved a return on invested capital of 23.9 per cent
in 2009, against 34.1 per cent in 2008. This decrease is due to

the negative development in net working capital and large-scale
investments.

Trade receivables
Trade receivables amounted to EUR 525m at the end of 2009,
an decrease of EUR 413m relative to the end of 2008.

Construction contracts

Construction contracts, which comprise projects currently being
installed, for which the total project has not finally been trans-
ferred to the customer, amounted to EUR 1,032m, net, at 31
December 2009.

Provisions

In 2009, Vestas made warranty provisions of EUR 233m. This
equals 3.5 per cent of revenue, which is lower than in 2008 when
provisions represented 4,0 per cent of revenue.

Vestas makes provisions for all costs associated with turbine
repairs, and any reimbursement is not offset unless a written
agreement has been made with the supplier to that effect.

The development is due to the fact that Vestas constantly
improves the reliability of its turbines owing to increased invest-
ments in development, testing and monitoring of wind power
plants. Triple15 includes 3 per cent for provisions.

The typical warranty period is currently two years as opposed to
previously, up to five years, and that reduces Vestas' risk expo-
sure.

Changes in equity

Vestas' equity amounted to EUR 3,364m at the end of 2009
compared with EUR 1,955m at 31 December 2008. Vestas has
defined a long-term solvency ratio target of at least 40 per cent.
At 31 December 2009, the solvency ratio was 52 per cent.

Cash flow and investments

In 2009, cash flows from operating activities before the change
in working Capital rose by EUR 259m to EUR 903m. After an
increase in working capital of EUR 937m, cash flows declined
by EUR 31 1m to EUR (34)m. Cash flows for investments rose to
EUR 808m, of which EUR 227m in intangible assets. The free
cash flow was EUR 233m, against EUR (494)m in 2008.

OUTLOOK FOR 2010

In 2010, Vestas expects to achieve an EBIT margin of 10-11

per cent and revenue of EUR 7bn against previously expected
10-12 per cent and EUR 7-8bn, respectively. The specification is
due to the fact that the year's expected order intake of firm and
unconditional orders of 8,000-9,000 MW now is anticipated to
materialise so late in the year that it is considered unlikely that
revenue will reach EUR 8bn, Europe will account for almost half of
the expected 2010 order intake of 8,000-9,000 MW, whereas
the Americas and Asia/Pacific will account for 30 per cent and 20
per cent, respectively.

Adjusted for input prices, in general Vestas expects that prices
and conditions remain unchanged in 2010 relative to 2009. The
slowdown in profitability improvement is due to Vestas having
excess capacity and the far majority of revenue, and especially
profit, being expected in the second half of the year. Quarter-on-
quarters distribution is thus expected to be more imbalanced
than in 2009. Net working capital is expected to fluctuate heavily
in 2010 and is expected to amount to 15 per cent of annual rev-
enue at the end of the year.

1003234Eog3N06683

8) 7 22 IMT sneen

Revenue in the service business is expected to rise to EUR 600Mm
with an EBIT margin on a level with that achieved in 2009.

Investments in property, plant and equipment and intangible
assets are expected to be EUR 250m and EUR 350m, respect-
ively. The completion in 2010 of recent years' large investments
in the USA and China will lead to lower investments in property,
plant and equipment than in 2009.

Financial items are expected to amount to EUR (25)m. The
effective tax rate is expected to be 28 per cent. Warranty provi-
sions are expected to fall to 3 per centin 2010.

Vestas expects to recruit 1,300 employees, net, in 2010, of
which 500 will be employed with Vestas Technology R&D. At
the end of 2010, Vestas thus expects to have approx 22,000
employees.

EVENTS AFTER THE BALANCE SHEET DATE
Orders
In 2010, Vestas has announced an 80 MW order for Germany.

A complete overview of announced orders is available at
vestas.com/investor. Vestas only discloses firm and uncondi-
tional orders and in relation to company announcements, the
order value must be above EUR 66m.

US tax credit
In connection with the investments in Colorado, USA, Vestas has
received a manufacturing incentive tax credit of EUR 36m.

Extraordinary General Meeting

On 14 January 2010, Vestas Wind Systems A/S held an Extra-
ordinary General Meeting for the purpose of amending Article
4(6) of the company's Articles of Association concerning the
deadline for shareholders' rights to include a specific matter on
the agenda for the company's Annual General Meeting.

The Board of Directors had proposed that the existing deadline
was changed to a deadline of six weeks, which is consistent with
the deadline set out inthe new Danish Companies Act. The pro-
posed resolution was adopted unanimously.

Vestas annual report 2009 j 027

 

 

 

 

 

 
 

1003234EogSN06684

 

 

 

i
|
|
|
i
|
i

Corporate governance

GENERAL MEETING

 

 

"IN ORDER TO SAFEGUARD THE COMPANY'S
COMPETITIVE STRENGTH IN THE YEARS AHEAD,

IT IS PIVOTAL THAT VESTAS' ORGANISATION CAN
EFFECTIVELY HANDLE FUTURE GROWTH AND AVOID
A SIMILAR INCREASE IN COSTS AND COMPLEXITY?

BENT ERIK CARLSEN, CHAIRMAN

NUMBER OF BOARD MEMBERS AND NUMBER OF EXECUTIVE MANAGEMENT MEMBERS AND
REMUNERATION IN MEUR REMUNERATION IN MEUR

FÅ 1.6 +0.6'+ 0.8"
ff 1.2+0.7+0.7"
I RR 1.4+0.7'+ 0.7"

==. Bonus expensed.
== Share based remuneration, see note 6 to the consolidated
accounts.

 

 

 

030 | Vestas annuatrepørt 2009

The Board of Directors and the Executive Management of Vestas
Wind Systems A/S believe that corporate governance initiatives
should be a constant process and address the principles of cor-
porate governance in an ongoing process with due consideration
to current legislation, practices and recommendations. Such
evaluation includes a review of the company's business concept,
business procedures, goals, organisation, capital position, stake-
holder relations, risks and exercise of the necessary control.

The Board of Directors finds that Vestas is run in a financially,
socially and environmentally responsible manner, and that its
owners and the capital markets are provided with an insight of
Vestas through open and direct communications.

In 2009, Vestas generated revenue of EUR 6.6bn, and in light of
this development and the challenges that Vestas is facing, it is
important for the Group to have clear management guidelines.

Based on results achieved to date, the ongoing capacity expan-
sion, the identified savings and efficiency improvement meas-
ures, including the organisational alignment of the production
and sales business units, and improved wind turbine output and
the development of service products, the Board of Directors and
the Vestas Government resolved at the strategy seminar held in
September to define and announce the financial targets to be
met no later than 2015 - Triple15.

MANAGEMENT STRUCTURE

Vestas Wind Systems A/S is a Danish limited liability company
with a two-tier management system in which the Board of Direct-
ors and the Executive Management handle the management of
the company's affairs. The company is also the parent company
of the Vestas Group. The management of the company and the
Group is governed by the company's Articles of Association, the
Danish Companies Act and other applicable Danish rules and
regulations.

In order to safeguard the company's competitive strength in the
years ahead, it is pivotal that Vestas' organisation can effectively
handle future growth and avoid a similar increase in costs and
complexity. Furthermore, clearly defined responsibilities are a
prerequisite for Vestas to deliver the same high quality to all cus-
tomers in every context.

Consequently, Vestas is in the process of aligning the Group's
business units in order to reduce organisational complexity so
that departments, job descriptions and work processes are the
same across the Group. These initiatives are described in detail
under "Business Development” on page 19 in the management
report.

General Meeting

The General Meeting is the suprerne management body of Vestas
Wind Systems A/S and is the supreme authority in al! company
matters, subject to the limits laid down by Danish legislation and
the company's Articles of Association.

The General Meeting is held at least once a year and is convened
by no less than eight days' and no more than four weeks' notice,
ref. Article 4(4) of the Articles of Association.

All shareholders are entitled, in compliance with a few formal
requirements, to have equal access to submit proposals, attend,
vote and speak at general meetings. The Board of Directors
invites all shareholders to exercise their voting rights in con-
nection with the company's Annual General Meeting either by

1003234EogSN06685

attending, using the proxy form or by giving proxy to the Board
of Directors and in that way give it a strong mandate to serve
Vestas' best interest.

Information about the Annual General Meeting in 2010 is pro-
vided in”General Meeting" on page 133.

Auditors

Pursuant to Article 11(1) of the company's Articles of Associa-
tion, Vestas' annual report must be audited by one or two audit
firms to be appointed by the shareholders for the period until the
next Annual Genera! Meeting. In 2009, PricewaterhouseCoop-
ers and KPMG were appointed as the company's auditors for the
2009 financial year.

Board of Directors
The Board of Directors deals with the overall management of the
company, including:

- appointing the Executive Management;

- laying down guidelines for and exercising control of the work
performed by the Executive Management;

. ensuring responsible organisation of the company's business;

+» defining the company's business concept and strategy;

- ensuring satisfactory bookkeeping and financial reporting;

- ensuring the necessary procedures for risk management and
internal controls are implemented; and

. ensuring that an adequate capital contingency programme is in
place at all times.

Board members are elected by the shareholders in connection
with the Annual General Meeting. The existing Board members
elected by the General Meeting were elected in 2009, and their
election term expires in 2010.

Board members elected by the General Meeting may be recom-
mended for election by the shareholders or by the Board of
Directors. When proposing candidates for Board membership, the
Board of Directors strives to ensure that they:

- are able to act independently of special interests;

- represent a balance between continuity and renewal;

- match the company's situation; and

- have industry insight and the commercial and financial skills
required to allow them to perform their tasks in the best pos-
sible manner.

Pursuant to Danish legislation, a number of employee repre-
sentatives are elected for terms of four years. The existing rep-
resentatives were elected to the Board of Directors in 2008, and
their election term runs until 2012. A description of the Danish
system concerning employee representatives is available at
vestas.com/investor.

The Board of Directors currently consists of 12 members, of
which eight are elected by the General Meeting and four are
elected by and among the employees. An overview of the Board
members is shown on page 35.

in 2009, the General Meeting elected two new Board members:
Håkan Eriksson, who is employed as Group Chief Technology

Officer at Telefonaktiebolaget LM Ericsson and head of Ericsson
Silicon Valley, and Ola Rollén, who is employed as President and

CEO of Hexagon AB. >>

Vestas annual report 2009 | 031

>> All Board members elected by the General Meeting are con-
sidered independent of the company, except Jørn Ankær Thom-
sen, who is associated with one of the law firms that provide legal
advice to the company. Moreover, the employee representatives
cannot be considered independent members due to their employ-
ment with the Vestas Group.

In 2009, the Board of Directors held a total of eight meetings and
atwo-day strategy seminar.

Annually, the Board of Directors visits some of Vestas' facilities
and meets decision-making officials of the region in question.

In 2009, the Board of Directors went to the USA to visit Vestas"
new facilities in Colorado and Vestas Americas' headquarters in
Portland, Oregon. During the visit, the Board of Directors held
meetings with the governors of Colorado and Oregon and the
mayor of Portland.

Assessment of the work performed by the Baard of Directors
Pursuant to the rules of procedure for the Board of Directors, the
Board of Directors must evaluate its work and collaboration once
a year. The evaluation consists of the Chairman conducting a
discussion among the entire Board of Directors, normally taking
place at the Board meeting in connection with approval of the
interim report for the third quarter.

Board committees

The purpose of Vestas' Board committees is to prepare decisions
and recommendations for evaluation and approval by the entire
Board of Directors. The committees are not authorised to make
independent decisions; instead they report and make recommen-
dations to the combined Baard of Directors.

Vestas has established four permanent Board committees. Each
of these consists of three members elected for terms of one year
by and among the Board members.

The chairman of each committee is appointed by the Board for
terms of one year, and the election usually takes place at the
Board meeting held immediately after the General Meeting.

The committees hold the necessary annual number of meetings.
At the request of the committees, other members of manage-
ment may also participate in these meetings.

People & Compensation Committee

The People & Compensation Committee supports the Board on
overall staff-related topics, including assessment of remuner-
ation. In 2009, the committee held five meetings.

Audit Committee
The Audit Committee assists the Board in assessments and con-
trols relating to auditing, accounting policies, systems of internal

 

 

 

controls, financial reporting, procedures for handling complaints
regarding accounting and auditing and the need for an internal
audit function. In 2009, the committee held five meetings.

All members of the Audit Committee meet the definition of inde-
pendency of audit committee members set out in the Danish
Auditors' Act. The chairman also meets the requirements under
the Auditors' Act on accounting qualifications.

Manufacturing & Excellence Committee

The Manufacturing & Excellence Committee supports the Board
in the evaluation of technical matters. The committee also sup-
ports the Board in matters concerning production, including the
ongoing improvements that Vestas Excellence is involved in. In
2009, the committee held four meetings.

Technology Committee

The Technology Committee assists the Board in the evaluation
of technological matters, IPR strategy and product development
plans. In 2009, the committee held five meetings.

Executive Management

The Executive Management of Vestas Wind Systems A/S is
responsible for the day-to-day management of the company,
observing the guidelines and recommendations issued by the
Board of Directors. The Executive Management is also respon-
sible for presenting proposals for the company's overall objective,
strategies and action plans as well as proposals for the overall
operating, investment, financing and liquidity budgets to the
Board of Directors.

Business units

The Vestas Group consists of 14 business units, all of which
report directly to the Executive Management of Vestas Wind
Systems A/S. The presidents of the individual business units are
responsible for the overall and day-to-day management of their
specific business areas.

Each business unit has a board of directors, whose objective is

to ensure collaboration across the Group. Each board consists

of three to six members and includes members of the Executive
Management of Vestas Wind Systems A/S, the Senior Vice Pres-
ident of Group Finance & Operations and a number of employees
of the business units in which the employees have decided to
exercise their rights to elect employee representatives. The
organisational structure of Vestas' sales and production business
units is shown on page 18 in the management report.

Vestas Government
The Vestas Government consists of the Executive Management
and the Presidents of the 14 business units.

The Vestas Government holds a conference call once a week and
government meetings once every quarter with personal atten-
dance. Once every year, Vestas arranges a strategy seminar
attended by the Board of Directors and all Government members.
The Government is responsible for ensuring the implementation
of Vestas' strategy as defined by the Board of Directors in col-
laboration with the Executive Management.

Group staff functions
”The ten Senior Vice Presidents of the group staff functions in
Vestas Wind Systems A/S all report directly to the Executive
Management of Vestas Wind Systems A/S and are responsible
for the overall and day-to-day management of their specific staff
functions. No Senior Vice President has been appointed for the

1003234EogSN06686

group staff function Vestas Excellence, but Henrik Nørremark,
Executive Vice President and CFO, has the overall responsibility.

REMUNERATION

Vestas is a global company based in Scandinavia, which is
reflected in the Group's remuneration principles. Vestas' global
remuneration system for Executive Management, Business Unit
Presidents, Senior Vice Presidents, and other senior employees
is based on Mercer's International Position Evaluation System.
Mercer Reward Surveys are used as the benchmark.

For all other employee groups, locally based statistics are used as
the basis for the remuneration.

The remuneration policy for members of the Board of Directors
and Executive Management of Vestas Wind Systems A/S reflects
the interests of the shareholders and the company, taking into
consideration any specific matters, including the assignments and
the responsibility undertaken. In addition, the remuneration policy
helps to promote long-term goals for safeguarding the company's
interests. The policy can be downloaded at vestas.com/investor.

Remuneration to the Board of Directors

Members of the Board of Directors receive a fixed basic remu-
neration. Board members elected by the employees receive the
same remuneration as the board members elected by the share-
holders.

The Chairman receives a triple basic remuneration and the
Deputy Chairman receives a double basic remuneration for their
extended board duties.

In addition to the basic remuneration, the Board members receive
committee remuneration for sitting on one of the board commit-
tees. This remuneration is determined using the same principles
as for the basic remuneration, and the committee chairman
receives double committee remuneration.

For 2009, Board members' total remuneration amounted to EUR
0.9m, inclusive of committee remuneration. No special fees have
been paid.

The Board members are not comprised by any incentive pro-
gramme (option programme, bonus scheme or similar) or by
Vestas' pension scheme, and in case of a takeover, the directors
will not receive any compensation.

Remuneration to the Executive Management

The Board of Directors believes that a combination of fixed and
performance-based pay to the Executive Managernent helps
ensure that the company can attract and retain key employees.
At the same time the Executive Management is given a further
incentive to create shareholder value through partly incentive-
based pay.

Members of the Executive Management are employed under
executive service contracts, and all terms of their remuneration
are fixed by the Board of Directors.

Members of the Executive Management receive a competitive
remuneration package consisting of three components: a fixed
salary, a bonus and share options.

The fixed salary is based on a market level, the bonus is based on
the results for the year, and the share options focus on retention
and long-term value creation for the shareholders. >>

Vestas annual report 2009 | 033

>> In 2009, a total of EUR 1.4m was paid in salaries to the Executive

Management. In addition, EUR 0.Zm was expensed in bonus and
EUR 0.7m was expensed as share-based payment to the Execu-
tive Management, ref, note 6 to the consolidated accounts.

Based on proposals from the People & Compensation Committee
for the remuneration of the Executive Management, the Chair-
man and Deputy Chairman of the Board of Directors annually
assess and approve the remuneration to ensure that it is in line
with the conditions in comparable companies.

The service contracts for the members of the Executive Manage-
ment contain a 24 month-notice of termination which is normal
for executives in Danish companies. The members of the Execu-
tive Management will not receive any compensation in the event
of termination in connection with a change of ownership of the
company's voting majority or if the company is dissolved through
a merger or demerger. Their notice of termination will, however, be
changed to 36 months.

Share-based incentive programme for 2007 to 2009

In 2007, an option programme for the Executive Management
and selected executives was established for the financial years
2007 to 2009. More information about this option programme is
available in note 30 to the consolidated accounts.

In 2009, the Board of Directors resolved to expand the existing
incentive programme twice in connection with the employment
and appointment of new Presidents and Senior Vice Presidents,
ref. company announcements Nos. 1/2009 of 7 January 2009
and 23/2009 of 27 October 2009.

A total of 53,828 options were issued. The allotment was made
in connection with the Board of Directors" approval of this annual
report. The terms and conditions of the options are equivalent to
the terms and conditions of the options issued in May 2007.

   
 

    

gl

Exercise price

 

Year of Number of Exercise

 

grant options granted (DKK) Period
2007 207,952 380.50 2010-2012
2008 189,002 380.50 2012-2014
2009 183,126 380.50 2013-2015

On exercise of the options, the participants must invest 50 per
cent of the after-tax gain in Vestas shares, which must be held for
at least three years.

Share-based incentive programme for 2010 to 2012

At the Annual General Meeting in 2009, Vestas disclosed that
the company's option programme would be expanded in the
autumn of 2009 to include a larger group of employees. Against
that background, at its meeting in October 2009 the Board of
Directors resolved to set out the detailed guidelines for the incen-
tive programme for the years 2010 to 201 2 før all participants,
including the Executive Management.

034 | Vestas annual report 2009

   

The participants will be allotted options at a present value cor-
responding to a defined percentage of their fixed gross salary for
the 2010 financial year. The total present value is EUR 15.9m.
On exercise of the options, participants reporting directly to the
Executive Management must invest 50 per cent of the after-tax
gain in Vestas shares, which must be held for at least three years.

The exercise price for the options is determined by the People &
Compensation Committee at DKK 320.60, corresponding to the
average stock exchange quotation price on the NASDAQ OMX
Copenhagen (all trades) in the period 11 to 22 January 2010.
Further information about the incentive programme is available in
company announcement No. 23/2009 of 27 October 2009.

Bonus

All Vestas employees have been covered by a bonus programme
since 1 January 2008. The global bonus programme for 2008
built on the Group's targets for EBIT margin, net workinq capital,
customer loyalty, market share and results in the business unit of
each employee.

Based on the results achieved in 2008, bonus of EUR 0.3m was
paid to the Executive Management and EUR 38mto the other
employees in 2009.

Vestas expects the bonus paid out for 2009 to be approx EUR
GOmM.

DANISH CORPORATE GOVERNANCE RECOMMENDATIONS

As a listed company, Vestas must comply with the rules applying
to companies listed on NASDAQ OMX Copenhagen, which include
a national code on corporate governance

Pursuant to clause 4,3 of the "Rules for issuers of shares -
NASDAQ OMX Copenhagen” Danish companies must state how
they address the ”Recommendations for corporate governance"
based on the "comply or explain” principle, The recommendations
specify that it is equally legitimate to provide an explanation or to
comply with a specific recommendation, as the key issue is to cre-
ate transparency in corporate governance matters.

Further information on Vestas" position on each individual recom-
mendation is provided at vestas.com/investor.

THE BOARD OF DIRECTORS OF VESTAS WIND SYSTEMS A/S

Bent Erik Carlsen, Chairman

Torsten Erik Rasmussen, Deputy Chairman
Elly Smedegaard Rex

Freddy Frandsen

Håkan Eriksson

Jørgen Huno Rasmussen

BOARD COMMITTEES

PEOPLE & COMPENSATION COMMITTEE
Bent Erik Carlsen, Chairman

Jørn Ankær Thomsen

Torsten Erik Rasmussen

AUDIT COMMITTEE

Kurt Anker Nielsen, Chairman
Freddy Frandsen

Torsten Erik Rasmussen

Jørn Ankær Thomsen

Kim Hvid Thomsen

Kurt Anker Nielsen

Michael Abildgaard Lisbjerg
Ola Rollén

Sussie Dvinge Agerbo

MANUFACTURING & EXCELLENCE COMMITTEE
Freddy Frandsen, Chairman

Kim Hvid Thomsen

Ola Rollén

TECHNOLOGY COMMITTEE
Bent Erik Carlsen, Chairman
Håkan Eriksson

Jørgen Huno Rasmussen

THE EXECUTIVE MANAGEMENT OF VESTAS WIND SYSTEMS A/S

Ditlev Engel, President and CEO

THE VESTAS GOVERNMENT

Ditlev Engel, President and CEO

Henrik Nørremark, Executive Vice President and CFO
Anders Søe-Jensen, Vestas Offshore

Bjarne Ravn Sørensen, Vestas Control Systems

Finn Strøm Madsen, Vestas Technology R&D

Hans Jørn Rieks, Vestas Central Europe

Jens Tommerup, Vestas China

Juan Araluce, Vestas Mediterranean

Henrik Nørremark, Executive Vice President and CFO

Klaus Steen Mortensen, Vestas Northern Europe
Knud Bjarne Hansen, Vestas Towers

Martha Wyrsch, Vestas Americas

Ole Borup Jacobsen, Vestas Blades

Phil Jones, Vestas Spare Parts & Repair

Roald Steen Jakobsen, Vestas People & Culture
Sean Sutton, Vestas Asia Pacific

Søren Husted, Vestas Nacelles

SENIOR VICE PRESIDENTS FOR THE GROUP STAFF FUNCTIONS

REPORTING TO THE PRESIDENT AND CEO

Morten Albæk, Group Marketing & Customer Insight
Peter C Brun, Group Government Relations

Peter Wenzel Kruse, Group Communications

1003234EogSN06687

REPORTING TO THE EXECUTIVE

VICE PRESIDENT AND CFO

Henrik Hald Hellmuth, Group Treasury

Jan Pilgaard, Group Finance & Operations

John Skat Dalgaard, Group Engagement Office

Jørgen Peter Nielsen, Contract Review

Robert Paul Fritz, Group Quality

Torben Bonde, Group IT

Tommy Rahbek Nielsen, Group Forecasting & Planning

Vestas annual eport 2009 | 035

 

fi WE NEED TO ESTABLISH LONG-TERM, STABLE NATIONAL
SCHEMES THAT PROVIDE THE INDUSTRY WITH THE
OPPORTUNITIES TO PLAN AND INVEST IN EMPLOYEES,
TECHNOLOGY AND PRODUCTION FACILITIES.

Elly Smedegaard Rex

[i WE ARE MAKING Å DEDICATED EFFORT TO KEEP WIND
POWER AT THE TOP OF THE GLOBAL ENERGY AGENDA, AS
MODERN ENERGY IS PRESENTLY THE BEST SOLUTION TO
THE CLIMATE AND ENERGY CHALLENGES.

Bent Erik Carlsen, Chairman

 

 

[i WITH OUR NO, 1 IN MODERN ENERGY STRATEGY, WE INTEND
TO BUILD THE WORLD'S STRONGEST ENERGY BRAND. AS A
SPOKESPERSON FOR QUR INDUSTRY, THIS MEANS THAT WE
MUST CONSOLIDATE OUR LEADERSHIP POSITION.

Torsten Erik Rasmussen

036 | vestas annual report 2009

 

1] IN ORDER TO ACCOMPLISH OUR VISION, THE COST OF ENERGY
MUST BE REDUCED, I.E. THE PRICE PER MWH PRODUCED.
VESTAS' 6.0 MW OFFSHORE TURBINE, WHICH IS CURRENTLY
BEING DEVELOPED, MUST DRAMATICALLY REDUCE THE COST OF
ENERGY COMPARED WITH ALL KNOWN COMPETING PRODUCTS.

Håkan Eriksson

[1 OUR WIND, OIL AND GAS VISION UNDERLINES
QUR AMBITION OF ASSUMING LEADERSHIP
INTHE EFFORTS TO MAKE WIND AN ENERGY
SOURCE ON A PAR WITH FOSSIL FUELS.

Freddy Frandsen

 

II OVER THE PAST 25 YEARS, WE HAVE IMPROVED THE
EFFICIENCY OF OUR WIND TURBINES BY A FACTOR OF
100. WE HAVE BY FAR THE LARGEST DEVELOPMENT
DEPARTMENT IN THE WIND POWER INDUSTRY, AND
EVERY DAY WE SEEK TO ENHANCE THE RELIABILITY
AND OUTPUT OF OUR WIND POWER PLANTS.

Jørgen Huno Rasmussen

Vestas annua! report 2009 | 037

1003234EogSN06688

li CUSTOMER LOYALTY I!S IMPORTANT. VESTAS' FUTURE
DEPENDS ON LOYAL AND SATISFIED CUSTOMERS.
CONSEQUENTLY, WE NEED TO STEP UP QUR CUSTOMER
RELATIONS AT ALL LEVELS, AND WE ENDEAVOUR TO BECOME
A MORE FLEXIBLE AND OPEN COLLABORATION PARTNER.

Kim Hvid Thomsen

li IN SPITE OF THE CREDIT SQUEEZE, VESTAS ACHIEVED
ITS BEST-EVER FINANCIAL PERFORMANCE, THEREBY
CONSOLIDATING ITS FOUNDATION FOR ACCOMPLISHING
TRIPLE15 - AMONG OTHER THINGS THROUGH SIGNIFICANT
INVESTMENTS IN TECHNOLOGY AND PRODUCT DEVELOPMENT.

Kurt Anker Nielsen

 

fi THROUGH IMPROVED PRODUCT QUALITY
AND MUCH CLOSER CUSTOMER RELATIONS,
VESTAS PROVIDES BUSINESS CASE CERTAINTY,
VESTAS KEEPS ITS PROMISES.

Jørn Ankær Thomsen

038 | vestas annual report 2009

IT SAFETY FOR THE EMPLOYEES IS ALWAYS GIVEN TOP

PRIORITY AT VESTAS. CONSEQUENTLY, WE WORK WITH

DEDICATION AND STRUCTURE TO ENHANCE SAFETY
AND REDUCE THE NUMBER OF INJURIES - WITH THE
ULTIMATE GOAL OF AVOIDING INJURIES ALTOGETHER.

Ola Rollén

 

 

[I TRIPLE15 IS AMBITIQUS, BUT WITH OUR FINANCIAL
PRIORITIES - EBIT MARGIN, NET WORKING CAPITAL
AND REVENUE - WE HAVE PREVIOUSLY PROVED THAT
IT IS POSSIBLE TO ACHIEVE AMBITIOUS GOALS TO THE
BENEFIT OF THE COMPANY AND OUR SHAREHOLDERS.

Michael Abildgaard Lisbjerg

1003234EogSN06689

Hi AT VESTAS, MANAGEMENT IS ALWAYS RESPONSIBLE
FOR SAFETY, BUT EACH EMPLOYEE ALSO SHARES
INTHE RESPONSIBILITY. IN ALL WORK PROCESSES,
LACK OF CONSIDERATION CAN EASILY LEAD TO
UNNECESSARY RISKS.

Sussie Dvinge Agerbo

Vestas annual report 2009 1039

COMPETENCIES AND FIDUCIARY POSITIONS OF

THE MEMBERS OF THE BOARD OF DIRECTORS

The members of the Board of Directors have informed the
company of the following competencies and fiduciary positions
in Danish and foreign companies and organisations.

Bent Erik Carlsen (b. 1945), Chairman

Director,

B. Carlsen Shipping ApS (Denmark) 2008 -.

Member of the Board since September 1996 and re-elected
since 1996, latest in 2009, The election term expires in 2010.

Competencies

Education
1972 B. Com. (marketing),

Copenhagen Business School (Denmark)
1978 B. Com. (management accounting),

Copenhagen Business School (Denmark)
- Various management courses INSEAD (Denmark)

Former positions
1969-1972 Sales Manager, Colon Emballage A/S (Denmark)
1972-1979 Managing Director,

Eurocard Denmark A/S (Denmark)
1979-1981 Managing Director,

Winther & Heide Eftf. A/S (Denmark)
1981-1983 Member of the European Management,

Air Liquide (France)
1983-1988 Managing Director,

Aktieselskabet Dansk lit- & Brintfabrik (Denmark)
1988-1990 Managing Director, Fro Saldatura S.A. (Italy)
1990-1992 Managing Director,

L' Air Liquide Belge sa-nv (Belgium)
1992-1999 Managing Director, Hede Nielsen A/S (Denmark)
1999-2002 Managing Director,

Air Liquide Scandinavia (Denmark)
2002-2008 Group Executive Vice President

A.P Møller-Mærsk A/S (Denmark)

Fiduciary positions

Chairman of the Boards of: Maersk Container Industry (China),
Maersk Container Industry A/S (Denmark) and Rosti A/S
(Denmark).

Deputy Chairman of the Board of: Dansk Supermarked A/S
(Denmark).

Member of the Boards of: F. Salling A/S (Denmark), EF, Salling
Holding A/S (Denmark), Investeringsforeningen Valueinvest
Danmark (Denmark), Norfolkline Holding BY. (The Netherlands),
Odense Staalskibsværft A/S (Denmark) and Svitzer A/S
(Denmark).

Positions of trust

Chairman of: Vestas Wind Systems A/S' People & Compensation
Committee (Denmark) and Vestas Wind Systems A/S' Technology
Committee.

independency
Complies with the Committee on Corporate Governance's
definition of independency.”

040 | Vestas annual report 2ZUUY

Torsten Erik Rasmussen (b. 1944), Deputy Chairman
Managing Director and CEO,

Morgan Management ApS (Denmark) 1997 -.

Member of the Board since January 1998 and re-elected since
1998, latest in 2009. The election term expires in 2010.

Competencies
Education
1961-1964 Commercial education,
Dalhoff Larsen & Horneman A/S (Denmark)
1964-1966 Military service, Royal Danish Life Guards (Denmark)
and discharged as First lieutenant (R) 1967
1972 MBA, IMEDE, Lausanne (Switzerland)
1985 International Senior Managers" Program,
Harvard Business School! (USA)

Former positions
1967-1971 Department Manager and later Director,
Northern Soft- & Hardwood Co. Ltd. (Congo)
1973 Management Assistant,
LEGO System A/S (Denmark)
1973-1975 Finance and Administration Director,

LEGOLAND A/S (Denmark)
1975-1977 Logistics Manager, LEGO System A/S (Denmark)
1977 Vice President, logistics,

LEGO System A/S (Denmark)

1978-1980 President and CEO,
LEGO Overseas A/S (Denmark)

1981-1997 Executive Vice President, Operations and member
of the Group Management, LEGO A/S (Denmark)

Fiduciary positions

Chairman of the Boards of: Ball ApS (Denmark), Ball Holding ApS
(Denmark), Bali Invest ApS (Denmark), CPD Invest ApS (Denmark),
EVO Invest A/S (Denmark), Oase Outdoors ApS (Denmark) and
Outdoor Holding A/S (Denmark).

Deputy Chairman of the Boards of: A/S Det Østasiatiske
Kompagni (Denmark) and TK Development A/S (Denmark).

Member of the Boards of: Acadia Pharmaceuticals A/S
(Denmark), Acadia Pharmaceuticals Inc. (USA), Coloplast A/S
(Denmark), ECCO (Thailand) Co. Ltd. (Thailand), ECCO (Xiamen)
Co. Ltd. (China), ECCO Sko A/S (Denmark), ECCO Slovakia a.s.
(Slovakia), Morgan Invest ApS (Denmark), PT ECCO Indonesia
(Indonesia), Schur International A/S (Denmark), Schur
International Holding A/S (Denmark), Vola A/S (Denmark) and
Vola Holding A/S (Denmark).

Positions of trust

Member of: Acadia Pharmaceuticals Inc,'s Compensation
Committee (USA), Acadia Pharmaceuticals Inc/'s Corporate
Governance Committee (USA), Vestas Wind Systems A/S"
People & Compensation Committee (Denmark) and Vestas Wind
Systems A/S' Audit Committee (Denmark).

Independency
Complies with the Committee on Corporate Governance's
definition of independency "

 

Elly Smedegaard Rex (b. 1955)

Service assistant,

Vestas Wind Systems A/S (Denmark) 1999 —.

Elected by company employees.

Member of the Board since April 2008. The election term expires
in2012.

Competencies
Education
1973 Dental nurse (Denmark).

Former positions
1974 Shop assistant, Lem El (Denmark)
Shop assistant, Stop (Denmark)
1980-1983 Host, Ølstrup parish community centre (Denmark)
1983-1985 Dental nurse, Tandlægerne i Nygade (Denmark)
Dental nurse, Tandlæge Bidstrup (Denmark)
1986 Host, Ølstrup parish community centre (Denmark)
1987-1990 Office manager, Sommerland Vest (Denmark)
1991-1993 Dental nurse, Tandlægerne i Nygade (Denmark)
1993-1994 Office manager, Sommerland Vest (Denmark)
1995-1996 Kitchen assistant, ROFI-Centret Ringkøbing
(Denmark)
Kitchen assistant, Vedersø Mejerikro (Denmark)
1997-1998 Office manager, Troldeparken Sommerland Vest
(Denmark)
1998-1999 Kitchen assistant, ROFI-Centret Ringkøbing
(Denmark)

Independency
Does not comply with the Committee on Corporate Governance's
definition of independency” due to employment with Vestas.

 

Freddy Frandsen (b. 1944)

Director.

Member of the Board since April 2004 and re-elected since
2004, latest in 2009. The election term expires in 2010.

Competencies
Education
1967 Electronic Engineer,
Engineering College of Aarhus (Denmark)
- Various management courses INSEAD (Denmark)

Former positions
1967-1973 Engineer, Industry Department,

Bruun & Sørensen A/S (Denmark)
1973-1987 Divisional Director, Skako A/S (Denmark)
1987-1989 Managing Director,

Kverneland-Danmark A/S (Denmark)
1989-1993 Managing Director, Pedershaab A/S (Denmark)
1993-2005 Managinq Director,

Aalborg Industries A/S (Denmark)

Fiduciary positions
Chairman of the Board of: Hans Følsgaard A/S (Denmark).

Member of the Boards of: Aktieselskabet af 1. november

1998 (Denmark), Anpartsselskabet af 8. februar 2005
(Denmark), Odense Staalskibsværft A/S (Denmark), Polaris
Invest II ApS (Denmark), Polaris Management A/S (Denmark),
Svejsemaskinefabrikken Migatronic A/S (Denmark) and Aalborg
University (Denmark).

1003234EogsSN06690

Positions of trust:
Chairman of: Vestas Wind Systems A/S' Manufacturing &
Excellence Committee.

Member of: The non-profit foundation: Utzon Foundation
(Denmark), Følsgaard Fonden (Denmark), Nordsøen Forskerpark/
Ocenarium (Denmark) and Vestas Wind Systems A/S' Audit
Committee (Denmark).

Independency

Complies with the Committee on Corporate Governance's
definition of independency”), and complies with the Danish audit
law's definition of audit committee members' independency)).

Håkan Eriksson (b. 1961)

Group Chief Technology Officer, Telefonaktiebolaget LM Ericsson
(Sweden) and Head of Ericsson Silicon Valley (USA) 2009 —.
Member of the Board since March 2009. The election term
expires in 2010.

Competencies

Education

1981-1985 MSc engineering (electrical), Linkdping Institute of
Technology, Linkdping University (Sweden)

2005 Honorary PHD, Linkåping Institute of Technology,
Linkåping University (Sweden)

Former positions

1986-1992 Employed with Ericsson Radio Systems AB
(Sweden)

1992-1995 Manager, Systems Research and Development
department, Ericsson Radio Systems AB (Sweden)

1995-1997 Director, Systems Design and Management
Ericsson Research Canada (Canada)

1997-1998 Vice President, Business and Technology
Development, Ericsson Radio Systems AB
(Sweden)

1998-2003 Vice President and General Manager, Ericsson
Research, Ericsson Radio Systems AB (Sweden)

2003-2009 Senior Vice President and General Manager,
Research & Development, Telefonaktiebolaget
LM Ericsson (Sweden)

Fiduciary positions
Member of the Boards of: Anoto Group AB (Sweden) and
Linkdping University (Sweden).

Positions of trust

Member of: Kungliga Ingenjårsvetenskapsakademien (Sweden),
Statens IT Råd (Sweden) and Vestas Wind Systems A/S' Technology
Committee (Denmark).

Independency
Complies with the Committee on Corporate Governance's
definition of independency.”

 

>>

Vestas annual repart 2009 1041

 

>> Jørgen Huno Rasmussen (b. 1952)

President and CEO,

FLSmidth & Co. A/S (Denmark) 2004 -

Member of the Board since January 1998 and re-elected since
1998, latest in 2009. The election term expires in 2010.

Competencies

Education
1976 MSc engineering (civil),
the Technical University (Denmark)
1977 B. Com. (organisation),
Copenhagen Business School (Denmark)
1980 Lich.tech,, the Technical University (Denmark)

Former positions
1979-1982 Project Manager,

A. Jespersen & Søn A/S (Denmark)
1982-1983 Manager, Industrial Construction,

Chr. fslef & Co. A/S (Denmark)
1983-1986 Department Manager,

H. Hoffmann & Sønner A/S (Denmark)
1986-1988 Director of International Operations,

H. Hoffmann & Sønner A/S, (Denmark)
1988-2003 Managing Director, Hoffmann A/S (Denmark)
2000-2003 Director and member of the Group Management,

Veidekke ASA (Norway)

Fiduciary positions

Chairman of the Boards of. Aktieselskabet af 1. januar 1990,
Valby (Denmark), FFE Invest A/S (Denmark), FLS miljø A/S
(Denmark), FLS Plast A/S (Denmark), FLSmidth Dorr-Oliver Eimco
Denmark ApS (Denmark), FLSmidth Finans A/S (Denmark),
FLSmidth Inc. (USA), FLSmidth Private Ltd. (India), FLSmidth
Materials Handling A/S (Denmark), FLSmidth Minerals Holding
ApS (Denmark) and SLF Romer XV Ap5 (Denmark).

Deputy Chairman of the Board of: Cembrit Holding A/S
(Denmark).

Member of the Board of- LFI A/S (Denmark).

Positions of trust

Member of: The General Council of the Confederation of Danish
Industries (Denmark), the Lundbeck foundation (Denmark), the
representatives of the Tryghedsgruppen (Denmark), the Board of
the Copenhagen Industries Employers' Federation (Denmark) and
Vestas Wind Systems A/S' Technology Committee (Denmark)

Independency
Complies with the Committee on Corporate Governance's
definition of ndependency. ”

Jørn Ankær Thomsen (b. 1945)

Attorney at Law and partner,

Gorrissen Federspiel (Denmark) 1976 -

Member of the Board since April 2004 and re-elected since
2004, latest in 2009, The election term expires in 2010

Competencies

Education
1970 Master of Law, University of Copenhagen (Denmark)
Former positions

1970-1974 Deputy judge and Junior associate (Denmark) and
Lawyer in 1974

042 fe ta ammatrepørt Tage

Fiduciary positions

Chairman of the Boards of: Aida A/S (Denmark), Aktieselskabet
af 1. juli 2009 A/S (Denmark), Aktieselskabet af 26

november 1984 (Denmark), Aktieselskabet Schouw & Co.
(Denmark), Carlsen Byggecenter Løgten A/S (Denmark),

Carlsen Supermarked Løgten A/S (Denmark), Danish Industrial
Equipment A/S (Denmark), Danske Invest Management A/S
(Denmark), DB 2001 A/S (Denmark), Den Professionelle Forening
Danske Invest institutional (Denmark), F.M.J. A/S (Denmark),
Fibertex A/S (Denmark), Fåmandsforeningen Danske Invest
Institutional (Denmark), GAM Holding A/S (Denmark), GAM Wood
A/S (Denmark), Givesco A/S (Denmark), Investeringsforeningen
Danske invest (Denmark), Investeringsforeningen Danske

Invest AlimenBolig (Denmark), iInvesteringsforeningen Danske
Invest Select (Denmark), Kildebjerg Ry A/S (Denmark), Krone
Erhvervsinvestering A/S (Denmark), Krone Kapital A/S (Denmark),
Løgten Midt A/S (Denmark), Martin Professional A/S (Denmark),
OPA Ortopædisk Privathospital Aarhus A/S (Denmark),
Placeringsforeningen Profil Invest (Denmark), Schouw Finans
A/S (Denmark), Specialforeningen Danske Invest (Denmark),
Søndergaard Give A/S (Denmark) and Th. C. Carlsen, Løgten A/S
(Denmark).

Member of the Boards of: A/S P. Grene (Denmark), ASM Foods AB
(Sweden), Biomar Group A/S (Denmark), Carletti A/S (Denmark),
Dan Cake A/S (Denmark), Ejendomsselskabet Blomstervej 16
A/S (Denmark), GFK Holding ApS (Denmark), GEFKJURA 883 A/S
(Denmark), Givesco Bakery A/S (Denmark), Hydra-Grene A/S
(Denmark), Hydra-Grene Holding A/S (Denmark), Krone Kapitaf I
A/S (Denmark), Krone Kapital II A/S (Denmark) and Krone Kapital
Il A/S (Denmark).

Positions of trust

Member of: Jens Eskildsen og hustru Mary Antonie Eskildsen
memorial foundation (Denmark), Købmand Th. C. Carlsens Memorial
foundation (Denmark), Otto Mønsteds Kollegium (Denmark) and
Vestas Wind Systems A/S' People & Compensation Committee

Independency

Does not comply with the Committee on Corporate Governance's
definition of independency due to connection to one of the law
firms acting as consultant to the company.

Kim Hvid Thomsen (b. 1963)

Senior Shop Steward,

Vestas Nacelles A/S (Denmark) 1985 -.

Elected by group employees.

Member of the Board since May 1996 and re-elected since
1996, latest in 2008. The election term expires in 2012

Competencies

Education
1984 Industry technician (Denmark)
Former pusituns

1981-1984 Industry technician trainee,
Tim Maskinfabrik (Denmark)
1985 Industry technician K.P Komponenter (Denmark)

Fiduciary positions
Deputy Chairman of the Board of Metal Skjern-Ringkøbing
(Denmerk).

Member of the Board of: Uddannelsescenter Ringkøbing-Skjern
(Denmark)

 

Positions of trust:
Member of: Vestas Wind Systems A/S' Manufacturing &
Excellence Committee (Denmark).

Independency
Does not comply with the Committee on Corporate Governance's
definition of independency! due to employment with Vestas.

Kurt Anker Nielsen (b, 1945)

Director.

Member of the Board since April 2006 and re-elected since
2006, latest in 2009. The election term expires in 2010.

Competencies

Education

1972 MSc (Economics and Business Administration),
Copenhagen Business School (Denmark)

Former positions
1972-1973 Business Economist, Carlsberg A/S (Denmark)
1973-1974 Management Consultant, Booz, Allen and
Hamilton of Scandinavia (Denmark)
1974-1977 Economist, Novo Industri A/S (Denmark)
1977-1984 Head of Corporate Planning,
Novo Industri A/S (Denmark)
1984-1985 Director, Corporate Planning and Communications,
Novo Industri A/S (Denmark)
1985-1989 Vice President Corporate Finance,
Novo Industri A/S (Denmark)
1989-2000 Chief Financial Officer,
Novo Nordisk A/S (Denmark)
1996-2000 Deputy CEO, Novo Nordisk A/S (Denmark)
2000-2003 CEO, Novo A/S (Denmark)

Fiduciary positions
Chairman of the Board of: Reliance A/S (Denmark).

Deputy Chairman of the Board of: Novozymes A/S (Denmark).

Member of the Boards of: Lifecycle Pharma A/S (Denmark), Novo
Nordisk A/S (Denmark), Novo Nordisk Fonden (Denmark) and
ZymoGenetics Inc. (USA).

Positions of trust

Chairman of: LifeCycle Pharma A/S' Audit Committee (Denmark),
Novo Nordisk A/S' Audit Committee (Denmark), Novozymes A/S'
Audit Committee (Denmark), Vestas Wind Systems A/S' Audit
Committee (Denmark) and ZymoGenetics Inc.'s Audit Committee
(USA).

Independency

Complies with the Committee on Corporate Governance's
definition of independency.' Complies with the Danish audit
law's definition of audit committee members' independency”'and
demand for qualifications within financial accounting.

Michael Abildgaard Lisbjerg (b. 1974)

Skilled Worker - Production,

Vestas Nacelles A/S (Denmark) 2001 -—.

Elected by group employees.

Member of the Board since April 2008. The election term expires
in2012.

Competencies

Education

1995 Auto Mechanic (Denmark)

1996-1999 Military service, Royal Danish Life Guards
(Denmark) and discharged as technical sergeant

1998 Higher Preparatory Course - single subject
(Denmark)

Former positions
1999-2001 Nordisk Dæk Import A/S (Denmark)

Independency
Does not comply with the Committee on Corporate Governance's
definition of independency due to employment with Vestas.

 

Ola Rollén (b. 1965)

President and CEO,

Hexagon AB (Sweden) 2000-—.

Member of the Board since March 2009. The election term
expires in 2010.

Competencies
Education
1989 BSc (Econ), Stockholm University (Sweden)

Former positions

1990-1998 CEO and member of the Board of Directors,
Kanthal AB (Sweden)

1998-1999 Executive Vice President,
Avesta Sheffield Ltd (England)

1999-2000 CEO, Sandvik Materials Technology and
member of Group Management, Sandvik AB
(Sweden)

Positions of trust
Member of: Vestas Wind Systems A/S' Production & Excellence
Committee (Denmark).

Independency
Complies with the Committee on Corporate Governance's
definition of independency.”

Sussie Dvinge Agerbo (b. 1970)

People & Culture employee,

Vestas Wind Systems A/S (Denmark) 1990 —.

Elected by company employees.

Member of the Board since November 2005 and re-elected since
2005, latest in 2008. The election term expires in 201 2.

Competencies

Education

1989-1992 Commercial upper secondary examination
(Denmark) and office assistant

1995 Language secretary, English, Open education at
HIH Herning (Denmark)

1997 Language secretary, German, Open education at
HIH Herning (Denmark)

2003 IT Administrator, Ringkøbing Business College/

Vestjysk Business College, Skjern (Denmark)

Independency
Does not comply with the Committee on Corporate Governance's
definition of independency” due to employment with Vestas.

1) The Committee on Corporate Governance's definition of independency is available at vestas com/investor.

2) The Danish audit law's definition of audit members' independency is available at vestas com/investor.

1003234FogSN06691

Vestas annual report 2009 | 043

 

 

< , 2
. |

. 2 '

i

 

 

 

COMPETENCIES AND FIDUCIARY POSITIONS OF

THE MEMBERS OF THE EXECUTIVE MANAGEMENT

The members of the Executive Management have informed the
company of the following competencies and fiduciary positions in
other Danish and foreign companies and organisations.

 

Ditlev Engel (b. 1964)

President and CEO,

Vestas Wind Systems A/S (Denmark) 2005 -.

Member of the Executive Management since May 2005.

Competencies

Education

1990 Bachelor of Commerce (Management accounting),
Copenhagen Business School (Denmark)

1997 General Management Program - INSEAD (France)

Former positions

1990-1992 Vice President of Hempel Hong Kong Ltd.
(Hong Kong)

1992-1995 Vice President of Hempel! Hai Hong Ltd.
(Hong Kong)

1995-1997 President of Hempel Norge AS (Norway)

1997-1999 President of Hempel Hai Hong Ltd. (China)

1999-2000 Executive Vice President of Hempel A/S
(Denmark)

2000-2005 Group President and CEO of Hempel A/S
(Denmark)

Positions of trust

Member of; The General Council of the Confederation of Danish
Industries (Denmark), the Industrial Policy Committee of the
Confederation of Danish Industries (Denmark), the International
Advisory Panel (IAP) on Energy of the Singaporean Ministry of
Trade and Industry (Singapore) and the Industry Advisory Group
of the International Energy Agency (France).

Industrial adviser to: EQT (Sweden).

1003234EogSN06692

Henrik Nørremark (b. 1966)

Executive Vice President and CFO.

Vestas Wind Systems A/S (Denmark) 1.993 —,

Member of the Executive Management since March 2004.

Competencies

Education

1991 Bachelor of Commerce (Management accounting),
Herning Business School (Denmark)

Former positions

1986-1991 Auditor with Krøyer Pedersen (Denmark)

1991-1993 Financial Controller at Wind Turbine Maintenance
Corporation (Denmark)

1993-1994 Financial Controller at Vestas Wind Systems A/S
(Denmark)

1994-1995 Financial Controller at Vestas - American Wind
Technology, Inc. (Denmark)

1995-1999 Group Financial Controller at Vestas Wind
Systems A/S (Denmark)

1999-2004 Managing Director of Vestas - American Wind
Technology, Inc. (USA)

Vestas annual report 2009 | 045

 

PRESIDENTS OF THE GROUP'S BUSINESS UNITS

 

Anders Søe-Jensen, Vestas Offshore. Bjarne Ravn Sørensen, Vestas Control Finn Strøm Madsen, Vestas Technology R&D
Joined Vestas in 2006. Systems. Joined Vestas in 1998. Joined Vestas in 2005.

    

Klaus Steen Mortensen, Vestas Northern Knud Bjarne Hansen, Vestas Towers. Martha Wyrsch, Vestas Americas.
Europe. Joined Vestas in 2007. Joined Vestas in 1989. Joined Vestas in 2009.

 

Sean Sutton, Vestas Asia Pacific. Søren Husted, Vestas Nacelles.
Joined Vestas in 2009. Joined Vestas in 1991.

046 | vostas annual report 2009

 

   

Hans Jørn Rieks, Vestas Central Europe. Jens Tommerup, Vestas China. Juan Araluce, Vestas Mediterranean.
Joined Vestas in 1993. Joined Vestas in 2009. Joined Vestas in 2007.

      

Y 14
ie ;
Ole Borup Jakobsen, Vestas Blades. Phil Jones, Vestas Spare Parts & Repair. Roald Steen Jakobsen, Vestas People &
Joined Vestas in 1995. Joined Vestas in 2009. Culture. Joined Vestas in 2003.

Vestas annual report 2009 | 047

1003234EogSN06693

 

1003234EogSN06694

Non-financial issues

051
052
053
055
057
058
060
061

Clobal Compact

Safety first

Ås green as it gets

Code of Conduct

Non-financial highlights for the Group
Global Compact's ten principles
Accounting policies

The independent auditor's statement

Non-financial issues

   
    

8

Nacelle assembly
factories

,

Warehouse
and supply
centres

IN

SES taler a tas
Fans

8

Component
factories

tonnes of CO» was emitted by Vestas in 2009

49%

of Vestas' total
energy consumption
in 2009 was green

ØBAL Co
DD S KEN

SÆGRYS VESTAS JOINED
"Ray,
Erlen UNR, THE GLOBAL COMPACT
and controls 4
factories Syse IN 2009
WE SUPPORT
Blade SITE DESCRIPTIONS FOR.
factories CODE OF CONDUCT

VESTAS' MAJOR ACTIVITIES
ARE AVAILABLE AT
VESTAS.COM

Updated global principles have
been rotled out in 2009 in future,
all new employees will be trained

2 in Code of Conduct.

Tower
factories

 

   

reduction in incidence
of industrial injuries
from 2008 to 2009

0%

of a V90-3.0 MW turbine

 

”salayeter.
» Workingsaiety
emplome

    

  

can be recycled today

163 million

tonnes of CO» will be saved by the turbines
produced and shipped by Vestas in 2009

 

050 | veste ammwal reput 2009

 

GLOBAL COMPACT

The challenges we face as a society call for solutions and dedi-
cated efforts by many different players with the common aim
of striving for a more balanced world. Vestas thus continuously
works on improving its interaction with all its stakeholders.

To Vestas, lowest Cost of Energy involves wind power consist-
ently becoming increasingly competitive, but also that wind
power should have as little impact as possible on the environ-
ment, the climate, Earth's resources and the surroundings in gen-
eral. In this way, wind power benefits not only Vestas' customers,
employees and shareholders, but the whole of society in general.

Energy is a prerequisite for growth and prosperity throughout
the world. There are currently 1.5 billion people without access
to electricity. During the next generation, the world's population
will grow by two billion, and everyone will want to have unlimited
access to electricity.

Wind power is part of the solution to this massive challenge be-
Cause it is financially competitive, predictable, local, fast and clean.

Today's wind power is financially competitive compared with the
conventional forms of energy, many of which are being depleted.
Wind power is predictable because wind is free and, over longer
periods of time, blows steadily. Because wind power is local, it
reduces dependence on imported energy. Wind power can be
installed quickly and on a large scale, and it emits no hazardous
particles or greenhouse gases. Furthermore, most of the materials
used in a wind turbine can be recycled. Finally, wind power creates
many jobs, thus acting as a direct catalyst for growth and prosperity.

Being the market leader, Vestas has put wind power at the top of
the global energy agenda, and we will continue our efforts to dis-
seminate knowledge about wind to all corners of the Earth now
and in the future.

 

In September 2009, we joined the UN Global Compact. Hence-
forth, Vestas will therefore on a quarterly basis report on its
achievements in areas covered by the Global Compact. The most
important areas are:

- Safety first
Vestas is building a world-class safety culture.

- Ås green as it gets
Vestas' production and products must be as green as possible.

- Code of Conduct
Vestas' employees and business partners must know what is
correct Vestas behaviour.

All areas require a dedicated effort by all Vestas employees
throughout the world. Through close and consistent manage-
ment follow-up on a level with financial reporting from the busi-
ness units to the Vestas Government, we will make sure that we
reach our goals.

As the many initiatives are incorporated into processes and
routines in all parts of Vestas, local departments are being set
up to be in charge of sustainability. New initiatives will initially be
managed centrally by Vestas People & Culture. Each of our 14
business units currently have their own environment, health and
safety organisation.

We will continue our sustainability efforts and our work with the
ten Global Compact principles with undiminished dedication in
2010.

Ditlev Engel
President and CEO

 

SAFETY FIRST

Vestas is building a world-class safety culture with the ultimate
goal of zero accidents. Our customers demand it, and our employ-
ees are entitled to it, Consequently, the incidence of industrial
injuries is a Component of Vestas' global bonus scheme. As
Vestas is itself only a smal! part of the supply chann, reguire-
ments, advice and guidance to many suppliers are being inten-
sified in order for them to provide safer workplaces.

Vestas' comprehensive management training programme is
based on five safety principles:

+ All industrial injuries can be prevented
The ultimate goal of avoiding industrial injuries altogether is a
realistic goal, which Vestas is aiming to achieve by giving top
priority to safety no matter what the context.

- Every hazard can be managed
It is impossible to eliminate all risks at a workplace, but meticu-
lous mapping of potential risks and subsequent disciplined
planning and execution of the work process can make the work-
place safe.

- Management is accountable for safety
Management is always accountable for the safe execution of
work processes, irrespective of level. Ail managers Must person-
ally lead by example.

- People are the most important component in a safety effort
All employees should actively think and act under the "Safety
first” principle.

- Working safely is a condition of employment at Vestas
All employees must follow Vestas' safety instructions to ensure
personal safety and the safety of others.

For more than ten years, Vestas has worked systematically to
make the company a safe workplace. Physical facilities and tools,
manuals and instructions, education and training as well as plan-
ning and organisation combined with training in personal leader-
ship, behaviour, safety waiks and controls form the cornerstone
of safety endeavours at all locations.

The results speak for themselves: The incidence of industrial
injuries per one million working hours was 8.1 in 2009, declin-
ing 48 per cent from 2008 which is a significant improvement.
The incidence rate has fallen by 76 per cent from 33.8 industrial

injuries per one million working hours in 2005.

In 2010, the target is to achieve an incidence of 7.0 industrial
injuries per one million working hours and for 201 2, the target is
3.0 or less

Health & safety management system

Reports on and measures to prevent injuries build on Vestas"
OHSAS 18001 certification from 2000. In 2009, al! Vestas units
were certified with the exception of the factory in Hohhot, Inner
Mongolia, China. Vestas' units must be certified within six months
after commencing operations. At the end of 2009, 97 per cent of
all Vestas' employees worked at certified locations.

 

 

  

  
  

    
   

   

 

 

 

 

Ø rå
dy 3 ai
Si i: 9:
Så Sd =
må BØ Er

BOE 3 39)
fe GÅ =4
dl M sæ N aef 2

3) | (94 Ed

> 4 S fg
SÅ 3 S

(23 i) 3 i

 

 

052 | Vestas annual report 2009

ændr)

 

30
25 | 71
20 =
15

10

   

 

 

 

 

 

2007

 

2005 2006 2008 2009

|

 

AS GREEN AS IT GETS

Vestas' production and products must be as green as possible,
Partly to save money for expensive raw materials and energy,
partly because ”green"” will be a future strategic competitive
parameter,

Through recycling in Vestas' production and recycling of materi-
als from dismantled wind turbines as well as production of more
MWh per kilogram wind turbine, Vestas seeks to reduce its use of
Earth's limited resources. At the same time, Vestas minimises its
sensitivity to unstable raw materials prices.

The long-term objective is wind turbines built from easily access-
ible and renewable materials. This objective can only be accom-
plished through close collaboration with the many suppliers.

For more than ten years, Vestas has prepared life cycle assess-
ments. Through five phases of the lifetime of a wind turbine from
cradle to grave, these assessments identify the wind turbine's
greatest environmental impact and measures to reduce such
impact:

- raw materials and suppliers

- Vestas' production

- transport and installation

- operation and service over 20 years
» dismantling

Cost of Energy
Steel and cast iron account for about 85 per cent of the weight
of a V90-3.0 MW wind turbine, the total weight of which is up to

ENERGY PRODUCTION DURING THE LIFECYCLE OF A WIND TURBINE

A
pE
ccm BUD
TT ' ] bd
ey Tone oa

 

 

Landfill/ < Waste
Incineration | |
NZ
Re
16)
Recycling

!
27% |

  

Raw materials Suppliers
and resources

33%

 

=22%

350 tonnes. To this comes a concrete foundation of some 1,200
tonnes, and it requires ten lorries with pilot cars to transport each
wind turbine, Many turbines also need to be transported by ship
and train, and the final installation requires a number of mobile
cranes. Wind turbine production is thus very material and trans-
port-intensive, requiring much energy.

At Vestas, which currently controls 9 per cent of its total energy
consumption during the lifetime of a wind turbine, efforts are
dedicated to reducing the consumption of water and energy
and the production of waste. Suppliers of components and raw
materials account for 83 per cent of the energy consumption,
and transport and installation account for 8 per cent.

The greater the output relative to weight - MWh per kilogram

of wind turbine - the more effectively Vestas exploits the raw
materials used to manufacture a wind turbine. In this way, Vestas
increases its positive contribution to reducing emissions of haz-
ardous particles and greenhouse gases. Measured in terms of
MWh per kilogram of wind turbine, the new V1 12-3.0 MW turbine
is thus more than 20 per cent more effective than the compara-
ble V90-2.0 MW turbine.

Ås renewable energy becomes more widespread, the environ-
mental impact from the energy used by suppliers will gradually
be reduced. The biggest effect will be achieved in iron ore mining
and steel processing.

80 per cent of a V90.3.0 MW turbine can be recycled, and after
less than seven months, the wind turbine is energy-neutral, which
means that it will contribute to reducing carbon emissions for >>

Transport and Renewable
installation energy

23% m271833%0

The figure shows the overall activities during the lifecycle of a wind turbine from extraction of raw materials and consumption of resources
to the final dismantling process. Positive values indicate energy production and recycling, primarily of steel. Negative values indicate energy

consumption.

, 1003234EogSN06696

Vestas annual report 2009 | 053

>> more than 19 years During its lifetime, the V90-3.0 MW wind

turbine only emits 5 grams of CO; per KWh, deriving from produc-
tion and installation of the turbine.

By comparison, an effective modern coal-fired power plant emits
790 grams of CO. per kWh. Over the years, the difference grows
to more than 200,000 tonnes of CO. for a V90-3,0 MW offshore
turbine. The average annual CO, emission per capita in OECD
countries is approx 1 1 tonnes.

Metals represent a large share of Vestas' product The consump-
tion of metal is highly dependent on the degree of insourcing at
Vestas' foundries and tower factories At the tower factories, an
increase in the degree of insourcing and thus metal consumption
was recorded in 2009, and that is the main reason for the 8 per
cent increase in overall consumption of metals.

Water consumption

Vestas uses water In its production process, especially cool-

ing water at the four foundries In 2009, water consumption
increased by 11 per cent from 474,958 m' to 521,005 m?. The
increase was ascribable to the new factories in China, the USA
and Spain Vestas' blade factories consume about 220,000 m' of
water, primarily for air humidification and washing of blades after
grinding

As much of the water as possible must be recycled in closed cir-
cuits, and the watering of outdoor areas and other uses must be
minimised, which is part of Vestas' new building policy.

Waste disposal

The volume of waste, including the volume of waste sent to re-
cycling, is considered a key indicator of how Vestas' affects the
environment.

 

(rynke

 

Vestas endeavours not to generate any waste, In 2009, the total
volume of waste was 97,471 tonnes, against 96,632 tonnes

in 2008. In 2009, 35 per cent of the total volume of waste was
recycled, against 31 per cent the year beføre The volume of
waste should be viewed relative to the production and delivery of
6,131 MW in 2009 and 6,160 MW in 2008.

The use of suppliers and the degree of insourcing affect the vol-
umes that Vestas controls itself. In addition, the infrastructure for
recycling Vestas' waste, which consists primarily of sand, metals,
wood, paper, oil, plastic and composites, has not been developed
to the same levet in all countries in which Vestas operates. The
recycling of composites used in the blades represents the final,
huge challenge.

About half of Vestas' waste measured in tonnes is sand from the
moulding processes. Following the installation of a facility for re-
cycling of moulding sand in the foundry at Lidkoping, Sweden, in
2009, moulding sand is now being recycled at all Vestas' found-
ries. 80 to 90 per cent of the moulding sand is being recycled on
site, which reduces not only raw materials consumption and the
total waste volume but also transport costs. At the foundry in
Lidkåping, moulding sand for tandfills relating to the production
volume was reduced by about 2,100 tonnes, corresponding to a
reduction of 17 per cent.

Energy consumption

As part of its environment initiatives, Vestas has implemented
a green building policy. a green car policy and a green electricity
policy.

Vestas will henceforth build green in accordance with LEED
platinum plus, which is the highest standard in environmentally
sustainable construction. LEED specifies requirements for factors

 

 

 

 

    

     

 

 

 

600,000 125
120
500,000
— 115
R
400,000 Eg 110
"ey
bal 4
in ””F= 105
| 1
300,000 Ble DOM
lø IRI
3 100
AN
200,000 å 95
BY
3 3 90
m o
100,000 fm 9 2 R
o å & rå
we + m 85
- N d
+ ' rd
” 7 ” REE i 80
2005 2006 2007 2008 2009
ElRenewable electricity - - - Energy consumption index-linked in
relation to MW produced and shipped
054 | Vestas anngalreporr 2009

 

 

 

 

    

 

ære —lindtan |
100,000 125
TT 120
me al
80,000 2 2 115
å
er
110
60,000
105
sen PTTV
— y 100
40,000
95
ml N
20,000 R g 90
|. in 3
wo" N N
g 85
PM
rd
80

 

2005 2006 2007 2008 2009

EIShare of recycling - = = Waste disposal index-linked in

relation to MW produced and shipped

 

such as insulation, light, sound, energy types, rain water catch-
ment and water recycling. The future-proof buildings will be 5-10
per cent more expensive than standard construction, but they will
help Vestas avoid rising costs for increasingly expensive water,
heat and electricity.

In connection with the green building policy, Vestas has joined
the World Business Council Manifesto for Energy Efficiency in
Buildings, whose subscribers work proactively for lower energy
consumption.

All new vehicles bought or leased by Vestas must be environ-
mentally friendly. Diesel cars with particle filters is the preferred
choice, as these cars cause less pollution and CO, emissions than
petrol-fuelled cars. Requirements for external transport suppliers
will also be sharpened in the years ahead.

The use of renewable energy combined with lower energy con-
sumption and greater output per kilogram of turbine is the most
effective way of reducing Vestas' CO- emissions.

Consequently, 55 per cent of Vestas' energy consumption must
come from renewable energy sources by 2010. This is only possi-
ble, if at least 90 per cent of its electricity consumption is gener-
ated by renewable sources. The original renewable energy target
for 2010 was 50 per cent.

With these targets, Vestas aims to contribute to greater demand
for renewable electricity. By procuring renewable electricity and in
collaboration with power suppliers and authorities, Vestas seeks
to ensure better access to renewable electricity.

In 2009, it was not possible to buy renewable electricity in suf-
ficient volumes from China, parts of the USA and India. Conse-

quently, compensation from 3 wind power plant established in India
by Vestas is included in the figure. The generated renewable elec-
tricity has been used to balance electricity consumption in markets
where Vestas is currently unable to buy renewable electricity.

in 2009, contracts were signed in respect of delivery of 17,500
MWh of renewable electricity for the following units: Sales &
Service in Australia, Portugal, Sweden and the USA, the foundry
in Guldsmedshyttan, Sweden, and the blade factory in Windsor,
USA. Vestas" share of renewable electricity thus rose from 68 per
cent in 2008 to 85 per cent in 2009. In 2010, Vestas expects to
enter into contracts for 40,000 MWh of renewable electricity.

In 2009, Vestas' overall energy consumption rose by 17 per
cent, primarily due to the increase in production at Vestas Blades"
new factories. When index-linked to produced and shipped MW,
Vestas' energy consumption and CO, emissions also rose, be-
Cause energy consumption and CO, emissions are more closely
linked to production facilities that are not fully utilised than they
are to the level of activity.

Environment management system

In 2009, 97 per cent of Vestas had been certified according

to the IS0 14001 standard, as measured by the number of
workplaces. The aim is for all new units to be certified within six
months after commencing operations. Vestas has systematically
worked with environment and health & safety standards since
2000, when Vestas received its first ISO 14001 certification.

CODE OF CONDUCT

As Vestas gradually grows bigger and bigger with employees and
business partners with widely different cultural backgrounds,
religious beliefs and political convictions, it is becoming more

and more important to have a formal set of common values.The >>

 

 

   

 

 

 

 

 

 

 

 

 

 

(an) he] FEET
60,000 — murer, ——- - 125 BO "1" een
; me
, -
I
i 120 $
50,000 "— TTT — i ne ne
2 |AL 115 40
,
or ”
40,000 ' pe ag > 110
i BR
” d 30 -— TT TT TT
Mu . 105
30,000
100
20 — TT —— mer mm ra
-— 95
90 3
| 10 vi 7 TT — ZZT
Sl on
85
. rn
- : — 80 (og "
2005 2006 2007 2008 2009 E y n uw 2 nm
oa == W Fæj w uw
2 S 2 ni 5 £
c z = Q c£ o
ø £ E S
- = - Emission of CO2 index-linked in relation ml i E ØV
Ww

to MW produced and shipped

1003234EogSN06697

Vestas annual report 2009 j 055

>> updated Code of Conduct that Vestas implemented in 2009 is to

ensure that all employees and other persons acting on behalf of
Vestas know what is correct Vestas behaviour.

Vestas' Code of Conduct sets the framework for the work with the
UN Global Compact, the International Bill of Human Rights and
the International Labour Organization's conventions. Vestas will
work proactively to ensure that its business partners also respect
the Code of Conduct, including the ban on child labour and forced
labour, freedom of association, the right to collective bargaining
and respect for the individual regardless of race, colour, religion,
political conviction, gender, age, national origin, sexual orienta-
tion, marital status or disability.

Vestas' supply Chain covers more than 1,000 business partners
throughout the world, giving Vestas good opportunities to help
disseminate the UN Global Compact and other similar initiatives,
even though there are large national and cultural differences
among the business partners. Vestas' long-term efforts involve a
combination of requirements, advice and guidance in the fields of
safety, the environment, human rights, labour rights, ethics, etc.
with the aim of ensuring that not only Vestas' production, but the
whole product and the preparation thereof, is sustainable in the
broadest sense.

For more information on sustainability in relation to Vestas" busi-
ness partners, see vestas.com under About Vestas/Principles/
Suppliers.

The work also involves active efforts against bribery and corrup-
tion and clear rules and policies for receiving gifts and similar
issues with the aim of preventing abuse. During 2010, Vestas will
develop an anti-corruption programme and training in this area

ÅA large number of initiatives are made to ensure compliance with
the Vestas Code of Conduct:

. In 2009, the updated Code of Conduct has been made available
to all employees through e-learning, information material in 18
languages, presentations, etc.

- Code of Conduct will become part of the induction programme
for all new employees.

» E-learning programmes on fraud, bribery, competitor intel-
ligence and gifts, etc. have been developed for selected em-
ployee groups.

- A number of legal experts have received special training in han-
dling matters dealing with any non-compliance with the Code of
Conduct

- Vestas' whistleblower scheme has been re-launched under the
name EthicsLine.

Vestas' Code of Conduct can be downlioaded from vestas.com
under About Vestas/Principles/Sustainability.

 

 

 

 

NON-FINANCIAL HIGHLIGHTS FOR THE GROUP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2009 2008 2007 2006 2005
KEY FIGURES"
Occupational health & safety
Industrial injuries (number) 306 534 534 525 472
— of which fatal industrial injuries (number) o 0 0 1 o
Products
MW produced and shipped? 6,131 6,160 4,974 4,313 3,900
Utilisation of resources
Consumption of metals (tonnes) 202,624 187,478 170,505 164,413 143,170
Consumption of other raw materials, etc. (tonnes) 126,600 129,207 111,541 93,983 82,592
Consumption of energy (MWh) 537,165 458,296 372,037 330,106 227,907
- of which renewable energy (MWh) 263611 172,800 139,983 124,841 118,603
— of which renewable electricity (MWh) 238,462 167,311 138,035 124,841 118,603
Consumption of water (m2) 521,005 474,958 554,516 343,084 226,410
— of which water of non-drinking water quality (m2) 102,528 103,066 14,809 14,954 0
Waste disposal
Volume of waste (tonnes) 97,471 96,632 89,643 82,739 67,313
- of which collected for recycling (tonnes) 34,303 30,254 28,422 27,593 17,266
Emissions ——
Emission of CO» (tonnes) 50,523 41,832 32,798 28,396 18,406
Local community —
Environmental accidents (number) 10 16 15 7 4
Breaches of internal inspection conditions (number) 3 5 5 6 5
Employees i HE i
Average number of employees 20,832 17,924 13,820 11,334 10,300
Number of employees at the end of the year 20,730 20,829 15,305 12,309 10,618
INDICATORST ”
Occupational health and safety
Incidence of industrial injuries per one million working hours? 8.1 15.6 20.8 25.3 33.8
Absence due to illness among hourly-paid employees (%) 2.8 3.3 3.6 3.2 41
Absence due to illness among salaried employees (%) 1.3 1.1 1.4 1.5 1.5
Products
CO2 savings over 20 years on the MW produced and shipped
(million tonnes af CO2) 163 164 143 124 112
Utilisation of resources
Renewable energy (%) 49 38 37 38 52
Renewable electricity for own activities (%) 85 68 66 68 75
Employees
Women at management level (%) 19 17 N/C2 N/C N/C
Non-Danes at management level (%) 46 42 N/C N/C N/C
Management system?)
ISO 14001 (%) 97 100 80 76 75
OHSAS 18001 (%) 97 98 84 77 63

 

 

1) Accounting policies for non-financial highlights for the Group, see page 60. Comments on non-financial issues for the Group, see pages 50-59.
2) Tobeableto better illustrate the connection between physical production and resource consumption, products are now calculated as MW produced and shipped in stead

of as previously MW delivered.

3) Please note that accounting policies have been changed as from 2009, see page 101 in the annual report 2008.

4) Not calculated (N/C) for the year.

5) The production facilities in Hohhot, Inner Mongolia, China, are expected certified by the end of first half-year 2010.

1003234EogSN06698

 

WE SUPPORT

GLOBAL COMPACT'S TEN
PRINCIPLES

The UN Global Compact is a strate-
gic policy initiative for businesses
that are committed ta aligning their
operations and strategies with ten
universally accepted principles in
the areas of human rights, labour
standards, environment and anti-
corruption

With the participation in Global
Compact, Vestas commits to report
and publish its progress within these
areas at least once a year

058 [vers mmm mint zone

Principles

HUMAN RIGHTS

Principle 1

Businesses should support and respect the
protection of internationally proclaimed human
rights.

Principle 2
Businesses must make sure they are not com-
plicit in human rights abuses.

LABOUR STANDARDS

Principle 3

Businesses should uphold the freedom of asso-
ciation and the effective recognition of the right
to collective bargaining.

Principle 4
Businesses should uphold the elimination of all
forms of forced and compulsory labour.

Principle 5
Businesses should support the effective aboli-
tion of child labour.

Principle 6

Businesses should uphold the elimination of
discrimination in respect of employment and
occupation.
ENVIRONMENT

Principle 7

Businesses should support a precautionary
approach to environmental challenges.

Principle 8
Businesses should undertake initiatives to pro-
mote greater environmental responsibility.

Principle 9

Businesses should encourage the develop-
ment and diffusion of environmentally friendly
technologies.
ANTI-CORRUPTION

Principle 10

Businesses should work against corruption in
all its forms, including extortion and bribery.

Commitment

Vestas recognises every human being as free
and equal in dignity and rights at the work-
place. We are committed to human rights and
employee rights as expressed in the Universal
Declaration of Human Rights and the Intern-
ational Labour Organization conventions.

Vestas believes that all employees are entitled
to a safe and secure workplace. Therefore
Vestas is committed to continuous improve-
ment in occupational health and safety.

Vestas is committed to respect freedom of
association and the right to collective bargain-
ing.

Using forced or child labour in any of our oper-
ations is not accepted.

Vestas emphasises the importance that every-
one is treated equally with dignity and respect
regardless of race, colour, religion, political
conviction, gender, age, national origin, sexual
orientation, marital status or disability.

Vestas is committed to devoting the necessary
Care as regards to development, manufacture,
service procedures and disposal. Vestas is also
dedicated to integrating consideration for the
surroundings in the planning and performance
of activities and to integrating environmental
considerations in its development of products
and processes.

Vestas takes a clear stand on bribery and facili-
tation payments. Employees must not engage
in bribery of any kind and Vestas does not per-
mit facilitations payments.

 

— Systems |

Actions

Performance

 

The Vestas Code of Conduct is a global set of
principles for correct Vestas behaviour.

EthicsLine is a system where employees can
report on violations of Vestas' policies or ask
questions on ethical dilemmas.

Vestas operates an occupational health and
safety management system fully certified
according to OHSAS 18001.

Vestas has started to harmonise its efforts in
relation to responsible supplier management
across business units.

The Vestas Code of Conduct is a global set of
principles for correct Vestas behaviour.

EthicsLine is a system where employees can
report on violations of Vestas" policies or ask
questions on ethical dilemmas.

Vestas has started to harmonise its efforts in
relation to responsible supplier management
across business units.

 

Vestas operates an environmental manage-
ment system fully certified according to ISO
14001. Within six months of production, a new
site is expected to be certified.

Life cycle assessments are used to map and
evaluate the potential impact of the wind tur-
bine on the external environment throughout
its lifetime.

Vestas prepares quarterly reports to monitor
development of targets.

 

The Vestas Code of Conduct is a global set of
principles for correct Vestas behaviour.

Vestas has a system where employees must
report when they have been asked for or
offered a bribery or facilitation payment.

Through EthicsLine Vestas employees can
report on violations of Vestas' policies or ask
questions on ethical dilemmas such as bribery
they can do it anonymously. They can call in

on a toll-free number or report/ask questions
online.

 

1003234EogSN06699

Vestas has joined the UN Global Compact
initiative.

Vestas' updated Code of Conduct has been
made available to all employees through
e-learning, information material in 18 lan-
guages, presentations, etc.

Vestas has re-launched its whistleblower sys-
tem, under the name EthicsLine.

A group of legal experts within Vestas have
been trained in Vestas' Code of Conduct.

Vestas has joined the UN Global Compact
initiative.

Vestas' updated Code of Conduct has been
made available to all employees through
e-learning, information material in 18 langua-
ges, presentations, etc.

Vestas has re-launched its whistleblower sys-
tem, under the name EthicsLine.

A group of legal experts within Vestas have
been trained in Vestas' Code of Conduct.

In 2009, Vestas' updated Code of Conduct has
been made available to all employees.

The incidence of industrial injuries per one mil-
lion working hours was 8.1 in 2009, a decrease
of 48 per cent relative to 2008.

Five units were certified according to OHSAS
18001 in 2009. All Vestas units with the
exception of Hohhot, Inner Mongolia, China, are
now certified according to OHSAS 18001.

 

Vestas maintains a Cost of Energy programme
to design lighter and more intelligent turbines
to reduce the amount of material used per
MWh produced.

In order to reduce its COz emissions, Vestas has
adopted a new car policy and a new building
policy.

Vestas' target is to have a share of renewable
energy of 55 per cent and a share of renewable
electricity of at least 90 per cent in 2010.

Vestas' updated Code of Conduct has been
made available to all employees through
e-learning, information material in 18 lan-
guages, presentations, etc.

Vestas has re-launched its whistleblower sys-
tem, under the name EthicsLine.

See non-financial highlights on page 57.

A total of 88 reports were registered in Ethics-
Line in 2009.

 

Vestas annual report 2009 | 059

ACCOUNTING POLICIES FOR

NON-FINANCIAL HIGHLIGHTS FOR THE GROUP

Vestas has selected a number of non-financial key figures that
are relevant to understanding Vestas' development, results and
financial position. These key figures are monitored closely, and
specific targets have been defined for relevant indicators.

Ali Vestas' wholly owned companies are covered by the report.
The same measurement and calculation methods are applied at
all Vestas sites.

Safety and health

Occupational health & safety is measured for all activities under
the organisational structure. Industrial injuries of all employees
are stated on the basis of registration of incidents that have
caused more than one day's absence.

For 2009, injuries and working hours for external supervised
employees are also included. The incidence of injuries is defined
as the number of injuries per one million working hours. The
number of working hours is measured on the basis of daily time
cards registered in the payroll system for hourly-paid employees
and prescribed working hours for salaried employees For exter-
nal supervised employees, the injuries are reported by Vestas,
and working hours are reported by the subcontractor.

Absence due to illness is defined as hours absent due to illness,
exclusive of absence caused by industrial injuries, maternity leave
and child's first day of illness. Absence due to iliness is measured
by means of registrations in the payroll system based on daily
time cards (hourly-paid employees) and absence records (sala-
ried employees), respectively.

Management systems

Percentages of Vestas certified according to ISO 14001 and
OHSAS 18001, respectively, is stated on the basis of the number
of employees in the certified departments.

Consumption of resources

Metals and other raw materials are stated on the basis of con-
sumption from inventories to manufacturing in the first phase
of production and to servicing of wind turbines, respectively, as
recorded in the company's ordinary registration systems. Metals
include only the amount of metal that is processed at Vestas.

Consumables are stated on the basis of decentralised lists of
quantities delivered per site in the financial year. Relevance has
mainly been determined on the basis of Vestas' sector assess-
ment of material environmental impacts, followed by a selection
inrelation to quantities consumed compared with the activities
carried out at the sites.

Electricity, gas and district heating are measured on the basis

of quantities consumed according to direct meter readings per
site including related administration. Consumption of electricity
comprises electricity purchased externally and consumption of
production from own wind turbines. Oil for heating is stated on
the basis of external purchases adjusted for inventories at the
beginning and at the end of the period. Fuel for transport has
been recognised on the basis of supplier statements Electricity
from renewable energy sources is calculated on the basis of sup-
plier statements.

OBO | veste anmuol report 2009

Renewable energy is energy generated from natural resources,
which are all naturally repfenished - such as wind, sunlight, water
and geothermal heat. Nuclear power is not considered to be re-
newable energy.

Consumption of electricity from non-renewable sources pur-
chased as a result of not being able to purchase renewable elec-
tricity at some locations, is in the Group statement balanced with
renewable electricity produced by wind power plants owned by
Vestas and sold to the local grid.

The consumption of water is stated as measured consumption of
fresh water. Water of less quality than drinking water is part of the
fresh water consumption and is primarily used for watering of the
outdoor areas and process water. Cooling water from streams,
rivers, lakes, etc. that is solely used for cooling and released to
the stream after use without further contamination than a higher
temperature, is not included.

Waste and emissions

Waste including waste for recycling is stated on the basis of
weight slips received from the waste recipients for deliveries
effected in the accounting period, apart from a few types of
waste and non-significant volumes which are estimated on the
basis of subscription arrangement and load.

Emission of COz is calculated on the basis of determined
amounts of fuel for own transport and the direct consumption of
oil and gas, with the usage of standard factors published by the
Danish Energy Authority.

MW produced and shipped

Produced and shipped MW is stated as the accumutated effect of
wind turbines that were produced and shipped to the customers
in the accounting period.

CO- savings from the produced and shipped MW

CO, savings are calculated on the basis af a capacity factor of 30
per cent of the produced and shipped MW, an expected lifetime
of 20 years of the produced and shipped MW, and the latest
updated standard factor from the International Energy Agency
(IEA) of average CO; emission for electricity in the world, at
present 507 grams of CO, per kWh.

Breaches of internal control conditions

Breaches of internal inspection conditions are stated as the con-
ditions for which measurements are required, and where meas-
urements show breaches of stated conditions.

Environmental accidents
Accidental retease of substance that Vestas considers to have an
irreversible impact on the environment.

Employees and diversity

The number of employees 1s catculated as the number of emptoy-
ees who have a direct contract with Vestas and permanent staff
employed through third parties. The average number of employ-
ees is calculated as the number of active employees at the end
of a month distributed on the 1.2 months of the year Employee
information is determined on the basis of extracts from the com-
pany's ordinary registration systems with specification of nation-
ality, sex and IPE level (Mercers International Position Evaluation)

 

THE INDEPENDENT AUDITOR'S STATEMENT CONCERNING
NON-FINANCIAL HIGHLIGHTS FOR 2009

We have made an assessment of Vestas Wind Systems A/S' non-
financial key figures and indicators for 2009, stated on page 7, in
the annual report for 2009.

Criteria for the preparation of reporting on non-financial issues
Pages7, 15-19 and 50-60 of the annual report for 2009 include
the Management's reasons for choice of the non-financial high-
lights relevant for integration in the annual report page 7. The
non-financial key figures and indicators have been included in the
annual report for 2009 according to the accounting policies for
non-financial highlights for the Group applied and described on
page 60.

The preparation of the reporting on non-financial issues and
non-financial highlights is the responsibility of the Company
Management. Our responsibility is to express an opinion on the
reporting on non-financial key figures and indicators based on
our assessment.

Basis of opinion

Our work has been planned and performed in accordance with
the International Standard on Assurance Engagements, ISAÅE
3000 (other assurance than audit or review of historical, financial
information) to obtain reasonable assurance that the data stated
on page 7 have been computed in accordance with the criteria for
the preparation of reporting on non-financial highlights.

Based on an assessment of materiality and risk, our work has
comprised accounting technical analyses, inquiries and spot-
checks of systems, data and underlying documentation, including
test that the guidelines for measurement and statement of data
have been followed. We have assessed the expediency of the
internal recording and reporting system as basis for consistent
recording and reporting on the non-financial environmental and
occupational health & safety data.

Opinion

In our opinion, the non-financial key figures and indicators
included on page 7 of the annual report for 2009 have been
stated in accordance with the criteria mentioned.

Copenhagen, 10 February 2010

PricewaterhouseCoopers
Statsautoriseret Revisionsaktieselskab

     
  

SY

    

  

N LØN
FOA 0
Søren Skov Lars

     
 

Public Accountant

1003234EogSN06700

 

Bue

Birgitte Moge
State Authorised
Public Accountant

Vestas annua! report 2009 | 061

 

 

 

1003234EogSN06701

Consolidated accounts

064
065
066
068
069
070
113
116
117

Income statement

Statement of comprehensive income
Balance sheet

Statement of changes in equity

Cash flow statement

Notes to the consolidated accounts
Legal entities

Management's statement

The independent auditors' report

Consolidated accounts

 

CONSOLIDATED INCOME STATEMENT 1 JANUARY - 31 DECEMBER

 

 

 

 

 

 

 

 

 

 

 

mEUR | —— NH FE Note 2009 2008
Revenue 3,4 6,636 6,035
Cost of sales — | BE 5,6 (5,195) (4,856)
Gross profit eN i i i 1,441 1,179
Research and development costs 5,6,7 (92) (119)
Selling and distribution expenses 5,6 (232) (181)
Administrative expenses — NE 5,6. (261) (211)
Operating profit EEN | 856 … 668
Income from investments in associates 14 1 0
Financial income 8 14 66
Financial expenses — EN 9 (62) (20)
Profit before tax KEE | e —  …… 809 714
—— enn 10 (230) … (203)
HERE 579 5
Distributed as follows:
Shareholders in Vestas Wind Systems als — BENENE 579 . 511
— . —— nm — 579 511
Earnings per share (EPS) 11
Earnings per share (EUR) 2.94 2.77
Earnings per share (EUR), diluted 2.94 2.76

 

 

  

064 | veste: anmuatrøport 7009

  

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 31 DECEMBER

 

 

 

 

mEUR " — 2009 2008
Profit for the year 579 511
Exchange rate adjustment from conversion to EUR 2 0
Exchange rate adjustments relating to foreign entities 13 (43)
Fair value adjustments of derivative financial instruments (8) (38)
Fair value adjustments of derivative financial instruments transferred to the income statement (cost of sales) 38 (4)
Tax on derivative financial instruments (8) 10
Other comprehensive income after tax i 37 (75)
Total comprehensive income 616 436

 

Distributed as follows:
Shareholders in Vestas Wind Systems A/S 616 436
616 436

 

 

Consolidated accounts

Vestas annual report 2009 | 065

1003234EogSN06702

 

CONSOLIDATED BALANCE SHEET 31 DECEMBER - ASSETS

MmMEUR Note 2009 2008
Goodwill 320 320
Completed development projects 99 60
Software 73 62
Development projects in progress i KEE | 320. i 202
Total intangible assets i — . i 12 00 82 644
Land and buildings 661 433
Plant and machinery 230 159
Other fixtures and fittings, tools and equipment 216 167
Property, plant and equipment in progress | i NEN i 354 271
Total property, plant and equipment | | 13 1461 | 1,030
Investments in associates 14 1 1
Other receivables 19 16 25
Deferred tax : so 63
Total other non-current assets — — — … i … 127 89
Total non-current assets BEER … 2400 1,763
Inventories 16 1,663 1,612
Trade receivables 17 525 938
Construction contracts in progress 18 1,032 482
Other receivables 19 234 181
Corporation tax 20 93 49
Investments O 121
Cash at bank and in hand 28 … 488 162
Total currentassets — — — i KE 4,035 — 3,545
Total assets 6435 5,308

   

066 ] Vesleas anutalrepnur 700

 

CONSOLIDATED BALANCE SHEET 31 DECEMBER - EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

mEUR —— 1 Note 2009 2008
Share capital 21 27 25
Other reserves (41) (78)
Retained earnings 3,378 2,008
Total equity . eee 3,364 1,955
Deferred tax 15 121 9
Provisions 22 82 85
Pension obligations 23 2 2
Financial debts He 24 339 14
Total non-current liabilities … 544 110
Prepayments from customers 123 106
Construction contracts in progress 18 598 1,383
Trade payables 1,062 1,030
Provisions 22 151 178
Financial debts 24 12 109
Other liabilities 25 436 395
Corporation tax — 20 145 42
Total current liabilities 2,527 3,243
Total liabilities 3,071 3,353
Total equity and liabilities 6,435 5,308

Consolidated accounts

Vestas annual report 2009 1 067

1003234EogSN06703

 

  

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 1 JANUARY - 31 DECEMBER

 

 

 

 

 

 

 

 

 

 

 

i Other reserves nn
Cash flow

Share Translation hedging
mEUR | — em capital reserve == — reserve == Reserves Total
Equity at 1 January 2009 0. 25 (So) 0 (28) 2,008 1,955
Capital increase 2 0 0 800 802
Costs of capital increase (8) (8) 0 (10) (10)
Acquisition of treasury shares 0 (8) 0 (1) (1)
Share based payment 0 0 0 2 2
Total comprehensive income for the year — BEEN 0 nm 15 22 579 616
Equity at 31 December 2009 i — 27 (35) (6) 3,378 3,364
—" i FEE FE Other reserves —

Cash flow

Share Translation hedging
mEUR . capital reserve … reserve Reserves Total
Equity at 1 January 2008 . 25 (7) 4 "1,494 1,516
Capital increase 0 0 0 0 0
Costs of capital increase 0 O 0 0 0
Acquisition of treasury shares 0 0 0 0 0
Share based payment 0 O 0 3 3
Total comprehensive income for the year HENNE oa … (43) (32) 511 436
Equity at 31 December 2008 i 25 (50) …— (28) 2,008 1,955.

 

Refer to the parent company's statement of changes in equity on page 123 for information about which reserves
are available for distribution. For proposed distribution of profit, refer to the parent company's annual accounts on
page 121.

068 | vestas annual report 2009

 

CONSOLIDATED CASH FLOW STATEMENT 1 JANUARY - 31 DECEMBER

 

 

 

 

 

 

 

 

 

 

 

mEUR Note 2009 2008
Profit for the year 579 511
Adjustments for non-cash transactions 26 461 258
Interest received, etc. 8 32
Interest paid, etc. (31) (9)
Corporation tax paid (114) (148)
Cash flow from operating activities before change in working capital 903 644
Change in working capital 27 (937) (367)
Cash flow from operating activities (34) 277
Purchase of intangible assets (227) (169)
Purchase of property, plant and equipment (606) (509)
Purchase of other non-current assets O (12)
Disposal of property, plant and equipment 15 10
Disposal of other non-current assets 10 O
Cash flow from investing activities (808) (680)
Capital increase 792 0
Acquisition of treasury shares (i) o
Repayment of non-current liabilities O (91)
Raising of non-current liabilities 284 Q
Cash flow from financing activities 1,075 (91)
Change in cash at bank and in hand less current portion of bank debt 233 (494)
Cash at bank and in hand less current portion of bank debt at 1 January 219 763
Exchange rate adjustments of cash at bank and in hand 27 (50)
Cash at bank and in hand less current portion of bank debt at 31 December 479 219

 

The balance is specified as follows:

 

 

Cash at bank and in hand without disposal restrictions 468 150
Cash at bank and in hand with disposal restrictions 28 20 12
Investments O 121
Total cash at bank and in hand 488 283
Current portion of bank debt 24 (9) (64)
479 219

 

Consolidated accounts

Vestas annual report 2009 | 069

1003234EogSN06704

 

NOTES TO THE CONSOLIDATED ACCOUNTS

 

 

 

 

  

 

 

 

 

 

 

Note Page
1. Group accounting policies.… 071
2. Critical accounting judgements and estimates 078
3. Segment information 080
4. Revenue 082
5. Amortisation, depreciation and impairment losses 082
6 Staff costs buen uren urne . 083
7. Research and development costs
8 Financial income
9. Financial expenses

 

10 Corporationtax
11  Earnings per share (EPS)
12. Intangible assets
13 Property, plant and equipment
14 Investments in associates
15  Deferred tax
16. Inventories
17  Tradereceivables
18 … Construction contracts in progress
19 Other receivables

20  Corporationtax
21 Share capital
22. Provisions
23 Pension obligations
24. Financial debts
25. Other liabilities
26. Adjustment for non-cash transactions
27 Change in net working capital
28  Cashat bank and in hand
29. Fees to auditors appointed by the Annual General Meeting.
30  Management's option programme and shareholdings
31 Related party transactions
32. Government grants
33. Mortgages and security.
34  Contractual obligations ......ecscssseccscscssrttsrereeseeneennrner urene
35  Contingent liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36 Derivative financial instruments, risk and capital management 104
37  Subsequent events 111
38 New accounting regulations u 112

 

0 70 | vestas anmue report 2009

 

 

1003234EogSN06705

NOTES TO THE CONSOLIDATED ACCOUNTS

GROUP ACCOUNTING POLICIES

The Consolidated accounts have been prepared in accordance with
the International Financial Reporting Standards (IFRS) as adopted by
the European Union and in compliance with the international Financial
Reporting Standards (IFRS) as issued by the IASB.

The parent company's annual accounts have been prepared in accord-
ance with the provisions of the Danish Financial Statements Act apply-
ing to listed Companies.

The annual report has been prepared in accordance with the additional
Danish disclosure requirements for annual reports of listed companies.
Reference is made to the disclosure requirements for annual reports of
listed companies laid down by the NASDAQ OMX Copenhagen, the Dan-
ish Financial Statements Act and the Danish Statutory Order on Adop-
tion of IFRS issued pursuant to the Danish Financial Statements Act.

Basis of preparation
The annuai report has been prepared under the historical cost method,
except for the derivative financial instruments for hedging purposes.

Non-current assets and groups of assets held for sale are measured at
the lower of carrying amount prior to the reclassification and fair value
less selling costs.

The accounting policies as described below have been applied consist-
ently over the financial year and in respect of the comparative figures.

The accounting policies remain unchanged from 2008 except for the
implementation of the new accounting standards specified below.

The annual report is presented in million EUR.

Implementation of new International Financial Reporting Standards
With effect from 1 January 2009, the Vestas Group has implemented
amendments to |AS 1 presentation of the consolidated financial state-
ments, IAS 23 borrowing costs, IAS 27 consolidated financial state-
ments, |AS 32 & 39 financial instruments, IFRS 1 first-time adoption
of IFRS, IFRS 7 financial instruments disclosures, !FRS 8 operating
segments, IFRIC 13 customer loyalty programmes and improavements
to IFRSs (May 2008).

The amendments and interpretations have not affected recognition
and measurement. Apart from the amendments to IAS 1 and the
implementation of IERS 8, they have neither resulted to changes in the
Group's accounting policies nor changes to the note disclosures.

The amendments to IAS 1 only resulted to the change in the equity
note by separately disclosing the statement of comprehensive income/
total recognised income and expenses, immediately after the income
statement. Thus, the equity note only shows transactions with the
shareholders of Vestas.

The implementation of IFRS 8 has resulted to changes in the disclosure
requirements as described below, and presented in note 3 to the con-
solidated financial statements.

The new standards and interpretations do not affect earnings per share
and diluted earnings per share.

The description of new standards and interpretations that are not yet
effective has been included in note 38 to the consolidated accounts.

Consolidated accounts and business combinations

The consolidated accounts comprise Vestas Wind Systems A/S (the
parent company) and the enterprises in which Vestas Wind Systems
A/S directly or indirectly holds more than 50 per cent of the votes or
otherwise exercises control (subsidiaries). Vestas Wind Systems A/S
and its subsidiaries together are referred to as the Group.

Enterprises that are not subsidiaries, but in which the Group holds be-

tween 20 per cent and 50 per cent of the votes or otherwise exercises
significant influence on operational and financial management, are
classified as associates.

An overview of Group legal entities is provided on pages 113-115.

The consolidated accounts are prepared from the financial statements
of the parent company and subsidiaries by combining accounting
items of a uniform nature with subsequent elimination of intercompany
income and expenses, shareholdings, intercompany balances and divi-
dends as well as unrealised profits and losses on transactions between
consolidated enterprises.

The consolidated accounts are based on financial statements prepared
under the accounting policies of the Vestas Group.

On purchase of new enterprises, the acquisition method of accounting
is applied. Cost is measured as consideration paid with addition of the
fair value of equity instruments issued plus expenses directly attribut-
able to the acquisition. Identifiable assets, liabilities and contingent
liabilities acquired or assumed upon a business combination are initially
measured at fair value at the time of acquisition. Any positive differ-
ences between cost and fair value of the Group's share of the identifi-
able net assets acquired are recognised as goodwill.

Newly acquired, sold or wound-up enterprises are recognised in the con-
solidated income statement from the time of acquisition or until the time
of disposal. Comparative figures are not restated for newly acquired, sold
or wound-up enterprises. However, comparative figures in the income
statement are restated in respect of discontinued operations.

Goodwill from acquired enterprises may, due to changes to the meas-
urement of net assets, be adjusted for a period of up to one year follow-
ing the date of acquisition where goodwill has been determined on a
provisional basis at first recognition. Subsequently, goodwill is adjusted
only as a result of changes in estimates of conditional consideration
and the realisation of deferred tax assets of acquired enterprises which
were not recognised at the time of acquisition.

Profits or losses on disposal or winding up of subsidiaries are calculated
as the difference between the sales sum or proceeds from winding up
and the carrying amount of net assets at the time of sale, including
goodwill and estimated expenses to sell or wind up. Profit or losses are
recognised in the income statement.

The assets, liabilities and transactions of subsidiaries are recognised
fully in the consolidated accounts. Minority interests' shares of profit
for the year and of equity of subsidiaries that are not fully owned are

included in the Group's profit for the year and equity, respectively, but
are shown separately.

Translation policies

Functional currency and presentation currency

Assets, liabilities and transactions of each of the reporting entities of
the Group are measured in the currency of the primary economic envir-
onment in which the entity operates (the functional currency). Trans-
actions in currencies other than the functional currency are transactions
in foreign currencies. The functional currency of the parent company

is Danish kroner (DKK); however, due to the Group's international rela-
tions, the consolidated accounts are presented in euro (EUR).

Translation into presentation currency

The balance sheet is translated into the presentation currency at the
EUR rate at the balance sheet date. The transaction date rates are based
on average rates for the individual months to the extent that this does
not materially distort the presentation of the underlying transaction.

Translation of transactions and amounts
Transactions in foreign currencies are initially translated into the func-
tional currency at the exchange rates at the dates of transaction. Ex-

change adjustments arising due to differences between the transaction >>

Vestas annual report 2009 1071

Consolidated accounts

 

>>

NOTES TO THE CONSOLIDATED ACCOUNTS

date rates and the rates at the dates of payment are recognised as
financial income or financial expenses in the income statement. Receiv-
ables, payables and other monetary items in foreign currencies not
settled at the balance sheet date are translated at the exchange rates
at the balance sheet date. Exchange adjustments arising due to differ-
ences between the rates at the balance sheet date and the transaction
date rates are recognised as financial income or financial expenses in
the income statement.

Translation of group enterprises

On recognition in the consolidated accounts of foreign enterprises with
a functional currency that differs from the presentation currency of the
Group, income statements are translated at transaction date rates, and
balance sheet items are translated at the exchange rates at the balance
sheet date. The transaction date rates are based on average rates for
the individual months to the extent that this does not materially distort
the presentation of the underlying transaction. Exchange adjustments
arising on the translation of the opening equity of foreign enterprises at
exchange rates at the balance sheet date and on the translation of in-
come statements from transaction date rates to exchange rates at the
balance sheet date are recognised directly in equity under the separate
translation reserve.

Exchange adjustments of balances with foreign enterprises that are
treated as part of the total net investment in the enterprise in question
are recognised directly in eguity in the consolidated accounts. Similarly,
exchange gains and losses on the part of loans and derivative financial
instruments entered into in order to hedge the net investment in for-
eign enterprises with another functional currency than the presentation
currency of the Group, which effectively hedge against corresponding
exchange gains/losses on the net investment in the enterprise, are
recognised directly in equity under a separate translation reserve in the
consolidated accounts.

On recognition in the consolidated accounts of associates with func-
tional currencies that differ from the presentation currency of the
Group, the share of results for the year are translated at average ex-
change rates, and the shares of equity including goodwill are translated
at the exchange rates at the balance sheet date. Exchange adjustments
arising on the translation of the share of the opening equity of foreign
associates at exchange rates at the balance sheet date and on the
translation of the share of results for the year from average exchange
rates to exchange rates at the balance sheet date are recognised
directly in equity under the separate translation reserve.

On disposal of foreign entities, in full or in part, or on repayment of
balances treated as part of the net investment, the share of the accu-
mulated exchange adjustments recognised directly in and attributable
to equity, is recognised in the income statement at the same time as
any profit or loss on the disposal.

Derivative financial instruments

Derivative financial instruments are recognised and measured in the
balance sheet at fair value. Positive and negative fair values of deriva-
tive financial instruments are included in other receivables and other
payables, respectively, and positive and negative values are set off only
where the enterprise has the right and intention to settle several finan-
cial instruments on a net basis.

Fair values of derivative financial instruments are calculated on the
basis of market data as well as recognised valuation methods.

Changes in the fair values of derivative financial instruments that are
designated and qualify as fair value hedges of arecognised asset or a
recognised liability are recognised in the income statement as are any
changes in the value of the hedged asset or the hedged liability related
to the hedged risk.

According to the agreements entered into the hedging of future cash
flows, except for currency hedging, are treated as fair value hedges of a
Fecognised asset or a recognised liability.

072 | vestas armual repurt 2009

 

Changes in the fair values of derivative financial instruments that are
designated and qualify as hedges of expected future cash flows and
effectively hedge changes in the value of the hedged item are recog-
nised in equity. Profits or losses on such hedging transactions are trans-
ferred from equity on realisation of the hedged item and are recognised
in the same entry as the hedged itern. However, on hedging of proceeds
from future borrowing, profits or losses on hedging transactions are
transferred from equity over the term of the loan.

Changes in the fair values of derivative financial instruments, desig-
nated and qualify as hedges of net investments in foreign subsidiaries
or associates and effectively hedge against exchange adjustments in
these enterprises, are recognised directly in equity under the cash flow
hedging reserve.

Changes in the fair values of derivative financial instruments that do
not qualify for hedge accounting are recognised as they arise in finan-
cial income and expenses in the income statement.

Segment information

The Group has adopted IFRS 8 which is required for all annual reports
and interim financial statements starting 1 January 2009 or later.
Implementation of IFRS 8 has not resulted to changes in Vestas' policy
in measuring/valuing the amounts included in segment reporting. How-
ever, the composition of the reportable segment in 2009 compared to
2008 has changed and there are additional narrative disclosures. The
measure of profit or loss, revenues and expenses included in segmental
reporting are the same as those used in the consolidated accounts and
remain unchanged from 2008.

The reportable segments identified make up most of the Group's
external revenue, which is solely derived from the sale of wind turbine
generators and associated service activity. The reportable segments
are an aggregation of operating segments within the Vestas Group as
prescribed by IFRS 8. The reportable segments are determined based
on the Group's management structures and the consequent reporting
to the Chief Operating Decision Maker, the Executive Management.
Thus, they are determined based on both geographical segments and
business units (production and sales business units) of the Group. The
remaining operating segments not included in the identified reportable
segments are included under all other operating segments.

The production business units are classified as one reportable seg-
ment because the revenues generated by these units are driven by the
Group's transfer pricing policy and are consistent across the Group.
Secondly, Vestas only sells one product - wind turbines - and revenue
is recognised largely based on the delivery of a complete wind turbine
not on the basis of the independent sale of the three main products
(blades, nacelle and tower) that make up the wind turbine.

Income and expenses included in profit for the year are allocated to the
extent that they can be directly or indirectly attributed to the segments
on areliable basis. Expenses allocated as either directly or indirectly
attributable comprise: cost of sales, research and development costs,
selling and distribution expenses and administrative expenses.

The income and expenses allocated as indirectly attributable to the
segments are aliocated by means of sharing keys determined on the
basis of the utilisation of key resources in the segment.

Non-current segment assets comprise the non-current assets used
directly for segment operations, including intangible assets, property,
plant and equipment and investments in associates.

Current segment assets comprise the current assets used directly for
segment operations, including inventories, trade receivables, other
receivables and prepayments.

All other segments primarily comprise incorne and expenses relating to
the Group's administrative functions.

 

NOTES TO THE CONSOLIDATED ACCOUNTS

Inter-company balances primarily comprise arms' length transactions
between operating segments making up the reportable segments.
These balances are eliminated to arrive at the figures in the consoli-
dated accounts.

Share-based payments
The value of the services received in exchange for the granting of
options is measured at the fair value of the options.

Equity settled share options granted to employees are measured at fair
value at the time of granting and are recognised in staff expenses in the
income statement over the vesting period. The counter item is recog-
nised directly in equity.

On initial recognition of the share options, the number of options
expected to vest is estimated. Subsequently, the estimate of the
number of vested options is revised so that the total recognised is
based on the actual number of options vested.

The fair value of the options granted is estimated using an option pri-
cing model (Black-Scholes). In determining fair value, terms and condi-
tions relating to the share options granted are taken into account.

Government grants

Government grants comprise grants for investments, research and
development projects, etc. Grants are recognised when there is reason-
able certainty that they will be received.

Grants for investments and capitalised development projects are set
off against the cost of the assets to which the grants relate. Other
grants are recognised in development costs in the income statement so
as to offset the expenses for which they compensate.

Income statement

Revenue

Revenue comprises sale of wind turbines and wind power systems,
after-sales service and sale of spare parts.

Contracts to deliver large wind power systems with a high degree

of customisation are recognised in revenue as the systems are con-
structed based on the stage of completion of the individual contract
(turnkey and supply-and-installation projects). Where the profit from a
contract cannot be estimated reliably, revenue is only recognised equal-
ling the expenses incurred to the extent that it is probable that the
expenses will be recovered. Sale of individual wind turbines and small
wind power systems based on standard solutions (suppiy-only projects)
as well as spare parts sales are recognised in the income statement
provided that the risk has been transferred to the buyer prior to the
year end, and provided that the income can be measured reliably and is
expected to be received.

Service sales, comprising service and maintenance agreements as well
a5 extended warranties regarding wind turbines and wind power sys-
tems sold, are recognised in the income statement over the term of the
agreement as the agreed services are provided.

Cost of sales

Cost of sales, including warranty costs, comprise the expenses incurred
to achieve revenue for the year. Cost comprises raw materials, consum-
ables, direct labour costs and indirect expenses such as salaries, rental
and lease expenses as well as depreciation of production facilities.

Furthermore, provisions for losses on construction contracts are
included in cost of sales.

Research and development costs

Research and development costs comprise development costs that do
not qualify for capitalisation, as well as amortisation of and impairment
losses on capitalised development costs.

1003234EogSN06706

Selling and distribution expenses

Selling and distribution expenses comprise expenses incurred for the
sale and distribution of products sold during the year as well as for
sales campaigns, etc. carried out during the year. Also included are,
expenses relating to sales staff, advertising and exhibitions and depre-
ciation are recognised.

Administrative expenses

Administrative expenses comprise expenses incurred during the year
før management and administration of the Group, including expenses
for administrative staff, Management, office premises, office expenses
and depreciation.

Income from investments in associates

The proportionate share of the results of associates after minority inter-
ests and tax and after elimination of the proportionate share of intercom-
pany profits/losses is recognised in the consolidated income statement.

Financial income and expenses

Financial income and expenses comprise interest, exchange gains and
losses and impairment losses on securities, debt and foreign currency
transactions, amortisation of financial assets and liabilities, including
finance lease obligations, as well as extra payments and repayments
under the on-account taxation scheme.

Borrowing costs related to construction of qualifying assets are recog-
nised as part of the assets' cost price.

Corporation tax

Tax for the year consists of current tax and deferred tax for the year. The
tax attributable to the profit for the year is recognised in the income
statement, whereas the tax attributable to equity transactions is recog-
nised directly in equity.

To the extent that the Vestas Group achieves any tax allowance in the
calculation of the taxable income in Denmark or abroad as a result of
share-based payment schemes, the tax effect of the schemes is recog-
nised in current tax for the year. However, where the total tax allowance
exceeds the total cost of the scheme for accounting purposes, the tax
effect of the excess allowance is recognised directly in equity.

Balance sheet

Intangible assets

Goodwill

Goodwill is initially recognised in the balance sheet at cost. Subse-
quently, goodwill is measured at cost less accumulated impairment
losses, Goodwill is not amortised.

The carrying amount of goodwill is allocated to the Group's cash-
generating units. Identification of cash-generating units is based on
management structure and internal financial management. Manage-
ment assesses that the smallest cash-generating units to which the
carrying amount of goodwill can be allocated are the Group's geo-
graphical segments, Europe, Americas and Asia/Pacific.

The carrying amount of goodwill is tested at least annually for impair-
ment, together with the other non-current assets of the cash-gener-
ating unit to which goodwill has been allocated, and if the recoverable
amount is lower than the carrying amount, goodwill is written down to
its lower recoverable amount in the income statement.

The recoverable amount is usually calculated as the net present value
of expected future net cash fiows from the enterprise or the activity
(cash-generating unit) to which the goodwill has been allocated. Alter-
natively, the recoverable amount is calculated as fair value less costs to
sell. Impairment losses on goodwill are recognised in a separate line in
the income statement.

Development projects and software
Development projects that are clearly defined and identifiable and in
respect of which technical feasibility, sufficient resources and a poten-

Vestas annual report 2009 | 073

 

>>

Consolidated accounts

>>

 

NOTES TO THE CONSOLIDATED ACCOUNTS

tial future market or application in the enterprise can be demonstrated,
and where it is the intention to manufacture, market or use the project,
are recognised as intangible assets. This applies if cost can be meas-
ured reliably and sufficient certainty exists that future earnings or the
net selling price can cover cost of sales, selling and distribution and
administrative expenses as well as research and development costs.
Other development costs are recognised in the income statement as
incurred.

Recognised development costs are measured at cost less accumulated
amortisation and impairment losses. Development costs comprise
salaries, amortisation and other expenses attributable to the Group's
development activities.

Following completion of the development work, development projects
are amortised on 2 straight-line basis over the estimated useful life. The
amortisation period is three to five years. The basis of amortisation is
calculated net of any impairment losses.

The carrying amount of development projects in progress is tested for
impairment at least annually and where the carrying amount exceeds
the net present value of the future net cash flows expected to be gener-
ated by the development project, the project is written down to its
recoverable amount in the incorne statement.

Patents and licences included in development projects are measured
at cost less accumulated amortisation and impairment losses. Patents
and licences are amortised over the patent period or term of agree-
ment, the life of the development project or the estimated useful life,
whichever is shorter. The basis of amortisation is calculated net of any
impairment losses.

Software is measured at cost less accumulated amortisation and
impairment losses. Cost includes both direct internal and external ex-
penses. Software is amoftised on a straight-line basis over five years.
The basis of amortisation is calculated net of any impairment losses.

Borrowing costs that are directly attributable to the acquisition, con-
struction or production of a qualifying asset form part of the cost of
that asset. All other borrowing costs are recognised as expenses in the
financial year in which they are incurred. A qualifying asset is an asset
that necessarily takes a substantial period, more than three months, of
time to get ready for its intended use or sale.

Intangible assets with an indefinite useful life are, however, not amort-
ised, but are tested annually for impairment.

Property, plant and equipment

Land and buildings, plant and machinery as well as other fixtures and
fittings, tools and equipment are measured at cost less accumulated
depreciation and impairment losses.

Cost comprises the cost of acquisition and expenses directly related
to the acquisition up until the time when the asset is ready for use.
inthe case of assets of own construction, cost CoMprises direct and
indirect expenses for materials, components, sub-suppliers and labour.
Estimated expenses for dismantling and disposing of the asset and
for re-establishment are added to cost to the extent that they are
recognised as a provision. Where individual components of an item of
property, plant and equipment have different useful lives, the cost of
the item is broken down into separate components which are depre-
ciated separately.

The cost of assets held under finance leases is calculated at the lower
of the fair value of the leased asset and the net present value of the
future minimum lease payments computed by applying the interest
rate implicit in the lease or an approximated value thereof as the dis-
count rate.

Subsequent expenses, e.g. in Connection with the replacement of com-
ponents of an item of property, plant and equipment, are recognised in

074 | vestas annuatsepørt 2009

the carrying amount of the asset in question when it is probable that
the expenses incurred will result in future economic benefits to the
Group. The carrying amount of the replaced components is derecog-
nised in the balance sheet and recognised in the income statement.
All other expenses incurred for ordinary repairs and maintenance are
recognised in the income statement as incurred.

Borrowing costs that are directly attributable to the acquisition, con-
struction or production of a qualifying asset form part of the cost of
that asset. All other børrowing costs are recognised as expenses in the
financial year in which they are incurred. A qualifying asset is an asset
that necessarily takes a substantial period, more than three months, of
time to get ready for its intended use or sale,

Depreciation is calculated on a straight-line basis over the expected
useful lives of the assets, which are:

Buildings, including installations 2... 25-40 years
Plant and Machine Ry 2.2.2... 3-10 years
Power-operated tools of own construction and newly

manufactured test and exhibition turbines
Other fixtures and fittings, tools and equipment

 

 

Land is not depreciated.

The basis of depreciation is calculated taking into account the residual
value of the asset less any impairment losses. The residual value is
determined at the time of acquisition and is reassessed annually. Where
the residual value exceeds the carrying amount of the asset, depreci-
ation is discontinued.

If the depreciation period or the residual value has changed, the effect
on depreciation is recognised prospectively as a change of accounting
estimate.

Depreciation is recognised in the income statement as cost of sales,
research and development costs, selling and distribution expenses as
well as administrative expenses to the extent that depreciation is not
included in the cost of assets of own construction.

Leases
For accounting purposes, lease obligations are classified as either
finance or operating lease obligations.

A lease is classified as a finance lease when it transfers substantially all
risks and rewards of the leased asset as if the asset had been owned.
Other leases are classified as operating leases.

Finance lease assets are capitalised under property, plant and equip-
ment and are depreciated over their expected useful lives in accord-
ance with the periods listed above. The corresponding finance lease
obligations are recognised in liabitities. Operating lease expenses are
recognised on a straight-line basis in the income statement over the
lease term.

Impairment of assets

Goodwill and intangible assets with indefinite useful lives are tested
annually for impairment, initially before the end of the year of acquisi-
tion. Similarly, development projects in progress are tested annually for
impairment.

The carrying amount of goodwill is tested for impairment together with
the other non-current assets of the Cash-generating unit to which good-
will has been allocated, and if the recoverable amount is lower than

the carrying amount, goodwill is written down to its lower recoverable
amount in the income statement. Impairment losses on goodwill are
recognised in a separate line in the income statement.

Deferred tax assets relating to tax loss carry-forwards are reviewed on
an annual basis and are only recognised when it is probable that they
will be utilised in future periods.

 

NOTES TO THE CONSOLIDATED ACCOUNTS

The carrying amounts of other non-current assets are reviewed on an
annual basis to determine whether there is any indication of impair-
ment. If so, the recoverable amount of the asset is calculated. The
recoverable amount is the higher of the fair value of the asset less esti-
mated costs to sell and value in use. Value in use is calculated as the net
present value of expected future net cash flows from the asset or the
cash-generating unit to which the asset has been allocated.

Any impairment loss is recognised where the carrying amount of an
asset or a cash-generating unit, respectively, exceeds the recoverable
amount of the asset or the cash-generating unit. Impairment losses
are recognised in the income statement in cost of sales, research and
development costs, selling and distribution expenses and administra-
tive expenses, respectively. Impairment losses on goodwill are pre-
sented in a separate line in the income statement.

Impairment losses on goodwill are not reversed. Impairment losses on
other assets are reversed only to the extent of changes in the assump-
tions and estimates underlying the impairment calculation.

Impairment losses are reversed only to the extent that the new carrying
amount of the asset does not exceed the carrying amount of the asset
after depreciation/amortisation had the asset not been impaired.

Investments in associates

Investments in associates are measured in the balance sheet at the
proportionate share of the net asset value of the associates calculated
under the Group's accounting policies with deduction or addition of a
proportionate share of unrealised intercompany profits and losses and
with addition of the carrying amount of goodwill,

Associates with negative net asset values are measured at EUR 0. Any
legal or constructive obligation of the Group to cover the negative bal-
ance of the associate is recognised in provisions.

Receivables from associates are measured at amortised cost. Provi-
sions are made for bad debts.

Inventories
Inventories are measured at the lower of cost using the weighted aver-
age method and net realisable value (NRV).

The cost of goods for resale, duties, raw materials and consumables
comprises direct costs and transportation expenses.

The cost of work in progress comprises the cost of raw materials,
consumables, direct labour and indirect production costs. Indirect
production costs comprise the cost of materials and labour as well as
maintenance and depreciation of the machinery, factory buildings and
equipment used in the manufacturing process together with costs of
factory administration and management.

The NRV of inventories is measured at sales price less costs of comple-
tion and selling costs incurred. NRV is determined taking into account
marketability, obsolescence and development in the expected selling
price.

Trade receivables
Trade receivables and other receivables are measured at amortised
cost. Provisions are made for bad debts.

Prepayments recognised as assets comprise prepaid expenses con-
cerning subsequent financial! years and are measured at cost.

Construction contracts in progress

Construction contracts in progress comprises agreements to deliver
large wind power systems with a high degree of customisation (turnkey
and supply-and-installation projects).

Construction contracts in progress are measured at the selling price of
the work performed based on the stage of completion less interim bill-

1003234EogSN06707

ing and expected losses. Construction contracts are characterised by
the wind power systems delivered being customised to a high degree.
The stage of completion is measured by the proportion that the con-
tract expenses incurred to date bear to the estimated total contract
expenses. Where it is probable that total contract expenses will exceed
total revenues from a contract, the expected loss is recognised imme-
diately as an expense in the income statement.

The value of self-constructed components is recognised in"Construc-
tion contracts in progress” upon delivery of the components to the spe-
cific wind power systems construction site.

Where it is probable that the total expenses of a construction contract
in progress will exceed total revenues from the contract, the expected
loss for construction contracts in progress is recognised immediately as
an expense and an obligation.

Prepayments from customers are recognised as liabilities.

A construction contract in progress for which the selling price of the work
performed exceeds interim billings and expected losses is recognised

as an asset. Construction contracts in progress for which interim billings
and expected losses exceed the selling price are recognised as a liability.

Expenses relating to sales work and the securing of contracts are
recognised in the income statement as incurred.

Investments

Shares and bonds included in the Group's trading portfolio are recog-
nised under current assets at the trade date and are measured at fair
value, in line with the Group's investment policies, corresponding to the
market price for quoted securities. Changes in fair value are recognised
in the income statement as financial income or financial expense.

Equity

Treasury shares

Purchase and sales sums as well as dividends relating to treasury
shares are recognised directly in retained earnings in equity. A reduc-
tion of capital by cancellation of treasury shares reduces the share
capital by an amount equal to the nominal value of the shares.

Proceeds from the sale of treasury shares and the issuing of new shares
in Vestas Wind Systems A/S relating to the exercise of share options or
employee shares are recognised directly in equity.

Dividend

Å proposed dividend is recognised as a liability at the time of adoption
at the Annual General Meeting (declaration date). The dividend distribu-
tion proposed for the year is disclosed as a separate equity item.

Interim dividend is recognised as a liability at the time of resolution.

Translation reserve

The translation reserve in the consolidated accounts comprises ex-
change adjustments arising on the translation of the financial state-
ments of foreign enterprises from their functional currencies into the
presentation currency of the Group (EUR).

nm
z
E
3
o
3]
i
7
v
oa
s
(ø
z
o
um
c
o
u

Upon full ør part realisation of the net investment, exchange adjust-
ments are recognised in the income statement.

Cash flow hedging reserve

The cash flow hedging reserve in the consolidated accounts comprises
gains and losses on fair value adjustments of forward exchange con-
tracts concerning future transactions as well as hedging in connection
with commodities.

The cash flow hedging reserve also includes fair value adjustments of
interest rate swaps, outstanding at the balance sheet date, entered into

to hedge against the interest rate risks on loans with floating interest

rates. >>

Vestas annual report 2009 | 075

 

>>

  

NOTES TO THE CONSOLIDATED ACCOUNTS

Corporation tax and deferred tax

Current tax liabilities and receivables are recognised in the balance
sheet at the amounts calculated on the taxable income for the year
adjusted for tax on taxable incomes for prior years and for taxes paid
on account.

Deferred tax is measured using the balance sheet liability method in
respect of all temporary differences between the carrying amount

and the tax base of assets and liabilities. Deferred tax is, however, not
recognised in respect of temporary differences concerning goodwill not
deductible for tax purposes, office premises and other items - apart
from business acquisitions —- where temporary differences have arisen
at the time of acquisition without affecting the profit for the year or the
taxable income, In cases where the computation of the tax base may be
made according to different tax rules, deferred tax is measured on the
basis of Management's intended use of the asset and settlement of the
lability, respectively.

Deferred tax assets, including the tax base of tax loss carry-forwards,
are recognised in other non-current assets at the value at which the
asset is expected to be realised, either by elimination of tax on future
earnings or by set-off against deferred tax liabilities within the same
legal tax entity and jurisdiction.

Adjustment are made to deferred tax to take account of the elimination
of unrealised intercompany profits and losses.

Deferred tax is measured on the basis of the tax rules and tax rates of
the respective countries that will be effective when the deferred tax is
expected to crystallise as current tax based on the legislation at the
balance sheet date. Changes to deferred tax due to changes to tax
rates are recognised in the income statement except for items recog-
nised directly in equity.

Provisions

Provisions are recognised when - in consequence of an event that has
occurred before or on the balance sheet date - the company has a legal
or constructive obligation and it is probable that there will be an outflow
of the Group's financial resources to settle the obligation.

Provisions are measured at Management's best estimate of the ex-
penses required to settle the obligation, Discounting is applied where
relevant.

Warranty provisions are recognised systematically and comprise
warranty obligations made in respect of delivered wind turbines and
wind power systems based on experience. At the start of the warranty
period, calculated provisions are made for each type of wind turbine
and are reduced over the warranty period as warranty costs are in-
curred. Subsequently, periodic reviews are performed based on an over-
all assessment of the need for provisions.

Restructuring costs are recognised as liabilities when a detailed, formal
restructuring plan has been announced to those affected by no later
than the balance sheet date, On acquisition of enterprises, restruc-
turing provisions in the acquired enterprise are recognised in goodwill
only where a restructuring obligation relating to the acquired enterprise
exists at the time of acquisition.

A provision for loss-making contracts is made where the expected
benefits to the Group from the contract are lower than the unavoid-
able costs of meeting obligations under the contract (Ioss-making
contracts). Expected losses on construction contracts in progress are,
however, recognised in construction contracts in progress.

Pension obligations

Obligations relating to defined contribution plans where the Group con-
tinuously makes fixed pension contributions to independent pension
funds are recognised in the income statement in the period to which
they relate, and any contributians outstanding are recognised inthe
balance sheet in other payables.

076 | Vestas annual report 2009

For defined benefit plans, an annual actuarial calculation is made of the
net present value of the future benefits under the defined benefit plan.
Net present value is calculated based on assumptions of the future
development in e.g. salary level, interest rates, inflation and mortality.
The net present value is calculated only for benefits earned by employ-
ees from their employment to date with the Group. The actuarially
calculated net present value less the fair value of any plan assets is rec-
ognised in the balance sheet in pension obligations in accordance with
the corridor method.

Inthe income statement, the pension expense for the year is recognised
based on the actuarial estimates and financial expectations at the be-
ginning of the year. Furthermore, a share of the accumulated actuarial
gains or losses at the beginning of the financial year is recognised if it
exceeds the higher of 10 per cent of the pension obligations and 10 per
cent of the fair value of the pension assets. The amount is recognised in
the income statement over the employees' estimated average remain-
ing period of employment with the Group. The non-recognised part of
actuarial gains/losses is disclosed in the notes. Upon the change to
IFRS, accumulated actuarial gains and losses were fully recognised in
the opening balance sheet at 1 January 2005.

In the event of changes in benefits payable for employees" past ser-
vices to the Group, a change is made to the actuarially calculated net
present value, which is classified as past service cost. Past service cost
is charged to the income statement immediately if the employees have
already earned the right to the changed benefit. Otherwise, past service
cost is recognised in the income statement over the period in which the
employees earn the right to the changed benefit.

Where a pension plan constitutes a net asset, the asset is recognised
only to the extent that it offsets non-recognised actuarial losses, future
repayments from the plan, or if it will lead to a reduction in future contri-
butions under the plan.

Other long-term staff benefits are similarly recognised by using an
actuarial calculation, but without applying the corridor method. Accord-
ingly, all actuarial gains and losses are recognised immediately in the
income statement. Other long-term staff obligations include anniversary
bonuses.

Financial debts

Loans from credit institutions, etc. are recognised initially at the fair
value of the proceeds received net of transaction expenses incurred.
Subsequently, the loans are measured at amortised cost using the effec-
tive interest method. Accordingly, the difference between the proceeds
and the nominal value is recognised in financial expenses in the income
statement over the loan period.

Financial debts also include the capitalised remaining lease obligations
on finance leases measured at amortised cost.

Prepayments from customers

Prepayments from customers recognised in liabilities are measured

at cost and comprise prepayments received for wind turbines or wind
power systems ordered but not yet delivered and service prepayments
received in respect of wind turbines and wind power systerns delivered.

Other debt
Other debts are measured at amortised cost.

Deferred income is measured at cost and comprises payments received
inrespect of income in subseguent years.

Cash flow statement

The cash flow statement shows the Group's cash flows for the year,
broken down by operating, investing and financing activities, changes
for the year in cash and cash equivalents as well as the Group's cash and
cash equivalents at the beginning and end of the year.

 

NOTES TO THE CONSOLIDATED ACCOUNTS

Cash flows relating to acquired enterprises are recognised from the
date of acquisition. Cash flows relating to enterprises disposed of are
recognised until the date of disposal.

Cash flows from operating activities

Cash flows from operating activities are calculated as the net profit/
loss for the year adjusted for non-cash operating items such as depre-
ciation, amortisation and impairment losses, provisions and changes
in working capital, interest received and paid and corporation tax paid.
Working capital comprises current assets less short-term debt, which
does not include current bank loans.

Cash flows from investing activities

Cash flows from investing activities comprise cash flows from business
acquisitions and sales and from acquisitions and disposals of intan-
gible assets, property, plant and equipment as well as other non-current
assets. The cash flow effect of business acquisitions and sales is shown
separately.

The establishment of finance leases are treated as non-cash trans-
actions.

GLOSSARY

Financial ratios
EBIT margin: Profit/loss before income from associates, financial
income and expenses and tax as a percentage of revenue.

EBITDA margin: Profit/loss before financial income and expenses,
depreciation and amortisation, income from associates, financial
income and expenses and tax as a percentage of revenue.

Gearing (9%): Interest-bearing liabilities at year end divided by
equity at year-end.

Gross margin (%): Gross profit/loss as a percentage of revenue.

Return on equity (9%); Profit/loss after tax for the year divided by
average equity.

Return on invested capital (RO!C) (%): Operating profit/loss after
tax (effective tax rate) as a percentage of average property, plant
and equipment and intangible assets, inventories and receivables
less non-interest bearing debt including provisions.

Solvency ratio (9%): Equity at year end divided by total assets.
Share ratios
Book value per share: Equity at year end divided by the number of

shares at year-end.

Cash flow from operating activities per share: Cash flows from
operating activities divided by average number of shares.

1003234EogSN06708

Cash flows from financing activities

Cash flows from financing activities comprise changes to the amount or
composition of the Group's share capital and related expenses as well
as the raising of loans, repayment of interest-bearing debt, acquisition
of shares for treasury and sale of treasury shares together with distri-
bution of dividends to shareholders.

Cash flows from finance lease assets are recognised as interest pay-
ments and repayments of debts.

Cash at bank and in hand

Cash at bank and in hand comprise cash at bank and in hand and cur-
rent bank debt.

Assets and short term debts that are included as cash at hand and in

bank in the cash flow statement are those included in the Group's cash
management.

Dividend per share: Dividend percentage multiplied by the nominal
value of the share.

Earnings per share (EPS): Profit/loss for the year divided by the
average number of shares in circulation.

Payout ratio: Total dividend distribution divided by profit/loss for
the year.

P/E ratio: The official closing price on the NASDAQ OMX
Copenhagen divided by earnings per share for the year.

Price/book value: The official closing price onthe NASDAQ OMX
Copenhagen divided by year-end book value per share.

Terminology used in accounting policies
IFRS: Internationat Financial Reporting Standards

IAS: International Accounting Standards
IASB: International Accounting Standards Board

IFRIC/SIG: International Financial Reporting Interpretations
Committee/Standing Interpretations Committee

Vestas annual report 2009 | 077

Consolidated accounts

 

 

NOTES TO THE CONSOLIDATED ACCOUNTS

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

When preparing the annual report of the Vestas Group, Management
makes a number of accounting estimates and assumptions which form
the basis of recognition and measurement of the Group's assets and
liabilities. The most significant accounting estimates and judgements
are described below. The Graup's accounting policies are described in
detail in note 1 to the consolidated accounts.

Critical judgements

Use of percentage-of-completion method

Management performs critical accounting estimates in connection with
income-recognition. Provided that certain criteria in respect of project
complexity, etc. are met, revenue from projects in progress is recog-
nised under the percentage-of-completion method corresponding to
the selling price of the work performed based on the stage of comple-
tion (turnkey and supply-and-installation projects). Where projects

do not qualify for recognition under the percentage-of-completion
method, total revenue is not recognised until the point in time when the
risk is transferred to the buyer (supply-only projects).

Delays, etc. may result in material timing deviations in the Group's rev-
enue recognition, and thus earnings, compared to expectations.

Critical estimates

The calculation of the carrying amounts of certain assets and liabilities
requires judgements, estimates and assumptions relating to future
events.

The estimates and assumptions made are based on experience and
other factors that Management considers reasonable in the circum-
stances, but that are inherently uncertain and unpredictable. The
assumptions may be incomplete or inaccurate and unexpected events
or circumstances, may arise. Furthermore, the company is subject to
risks and uncertainties which may result in actual amounts deviating
from these estimates. Special risks of the Vestas Group have been
described on page 21 of the Management report, and in the individual
notes to the consolidated accounts.

lt may be necessary to change estimates made previously due to
changes in the assumptions on which the previous estimates were
based or due to new knowledge or subsequent events.

Warranty provisions

The product warranties, which in the great majority of cases cover com-
ponent defects, functional errors and any financial losses suffered by
the customer in connection with unplanned suspension of operations,
are usually granted for a two-year period from delivery of the turbine.
In certain cases, a warranty of up to five years is granted. For the cus-
tomer, the specific warranty period and the specific warranty terms are
part of the basis of the individual contract.

Warranty provisions include only standard warranty, whereas services
purchased in addition to the standard warranty are included in prepay-
ments from customers.

In addition to the above, provisions are made for upgrades of turbines
sold due to type faults, etc. where Vestas has a warranty obligation at
the date of provision. Such provisions will also include turbines sold in
prior years, but where type faults, etc. are identified later. Moreover, it
should be emphasised that the complexity of some of the type faults,
etc. identified may lead to adjustments of previous estimates, upwards
as well as downwards, in the light of factual information about popula-
tion size, costs of repair and the timing of such repair.

It is estimated that 30-35 per cent of the warranty provisions made
for the year relate to adjustments of estimates in previous years of
provisions for serial faults, etc. Included in this, is the cost of upgrades
of turbines sold in previous year, commercial settlements and proactive

upgrading as well as new information about the serial faults in question.

078 | VeSTaS annual report 2OUY

Total warranty provisions of EUR 233m have been made in 2009,
corresponding to 3.5 per cent of the Group's annual revenue.

For further information on warranty provisions and related product
risks, reference is made to page 27 of the Management report and to
note 22 to the consolidated accounts.

Management assesses the likely outcome of pending and future nego-
tiations with sub-suppliers for compensation. Compensation from sub-
suppliers may be recognised only when a written agreement with the
sub-supplier has been made.

The carrying amount of warranty provisions at 31 December 2009 is
EUR 161m (2008: EUR 183m).

Impairment of assets

Goodwill

Inthe annual impairment test of goodwill, an estimate is made to deter-
mine how parts of the enterprise (cash-generating units) related to

the goodwill will be able to generate sufficient future positive net cash
flows to support the value of goodwill, trademarks with an indefinite
useful life and other net assets of the enterprise in question.

The estimate of the future free net cash flows is based on budgets and
business plans for the coming five years and on projections for subse-
quent years. Key parameters are revenue development, profit margin,
proposed capital expenditure as well as growth expectations for the fol-
lowing years. Budgets and business plans for the coming five years are
based on specific future business initiatives for which the risks relating
to key parameters have been assessed and recognised in estimated
future free cash flows. Projections for years following the next five-year
period are based on general expectations and risks

The discount rates used to calculate the recoverable amount are before
tax and reflect the risk-free interest rate of the individual geographical
segments and related risk. The proportion of equity in relation to the
Group's future capital structure is expected to continue to be high.

For a description of the impairment test of intangible assets, refer to
note 12 to the consolidated accounts.

The carrying value of goodwill at 31 December 2009 is EUR 320m
(2008: EUR 320m).

Development projects

Finished development projects are reviewed on an annual basis to deter-
mine whether there is any indication of impairment, If this is indicated,
an impairment test is carried out for the individual development projects.
For development projects in progress, however, an annual impairment
test is always performed. The impairment test is performed on the basis
of various factors, including future use of the project, the fair value of the
estimated future earnings as well as interest rate and risks.

The carrying value of development projects in progress and finished
development projects at 31 December 2009 are EUR 419m (2008:
EUR 262m).

Receivables

Receivables are measured at amortised cost less provisions for bad
debts based on customers" inability to pay. If the ability to pay changes
in future, further provisions may be required. Management makes
analyses based on customers' expected ability to pay, historical data on
payment patterns, doubtful debts, customer concentrations, custom-
ers' credit standing and security received as well as economic trends in
the company's sales channels.

It is estimated that the provisions made are sufficient to meet bad

debts. The financial uncertainty related to provisions for bad debts is
considered limited.

 

NOTES TO THE CONSOLIDATED ACCOUNTS

The carrying value of receivables at 31 December 2009 is EUR
1,807m (2008: EUR 1,626m).

Deferred tax

The Vestas Group recognises deferred tax assets, including the tax
value of tax loss carry-forwards, where Management assesses that the
tax assets may be utilised in the foreseeable future for set-off against
future positive taxable income. The assessment is made on an annual
basis and is based on budgets and business plans for the future years,
including planned business initiatives.

The value of recognised deferred tax assets amounts to EUR 110m
(2008: EUR 63m), of which EUR 18m (2008: EUR 14m) relates to tax
loss carry-forwards. Of the total tax carry-forwards, EUR 14m is ex-
pected to be realised within 12 months, and EUR 4m is expected to be
realised later than 12 months after the balance sheet date. The value
of non-recognised tax assets (primarily tax loss carry-forwards) totals
EUR 26m (2008: EUR 37m), which is not expected to be utilised inthe
foreseeable future.

For further description of the Group's tax assets, refer to note 15 tothe
consolidated accounts.

 

1003234EogSN06709

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

SEGMENT INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe Americas Åsia/Pacific ' Production Total reportable
2009 — — MEN . Sales units sales units sales units units segments
External revenue
Wind turbines and wind power systems 4,217 1,256 653 0 6,126
Service 324 116 64 0 504
Other . eN O O 0 6 6
Totalexternalrevenue 0, 4,541 1,372 717 60 6,636.
Internal revenue NEN — i " 655 142 67 5,249 6,113
Total segment revenue i — 5,196 1,514 784 5,255 12,749
Other operating income NE 0 0 Q 0 O
Reportable segments' operating results (EBIT) 247 67 (41) 269 542
Financial items (net) (63) (27) (5) (62) (157)
Other segment items
Depreciation and amortisation 20 12 6 94 132
Impairment losses (recognised in the income statement) 0 Q o 1 1
Impairment losses (recognised in equity) O 0 0 0 0
Reversal of impairment losses
(recognised in the income statement) O 0 O o 0
Reversal of impairment losses (recognised in equity) O 0 O 0 0
Warranty provisions for the year 5 o 1 0 6
Share-based payments 3 0 0 0 3
Additions to property, plant and equipment and
intangible assets 48 11 25 441 525
Additions to investments in associates 0 o 0 o (9)
Investments in associates 1 0 0 0 1
Non current assets (excluding deferred tax, pensions, etc.) 122 20 64 1,077 1,283
Segment assets 1,986 512 609 2,046 5,153
External revenue specified by countries:
USA - 909 - - -
Germany 1,080 - - - -
Spain 873 - - - -
China - - 424 - -
External revenueinDenmark —— | 124
External revenue outside Denmark 6,512

USA China Others Total

Non-current assets located in Denmark TT — i
(excluding deferred tax, pensions, etc.) - - 1,349
Non-current assets located outside Denmark
(excluding deferred tax, pensions, etc.) 231 265 429 925

 

 

External revenue specified by country comprises all countries with external revenue that account for more than 10
per cent of the Group's total external revenue. The given amounts comprise total revenue generated from the coun-

tries specified.

No single customer accounts for more than 10 per cent of the Group's total external revenue. None of the Group's
assets are classified as held-for-sale. None of the write-downs made on a single asset is material in itself. The non-
current assets in all other countries do not individually exceed 10 per cent of total non-current assets for the Group

except for the USA and China.

080 ] Vestas annual report 2009

 

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

3 SEGMENT INFORMATION (CONTINUED)

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe Americas Asia/Pacific Production Total reportable
2008 sales units sales units sales units units segments
External revenue
Wind turbines and wind power systems 3,292 1,515 817 0 5,624
Service 284 67 45 0 396
Other 0 0 0 15 15
Total external revenue 3,576 1,582 862 15 6,035
Internal revenue 512 107 36 4,375 5,030
Total segment revenue 4,088 1,689 898 4,390 11,065
Other operating income O O O 0 0
Reportable segments' operating results (EBIT) 142 66 (13) 257 452
Financial items (net) 2 2 (4) (35) (35)
Other segment items
Depreciation and amortisation 20 10 4 56 90
Impairment losses (recognised in the income statement) 0 0 0 Q 0
Impairment losses (recognised in equity) 0 0 0 O 0
Reversal of impairment losses
(recognised in the income statement) 0 0 Oo 0 0
Reversal of impairment losses (recognised in equity) 0 0 O 0 0
Warranty provisions for the year 3 O 6 o 9
Share-based payments 3 O O 0 3
Additions to property, plant and equipment and
intangible assets 20 11 33 350 414
Additions to investments in associates 0 0 0 0 0
Investments in associates 1 0 0 0O 1
Non current assets (excluding deferred tax, pensions, etc.) 101 20 48 750 919
Segment assets 1,614 622 474 1,767 4,477
External revenue specified by countries:
USA - 1,289 - - -
Germany 890 - - - -
Spain 743 - - - -
China - - 424 - - n
s
g
External revenue in Denmark 124 3
External revenue outside Denmark 5,911 8
oa
USA China Others Total u
Non-current assets located in Denmark
(excluding deferred tax, pensions, etc.) - - - 974
Non-current assets located outside Denmark
(excluding deferred tax, pensions, etc.) 123 121 457 701

 

Vestas annual report 2009 | 081

1003234EogSN06710

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

3 SEGMENT INFORMATION (CONTINUED)

 

Reconcillations — EEEEEEEE KEE 2009 2008
Reportable segments' EBIT —— —— 542 i 452
All other operating segments' EB — KEE — 3340 216
Consolidated operating profit (EB EEEEEEEEEEEEEE — 856 668
Reportable segments' revenue 12,749 11,065
All other segments' revenue 1,114 742
Elimination of internal revenue BENENE i Mee (7227) (5,772)
Consolidated revenue EEEEEEEEEE FE 6,636 6,035
Reportable segments' assets 5,153 4,477
All other segments' assets 2,385 2,120
Elimination BENENE i Bee i — (1,103) —… (1,289)
Consolidated total assets — i 6,435 5,308

”) Includes parent company income (management fee, service, royalty and other rental income from group companies) reduced buy
costs related to Vestas Technology R&D and group staff functions.

 

 

 

 

4 REVENUE
DD 0 2008
Sale of wind turbines and wind power systems … 6,126 5,624
Sale of service 504 396
Other OL. BENE . 6 25
BEEN 6686 | 6035
Sale of wind turbines and wind power systems are specified as follows:
Revenue using percentage-of-completion method (turnkey and supply-and-installation projects) 4,582 3,620
Revenue using completed contract method (supply-only projects) BENE 4544 2,004
BENENE mn BEEN 6126 5,624
5 AMORTISATION, DEPRECIATION AND IMPAIRMENT LOSSES
omme BE — 3008 2008
Amortisation, depreciation and impairment losses of non-current assets are specified as follows:
Amortisation, intangible assets 60 32
Impairment losses, intangible assets 0 0
Depreciation, property, plant and equipment 151 103
Impairment losses, property, plant and equipment 1 0
Gains and losses on sold property, plant and equipment | 6 . 0
KEE ae 135
- and have been expensed as follows:
Cost of sales 122 89
Research and development costs 52 29
Selling and distribution expenses 25 1
Administrative expenses i — RENEE — — 19 BENE 16
— —— — 28 135

082 l Vesta annual report 2009

 

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

6 STAFF COSTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NE FE . 2009 2008

Staff costs are specified as follows:

Wages and salaries, etc. 852 805

Share-based payment 2 3

Pension schemes 41 42

Other social security expenses . 72 62

NEN i — 47 912

Attributable to:

Board of Directors

Board remuneration — 1

Executive Management

Wages and salaries, etc. 2

Share-based payment NEN 1 i 1

. . 3

Other executives (Vestas Government)

Wages and salaries, etc. 5 5

Share-based payment 1 2

Pension schemes RENEE BEEN 0 ..
' HE — 6 7

Board of Directors and Executive Management are not covered by any pension schemes.

Average number of employees 20,832 17,924

Number of employees 31 December 20,730 20,829

7. RESEARCH AND DEVELOPMENT COSTS

—— — 2009 2008

Research and development costs expensed in the year are specified as follows:

Research and development costs 249 227

Capitalised deveiopment projects (199) (132)

Amortisation of development projects 42 24

Impairment losses of development projects KEE N 0 0

— 92 119

 

 

Consolidated accounts

Vestas annual report 2009 | 083

1003234EogSN06711

 

10

  

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

FINANCIAL INCOME

 

Exchange rate adjustments
Investments (bonds)
Deposits and receivables:

-— Interest income

- Other financial income
Hedge ineffectiveness (cash flow hedge)
Hedge ineffectiveness (fair value hedge)

 

 

FINANCIAL EXPENSES

 

Exchange rate adjustments
Financial debts, which is measured at amortised cost:
— Interest expenses

- Other financial expenses

Hedge ineffectiveness (cash flow hedge)
Hedge ineffectiveness (fair value hedge)
Change in discounting of provisions

 

 

 

 

CORPORATION TAX

 

Current tax on profit for the year —
Deferred tax on profit forthe year RENEE
Tax on profit for the year

Change in Corporation tax rate

Adjustments relating to previous years (net)

 

Corporation tax in the consolidated income statement

 

 

 

Tax on entries in comprehensive income related to deferred tax
Tax on entries in comprehensive income

 

Total corporationtax fortheyear
Computation of effective tax rate:
Corporation tax rate in Denmark
Adjustment relating to previous years
Deviation in foreign subsidiaries' tax rates compared to the Danish tax rate (net)
Non-tax deductible expenses

Non-taxable income

Provisions for tax loss carry-forwards

Change in Corporation tax rate

 

Effectivetaxrate

 

Vestas Wind Systems A/S is jointly taxed with all its Danish subsidiaries. The current Danish corporation tax is allo-
cated to the jointly taxed enterprises in proportion to their taxable incomes. Enterprises that utilise tax losses of
other enterprises pay a joint tax contribution to the parent company corresponding to the tax value of the utilised
tax losses, whereas enterprises whose tax losses are utilised by other enterprises receive a joint tax contribution
from the parent company corresponding to the tax value of the utilised losses (full allocation). The jointly taxed
enterprises have adopted the on-account taxation scheme.

084 | Vestas annual report 2009

 

 

| 2009 2008

i —— 0 33
0 1

6 28

2 4

6 0

0 0

HE mM 66

DR 2009 2008
— — 29 0
14 9

17 0

0 10

0 0

2 1

— — 62 20
2009 2008.

154 99

BE 62 105

216 204

0 0

REE 14 (1)

—— 230 203

8 (10)

i 8 (10)

— 238 193

25% 25%

2% 0%

1% 3%

0% 0%

0% 0%

0% 0%
— — 0% 0%
28% 28%

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

11 EARNINGS PER SHARE (EPS)

 

Profit forthe year

Weighted average number of ordinary shares

2009 2008
579 511

197,723,281  185,204,103

 

Weighted average number of treasury shares (757,641) (736,393)
Weighted average number of ordinary shares outstanding 196,965,640  184,467,710
0o 626,385

Dilutive effect of outstanding options

 

Average number of shares outstanding including dilutive effect of options

Earnings per share (EPS)
Earnings per share (EPS-D), diluted

196,965,640  185,094,095

2,94 2.77
2.94 2.76

 

1003234EogSN06712

Vestas annual report 2009 | 085

 

Consolidated accounts

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

12 INTANGIBLE ASSETS
— Completed Development i

development projects in
2009 — Goodwill projects Software progress Total
Costat 1 January 320 126 75 202 723
Exchange rate adjustments 0 0 O 0 0
Additions 0 (ej 28 199 227
Disposals 0 0 0 0 0
Transfers 0 81 o (81) …
Cøostat 31 December — . — … 320 207 103 320 | 950
Amortisation and impairment losses at 1 January 0 66 13 0 79
Exchange rate adjustments 0 0 (1) 0 (1)
Amortisation for the year 0 42 18 0 60
Impairment losses for the year 0 0 0 0 0
Reversal of amortisation of disposals inthe year 0 0 o 0 0
Transfers . … i … 0 …( 0 00 0
Amortisation and impairment losses at 31 December | 0 108 | 30 0 "138.
Carrying amount at 31 December — EN — 320 99 73 320 812
Internally generated assets included above 0 99 71 320 490
Amortisation period 3-5 years 5 years

— i "| "Completed Development

development projects in
2008 — É … — Goodwill projects Software progress Total
Cost at 1 January 320 203 40 105 668
Exchange rate adjustments 0o 0 (1) 0 (1)
Additions 0 1 36 132 169
Disposals 0 (113) 0 O (113)
Transfers EN 0 … 35 0 (35) 0
Costat 31 December … …320 126 75. 202 | 723
Amortisation and impairment losses at 1 January 0 155 6 0 161
Exchange rate adjustments 0 0 (1) 0 (1)
Amortisation for the year 0 24 8 0 32
Impairment losses for the year 0 0 0 0 0
Reversal of amortisation of disposals in the year 0 (113) 0 0O (113)
Transfers HEE — O 0 0 0 0
Amortisation and impairment losses at 31 December Q 66 13 O 79
Carrying amount at 31 December 320 60 62 202 644
Internally generated assets included above 0 60 61 202 323
Amortisation period 3-5 years 5 years

086 |ve ts inematrepunt 00%

 

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

12 INTANGIBLE ASSETS (CONTINUED)

Goodwill

At 31 December 2009, management completed impairment testing of the carrying amount of goodwill. The
impairment testing was done in fourth quarter based on the budgets and business plans approved by the Board of
Directors and the Executive Management as well as other assumptions adjusted, as required, to comply with IAS 36.

The main part of the carrying amount of goodwill in the Vestas Group arose in connection with the merger between
Vestas Wind Systems A/S and NEG Micon A/S in 2004 when Vestas acquired NEG Micon A/S.

For the purpose of the impairment test, the carrying amount of goodwill at 1 January 2004 plus goodwill from sub-
sequent acquisitions have been allocated to the cash flow generating units: Europe, Americas and Asia/Pacific. At
31 December 2009, goodwill of the three units amounted to EUR 229m, EUR 84m and EUR 7m, respectively.

When performing impairment tests of cash-generating units, the recoverable amount (value in use) calculated as
the discounted value of expected future cash flows is compared to the carrying amount of each of the cash-gener-
ating units.

Expected future cash flows are based on budgets and business plans for the next five years.

For al! segments, the key parameters are revenue, EBIT, working capital investments, capital investments in pro-
gress and contracted as well as growth assumptions.

The revenue growth rate from 2008 to 2009 was 10 per cent, and in the period 2005-2008 the average growth
amounted to 27 per cent per year.

The growth rate used in the impairment model for the years after 2011 is 2.5 per cent, which, to be prudent, is
significantly lower than the expected growth rate included in No. 1 in Modern Energy's Triple15 targets.

At 31 December 2009, the net working capital as a percentage of revenue amounted to 19 per cent. In the period
2005-2008 the net working capital as a percentage of revenue moved from 14 to 5 per cent. It is Vestas' expect-
ation that the net working capital going forward will not exceed 20 per cent of revenue, which has been included in
the impairment test.

Budgets and business plans for the next five years are based on Vestas' investments in progress and contracted
investments, and the risks relating to the key parameters have been assessed and recognised in the expected
future cash flows. The first five years are based on the strategy No. 1 in Modern Energy and Triple15 approved by
management. Projections for year six onwards are based on general market expectations and risks.

The terminal value after the five years is determined taking into account general growth expectations for the seg-
ments in question.

The discount rates used to calculate the recoverable amount are before tax and reflect the risk-free interest rate
of the individual geographical segments and related risk, The proportion of equity in relation to the Group's future
capital structure is expected to continue to be high.

 

 
 

 

 

|

RENEE Discount rates before tax (%) — Growth in termin iod (%)

| | FEE — 2009 2008 2009 2008

| Europe 13.6 161 30 25

| Americas 13.6 16.9 3.0 2.5
Asia/Pacific 12.7 17.8 3.0 2.5

 

lt is management's assessment that probable changes to the fundamental assumptions will not result in the carry-
ing amount of goodwill exceeding the recoverable amount in any of the segments.

Development projects

Recognised completed development projects and development projects in progress comprise development and
testing of new wind turbines. The new wind turbines are expected to result in competitive advantages and thus a
strengthening of the Group's market position.

The values of the development projects recognised have been compared to expected sales of the individual turbine
types. This has not given rise to any value adjustment of the recognised value of development projects in 2009.

Software

Software comprises expenses for acquiring software licences and own development. The value of the recognised
software has been compared to the expected value in use. No indicators of impairment have been identified.

1003234EogSN06713

Vestas annual report 2009 | 087

Consolidated accounts

 

 

13

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

Land and
2009 — in buildings
Cost at 1 January 514
Exchange rate adjustments 1
Additions 81
Disposals (2)
Transfers 174
Costat31 December | — RENEE 768
Depreciation and impairment losses at 1 January 81
Exchange rate adjustments 1
Depreciation for the year 26
Impairment losses for the year 0
Reversal of depreciation of disposals in the year (1)
Transfers i 0
Depreciation and impairment losses at 31 December 107
Carrying amount at 31 December 061
Assets held under finance leases included above 1
Depreciation period 25-40 years

Land and
2008 BENENE buildings
Cøst at 1 January 330
Exchange rate adjustments (4)
Additions 82
Disposals (2)
Transfers . BENENE 108
Cost at 31 December mn NE — 514
Depreciation and impairment losses at 1 January 69
Exchange rate adjustments (2)
Depreciation for the year 16
Impairment losses for the year 0
Reversal of depreciation of disposals in the year (2)
Transfers — 8
Depreciation and impairment losses at 31 December i 81
Carrying amount at 31 December — 433
Assets held under finance leases included above 0
Depreciation period 25-40 years

Plant and

machinery |

324

3-10 years

Plant and

Machine

306
(11)
52
(17)
(6)
324

163
(8)

3-10 years

 

 

Other fixtures Property,
and fittings, plant and
tools and equipment in
equipment progress Total
303 271 1,412
2 (4) 3
119 329 606
(32) (1) (59)
27 (241) 0
i Mg 354 1,962
136 0 382
0 0 3
84 o 151
o O 1
(18) 0 (36)
1 0. (9)
… 203 i 0 501
216 354 1,461
1 o 2
3-5 years
Other fixtures Property, ——
and fittings, plant and
tools and equipment in
… equipment progress Total
193 118 947
(4) 2 (17)
110 265 509
(7) (1) (27)
11 (113) …
…… 33 — 271 1412
77 o 309
(3) 0 (13)
58 Q 103
0 0 0
(2) 0 (17)
6 0 da
136 382
Nm 167 271 1,030
4 0O 5
3-5 years

 

 

088 | Vestas annual report 2009

 

14 INVESTMENTS IN ASSOCIATES

i 2009 2008
Costat 1 January i 2 2
Exchange rate adjustments 0 0
Additions O 0
Disposals 0 O
Disposals, disposals of companies Ek . O Q
Cost at 31 December 2 2
Value adjustments at 1 January (1) (1)
Exchange rate adjustments 0 0
Share of profit 1 0
Dividend (1) 0
Disposals o O
Value adjustments at 31 December En (1) (1)
Carrying amount at 31 December 1 1
Summary accounting information concerning associates owned at 31 December:
Revenue 1 2
Profit for the year 0 0
Total assets 5 5
Total liabilities 2 2

15 DEFERRED TAX
. 2009 2008

Deferred tax at 1 January (net) 54 151
Exchange rate adjustments 2 (6)
Deferred tax on profit for the year (62) (105)
Adjustment relating to previous years 3 4
Changes in corporation tax rate Q 0
Tax on entries in comprehensive income (8) 10
Deferred tax at 31 December (net) (11) 54
Tax base of tax loss carry-forwards (net) 18 14 z
Intangible assets 1 0 3
Property, plant and equipment 4 2 3
Current assets 42 12 2
Provisions 9 11 3
Other 36 24 a
Deferred tax assets NE 110 63 3
Intangible assets 87 34
Property, plant and equipment (4) (21)
Current assets 20 (26)
Provisions (9) (9)
Balance of tax losses for recapture in foreign subsidiaries under Danish joint taxation 24 26
Other 3 5
Provision for deferredtax 121 9
Deferred tax asset at 31 December (net) (11) 54

NOTES TØ THE CONSOLIDATED ACCOUNTS (MEUR)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vestas annual report 2009 i 089

1003234EogSN06714

 

 

15

16

17

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

DEFERRED TAX (CONTINUED)

No provision is made for deferred tax regarding undistributed earnings in subsidiaries, as the Group controls the
release of the obligation.

If the earnings were to be distributed, this would release a current tax charge of EUR 38m for 2009 (2008: EUR 20m).

Deferred tax assets are recognised for tax loss carry-forwards corresponding to earnings that are likely to be gener-
ated in the future, The assessment has been made considering the ability to utilise tax carry-forwards in previous
years as well as future expectations. Of the total tax carry-forwards EUR Om (2008: EUR 5m) are subject to expiry
limits, however, these are all expected to be utilised within the set time limit. Deferred tax assets amounting to EUR
26m (2008: EUR 37m) have not been recognised in the balance sheet, as their utilisation is not assessed to be
sufficiently certain, primarily because of Vestas' earnings expectations in some countries.

Of the total deferred tax relating to tax loss carry-forwards included in the deferred tax assets, an amount of EUR
Om (2008: EUR Om) relates to Denmark. Of the tax-loss carry-forwards noted above EUR Om (2008: EUR Om)
relates to Denmark. For further description of the utilisation of tax-loss carry-forwards, refer to note 2 to the con-
solidated accounts.

INVENTORIES
ET TT gog
Raw materials and consumables 797
Work in progress 220
Finished goods 625
Prepayments for goods — 5 KEE … 21
. …. 1,663
Inventories used for the year, which are included in costs of sales 3,873
Write-downs of inventories in the year 86
Reversal of write-downs in the year 22
The reversal of write-downs in the year is due to goods sold at a higher value than the written down carrying amount.
TRADE RECEIVABLES
TT mm T TT 3008
Trade receivables 525
Fair value of security received for trade receivables balances outstanding as at 31 December 170
Write-downs included in trade receivables, developed as follows:
Write-downs at 1 January
Write-downs in the year (1)
Realised in the year 1
Reversals i — EN Q
Write-downs at 31 December | . i 0
All trade receivables are expected to be received within 12 months.
The age distribution of receivables is as follows:
Not overdue 467
0-60 days overdue 33
61-120 days overdue 8
121-180 days overdue 3
More than 180 days overdue — 14
525

090 | 2000 ommatrepen pers

2008
809
332
453

18

1,612

3,299

21
12

2008
938

160

770
136
22

938

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

17 TRADE RECEIVABLES (CONTINUED)

Of the total write-downs of trade debtors of EUR 1m (2008: less than EUR 1m), that is based on an individual
assessment of each receivable, less than EUR 1m (2008: less than EUR 1m) relates to companies in bankruptcy,
while the remaining amount relates to companies with suspension of payments.

Trade receivables are mainly owed by companies within the energy sector. The credit risk is dependent on the

development within this sector. Vestas does not have a single significant trade debtor nor are the trade receivables
concentrated in specific countries.

18 CONSTRUCTION CONTRACTS IN PROGRESS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

— — KEE 2009 — 2008
Sales value of construction contracts in progress 3,216 1,800
Progress billing 2782) (2,701)
— 434 (901)
- which are included as follows:
Construction contracts in progress (assets) 1,032 482
Construction contracts in progress (liabilities) mn (598) (1,383)
oo 44 (901)
Retentions 20 18
All receivables relating to construction contracts in progress are expected to be received within 1.2 months.
19 OTHER RECEIVABLES
FEE . — 2009 2008
Prepayments FEE ' 18 | | 33
Supplier claims 17 4
Other receivables … 00 215 69
FEE —— ' … 250 206
- specified as follows:
O-1 years 234 181
> 1 year — 16 … 25
— BE — BEER 250 206 g
oOo
u
Other receivables stated above principally comprise VAT and insurance receivables. 3
uw
3
20 CORPORATION TAX g
— En BENE i S
EN — BE 1 2009 2008
Corporation tax 1 January | 7 (38)
Exchange rate adjustments (2) (1)
Corporation tax for the year (154) (99)
Adjustments relating to previous years (17) (3)
Corporation tax paid intheyear . 214 148
Corporationtaxat 31 December . (52) 7
Corporation tax (assets) 93 49
Corporation tax (liabilities) Hee | ' | (145) (42)
— ” i (52) 7

Vestas annval report 2009 | 091

1003234EogSN06715

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

21 SHARE CAPITAL

 

HERE Bee … 2009 2008
The share capital comprises of 203,704,103 shares of DKK 1.00 203,704,103  185,204,103
Number of shares at 1 January 185,204,103  185,204,103
Capital increase 18,500,000 0

 

Number of shares at 31 December — 203,704,103  185,204,103

Shares outstanding 202,945,740  184,467,710
Treasury shares i i —— 758,363 736,393

 

 

Number of shares at 31 December —— — 203,704103  185,204,103

The share capital was increased by 18,500,000 shares of DKK 1.00 in 2009 and by 10,292,930 shares of DKK
1.00 in 2006. Except for these increases, the share capital has been unchanged in the period 2005-2009.

All shares rank equally.

 

2009 2008 2009 2008 2009 2008

 

 

 

 

 

— Number of Numberof  Nominalvalue — Nominal value % of share % of share
shares "shares | (DKK) (DKK) capital capital

Treasury shares at 1 January 736,393 736,393 736,393 736,393 0.4 0.4
Purchases 21,970 … 0 21,970 | 0 0.0 … 0.0
Treasury sharesat31 December 00 758,363 736,393 758,363 736,393 04 — 0.4

 

The Board of Directors has been authørised at the Annual General Meeting to allow Vestas Wind Systems A/S to
acquire treasury shares amounting to a total nominal value of 10 per cent of the company's share capital during the
period up until the next Annual General Meeting on 17 March 2010.

Vestas Wind Systems A/S has acquired treasury shares in 2009, at a nominal value of DKK 22k at a share price

of DKK 339.17 corresponding to an acquisition sum of EUR 1m and in 2007, at nominal values of DKK 569k and
DKK 28k at share prices of DKK 378.54 and DKK 357,90 respectively, corresponding to an acquisition sum of EUR
30m.

Treasury shares are acquired with a view to using them for the Group's share option programmes.

The share capital has been fully paid.

No dividend has been paid out in 2009 and 2008 relating to the financial years 2008 and 2007.

  

092 | vestas annua! report 20094

  

 

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

22 PROVISIONS

 

 

 

 

 

 

2009 2008
Warranty provisions
Warranty provisions at 1 January 183 232
Exchange rate adjustments 0 (2)
Warranty provisions for the year 233 240
Utilised warranty provisions during the year (257) (262)
Reversed warranty provisions during the year 0 (6)
Adjustment to previously recognised warranty provisions 0 (20)
Adjustments relating to the change in discounting of warranty provisions 2 1
Warranty provisions at 31 December — . 161 183
The warranty provisions are expected to be consumed as follows:
0-1 year 111 128
>1 year 50 55

161 183

 

The product warranties, which in the great majority of cases cover component defects, functional errors and any
financial losses suffered by the customer in connection with unplanned suspension of operations, are usually
granted for a two-year period from delivery of the wind turbine, In certain cases, a warranty of up to five years is
granted. For the customer, the specific warranty period and the specific warranty terms are part of the basis of the
individual contract.

Warranty provisions include only standard warranty, whereas services purchased in addition to the standard war-
ranty are included in prepayments from customers. Reference is made to page 27 of the management report and
note 2 to the consolidated accounts for further information on Vestas' warranty provisions.

In addition to the above, provisions are made for upgrades to wind turbines sold due to type faults, etc. where
Vestas has a warranty obligation at the date of provision, Such provisions will also include wind turbines sold in prior
years, but where type faults, etc. are identified later. Moreover, it should be emphasised that the complexity of some
of the type faults, etc. identified may lead to adjustments, upwards as well as downwards, of previous estimates in
light of factual information about population size, costs of repairs and the timing of such repairs.

It is estimated that 30-35 per cent of the warranty provisions made for the year relate to adjustments of previous
years' estimates of provisions for serial faults, etc, Included in this is the cost for upgrades of wind turbines sold in
previous years, commercial settlements and proactive upgrading as wel! as new information about the serial faults
in question.

Product risks

Lack of reliability in several of Vestas' products has previously led to major warranty provisions, and in recent years,
Vestas has invested significant resources in improving the products and increasing their reliability. This work com-
prises design, production, installation and continuous maintenance.

The goal of these initiatives is to reduce Vestas' warranty costs, to secure customer returns, to increase the com-
petitiveness of the Group's products and to improve supplier earnings.

Consolidated accounts

Vestas annual report 2009 | 093

1003234EogSN06716

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

22 PROVISIONS (CONTINUED)

2009 2008
Other provisions i FE
Other provisions at 1 January 80 68
Exchange rate adjustments 1 2
Other provisions for the year 51 52
Utilised other provisions during the year (60) (42)
Adjustment to previously recognised other provisions 0 o
Other provisions at 31 December — i 72 nm 80
Other provisions include compensation regarding agreements made to purchase wind turbine parts which are
not expected to be fulfilled in accordance with the contractually agreed parameters and provisions for onerous
service contracts. The provisions have been calculated based on management's best estimate and are expected
tobesettled in 2013 at the latest.
Other provisions are expected to be payable as follows.
0-1 year 40 50
>1 year 32 30
The provisions are expected to be payable as follows:
0-1 year 151 178
>1 year … 82 85

233 263
F

0941...

 

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

23 PENSION OBLIGATIONS

The Vestas Group's entities have different pension schemes and severance programmes which have been adapted
to the labour market variables of the individual countries. Approx 99 per cent of the Group's pension expenses
relate to defined contribution plans, which includes no further obligations to the company other than the contri-
butions paid.

The other plans are defined benefit plans, the majority of which have related plan assets in independent pension
funds. The defined benefit plans will typically secure the employees covered by a pension based on final-salary.

Under defined contribution plans, an employer commits to paying a certain contribution (e.g. a fixed amount or a
fixed percentage of their salary). Under a defined contribution plan, the Group does not carry the risk relating to the
future development in interest rate, inflation, mortality and disablement.

Under defined benefit plans, an employer commits to paying a certain benefit (e.g. a retirement benefit as a fixed
amount or a fixed percentage of the employee's final salary). Under a defined benefit plan, the Group carries the risk
relating to the future development in interest rate, inflation, mortality and disablement.

The pension obligation of Danish and some foreign entities are covered by insurance. Foreign entities whose
obligations are not or are only partly covered by insurance (defined benefit plans) calculate their obligations, using
actuaries, at net present value at the balance sheet date. These pension plans are fully or partly covered through
pension funds for the employees. In the consolidated accounts an amount of EUR 2m (2008: EUR 2m) has been
recognised in ljabilities in respect of the Group's obligations towards current and previous employees after deduc-
ting plan assets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FEE — — — FE 2009 "2008
The following amounts have been recognised in the consolidated income statement:
Defined contribution plans 48 41
Defined benefit plans KNEE 2 So
i HEN 0 00 42
The cost has been recognised in the following items:
Cost of sales 29 24
Research and development costs 5 4
Selling and distribution expenses 5 4
Administrative expenses mn mr mn me . 11 10
— 50 42
Net present value of covered defined benefit plans (8) (7)
Net present value of uncovered defined benefit plans i (2) (3)
Net present value of defined benefit plans (10) (10)
Fair value of plan assets 7 …7
Surplus/(deficit) cover (3) (3) 2
Non-recognised actuarial (gains)/losses 1 1 8
Net obligation recognised inthe balance sheet | — «(Bd ed Z
Z
Development in net present value of defined benefit plan obligations: z
cz
Net present value of defined benefit plan obligations at 1 January 10 10 S
Exchange adjustments 0 0
Pension expenses relating to current financial year O 0
Calculated interest on obligations 0 1
Actuarial gains /(losses) (1) 0
Loss on reductions and fulfilment 0 0o
Pension expenses relating to prior financial years 0
Pensions paid . i — — 1 (1)
Net present value of defined benefit plan obligations at 31 December 10 10

 

Vestas annual report 2009 [095

1003234EogSN06717

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

23 PENSION OBLIGATIONS (CONTINUED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

— 2009 2008

Development in fair value of pension assets:

Pension assets at 1 January 7 8
Exchange rate adjustments 0 0
Estimated return on plan assets 1 1
Actuarial gains/(losses) O (1)
Paid in by the Vestas Group O 0
Pensions paid . Re (1) (1)
Pension assets at 31 December TT 7.
Pension expenses recognised in the income statement:

Pension expenses relating to current financial year 1 1
Calculated interest on obligation 1 0
Estimated return on plan assets 0 0
Recognised actuarial (gain)/loss for the year O 0
Pension expenses relating to prior financial years 0 (8)
Loss on reductions and fulfilment — — o 0
Total recognised for defined benefit plans — i 2 1
Pension assets break down as follows:

European shares 2 2
European bonds 4 4
Cash funds — 1 1

— i — i 7 7

Return on pension assets:

Estimated return on plan assets 0 1
Actual return on plan assets 0 0
Actuarial gain/(loss) on plan assets 0 (1)
The Graup expects to pay less than EUR 1m to the defined benefit plan in 2010.

The average assumptions underlying actuarial calculations at the balance sheet date are as follows:

Discount rate (%) 5.3 53
Estimated return on pension funds (%) 56 6.3
Estimated rate of pay increase (%) 4.3 4.0
Estimated pension increase (%) 2.0 2.0
The estimated return on the plan assets has been determined based on the composition of the assets and general
expectations with respect to economic trends.

HE — 2009 2008 2007 2006 2005
Actuarially calculated pension obligations (10) (10) (10) (11) (10)
Pension assets — … ZZ 7 8 TT 7
Deficit cover En BB) (3) (2) (4) (3)
Changes to obligations based on experience Q Oo 0 0 0
Changes to pension assets based onexperience 0 . 0 (É— (| 0

There are no restrictions on the types of the pension assets which Vestas is allowed to invest in to meet the pension
obligations. The pension assets include no Vestas shares, receivables from or any property leased by Vestas.
All relevant assumptions relating to the actuarial calculations exclude immaterial costs.

096 | Vestas annual report 2009

 

 

24

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL DEBTS
2009 2008
Financial debts are recognised in the balance sheet as follows:
Current liabilities
Mortgage debt 3 3
Bank debt and debt to credit institutions 9 106
— 12 109
Non-current liabilities
Mortgage debt 8 11
Debt to credit institutions 331 … 3
339 14
1-5 years 302 7
> 5 years 37 7
Financial debts 351 123
Fair value 351 123
Nominal value 351 123
It is Group policy to endeavour and ensure an appropriate development in the financial ratios with a view, for
example, to maintaining the Group's credit rating and to complying with the agreed requirements in the Group's
financing agreements.
The fair value is calculated as the present value of agreed cash flows using a current market-based interest rate.
Obligations relating to assets held under finance leases are included in mortgage debt and debt to credit institu-
tions as follows:
2009 2008
Minimum Carrying Minimum Carrying
lease payment Interest amount lease payment Interest amount
O-1 year 1 0 1 2 0 2
1-5 years 0 0 0 2 0 2
> 5 years 0 0 0 Q 0 0
— 1 0 1 4 o 4
Weighted effective interest rate at
31 December (%) 7.9 6.0

 

The fair value of financial debts amounts to EUR 1m (2008: EUR 4m).

The finance lease agreements of the Group mainly relate to service vans and run for up to three years after the

balance sheet date.

The lease agreements wil! not result in any restrictions in relation to raising of other debts or dividend payments.

1003234EogSN06718

 

Vestas annual report 2009 | 097

Consolidated accounts

25

26

27

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

OTHER LIABILITIES

 

 

BERMENNNEEE . En HEN 2009
Staff cost 157
Taxes and duties 181
Accruals 0
Other pavables NE 1 PE
HENNE le NEN EN 436
ADJUSTMENT FOR NON-CASH TRANSACTIONS
une enn meme — KEN EN — gg
Amortisation and depreciation for the year of intangible assets and property, plant and equipment, i — ——
including gains and losses on sale of non-current assets 218
Share of profit in associates (1)
Warranty provisions in the year (net) (22)
Pension provisions in the year 0
Other provisions in the year (8)
Exchange rate adjustment (6)
Financial income (14)
Financial expenses 62
Corporation tax for the year 230
Cost of share-based payments 2
Other adjustments | NEN — BENENE … 0
. —— ' . HE 461
CHANGE IN NET WORKING CAPITAL
HEE FEE 2008
Change in inventories — (51)
Change in receivables (191)
Change in prepayments from customers (768)
Change in trade payables 32
Change in other liabilities — BENENE Bee eee 41
HENNE (937)

098 | Vestas smudl tet 2009

2008
103
131

24
137
395

2008

135
(49)

12
(1)
(66)

20

203

258

2008
(505)
(524)
397
141
124
(367)

 

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

28 CASH AT BANK AND IN HAND

Cash at bank and in hand with disposal restrictions, EUR 20m (2008: EUR 12m), primarily consist of prepayments
from customers regarding projects, and the amounts are released in line with the fulfilment of the related contrac-
tual obligations.

29 FEES TO AUDITORS APPOINTED BY THE ANNUAL GENERAL MEETING

 

 

 

 

 

 

 

 

2009 2008
Audit:
PricewaterhouseCoopers 2 2
KPMG 2 2
Total audit 4 4
Non-audit services:
PricewaterhouseCoopers
Other assurance staternents (8) 0
Tax assistance O 1
Other services 1 1
Me — De 1 2
KPMG
Other assurance statements 0 0
Tax assistance 4 0
Other services 1 1

5 1

Total non-audit services 6 3

 

Vestas' auditors can be used, within certain parameters, for certain non-audit services and may often be the obvious
choice due to business knowledge, confidentiality and costs consideration. Vestas has a comprehensive policy

for non-audit services ensuring that the provision of non-audit services to the Group does not impair the auditors'
independence or objectivity. The Audit Committee is responsible for the development and maintenance of this
policy and monitors compliance.

In 2009 and 2008, other services include fees mainly for other assistance in accounting.

30 MANAGEMENT'!'S OPTION PROGRAMME AND SHAREHOLDINGS

Option programme

A share option programme was established in 2006 for the Executive Management, the Vestas Government and
other selected executives of the Group, totalling 20 people. Options were granted based on the achievement of
specified targets for 2006 and 2007. The market value, based on the Black-Scholes valuation model calculated at
the date of grant/establishment of the programme, amounted to EUR 3m.

Consolidated accounts

In 2007, a new option programme was introduced for the same members as in the 2006 programme. The pro-
gramme granted 580,080 options, which were valued, based on the Black-Scholes valuation model, on 15 May
2007 at a market value of EUR 12m. 155,102 of the options, valued at EUR 3m, were allocated to the Executive
Management.

The members may exercise their options in specified periods and choose to purchase the company's shares at

the relevant strike price depending on the programme. Exercise of the options can only occur in the periods where
executives are allowed to trade shares in accordance with the Group's internal rules, being within the four weeks fol-
lowing the company announcement of the annual report and quarterly financial reports.

Options are allotted to members when the Board of Directors approves the final annual report for each year except
for options allotted in 2007. The allotment for 2007 was on 15 May 2007 when the programme was announced.
No options expired in 2009,

Vestas annual report 2009 | 099

"1003234EogSN06719

 

30

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

MANAGEMENT'S OPTION PROGRAMME AND SHAREHOLDINGS (CONTINUED)

The share prices and the exercise prices are based on the closing share prices obtained from Bloomberg Financial
Markets on the day the options were granted. The risk free interest rate is estimated as the effective interest rate on
a Danish government bond with the same economic life, in this case two, five, six and seven-year bonds. The future
volatility, which means movement in the shares' total yield, is calculated based on historic weekly closing share pri-
ces for a period of two and three years for the 2006 and 2007 programmes, respectively.

2006 programme

All the options allotted in 2006 have lapsed. 56,448 options were the net allotted amount in 2007 with a value

of EUR 1m at grant. The members of the scheme loose the right to the options, if they terminate their employment
before the end of the vesting period. The options can be exercised between two and four years after they have been
allotted. Options allotted in 2007 can be exercised from 2010 to 2012. There will be no More new allotments from
this programme.

2007 programme

The options allotted to the members of the schemes for 2007, 2008 and 2009 are valued based on the equiva-
lent of 60 per cent of their 2006 annual salary. For 2008 and 2009, members will only be allotted options if they
are still employed when the Board of Directors approves the annual report for the respective years. 207,952 and
189,002 options were allotted in 2007 and 2008, respectively, leaving 183,126 options to be allotted for 2009.

Three new members were added to the programme on 7 January 2009 and were granted 21,970 options at a
value estimated to be EUR 1m. A further four members were added to the scheme on 27 October 2009 and were
granted 31,858 options with an estimated value of EUR Im, in both cases the date of allotment of the options will
be the Board of Director's approval of the annual report for 2009 but the service periods start in January 2009 and
October 2009, respectively. The terms and conditions of the options are the same as the terms and conditions of
the options granted in May 2007 except that the options are valued based on the equivalent of 60 per cent of their
2009 annual salary.

The options can be exercised within two years when three years have elapsed after they have been allotted. This
five-year period after the allotment of options is referred to as vesting period. The exercise of the options can only
occur, if the members themselves have not terminated their employment at the time of the exercise. Options allot-
ted in 2007, 2008 and 2009 can be exercised from 2010 to 2012, 2012 to 2014 and 2013 to 2015, respect-
ively. The members of the scheme loose the right to the options, if they terminate their employment before the end
of each of the three allotments' vesting period. On exercising the options the participants must invest 50 per cent
of the profit after tax in Vestas shares, which must be held for at least three years.

The fair value at the grant date has been calculated under the Black-Scholes option pricing model adjusted for dilu-
tion of share capital based on the following assumptions:

 

 

2007 programme 2007 programme 2007 programme 2006 programme
2009 grant 2009 grant 2007 and 2008 2007 grant
i (October) (January) grant —

Share price at grant (DKK) 337.00 303.50 380.50 167.00
Volatility (%) 65 88 44 54
Exercise price (DKK) 380.5 3805 380.5 1476
Risk-free interest rate for options (%) 3.47 3.27 4.30 3.80
Annual dividend per share (DKK) 0 0 0 o
Years to expiry 5 5 5 5

 

 

100 | vestas annual repart 2009

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

30 MANAGEMENT'S OPTION PROGRAMME AND SHAREHOLDINGS (CONTINUED)

 

 

 

 

 

 

 

Grant date
Group
Executive Other Exercise price Fair value Total Total
Management executives Total per option per option fair value fair value
pcs pcs pcs DKK DKK tEUR tEUR
Outstanding at 1 January 2008 171,480 465,048 636,528 12,985
Granted 2007 programme Q 0 0 - - - -
Lapsed 2006 programme 0 (2,193) (2,193) 147,6 89 (26) -
Lapsed 2007 programme 0 (22,163) (22,163) 380.5 152-165 (471) -
Exercised 0 o 0 - - -
Expired 0 0 0 - - -
Outstanding at 31 December 2008 171,480 440,692 612,172 12,488 12,617
Outstanding at 1 January 2009 171,480 440,692 612,172 12,488
Granted 2007 programme (Jan) 0 21,970 21,970 380.5 206.9 611 -
Granted 2007 programme (Oct) 0 31,858 31,858 380.5 189.9 813 -
Lapsed 2006 programme 0 (2,295) (2,295) 147,6 89 (26) -
Lapsed 2007 programme 0 (21,566) (21,566) 380.5 152-165 (458) -
Exercised 0 0 0 - - -
Expired 0 0 0 - - -
Outstanding at 31 December 2009 171,480 470,659 642,139 13,428 13,355
Number of exercisable options at
31 December 2008 O 0o 0
Number of exercisable options at
31 December 2009 0 0 O

 

Average remaining life of the options outstanding at 31 December 2009 is three years (2008: four years).
No options have been exercised in the year.

Management's holdings of Vestas shares
The internal rules regarding the trading in Vestas shares for the Board of Directors, the Executive Management and cer-
tain employees only allow trading in the four weeks following the publication of the annual report and quarterly reports.

 

 

 

 

 

Balance at Purchased in Sold in Balance Market value”
— NE 1 January the year theyear 31 December tEUR
The Board of Directors ”
Bent Erik Carlsen 98,120 - - 98,120 4,180 3
Torsten Erik Rasmussen 3,837 - - 3,837 163 9
Elly Smedegaard Rex 0 - - o 0 2
Freddy Frandsen 3,653 - - 3,653 156 2
Håkan Eriksson 0 - 0 0 3
Jørgen Huno Rasmussen 500 - - 500 21 s
Jørn Ankær Thomsen O - - 0 0
Kim Hvid Thomsen 2,657 - - 2,657 113
Kurt Anker Nielsen 1,600 - - 1,600 68
Michael Abildgaard Lisbjerg 150 - - 150 6
Ola Rollén O 200 - 200 9
Sussie Dvinge Agerbo i 2,400 - | - 2,400 102
' 112,917 200 - 113,117 4,818
Executive Management
Ditlev Engel 224 - - 224 10
Henrik Nørremark 3,213 - - 3,213 137
3,437 - - 3,437 147

 

) The calculation of the year-end market value is based on the share price quoted on the NASDAQ OMX Copenhagen at the end of
the year (DKK 317.00).

Vestas annual report 2009 | 101

1003234EogSN06720

 

31

32

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

RELATED PARTY TRANSACTIONS

Vestas Wind Systems A/S has no shareholders with controlling influence.

The related parties of the Vestas Group include the Board of Directors of the company, the Executive Management,
and other executives (Vestas Government), together with close members of the family of these individuals. Further-
more, related parties include entities which are significantly influenced by the afore-mentioned individuals.

Transactions with the Board of Directors, Executive Management and other executives
Transactions with the Executive Management only consist of normal management remuneration, see note 6 to the
consolidated accounts.

Transactions with the Board of Directors, Executive Management and other executives in the year comprise the fol-
lowing:

Purchase of normal legal services for EUR 1.1m at arm's length basis (2008: EUR 1.9m) from the law firm Gorrissen
Federspiel, where Jørn Ankær Thomsen is a partner. The outstanding balance payable to Gorrissen Federspiel at 31
December 2009 amounted to EUR 0.1m (2008: EUR 0.1m).

Five people (2008: six) covered by the definition of related parties have directly or indirectly full or part ownership
of wind turbines where a company in the Vestas Group performs service work. These transactions take place at
arm's length and in total amounted to EUR 0.4m in 2009 (2008: EUR 0.5m). The outstanding amount of purchases
from related parties at 31 December 2009 amounted to EUR Om (2008: less than EUR 0.3m).

There have been no other transactions with any members of the Board of Directors and the Executive Management
in Vestas Wind Systems A/S or other executives during the year.

With the exception of the Board members elected by the employees, no members of the Board of Directors have
been employed by the Group in 2009.

Transactions with associates and joint ventures

Related parties also include associates over whom Vestas Wind Systems A/S has control or significant

influence.

The Vestas Group's associates and related shareholdings are listed under "Legal entities” on pages 113-115.
Outstanding balances with assøciates have resulted from standard business transactions regarding purchase and

sale of goods and services. No interest is calculated on the outstanding balances and the transactions are entered
into with the same trading conditions as for the Group's other customers and suppliers.

GOVERNMENT GRANTS

The Group has received a number of government grants, of which EUR 2m has been offset against incurred
expenses (2008: EUR Im) and EUR 27m has been offset against non-current assets (2008: less than EUR 1m).

102 | vestas arm me teport 200%

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

33 MORTGAGES AND SECURITY

Ås security for the Group's mortgage loans, mortgage deeds registered to the mortgagor and all-money mortgages
have been secured on land and buildings, plant and machinery as wel! as other fixtures and fittings, tools and equip-
ment. Some of the Group's other property, plant and equipment has been placed as security.

Furthermore, the Group has issued mortgage deeds registered to the mortgagor and all-money mortgages which
are secured on the aforementioned properties. These mortgage deeds registered to the mortgagor and all-money
mortgages are all in the possession of the Group.

As security for credit facilities, the Group has given security in its cash at bank and in hand and other current assets.

 

 

 

 

i i — 2009 — 2008

Total mortgage loans 11 14
Mortgage deeds and all-money mortgages:
Nominal value of mortgage deeds and all-money mortgages 10 10
Carrying amount of pledged assets 25 21
Other mortgage deeds and all-money mortgages in the possession of the Group 109 113
The carrying amounts of the collaterals outstanding as at 31 December are specified below:
Letters of credit 0 14
Bank guarantee BENN 7988 250

En Me 2 ME 264

34 CONTRACTUAL OBLIGATIONS

TT TT 0 2008
The minimum lease obligations relating to operating leases fall due:
0-1 year 37 49
1-5 years 73 68
> 5 years 65 72

 

 

Operating leases comprise irrevocable operating leases regarding buildings and vehicles. The main obligation re-
lates to buildings in Germany and runs for up to 23 years after the balance sheet date. The lease agreements will
not result in any restrictions in relation to raising of other debts or payment of dividends.

Costs recognised in the income statement relating to operating leases amount to EUR 49m in 2009
(2008: EUR 20m).

The Group has entered into binding contracts concerning purchase of plant to be delivered in 2010 and thereafter
at a value of EUR 97m (2008: EUR 267m).

The Group has entered into binding contracts concerning purchase of components for production to be delivered in
2010 and thereafter at a total value of EUR 3,099m (2008: EUR 3,317m).

Consolidated accounts

Væstas annudl report 2009 | 103

1003234EogSN06721

 

 

35

36

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

CONTINGENT LIABILITIES

Pending lawsuits
Vestas is involved in some litigation proceedings. However, it is the opinion of management that settlement or con-
tinuation of these proceedings will not have a material effect on the financial position of the Group.

DERIVATIVE FINANCIAL INSTRUMENTS, RISK AND FINANCIAL MANAGEMENT

The Group's policy for managing financial risks

The Vestas Group is exposed to changes in exchange rates, interest rates and commodity prices due to its invest-
ments and financing operations. Management identifies the level and concentration of risks and initiates policies
to address these, through continuous business reviews. Moreover, the Group is exposed to credit and liquidity risks.
It is the Group's policy not to engage in any active speculation in financial risks. Accordingly, the Group's financial
management is directed solely at managing or eliminating financial risks relating to operations and funding.

The Group's policy for managing financial risks remains unchanged from last year. The carrying amounts of the
financial instruments are reasonable approximations of their fair values.

Credit risks
The Group's credit risk primarily relates to receivables and bank balances, investments as well as derivative financial
instruments.

Credit risks relating to receivables arise when Vestas makes sales for which no prepayment has been received. It is
Vestas" policy to hedge uncertainties of payment by way of letters of credit, bank guarantees, credit insurance, con-
ditional sale, etc. Security received is taken into account in the assessment of any provision for bad debts.

Vestas' custorners' creditworthiness is reviewed in connection with the closing of contracts. If Vestas does not
receive security for the payments, the total contract amount plus VAT, or if the customer does not have adequate
credit rating from S&P, Moody's or Fitch, a more detailed assessment of the customer's creditworthiness is per-
formed by the sales unit, Contract Review Board and Group Treasury prior to the signing of the contract to mitigate
any risks to Vestas.

91 per cent (2008: 82 per cent) of Vestas' customers have not exceeded the deadline for payment at 31 December
2009. Historically, Vestas' customers have paid within the payment period agreed upon. Trade receivables overdue
by more than 180 days are immaterial.

Vestas sells wind turbines, wind power systems and service to companies, which are well positioned in national and
international markets. These companies are considered to be reputable companies. All outstanding trade debtors
are owed by reputable companies. In light of the credit squeeze management does not anticipate any defaults in
relation to ongoing projects and for firm orders signed.

104 | vestas aimuadl report 2009

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

36 DERIVATIVE FINANCIAL INSTRUMENTS, RISK AND FINANCIAL MANAGEMENT (CONTINUED)

Credit risks relating to bank balances, investments as well as derivative financial instruments arise due to uncer-
tainty as to whether the counterparty will be able to meet its obligations when they are due. The Group minimises
this risk by only using financial institutions with a high credit standing as brokers for the purchase and sale of finan-
cial instruments. Furthermore, internally Vestas has set limits for the Group's total balance with each bank.

Vestas' policy regarding placement of funds with banks is that they must have a minimum long-term credit rating
from either S&P, Moody's or Fitch as follows:

Credit Rating Agency Rating
S&P A
Moody's A2
Fitch Å

The key bankers of Vestas are:
Nordea Bank Danmark A/S
Commerzbank AG

Société Générale

Banco Espafiol de Crédito

Vestas uses two of the above banks when purchasing and selling financial instruments. In light of the financial crisis,
management can confirm that Vestas' bank deposits are secured and its financial instruments remain unaffected.

No bank balances or derivative financial instruments are overdue or written down due to the counterparty's inability
to pay. There are no historic losses related to bank balances and derivative financial instruments due to the counter-
party's inability to pay.

 

 

2009 2008

Maximum credit risk without taking into account security received for trade receivables 525 938
Maximum credit risk related to bank balances, securities and derivative financial instruments 490 298
Maximum credit risk related to construction contracts and other receivables 282 688
2,297 1,924

 

Liquldity risks

Liquidity risk is the risk that Vestas is unable to meet its obligations as they fall due because of inability to realise
assets or obtain adequate funding. The Group ensures that a strong liquidity position is maintained in order to ser-
vice its financial obligations as they fall due, both under normal and more pressing conditions.

Group Treasury is in charge of ensuring that substantial capital resources are in place at all times through a combi-
nation of liquidity management, non-committed and committed credit facilities and other debt instruments. Vestas
manages its liquidity risk through cash pool systems in various currencies and by using short-term overdraft facili-
ties ina number of financial institutions. Vestas expects to be able to finance its organic growth through cash flows
from operations. The current credit squeeze has not impacted on Vestas" ability to meet its obligations.

However, it is naturally not possible to guarantee that Vestas will always be able to maintain its credit rating or to
comply with the minimum requirements in the financing agreements. Then occurrence of either eventuality would
be likely to have a significant adverse effect on the Group.

n
z
cc
>
23
uw
(5)
mo
DO
uw
2
[43]
2
ao
nm
c
o
oa

The value of cash assets with disposal restrictions was EUR 20m at 31 December 2009 (2008: EUR 12m).

Vestas annual report 2009 | 105

1003234EogSN06722

 

 

36

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

DERIVATIVE FINANCIAL INSTRUMENTS, RISK AND FINANCIAL MANAGEMENT (CONTINUED)

The following table shows the timing of cash flows related to financial obligations, assets and hedging instruments.

 

 

 

 

 

 

 

 

 

Carrying More than Totalcash
2009 amount | Fairvalue <lyear — 1-5yeas —— S5yeas flows
Measured at amortised cost (Ioans and other debt)
Mortgage debts 11 11 3 3 8 14
Bank debt and debt to credit institutions 340 340 9 306 32 347
Trade payables 1,062 1,062 1,062 0 0 1,062
Other abilities ar 43 RB 0 0 … 423
— FE — — 1,836 1,836 1,497 309 40 1,846
Derivative financial instruments
Interest SWAPS (gross):
Floating-rate obligation 0 0 0
Fixed-rate obligation 1 1 1 0 0 1
Currency hedging agreements:
Cash flow hedges 10 10 9 1 O 10
Fair value hedges — . EN 2 2 2 …»…»(» o 2
Bee — — 13 3 2 I 000 13
Total financial liabilities 00 189 1,849 1,509 330 40 1,859
Measured at amortised cost (receivables and deposits)
Trade receivables 525 525 525 0 O 525
Construction contracts and other receivables —<ss 1,282 1282 … 1266 000 16 0 1282
— EEEEEEEEEEEEEE 1,807 1,807 1,791 16 0 1,807
Derivative financial instruments
Interest SWAPS (gross):
Floating-rate assets 0 0 O 0 O o
Currency hedging agreements:
Cash flow hedges 1 1 1 0 o 1
Fair valuehedges 0 20 0 0
EH BEER HEEEEREN 1 oe 1
Total financial assets 1808  — 1,808 1,792 16 0 1808.

 

 

106 | vestas anmuar report 2904

 

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

36 DERIVATIVE FINANCIAL INSTRUMENTS, RISK AND FINANCIAL MANAGEMENT (CONTINUED)

 

 

 

 

 

 

 

 

 

 

Carrying | More than Totalcash
2008 amount — Fairvalue <1 year 1-5 years 5 years flows
Measured at amortised cost (Iloans and other debt)
Mortgage debts 13 13 3 5 11 19
Bank debt and debt to credit institutions 109 109 106 3 1 110
Trade payables 1,030 1,030 1,030 0 1,030
Other liabilities 321 321 321 o o 321
1,473 1,473 1,460 8 12 1,480
Derivative financial instruments
Interest SWAPS (gross):
Floating-rate obligation 1 1 2 1 0 3
Fixed-rate obligation 0 O 0O 0o O 0
Currency hedging agreements:
Cash flow hedges 41 41 27 15 0 42
Fair value hedges 7 7 9 O 0 9
49 … 49 38 16 0 54
Total financial liabilities 1,522 1,522 1,498 24

 

 

 

Measured at amortised cost (receivables and deposits)

 

 

Trade receivables 938 938 938 0 0 938
Construction contracts and other receivables 688 688 663 | 25 0 688
1,626 1,626 1,601 28  … 0 1,626

 

 

Derivative financial instruments
Interest SWAPS (gross):

 

 

 

Floating-rate assets 1 1 2 1 0 3

Currency hedging agreements:

Cash flow hedges 15 15 16 O 0 16

Fair value hedges 0 0 0 0 0o 0
16 16 18 … 1 …0 19

Total financial assets 1,642 1,642 1,619 26 9 1,645

 

Cash at bank and in hand and investments are measured at fair value and any adjustments are made through the
income statement.

Cash flows for hedged assets and hedged liabilities as well the hedging instrument are recognised in the income
statement in the same period.

For a description of cash flows relating to operating leases, reference is made to note 34 ta the consolidated
accounts.

Consolidated accounts

The carrying amounts of derivative financial instruments are included in other receivables and other liabilities, as
appropriate.

As a general rule, the fair value of financial liabilities and financial assets is calculated using discounted cash flow
models based on the market interest rates and credit conditions at the balance sheet date.

Financial instruments measured at fair value are categorised into the following levels of the fair value hierarchy:
Leve! 1: Observable market prices for identical instruments.

Level 2: Valuation techniques primarily based on observable prices or traded prices for comparable instruments.
Level 3: Valuation techniques primarily based on unøbservable prices.

The fair value of Vestas' forward exchange contracts as well as of other derivative financial instruments (commodity
instruments) is measured according to level 2 as the fair value can be established directly based on exchange rates
published and forward interest rates specified at the balance sheet date.

Fair value of bonds is measured as level 1 because the fair value is set from the share price in an open market.

Vestas annual report 2009 | 107

1003234EogSN06723

 

 

 

36

NOTES TO THE CONSOLIDATED ACCOUNTS (MEUR)

DERIVATIVE FINANCIAL INSTRUMENTS, RISK AND FINANCIAL MANAGEMENT (CONTINUED)

Market risks
Vestas" market risks relating to financial instruments comprise: currency risks, interest rate risks and commodity
price risks.

Currency risks

The Group's business activities involve a number of currency risks in connection with purchases and sales of goods
and services in foreign currencies. It is Group policy to hedge the currency risk at the time of entering into a binding
agreement in foreign currency. Only the net exposure for each currency is hedged. The currency risk is primarily
hedged by forward exchange contracts and currency swap agreements.

In 2009, Vestas invested in production facilities ensuring that customers in Europe are supplied from Europe,
customers in Americas from North America and those in Asia/Pacific from Asia. This ensures significant reduction in
the currency risk for the Group.

Exchange adjustments relating to investments in Group subsidiaries and associates abroad with a different func-
tional currency than that of the parent company are recognised directly in equity. Related currency risks are not
hedged as, in the Group's opinion, hedging of such long-term investments will not be optimal from an overall risk
and cost perspective.

The isolated effects of the exchange rate changes considered probable by Management, (10 per cent) increase, at
31 December against the EUR are specified as follows:

 

 

 

 

 

 

 

 

mmm HEER 2009 2008
USD: Equity 7 4
Profit for the year 1 3
CAD: Equity 6 9
Profit for the year 1
GBP: Equity 10 20
Profit for the year 1 (1)
Only currencies with material effect on comprehensive income and income statement are specified above. The
above analysis is based on the assumption that all other variables, interest rates in particular, remain constant. The
expectations are based on currently available market data.
A corresponding decline in the exchange rates for the above currencies will have the same but opposite effect for
both equity and profit for the year. The differences between the 2009 and 2008 values are solely due to differ-
ences in the nominal amounts in the individual currencies.
Currency hedging agreements relating to future transactions (cash flow hedges)
The following net outstanding forward exchange contracts of the Group at 31 December, which are publicly traded,
are used and qualify as cash flows hedges:
2009 2008 DR
Accumulated Accumulated
capital Term to capital Term to
Nominal gain/loss Fair value maturity Nominal gain/loss Fair value maturity
principal recognised of principal (months), principal recognised of principal (months),
— amount” in equity amount up to amount” in equity amount up to
USD 133 (9) 142 17 504 (33) 537 29
SEK (20) 0 (20) 15 5 0 5 5
CAD 1 0 1 6 60 9 51 10
GBP (5) O (5) 7 (9) (1) (8) 12
EUR (109) o (109) 17 (560) 0 (560) 29
Så 9) 38. 0 (25) 25

”) Positive principal amounts of forward exchange contracts are sales of the currency in question, and negative principal amounts
are purchases.

The Group's cash flow hedges relate primarily to net cash flows outside euro-based countries, primarily in American
and Canadian dollars as well as Swedish kroner (USD, CAD and SEK, respectively) with equivalents in Dan