ANALYSIS: Questions on Vestas' 'Dragon'

Ditlev Engel
Vestas’s financial fortunes and business are recovering after some of the toughest years in its history.

This is good news both for the company and for the wind industry as a whole. But while the numbers and analyst reports continue to improve, the case of “Project Dragon” continues to rumble beneath the surface. Here, we ask some key questions about the case:

1.     How much damage can the revelations cause?

Project Dragon involves an attempt by certain Vestas representatives and its Indian partners to buy Chinese turbines and operate them in India, in order to analyse their components and performance. Full details have yet to emerge, but they almost certainly will, as Vestas has laid the blame firmly on former CFO Henrik Norremark, and the Danish fraud squad has opened proceedings against him. Norremark and several of his colleagues were on the losing side of a power struggle within Vestas in 2011-2012, and he is contesting the charges vigorously. Simultaneously, Vestas has opened legal proceedings against its long term Indian partner RRB to recover money involved in the project. So details of “Dragon” will emerge sooner or later.

The fact that Vestas officials (how many is still to be determined) were trying to buy Chinese turbines is embarrassing, but will be quickly forgotten unless the suppliers of the turbines can prove that Vestas has stolen its intellectual property rights. Given that the project was reportedly never built, this can be ruled out.

The damage will be limited further if the Danish police find that Mr Norremark did, as Vestas alleges, exceed his authority and initiate the project without the approval and knowledge of the board of directors.

2.     How much is at stake for Ditlev Engel?

On the other hand, the stakes are incredibly high for Vestas CEO Ditlev Engel. Vestas officials have stated repeatedly that Engel knew nothing about the project and that he handed over his computer, emails and all over relevant communications to auditors, who found no evidence to the contrary. One Danish newspaper however, claims to have emails that indicate that he did know about the project. If it turns out that he did, Chairman Bert Nordberg and the rest of the Vestas board would almost certainly turn their backs on Engel immediately, meaning game over for one of the wind industry’s great survivor and its most charismatic figure.

3.     Ties that bind: What was RRB’s role?

Indian company RRB Energy and its London born owner Rakesh Bakshi were Vestas’ original joint venture partners in India. The two companies parted ways in 2006 when Vestas sold its 49% stake in the Vestas RRB after acquiring NEG Micon, which had its own presence in India. However the two companies maintained close ties, with Vestas agreeing to focus on 750kW-plus turbines and RRB concentrating on smaller machines. Vestas agreed to continue to assist RRB through a technological cooperation agreement.

Danish newspapers have flagged up a private dinner that took place between Vestas CEO and Bakshi in the summer of 2008, although this is three years before the disputed payments were made.

A key question that is likely to be answered in the course of legal proceedings in India is: What went wrong with “Dragon”? Why was no project built, and what happened to the money? Some industry participants in India have pointed out that during the same period, RRB was putting the finishing touches to a brand new 1.8MW turbine of its own design. It would be interesting to know whether any of the Project Dragon “research” was related to RRB’s own R&D programme.

4.     Whose turbines was Vestas trying to buy and why?

And finally, which Chinese turbine’s were the Vestas/RRB officials interested in, and why? Though this information may be only of historical value… Recharge for one would love to know.

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