Vestas Wind Systems A/S (VWS) Earnings Call Transcript & Summary

Good afternoon to everybody out there virtual. My name is Bert Nordberg. I'm the Chairman of the Board of Directors, and I'm pleased to welcome you to Vestas Annual General Meeting for 2021. Once again, We are conveying this meeting with the option to attend virtually in the interest of upholding important safety measure with regards to COVID-19. In my upcoming address, I will discuss Vestas 2020 performance and the opportunity that lies ahead of the business. Before this, I would like to invite Klaus Søgaard from Gorrissen Federspiel to lay out the formalities for today so we can ensure that everything runs as scheduled. Again, thank you for joining our Annual General Meeting under the current circumstances. Thank you for understanding. We need to meet virtually where possible. Klaus, over to you.

[Interpreted] Thank you very much, and a warm welcome to everyone here at Vestas headquarters in Aarhus. The Board of Directors has encouraged shareholders not to participate physically in today's AGM. And by far, the most shareholders have agreed to this. Instead, it's been possible to vote by postal vote or by proxy. It's been possible to ask questions ahead of time and also interventions ahead of time. At the same time, you can follow the web streaming of the AGM. As the Chairman of the AGM, I need to check that everything has been convened in accordance with articles of the association, which has happened. One of the things that had to happen was that the AGM has to take place in either the mid Jutland region or the capital region of Denmark before the 1st of May. It has to be convened between 3 to 5 weeks before the date through the website and through a communication through the Copenhagen Stock Exchange and to shareholders who have asked for a letter. And that has occurred on the 15th of March, so that's correct. I've also checked that everything has been put forward, which has to be put forward in accordance with the legislation. So yes, we have quorum, and we are convened correctly. Most of the things we need to vote on today can be adopted by a simple majority, but 8.2 to 8.5 requires a 2/3 majority in capital and votes. 88 shareholders have signed up, 128 have given a proxy to the board and 1,941 have voted before end. So a very large part of the share capital is represented today. The votes, which have been cast already mean that all the proposals on the agenda will also be adopted with over 90% majority on all items. So I hope we don't need to have an actual voting procedure. As usual, the first items on the agenda will be proposed as one. That is the report on the company's activities, presentation adoption of the annual report and allocation of the result of the year. So Bert Nordberg, will start and then the CEO, Henrik Andersen will take over. So I give the floor to Bert Norberg, first.

Dear shareholder, 2020 marked an extraordinary period in the world history, where many industry faced unprecedented disruption from the pandemic. While Vestas was not immune to this disruption, 2020 also saw the renewable industry thriving. And our own growth journey has steadily gained momentum with this acceleration. Despite the ongoing battle against the pandemic and its challenge, Vestas secured deliveries for more than 17 gigawatt, a steady increase from the previous year. And with our highest ever order backlog of EUR 43 billion driven in part by our transaction and integration of the full ownership of our offshore business. 2020 was the busiest year ever. We now have a strong foundation in place, and we are ready to capture the rapid growth that lies ahead for renewables. The offshore arm of our business is now firmly back within the Vestas family, and we have begun a new technology -- technological journey to expand the scale of our solution to bold new heights. Our new global development business unit will allow Vestas to capture value from a much broader portion of the renewable value chain. And our service business has hit record growth, reaching 100 gigawatt of turbines under service. Furthermore, we are now translating this success into value for our shareholders through our significant dividend payout. 2020 was not without challenges, however, supply chain's disruption and quality issues have impacted our profitability. This is a key issue that we are working on to address through focused dedication and company-wide collaboration. Establishing a profitable scale will be crucial for Vestas as wind energy grows to meet the majority of global energy demand. As we move forward, we are fortunate to be playing an integral role in the global energy transition. Across the world, we are seeing an increase in global commitment to a net 0 future. This is spurred on by the need for sustainable economic recovery and the growing confidence in the dependability of renewables. At Vestas, we are proud to be driving this confidence. As the pandemic threatened economies, supply chains and even entire industry, we have succeeded in maintaining business continuity, ensuring our partners can provide stable power supply. This increase in confidence signals potential for growth, and this will -- opportunity for growth will underpin our focus moving forward, ensuring profitable scale through strong execution. As a testament to our focus and before Henrik Anderson takes you through our results in detail, I would like to take a moment to reflect on some of the 2020 highlights. We reached a revenue of EUR 14.8 billion, up 22% from 2019. We secured delivery of more than 17 gigawatt in a challenging COVID environment, up 35% compared to 2019. We achieved an all-time high order backlog of EUR 43 billion. We grew services revenue by 10% with an EBIT margin of over 27%. We reduced our total recordable injury rate by 15%. We recorded an EBIT margin of 5.1% and it's a decrease of 3.2% compared to 2019. We displaced CO2 emissions from the atmosphere with 186 million tons avoided in 2020. And we achieved a 33% reduction across our own carbon emission. Throughout the period of crippling disruption, Vestas has adapted to mobility restrictions and ensured the rapid implementation of safety infrastructure. Combined with our consistently strong execution, we have outperformed our competition across several parameters without compromising on safety. Our profitability is, of course, an urgent priority. We will address this by optimizing our operational approach, inspiring culture change and supporting a heightening focus on flawless execution. Overall, we aim to capture growth with our core wind business, including our newly established focus on offshore and development as well as maintaining market differentiation with our sustainability performance. I'd like to thank the Vestas leadership team for successfully implementing and executing these initiatives where lockdowns and restrictions in the unusual year of 2020. As we continue our upward trajectory, the Board is recommending that we pay a dividend for the 7 years in a row. Long-term profitability will remain our key priority so that we can continue to deliver value back to you, our shareholders. In 2020, the Board of Directors continued to work closely with executive management to ensure Vestas strategy reflects the evolving renewable industry. To fully leverage the opportunity ahead. The board has worked closely with the executive management to guarantee that Vestas new strategic direction are reflected in our ongoing governance. As Chairman, a key objective for me is to ensure that we have the right expertise reflecting in the board. This year, Carsten Bjerg will not stand for reelection. I would like to thank him for his great contribution to Vestas over the last 10 years within the board and for his dedicated contribution to the Audit Committee and Technology and Manufacturing Committee. In October 2020, we and Mitsubishi Heavy Industries in Japan signed an agreement to expand our partnership in sustainable energy. The strength in partnership so Vestas as acquiring with Mitsubishi shares in MHI Vestas Offshore Wind joint venture and Mitsubishi acquiring 2.5% stake in Vestas. In light of this, we have agreed to nominate Mr. Kentaro Hosomi for a seat in the Vestas Board of Directors. As Chief Regional Officer, Europe, Middle East and Africa, of Mitsubishi Heavy Industries. Mr. Hosomi brings a wealth of expertise from the engineering and innovation space. With more than 40 years of experience in power systems and energy industries and with valuable knowledge of the business development of power system, I'm confident he will make a strong addition to the board. In light of Vestas ongoing development and expectation for future growth continuity of composition of the board has been and will be a major advantage for the company. In this regard, we assess that this need for such continuity will remain. Before sharing what the board and I envision for the Vestas future, I would like to address the remuneration policy for the board and executive management. The remuneration policy and the remuneration report 2020, are available on the company website, but allow me to recap the key aspects. In 2020, the Board of Directors received a total remuneration of DKK 10.6 million. This was in accordance with the remuneration level approved by the shareholders at the Annual General Meeting in 2020 as well as with the remuneration policy. Detailed information about those remuneration payments in 2020 is available in the remuneration report. The report will be presented for advisory vote here at AGM for the first time in accordance with applicable law. Having made no change since 2018, the board recommends that the remuneration level are updated slightly. This is to reflect the increase in competition for attracting the most suitable candidates to our board. We propose that the remuneration in 2021 reflect basic remuneration for DKK 446,250 per board member. This would be an increase of 5%. And The Chairman receives 3x of the basic remuneration and the Deputy Chairman receives 2x of this remuneration for their extended board duties. In addition to the basic remuneration, we proposed that the board members receive a committee fee of DKK 62,500 membership of a Board Committee. In addition, we proposed that the Committee Chairman receives an increase of 5% to DKK 472,500 for the extended Committee duties. With regards to the remuneration of the executive management, the board continues to believe that the combination of fixed performance-based compensation supports the company short and long-term value creation for its shareholder. The purpose of the combined remuneration is to ensure motivation and performance management towards Vestas strategic focus area on both an annual basis as well as towards long-term value creation. Executive management's remuneration is divided by the board under the guideline outlined in the remuneration policy and includes 4 elements: salary, bonus, share-based incentive and benefits. As with many other industry, Vestas have, of course, experienced the effect of the pandemic and our ongoing operation. In light of this, we have implemented a 10% reduction of salary for both our CEO and our CFO. This reduction took effect from the May 1, 2020 for the remainder of the year. Please note that information around remuneration for individual members of the executive management is limited to the CEO and CFO as registered directors in the 2020 remuneration report. In 2020, Executive Management received a fixed remuneration of EUR 2.5 million compared to EUR 1.6 million in 2019. The overall increased salary is driven by the fact that Henrik Andersen was only employed for half of the year. Overall, executive management salary decreased in 2020 due to the aforementioned 10% reduction from May to December. Executive Management was allotted a total of 42,500 shares for 2020 as in 2019. These shares will be adjusted for performance in 2020, 2021 and 2022. For 2020, the performance adjustment is expected to be a reduction of 28% for the 1/3 of the share. In summary, this constituted a reduction of base salary for executive management and the lower result for the variable portion of the remuneration with no cash bonus and a large negative impact in the performance shares for the financial year 2020. You can read more about this in the 2020 Remuneration Report. And the board conducts an evaluation of the board work. In 2020, the valuation was completed through an open dialogue session facilitated by myself and an online evaluation form. The self-assessment revealed a good collaboration within the board and between the board and executive management as well as satisfaction with overall conductor meetings. The Board Committee also conducted a self-assessment in October and November 2020, following the same procedure. The evaluation revealed a good collaboration across each of the committees, between the committees and the executive management. This year, we have 7 proposals for the agenda, an amendment of the remuneration policy to simplify the long-term incentive program, an amendment to the denomination of shares, renewal of amendment for the authorization of increase of the share capital, authorization to hold General Meetings electronically accordance to the Section 77.2 of the Danish Company Act, but also in line with Vestas sustainability strategy, sustainability in everything we do. Number 5 is a resolution to grant authorization to adopt electronic communication in accordance with Section 92 of the Danish Company Act. Number 6 is authorization to the Board of Directors to distribute extraordinary dividend and lastly, renewal of the authorization to acquire treasury share. I would like to make a few comments regarding our proposed amendment to the nomination of share. And the Board proposed that the denomination per share should be changed from DKK 1 to DKK 0.01 or multiples thereof. The purpose is to make the proposal is to make it possible for the Board of Directors to undertake a share split in Q2 without changing the underlying value for the company. This would then support further trading of shares and removal of hindrance of share price. It is the intention of the board to carry out a share split in the ratio of 1:5 during the first half of 2021, so that each existing share of DKK 1 is divided to 5 new shares nominally at DKK 0.2. With our result and the Board formalities duly presented, I will now like to share the board's perspective in 2021 and beyond. Climate volatility is now making an impact across the world, extreme weather events are unfortunately becoming a common feature on the evening news. If there is one thing that 2020 has taught us, however, it's that adversity breeds resilience. In parallel to the pandemic or perhaps because of it, 2020 saw the world firming up to its commitment to net 0 future. We are at the point now where many announced recovery measures has a green focus. This shows a desire to build back better and the need for building resilient societies that has never been greater. As the global leader in sustainability and energy, we cannot underestimate the role we have to play in supporting these resilience. We have done exceptionally well to demonstrate the reliability of sustainable energy during times of crisis, but the future will ask for more from us. Renewable energy must now go beyond being seen as a reliable alternative. We must become the foundation from which society can thrive in a sustainable era. Vestas is already sowing these seeds. And in addition to maintaining energy supply, we have continued to support jobs and safeguard the growth of our industry as our sustainability performance increases. We are also minimizing our environmental footprint as we build scale. And our hunger for innovation is already creating new possibility for offering more sustainable products for our customer. With this, we can drive further market differentiation. Our renewed commitment to offshore and development will see us attracting new stakeholders to the sustainable energy industry. Our vision is to leverage our footprint, network and expertise to attract new investment and broader dedication to the energy transition. As the need of our customers evolve, we will be prepared to meet these needs with our expanded command of renewable value chain. Finally, we will continue our relentless dedication to streamline highly focused execution remaining unchallenged in services and delivery while tightening our approach to quality will support the profitability that we look for going forward. Wind energy is set to become the backbone of the global industry system. Sustainability will be driving force of our economy. In 2020, Vestas showed itself to be a global leader in both. We have laid a strong foundation to play a dominant role in the global acceleration to our net 0. All that's required now is that we have to execute. On behalf of the Board of Director, Executive Management and each of your -- our dedicated skillful and very loyal employees, I assure you we will work to achieve our vision and continue to create value for you, our owners. I thank you for your time and support and would like to extend a special thanks to executive management, all the Vestas 30,000 employees for their hard work, loyal and dedicated work in 2020. Thank you very much. I leave the word now to Henrik Andersen.

[Interpreted] Good afternoon, everyone. And welcome to, unfortunately, another electronic AGM. We would very much have liked to welcome you to our head office in Aarhus so that we could also show you what we actually do here and show you what we're proud of here at our address, but we need to put that off to 2022, and we truly look forward to that. And then we will try to do as we are doing today, have a set up like here so that we can invite you, the shareholders to come join us. My intervention today will be looking at the numbers of what we have achieved in 2020, but also looking towards the future, what will happen both when we get to 2030 and potentially also 2040. If we look at this slide, there's no doubt that, as Bert said, 2020 was an extraordinary year. But when you have an extraordinary year, you also know that the continued operation of Vestas was our first priority to get through that year. That first priority didn't mean that we didn't focus on other strategic things because, of course, we didn't, we'll talk about that today. One thing I want to mention already now is our sustainability strategy, which our 29,000 coworkers deal with every day globally. We've really found a good record there. We also have full ownership now again in offshore, and that has really been interesting to have the whole team Vestas. And I'll be talking a bit more about that later. Our development activities have expanded so that we now have a business unit for that, and we'll be spending more time on that in the years to come. And not least, we have crossed that 100 gigawatt's milestone, which is under our service sector. So it has been an extremely interesting year in spite of COVID-19. So let me begin with COVID. Because in a number of cases, since 10th of February, when we presented our annual report, many people have asked us, well, are we through the worst now? And the fact is we're probably not. In many of our activity areas, we are probably in the worst lockdown so far, and that also makes things more difficult, for instance, in India, Brazil and parts of Europe. We're dealing with it. It's no longer something that's new to us. But what's important for us to emphasize is looking at the things we have done since January, February 2020. We have received recognition of renewable energy types in almost all of the 83 countries we are working in. And in all those countries, we have seen that our staff need to be safe. They need to be able to work, so we need protocols to ensure health and safety for our colleagues globally. That's our top priority. It also means that when we have the continued operation of Vestas, we need to get the entire supply chain, all our partners, all our factories and transport all the links in the chain have to continue. So also a great big thank you to all our stakeholders and partners for enabling us to ensure continuity. We also see that everything is a bit more sensitive. We saw a blackout in Texas raising questions about the supply chain. Again, the blockage of the Suez Canal caused a major stir because we are challenged in capacity globally. But that being said, I still want to thank our more than 29,000 employees who have done a remarkable job in ensuring Vestas continued operation, and they will continue to do so in 2021. And I think we've gotten better at finding solutions. But there's certainly no doubt that we haven't given up when faced with challenges. Now let me look at the finances. As Bert said, We've had a revenue of EUR 14.8 billion, an increase from EUR 12.1 billion in 2019. We had an EBIT margin of 5.1%, which was a drop from 8.3% the year before. Our free cash flow ended on EUR 84 million, it was EUR 94 million the year before. And our total investments ended at EUR 659 million against EUR 729 million the year before. These figures tell a story about the numbers, but they also tell a story about the numbers but they also tell a story about a very active year because when you look at the revenue, it is EUR 14.8 billion but they cover that. Since 2018, we have grown by 46% in just 24 months. And also the gigawatts we supply to our customers has increased by 59% in those 24 months from the beginning of 2018. Those are remarkable figures and this is only -- and the fact that it is possible under these conditions is remarkable. When we look at profit, profits have gone down. And as Bert said, we will need to address this. We address it every day. One of the reasons is, of course, that we have upscaled to handle a much greater capacity. When you upscale, you need new plants and you need to establish new plants in places and continents where we haven't been before. Also to ensure that we don't get various export or import tariffs that can limit our trade. Also in 2020, we had to set aside more funds for some of our turbines, especially when it came to blades and that's why we had more set asides for that. That's not what we like to do, but we have to do it and we need to deal with that also and we have already done a great deal. In free cash flow, we ended at EUR 84 million And that was in both '19 and '20. But we have also spent some of the free cash flow to build our capacity. We can't upscale so much without also having larger stocks. And that has also helped us in 2020 to the supply even when there have been delays in the supply chain. Not least, we have maintained a high investment level in of EUR 659 million. We've, of course, invested in technology, but also in our footprint and our plants around the world and also looking forward, we will need to invest more in offshore wind, both when it comes to technology, but also as you hear in the news, many countries and continents want to be involved in the offshore capacity and of course, we will be involved in that as well. In 2020, we also had a very strong order intake of about just over 17 gigawatts. But what's impressive is that it comes from 30 countries or more. And if you look to the right here in the right lower corner, we have had about 10 gigawatts in 2016 to now having an order intake of over 17 and that means we've had top markets in the U.S., Brazil and China. But as you can also see from this map there are quite a few new countries who are now focusing on renewables. And that is the trend we see across the world, as Bert also mentioned. Looking at our Power Solutions. When you look at things quarter-on-quarter or year-on-year, you lose perspective. But our Power Solutions, our Wind Solutions across the world now cover 132 gigawatts established in more than 80 countries, a total of 83 countries in fact. And we have a displacement of CO2 emissions of 186 million tonnes. These 186 million tonnes is more than 120 million vehicles on the road. So we are at a level which really adds benefit to the world. As you see in 2020, also many countries have prioritized renewables. We've seen it in the EU. In South Korea, Japan, and not least, we have been encouraged to see that U.S. has also announced in last quarter that they rejoined the Paris Agreement. but also that they say we need structural reforms in the U.S., both when it comes to infrastructure and the energy structure. And of course, we welcome that, and we look forward to being an active participant in that. In our service business, it's a growing business. And of course we are pleased with that. So if we look on the left-hand side here, again, it's the perspective. In 2016, we had a revenue of EUR 1.3 billion. Now it is more than EUR 2 billion and what is even more important is that our margin has gone from 17% to 27%. We need more investment in our service business so that it's easier to be a customer in our service business. So having your assets there, but also working digitally, and we're investing in that in '21 and '22. So far, more than 10,000 colleagues in the service business, we will need to make it easier for them to do their job and look after our customers there. That will be very interesting. And again, to put it in perspective, we passed 100 gigawatts this year and we ended up at 117 gigawatts, both onshore and offshore. So this works. And it also works vis-a-vis our competitors. It's also nice to see that our order intake on service now has a duration of more than 9 years, which means it's a predictable business. And of course, it is a business we need to continue to invest in, and we look at assets in more than 70 countries -- look after assets in more than 70 countries across the globe. Now the annual report. You have seen the numbers in different formats, I'm sure. I just want to emphasize that we had a net profit of EUR 771 billion in 2020. We are following the normal dividends policy here, and that's also why we have a dividend of to you as the shareholders of DKK 8.45. It's about EUR 1.14 per share. And it's our way of thanking you for your great commitment and faith in us that you have shown as shareholders throughout the year. And we also still have a strong capital structure. That capital structure was also clear when got a rating in the beginning of 2021 of Baa1 with Moody's, and we will need to continue to use that to show our customers and the areas we work in that we can be a strong partner, both financially and technologically for renewables in the years to come. And the projects we work on have a duration of 1 to 5 to 7 years. So our financial strength is very important when it comes to helping individual clients. So the rating was certainly welcomed by us and we will be using it very much with our clients looking at the future. I'd like to spend a bit of time talking about what to expect in the future. Where are we today? Where are we coming from? Where are we heading? And how far have we come so far? So what has happened with renewables in wind in recent years? In 2000, the full capital in wind was about 12 gigawatts and then in 2010, it was 185 gigawatts, and now we are up at 701 gigawatts. What's interesting here is that, that increasing capacity over 10 years was 70% of the total capacity. So as an industry today, we are building a different capacity, larger scale capacity to help our clients and help the climate across the globe so that they can also prioritize renewables. But the most important thing in this slide is the graph on the right, which is the cost of wind energy. And it's essential that over the past 10 years, we have seen a drop in price for the electricity we produce. It's a drop of about 2/3. So wind and solar power is now at a level which is competitive and better and more optimal than all other power types, energy types. So when you select new energy sources now you typically select 2 of the renewables. And that has to do with both technology and innovation, and we are pleased with that. And that also means most people have stopped talking about developing new coal-fired or gas-fired power plants or nuclear power plants. So we've come some way, but the best is probably still to come. Because if we look at global energy generation in 2019, wind is still only at 1% for energy. When it comes to electricity, it's 70% -- is 7% globally. So there are still 93% for us to strive for. We're happy to share it with solar power, but there's certainly a lot to do. That's actually one of the reasons we would like to welcome you here at headquarters because we would have been able to show you how we can charge things charging for both batteries and vehicles because it's an important part to also reduce our CO2 footprint. So if you need a service car today or company car in Vestas it has to be either hybrid or fully electric car. And of course, you can see that because we have the charging stations here, and we will see it at our other plants in the future. So that transition we see every day for heating, cooling, transport happens at the same time as us being active participants. And as you can see, as the second point here, many of our power plants are going from coal and gas to electric and thus renewable energy. And that's, of course, extremely important for the world. The third one here is one I'm sure you've heard about several times because it's PTX, as we say it or P2X. Where we use renewable energy to also look at how to use hydrogen in our future electrification of many of our things like storage, but also industrial processes. In Denmark, we already have many examples of this and even more in all of Europe. And in the rest of the world, it grows week-on-week. We will participate in that, but the most important thing for that whole development is that you need strong technology from renewables, primarily solar and wind power, and we look forward to welcoming that. And I'm so pleased we have the engineers who are also taking part in those solutions from us. But of course, then you also have to say that we need sustainability in everything we do. It matters. Because from the beginning, we have a wind turbine, and that's about CO2 neutral after 4 months operation. But it would be great if it was neutral from day 1. We are not there today, but we will be working very hard on that going towards 2030. We will be working on it and it's 3 great building blocks our own production, our transport methods and the way we handle all our facilities in the world, plants, et cetera. How do we heat things and how do we use our facilities. In 2020, we did a good job there with our reduction, but there's still a way to go. And we invite all our partners in the supply chain to take part so that together, we can make this clear change in the improvement. We also need to get better at circularity. We want the turbines to be recyclable, 100% by 2040. We have said 2040 because we don't have the technology today to recycle our blades, but we will get there. But it's also an open invitation. If somebody wants to take part in this to find that technology. The company that finds that solution will definitely be a big corporation. So we also want to be involved. We can't do this without our employees. And we want to be the most attractive employer in the energy sector. That's for the benefit of our 29,000 colleagues today, but that also needs to continue in 5, 10 years. It's our job to do to create the framework so that everyone can fulfill their potentials in their career. And people can maybe work in renewables across the world, and we want to enable that. Then there's the energy transition. It's probably the greatest transition to date. It's greater than digitalization because it has to do with changing our whole energy system. You need enormous amounts in the next few decades, and we are happy about that because we will be one of the companies at the center of this energy transition. Looking into the details, let me mention our excellent report here, which goes into detail with the individual colleagues involved to improve our sustainability footprint over 2020. Do take the time to read that report and I just want to mention some of the highlights. The carbon footprint has dropped by 1/3. So we've gotten better at this in 2020, but we are not home safe yet, and we do have until 2030. And of course, the first steps are often the easiest. It's the low-hanging fruit. So we will need to work harder going to 2030. Our journey forward has also been approved. How do we see our own base targets, that's also very much something that motivates us. One of the statistics I'm the happiest about is that in spite of having so much to do and so much growth in capacity, we have still been able to reduce our injury rate. But even one injury is one too many. So this is not something we will be satisfied with. We will continue to work to ensure 0 injuries. But it takes a major effort and again, we are looking after each other. We have been looking out for each other, but we can even make improvements. Diversity is something we'll continue to discuss. And for Vestas, it means we want diversity. We are present at 83 countries. We want diversity in nationalities, in gender and other diversity aspects. And that doesn't come of its own accord. It has to do with the first recruitment, maybe you join as a graduate and until you finish in some job later on after many promotions. We want the best team in each country, in each business sector, and we will continue to spend resources on ensuring that and I'm sure we'll create a lot of satisfaction in that. There's also corporate responsibility, which includes an ethics line including a whistler blower scheme, and we are happy that we have many examples. Some of the things have just dealt with the question but as you can also see in our annual report, we talk about the reports we get, both the ones that became a full report and the other ones because we find it important in having such a large company that people have the courage and the freedom to speak up. Ask questions. Let us get rid of problematic issues, and we do that by asking questions and making reports. This is no surprise. We have 3 business sectors: onshore service and offshore. And offshore is an important business sector for us. We have made a major investment in 2020. And you can see here why. Onshore wind will continue to grow in many countries, service will continue to grow both in our Vestas fleet now, but also in competing brands around the world. And last but not least, the offshore wind, we hear so much about it's about -- it was about 5 to 6 gigawatts in 2020. And going to 2030, I think we can agree that just what happened in the past few years means that the offshore market can easily be 30 gigawatts a year. So that's double by 5 or 6 in the next decade. We need to be present there as a market leader and partner for clients who want this and countries who want to prioritize offshore. Let me say a bit more about offshore straightaway. We started by welcoming a great deal of new colleagues. We have announced our new organization. People thought it happened very quickly, but I just want to say it's a business that is an ongoing business, which now merges with the Vestas family. It's a business that had a revenue of more than EUR 10 billion and more than 10,000 colleagues. Of course, it creates a bit of turbulence when you make a merger like that, but we would like to reduce the turbulence as much as possible. We're working hard to do that, and that's also why we wanted the organization to be in place by February 1. But we will spend the rest of the year to get the teams to settle in, but also ensuring that systems, et cetera, completely function as one. It takes time. But we are sure that we will be achieving everything we want there, and I want to welcome the new colleagues and also the current Vestas colleagues who are welcoming their new colleagues. I want to welcome everyone there. And especially in operations and technology, we have gone live. And in technology, we need to be ready, and you also saw the result on February 10 when we announced our annual accounts. Our new offshore wind turbine will be V236 a 15 megawatts turbine. And now we are talking to our clients around the world, how that turbine can be used and should be used and the great acquisition rounds that are occurring. We go from one turbine where the strongest was V170 to V236. That means that the turbine is 84% larger, and that's impressive and also in some of these areas, it's just on the limits of the natural laws, but we are thrilled to be at that point. And we also need this business to meet our global customers, so it is an upscaling of our offshore integration. That, of course, brings me to our long-term financial ambitions. And in many ways, things are unchanged here. We are very much committed to our 3 business sectors, onshore service and offshore. All of it is interesting. And we will be combining these parts, and we will be growing in all 3 sectors. And here, we also have an indication that the service margins will be about 25% in coming years. And combined with the rest of it, we will be a market leader and our revenue will grow more than that, more than the average market. We will have a free cash flow every year, which is very important for us, even though we use the cash flow every year, we still need free cash flow because that's what we need for our shareholders, but we also need it to reinvest in the business. We will also have a return on invested capital of at least 20%. We didn't get to 20% in 2020. And that also means it's a strong driver for us to reach that target. But it's also a signal that we want a strong balance. And we want to have the strongest margin in the industry, which is a minimum of 10%. There's still some way to go, but also having built through the scaling of capacity and with tariffs and so on, I think all of us would like to see a year at the end of 2021 or 2022, where we don't see changing rules of the game all of the time because many of the tools we need to get to 10% is something we have internally in Vestas. Looking at the outlook for 2021, we expect a revenue of EUR 16 billion to EUR 17 billion. Services will grow with about 15% with our offshore service sector joining. And the EBIT margin, we are saying 6% to 8%. And for the whole service sector, both onshore and offshore, we expect it to be 24%. Total investments will be of around EUR 1 billion which is, of course, higher because we will be investing more in our offshore activities and also need to look at our localizations because these turbines need -- the machines need to be closer to where the turbines will be set up. We are now in a situation where COVID still exists. So of course, there's a risk element in 2021 like we saw it in 2020. But it's worth mentioning, of course, that there's still that dark horse. With that, I want to thank you all for your support in 2020 and especially a thank you to our colleagues and partners around the world. Thank you for your great commitment throughout 2020. And with that, I pass the floor to Klaus.

[Interpreted] Thank you very much. We have now heard a presentation of the activities of the company during the past year and the annual report. Now at an ordinary Annual General Meeting with physical attendance, you would be able to take the floor now. In this virtual setup, it's a matter of looking at what we have received, and we have received one contribution from the Association of Danish Shareholders by Mr. Søren Svendsen, who has been a guest at our AGMs for many years. I will read his contribution out loud and give our Chairman and CEO a chance to answer his questions. He writes, I represent the Association of Danish Shareholders working in the interest of private shareholders. Many of our members are shareholders in Vestas, as am I. First of all, thank you to the Chairman and the CEO for a good report, another solid, however, not extraordinary annual report. There's a lot of things to say about the annual report. First and foremost, it's a scoop having acquired all of MHI Vestas because offshore wind will see rapid growth in the future and Mitsubishi has not contributed much besides capital. They have not helped to secure many orders in Japan, which was otherwise, the idea. Add to that, Vestas has developed its 15-megawatt turbine and you get a very strong picture. The acquisition of CIP is another progressive move because they're good at launching projects. Normally, it can be dangerous to acquire your customer in consideration of your other customers. But I suppose Vestas has evaluated that this was possible. And we haven't seen much criticism in the media either. And Vestas has a strong base for its new 15-megawatt turbine. We have seen a good revenue growth from EUR 12 billion to EUR 15 billion. EBIT on the other hand, has decreased from EUR 1 billion to EUR 750 million. That is not a good development, and it seems that costs are not under control. That can be due to 3 things. First of all, we are informed that a lot of this is due to warranty provisions. That raises the question of quality, are there any quality issues with regard to the blades. That was one concrete question. The second question is it could also be due to lower prices on the finished turbines. Do we see a price pressure again? And thirdly, are there any -- is this due to extraordinary costs in connection with COVID, which will not be repeated to the same extent this year. And fourthly, financing costs. We believe that we can see a euro loan with quite high interest. Are we mistaken? Or could you pay this out with the large cash balance that you have? We also note that debt is down by EUR 2.5 billion. All the while, equity has increased EUR 1.3 billion. That is a remarkable improvement of the balance sheet and an improved solvency ratio. We would like to hear your comments on these 5 issues. And with great satisfaction, we note that you're going to pay out a dividend of DKK 8.45. That shows your confidence in the future. Last year, Torben Rasmussen gave the report, so I didn't have the chance to thank Anders Runevad myself. I and the other shareholders have been very pleased with Anders Runevad. He and Bert Nordberg brought in an engineer with good understanding of operations. Anders Runevad said, I don't promise much, but I keep my promises and you did. Together, you have worked with the processes internally, and you have created a well-run machine, today constituting a world-leading wind turbine producer. One of our focus areas is succession. Can management tell us how you ensure retention and development of new candidates for management? About a year ago Anders Runevad decided to leave executive management and join the Board of Directors. And Henrik Andersen left the board to take up the post of CEO. So you switched roles. Normally, that is not in accordance with good corporate governance. But we have seen that with great success in several Danish companies such as LEGO, Demant, Coloplast and others. And it was obvious that you could use Runevad's great knowledge about Vestas on the board. We would like to see him as Chairman of the Board, but not necessarily anytime soon as we see Bert Nordberg, as the best Chairman of a Board in Denmark. Another of our focus areas is good guidance in new and uncertain times. We have noted that the target is an EBIT margin of 10% and that you expect revenue of EUR 16 million to EUR 17 billion this year and an improved EBIT margin of 6% to 8%. That would give you an EBIT of towards DKK 9 billion. Now we are 1 quarter into the current year. Could you elaborate on your expectations? And with that contribution from the Association of Danish shareholders, I will give the floor to the CEO. And after that, the Chairman of the Board to answer any questions and give their comments.

[Interpreted] Thank you very much, Klaus. And also thank you to Søren for these remarks and questions. Let me, first of all, touch upon Japan. I think it's very important because in the end of November, we were in Japan discussing the journey in front of us in Japan, particularly when it comes to offshore. And that's interesting because that starts right now, and we are looking forward to participating that. And I think we should recognize MHI more than that. And this is a market that we are getting into via our Japanese setup, and we are going to do that in a collaboration, and we have gained a very strong partner here. You talked about our earnings, our EBIT margin and rightly so because I can tell you, first and foremost, that quality is 1 of our #1 priorities in Vestas. And we acknowledge that there have been a number of unexpected problems and issues during the course of 2020, which has resulted in a level of repairs and upgradings that we haven't seen before. On the other hand, we have, throughout the past 40 years seen with our great experience within this area that we are going to remain technology leaders in this industry. And therefore, we feel comfortable that we can guarantee the quality of our products today as well as in the future. But 2020 has given us some important lessons, and we are going to work on this and every single employee in Vestas knows that today. Let me also say that when you see such strong revenue growth and capacity growth of about 50% during the course of just 2 years, that does constitute a challenge. And it does constitute a challenge all the while most of the world is in lockdown because we have seen challenges every single day throughout the past year, and some of them have incurred costs for us. And we have solved these issues for our clients. And you mentioned whether this has been due to lower prices. And I must say we have seen a very reasonable stabilization during the course of the past years, and we expect that to continue. Profitability is and must be 1 of our highest priorities, and it should be for all players in this industry. And it should be because we have to continue to invest in technology and contribute to scaling up global capacity and nobody can do that without earning a profit. And therefore, it's important that we have a competitive technology that we can supply our customers with and that our clients want to use to build their next project. And as an industry leader, we must be able to drive this transition and this ongoing transition across the globe, and we can only do that with the right EBIT and the right profitability. Looking at the COVID crisis, you're absolutely right. COVID is not a big help for us in an industry where we have to source our components from different parts of the world and from different suppliers and partners. And that has definitely been a challenge for our suppliers, but our deliveries to the clients have succeeded. And I think the perspective will be more or less the same for the current year. But it's no excuse. And we said from day 1 that we are not going to use COVID as an excuse because now is the time to prove that wind energy can stand the distance. And there were some industries looking at us to see if we had to back out and step down from some of our promises, and we didn't. And I really thank our employees, I thank our suppliers because we were able to deliver on our promises, but it has incurred some costs in some of these areas. You also talked about financing costs and our capital structure. And I can tell you that we constantly evaluate our capital structure. That is one of our priorities, and it has been ever since we had these difficult years in 2012 and 2013, and ever since we have been acutely aware that we need a conservative approach to our capital structure looking forward. That has also contributed to our gaining the rating that we have gained. We also paid MHI in our own Vestas shares with the 50% in MHI Vestas offshore. And that was the right thing to do. And that meant we were able to welcome MHI and that gave us a stronger balance sheet at the end of the year than in the beginning of the year. Also after acquisition of our offshore activities. And therefore, we continue to have a strong balance sheet. We have a cash balance of almost EUR 2 billion, and that means that we can continue to invest at a level that means that we can stay a leader of this technology, and we can continue to help our clients also in more challenging areas where there are fewer suppliers who are willing to deliver the solutions that our clients need. So I can tell you that there very happy that we have now welcomed back our offshore business, and that will continue to be part of our strong but also very conservative approach to our balance sheet. When it comes to the what you call the best Chairman of a Board in Denmark, I think, I will pass the floor to the man himself, Bert Nordberg,

I will comment on some other things. Thank you, Søren, and thank you, Dansk Aktionærforening for a comment on your question. I would like to comment a little bit about the talent and leadership and development of future leaders in the company. We have a strategic initiative that we call talent and leadership. And part of that is, of course, to develop the employee value proposition. Why Vestas? Why should we work here? And our focus has been very much on Denmark before. And now we will take that globally to try to identify and attract the best talent in the world to work for our company. And we also put a pressure on all the leaders in the company to identify future leaders to ensure that we have a pipeline of leaders coming up and now develop with a focus on diversity, of course. On top of that, we have -- continued to have a yearly ongoing succession planning for leadership position in companies. So we develop and make sure that we have a pipeline of new leaders coming up and being developed in the company. So I think we are doing what we can to ensure that the company will have a leadership that it needs for the future. The company has become much bigger. We have more or less grown 50% in 2.5, 3 years. And I think that also put a lot of pressure on the leaders in the organization. So there will be a mix of external and internal development of leaders in the company. Thank you.

[Interpreted] Thank you very much. Those were the contribution we had received and if anyone wishes to take the floor, I can conclude that we have exhausted the debate on the report, though that was the first item on the agenda and Item 2 on the agenda, the presentation and approval of the annual report, I can conclude that the annual report has been approved. That leads me to the next item on the agenda. And as I have not received any objections or questions, I can simply go through the remainder of the agenda and refer to the presentation of the agenda carried out by the Chairman of the Board. When it comes to the to Item 3 on the agenda, the Board of Directors proposes that a dividend of DKK 8.45 per share be paid out for 2020. I conclude that is adopted. Item 4 is the presentation and advisory vote on the remuneration report that is a new requirement that you should not only have a remuneration report, but you should also -- that you should in the remuneration report, clarify how the remuneration policy has been implemented in the past year. And I can also conclude that the remuneration report has been adopted. Item 5 is the remuneration of the Board of Directors. It was said that the Board of Directors proposes an increase of 5%, a basic remuneration of DKK 446,250 per board member with the Chairman receiving 3x the basic fee and the Deputy Chairman receiving 2x the basic fee. And I conclude that this proposal is also adopted. Item 6 is election of members to the Board of Directors and the Articles of Association Article 8 says that The Board of Directors should consist of 5 to 10 members elected by the general meeting, and to that the members elected by the employees. The Board of Directors proposes reelection of Anders Runevad, Bert Norberg, Bruce Grant, Eva Merete Søfelde Berneke, Helle Thorning-Schmidt, Karl-Henrik Sundström and Lars Josefsson. That was 7 candidates and Carsten Bjerg has announced that he does not stand for reelection. Instead, the Board proposes that Kentaro Hosomi be elected a new member. We have not received any other candidacies and when it comes to other executive functions of these candidates, I refer to Appendix 1 from the convening notice. I can, therefore, conclude that the proposed candidates have been reelected and elected, respectively. Good luck to all of you. Item 7 is appointment of auditor. The Board of Directors proposes reappointment of PricewaterhouseCoopers. And as it is appropriate, in accordance with applicable law. I can inform you that this is pursuant to the Audit Committee's recommendation and that the Audit Committee has not been influenced by third parties nor been subjected to any contractual obligation restricting the general meeting's choice to certain auditors or audit companies. Further information about the proposed auditor can be found in the Appendix 2. I can conclude that PricewaterhouseCoopers has been elected the new auditor. That leads me to Item 8. It looks simple, but in fact, this includes 7 proposals. The first of them being 8.1 regarding the remuneration policy. This was presented by the Chairman of the Board. The policy has been updated by the Board of Directors when it comes to the variable remuneration with the goal of simplifying the long-term incentive programs. This has already been presented, and it has been described in detail in the convening notice. I will, therefore, not go into further detail, but simply conclude that this proposal has been adopted. That leads me to Item 8.2, a change of the denomination per share. This requires a majority of 2/3. And the proposal is that the denomination per share be changed from DKK 1 to DKK 0.01 or multiples thereof. The purpose of the proposal is to make it possible for the Board of Directors to undertake a share split to split each share into 2, 3, 4, 5 individual shares, which makes the share more easily tradable at the stock exchange. That is also adopted. The next item is the renewal and amendment of the authorizations to increase the share capital. Here, the Board proposes that the authorization to increase the capital -- the share capital by a total of 10% during the next 5 years. This is a nominal amount of DKK 20,197,345. This is pretty standard proposals. So I have no further comments, and I conclude that this has been adopted by a 2/3 majority. That leads me to Item 8. 4, an authorization to the Board of Directors to hold general meetings electronically, and the experience with COVID-19 has told us that it is not always easy to have physical attendance. And therefore, the board asks for authorization to hold general meetings electronically, and that means that shareholders would be able to send in comments and questions beforehand, but also vote and take the floor virtually during the actual Annual General Meeting. But the Board of Directors also informs me that they intend to hold physical meetings whenever possible. This has also been concluded by the sufficient majority. And it leads to a number of changes to the Articles of Association. 8.5 is a resolution to grant authorization to adopt electronic communication. This is a proposal to adopt a new article in the Articles of Association, and that means that a number of articles will be amended accordingly. This is so far, only an authorization to the Board, and this has also been adopted by a 2/3 majority. 8.6 is an authorization to the Board of Directors to distribute extraordinary dividend, so you don't have to wait the ordinary Annual General Meeting, but you are able to distribute dividend at a different time. That only is an authorization to give the board some a measure of flexibility. There are no concrete plans so far, but I have not received any objections and I can conclude that, that has been adopted. 8.7 is a renewal of the authorization to acquire treasury shares, almost all listed companies in Denmark ask for an authorization to acquire up to 10% of their treasury shares. This is a standard item on the agenda, an authorization that can be given for a period of 5 years. And this is for just 1.5 year years. This is up to 10% and the share price cannot deviate from the price quoted on NASDAQ by more than 10%. Finally, Item 9 is an authorization of the Chairman of the General Meeting, that is an authorization for me. It's not worth much. It's just for me to be able to register and file the adopted resolutions with the Danish Business Authority and I thank you as I can conclude that this authorization has been granted to me. Item 10 is any other business. You can take the floor, but we don't have many shareholders present. So I only have left to resign as Chairman of the Annual General Meeting and pass the floor back to the Chairman of the Board.

Yes. This concludes our Annual General Meeting for 2021. I sincerely hope that we all can work together to ensure that we, next year, can have it in a meeting in a more a nice environment and meet together in person. So stay tuned. I look forward to work another year with you as shareholders and I hope that we can fulfill our vision for the future. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]