Nordex - A closer look at order volumes and their effect

All,

Please find our update on Nordex here.

The company’s new family of D-4000 turbines has proven to be immensely successful, allowing the company entry into the US and other markets and promising improved margins for this year and next. Order books are overflowing.

However, liquidity is thin. To ramp up sufficient capital for the current year, the company needed to almost fully utilise its guarantee facilities and obtain a capital injection from its major shareholder in Q4. 

Now with Covid19 raging, the threat is that the recently ramped up order onslaught comes to a grinding halt. We note that over the last 18 months, the growth has been financed by NWC inflows of E400m, which Nordex would be entirely unable to unwind with its current cash balance / liquidity buffers. Moreover, the company needs to refinance E200m of Schuldscheine this year and the giant RCF/G’tee facility comes due next year. 

On top of the powder keg sit the SUNs, yielding ~ 20% right now. If orders continue to come in (large US tech learning corporates worried about their image and sometimes tax bills, utilities, municipals etc.) then the bonds are par. If orders dry up to the point where pre-payment morale also drops to 2017/18 levels, then the bonds are in danger. 

Nordex do however benefit from strong shareholders and a strong product line-up. Threatening the bonds with an insolvency (in Germany) would be disproportionate to the benefit the company would receive from that. 

So tracking renewable orders  (across the industry) could be a worthwhile past time in the next weeks.

Wolfgang