Anders Runevad - Group President and Chief Executive Officer Marika Fredriksson - Executive Vice President and Chief Financial Officer

Kristian Tornøe Johansen - Danske Bank David Vos - Barclays Investment Bank Claus Almer - Carnegie Investment Bank AB Pinaki Das - Bank of America Merrill Lynch Patrik Setterberg - Nordea Bank AB Sebastian Growe - Commerzbank AG Dan Togo - Handelsbanken Capital Markets Klaus Kehl - Nykredit Markets Sean Diego Mcloughlin - HSBC Mark Freshney - Credit Suisse Phuc Nguyen - Citigroup Jacob Pedersen - Sydbank Fasial Kalim Ahmad - Skandinaviska Enskilda Banken José Arroyas - Exane BNP Paribas

So good morning, everyone, thank you for calling in. And welcome to this First Quarter 2016 Earnings Call. As usual then, it’s me and Marika that will present the slides to you. So let’s start. First, the normal disclaimer slide, and then, we go into the key highlights for the first quarter. I will say solid performance with inventory buildup for an expected busy 2016. Of course, very encouraging to see the record-high Q1 order intake of the 2.4 gigawatt, also leading to the highest ever combined backlog for Vestas at €18 billion; improved earnings in the quarter with an EBIT margin of 5.8%, 0.6% improvement year over year. And the negative cash flow impacted by net working capital and the acquisition we did in the quarter on the services. So I will start talking a bit about order situation a bit more in detail, the markets, and then I will hand over to Marika on the financials, and come back and conclude then, and then we go to Q&A. So this is the time of the year when external consultants published their reports on market share development in megawatt. The measures differ a little bit if it’s installation or grid connected or delivery. And therefore, of course, there are variations in these reports. From our point of view it is encouraging to see that it confirms the view that we have, that Vestas is retaining a strong position in the market and actually improve our market share year over year. And megawatt is, of course, important but for us the main objective, and that we also expressed in our strategy and vision is, of course, based on revenue and not megawatt. And here on a revenue basis this, of course, also clearly confirms what we said before that we did outperform the market during 2015 in revenue growth. Overall, regulatory environment, I must say, not that much news in the quarter. One key event that we and rest of the industry are waiting for is the IRS guidelines on the PTC extension, always hard to predict when IRS will come out with this. But I will say, we think that it’s likely to be now in the second quarter of this year. Otherwise, as I said, not much news on the regulatory front; we see markets moving to tender systems. We see that in Latin America and we definitely also see that in the European markets. Overall, in Europe, I will say that what drives a big part of the market is, of course, the renewable energy targets 2020 and 2030 that are in place. And within those targets the market shifts to more tender-based systems. We also see positive signals in Middle East and Africa, where renewable targets are being developed, and in some cases are in place, in Middle East and Africa. In Asia Pacific, not much changes in the China and India target plans, but in the broader Asia Pacific region, we also now start to see markets putting in renewable energy targets in their local markets. So getting a bit more into order intake, and as I said, of course, very satisfying with 2.4 gigawatt, a 37% year-over-year increase. We also saw that average selling price declined, very much impacted by the big 1 gigawatt order that we took in the quarter. So in numbers, orders were up 653 megawatts, primarily due, of course, then to Norway but was a good development in the U.S. and Germany. The average selling price of order intake was €0.82, and as I said, impacted by the 1 gigawatt order in the quarter. Should remember as before, that price per megawatt depends on a number of factors: turbine type, geography, scope, uniqueness of the offer. And this actually a good example of what we have been talking about before with a big order in the quarter and of this size order we can, of course, optimize due to scale, transport, closeness to the factory, a construction and also here use our latest power mode of 3.6 megawatt at fairly ideal sites. Looking at the orders on a regional basis, then as we can see again, of course, a good development in EMEA and actually also even without the 1 gigawatt, an increase in orders. It comes from a broad base of countries. In Americas, we were down 35%, this is on a year-on-year comparison, very much due to lower activity level in Brazil. And it also, of course, shows the lumpiness of orders. As you know, about two weeks after the close of quarter we took a close to 200 megawatt order in the Brazilian market. Asia Pacific, lower overall and also low activity level in the quarter and especially in comparison to last year, where we had a significant order intake in China into Q1. If I look at deliveries, so even if we so regional differences, we saw a stable overall delivery situation and again highlights the benefit of our unique global reach. Main improvements came from Germany, Thailand, Sweden, and UK. So, as I said, down on delivery, 33% in Americas, primarily due to U.S. and Chile; up 40% in EMEA, and here it’s really a broad mix of countries contributing to the growth, and again, fairly stable development on a low level in Asia Pacific. So that leads us to the order backlog of €18 billion and, of course, very encouraging, increased by €1.2 billion in the quarter. The wind turbine side increased €0.7 billion and the service backlog increased by €0.5 billion. Joint venture with Mitsubishi Heavy Industries, for the offshore also on track. Two things in the quarter to comment about, the ownership ratio will remain at 50/50. And, of course, it’s a good signal of the confidence of the current setup that now have been running for a couple of years. Joint venture is busy ramping up the production on the 8 megawatt platform. The order backlog is solid at 1.2 gigawatt, showing a stable and plannable ramp up until 2019. First project of the 8 megawatt will be Burbo Bank, that installation is expected to begin in the autumn of this year. And, of course, preparation are also underway for the two 3 megawatt turbine project that is from orders. So with that, I hand over to Marika.

Yes. Thank you, Anders. So if you look at the income statement, you can see that also, what Anders have alluded to, for Q1 is reflected in the P&L. You see a little bit of mixed bag, which was also anticipated from our side. Revenue is down compared to last year, not as much I would say that we anticipated, but still down, according to plan. If you look at the gross profit, we have managed to further improve that in the quarter, despite Q1 of last year being a good quarter. We have increased the gross profit not only in absolute numbers, but also in percentage. That is primarily coming from a positive mix in the quarter. You can also see, the negative would be fixed cost increasing by 10% in the quarter and not - again, according to plan. And it’s primarily in R&D, innovation, but also in distribution cost, so really a reflection of the volume increase and the guidance that Anders has provided. EBIT before special items then improved despite the slightly slower revenue in the quarter by 8%, so a very good performance. And you can also see that our EBIT margin is up from 5.2% to 5.8% in Q1 of 2016. And then just to highlight the accounting for the JV, you see the income from investments accounted for is negative €19 million. And this is one thing that we have tried to comment on earlier that you will see the depreciations coming in from the V164 at the beginning of this year 2016. If we look at the cost side and how we’re leveraging, you can see that compared to Q1 of last year are down in percentage 7.9, slightly up according to plan again in absolute number, but still very well kept expenses. So our fixed capacity cost for the company also going forward. Just to reiterate that this is a key focus area and we’re continuously trying to be more efficient. If we look at the service business, there is an increase of 17% in revenue year-over-year Q1. So we are €299 million in Q1 of 2016, that includes both Availon and primarily UpWind, because that is a longer timeframe. And you see of the increase compared to last year, it’s around $17 million that comes from the two acquisitions. EBIT is still with stable margin, not as high as last year, but we delivered a 17%-plus margin in the quarter. And as Anders showed you earlier, our backlog continues to be very strong for the service business. If we go to the balance sheet, I wouldn’t say that there is a lot to comment on, but you see our equity position continues to be strong. Net debt continues to be negative. The only thing that we have consumed in the quarter is net working capital and it’s primarily inventory and I will come back to that. This is again according to plan and this is again what I would like to reiterate, this is the beauty with a strong balance sheet that we can actually in a flexible and cheap way prepare for higher activity level in the coming month by consuming working capital in a quarter. You also see that we changed our solvency ratio in last quarter, but we are slightly exceeding that solvency ratio in Q1 of this year. So we are at close to 31%. If we go to the change in net working capital this is what I said earlier and if we look at the last three months consumption, you see that the inventory is clearly up and you can see that it’s to some extent compensated by prepayments and payables. Payables is, again, as we have said, it’s not that we’re not paying suppliers but we have a high activity level and that’s consequently why it is up. You see the same development to a large extent for the last 12 months. If you look at the warranty provision and lost production factor, which is I think a solid receipt of our good quality work. We continue the lost production factor below 2% on a continuous basis. So obviously it is paying up of the quality work we’re doing throughout the company. You also see that we consume less than we provide for when it comes to provisions for our warranty. Cash flow statement, cash flow from operating activities continues to improve before working capital, which is a good performance. And the change, negative change is really the net working capital, which is a good performance. And the change - negative change is really the net working capital. As I have said before, we are tying up more inventory. Cash flow from operating activities is consequently negative and when you look at the investing activities that is a reflection of the Availon acquisition that we made in Q1 and that corresponds to €83 million. So we are from an operating basis negative, a little bit more than €200 million, and then on top of it we have the acquisition, again, as planned for Availon in Q - or March of last quarter. And then you see cash flow from financing activities is positive, compared to negative last year and that is really the refinancing of the bond. So if we look at the total investment for the company, we are investing more than last year same quarter. And that is primarily again R&D and - or capitalized R&D and molds for the blades. And here you see both in Q4 of last year and Q1 of this year the money spent on the two acquisitions up in Availon. The capital structure continues to be strong. So you see that we are - we have actually increased our net debt to EBITDA. And you can see that our solvency ratio is slightly down compared to Q4, again, as planned for. But we are above the target of 30%. And then, if you look at the return on invested capital, you see that we are at very high level, 119%. And this is primarily a reflection of the earnings capability that we are proving in the quarter. So we are actually increasing despite the efficiency on the balance sheet when it comes to working capital. But that I leave it to you Anders.

Thank you, Marika. So looking at the outlook for 2016 it’s unchanged. So to repeat it, revenue of minimum €9 billion; EBIT margin before special items of minimum 11%; total investments approximately €500 million; and a free cash flow of minimum €600 million; and also unchanged on the service business when it comes to growth and stable margins. So before we then open up for Q&A, I also would like to remind you or invite you to our Capital Markets Day on June 21 that we will - and we will be in London this year. So with that we can open for questions.

Thank you. [Operator Instructions] The first question comes from Kristian Johansen from Danske Bank. Please go ahead. Your line is now open. Kristian Tornøe Johansen: Yes, thank you. My first question is regarding your project margins in the quarter. Can you elaborate on what drove the high level of project margins and also how this compares to the average project margin of your backlog?

Well, this is - and this sounds, we have said it before, but it’s very hard to, say, give you a general project margin. The only thing I can say when it comes to project margin and how we treat them is that we are very, very rigorous, both for the service business, as well as the turbine business that you go through a process. So we make sure that we have the profitable growth that we have stated in our strategy. So we had a very good month. We had a good mix in the quarter of different projects. And whether this is a reflection of the coming quarters, it’s hard for me to say, because you can basically have a big project tipping over into quarter end and dilute the picture or further improve the picture. So it is a good product mix. It’s also a good mix of service business in the quarter. And we are obviously happy with the margin that we have provided here in the quarter. Kristian Tornøe Johansen: Okay. Fair enough. Then my second question is regarding the increase in R&D cost. You described higher innovation cost. Can you elaborate exactly what you mean and also how we should think about this going forward?

What Anders have said earlier is that obviously at the size of the business. We are leveraging that by spending a little bit more on the innovation and that is something that we have said that we are prepared to do. And we are the technology leader in the industry and will take that opportunity when we find that appropriate. And, so we have done here for 2016. Kristian Tornøe Johansen: So we should expect high level in the coming quarters as well year on year?

Overall, we are spending more on innovation. But it’s not extreme in any shape or form. It’s following the overall business, but we will, as I said, continue to invest in innovation. Kristian Tornøe Johansen: Okay. Thank you.

Thank you. Our next question comes from the line of David Vos from Barclays. Please go ahead. Your line is now open.

Good morning, Anders. Good morning, Marika. I have a couple of questions, please. So first with regard to the service margin, and I think the comment around stable margins has been a stable feature on your slides for a couple of years now. Can you just remind us what the baseline is that you see stability, just for the record there? And then also comment particularly on the impact of the two acquisitions in the service business, i.e., how have they weighed on the margin in Q1, and how do we see they’re developing in the rest of the year? And then, I have another question.

So the service margins, we are very confident on that we deliver stable margins in the service business. But we have also been fairly explicit on that you will see fluctuations in the quarter. It is very, very hard to have a consistent service margin. And I think you saw that clearly in 2015, where we were bouncing up and down in the quarter. The two acquisitions, I obviously don’t have the same profitability level as our own service business. And also to bear in mind that we will do the depreciations on the PPA, so it will not be accretive from the beginning. And also, capturing the synergies of the two acquisitions will take some time for us. So it will be more a reflection on the revenue than on the profitability when it comes to the two acquisitions. Having said that, David, we are very happy with the performance of the two service business and how we quickly have managed to integrate the people, and then obviously we are cautious in how we integrate and at what speed we will integrate the two companies. So again, just to reiterate, it will have a positive impact on the revenue, but not necessarily on the margin for this year.

Okay. That’s very clear from a conceptual point of view. I think I couldn’t agree more with you on that. But I would like to query you once more on what the baseline for the margins really is right now, because if I look at last year, for the full year the margin was around 18%. If I ex out all the provisions that you took in Q2 and Q3, I get to almost 21%, 20.6% or so. That’s a big difference, of course. And I’m just not sure where the baseline is. And then with the moving parts on PPA and the acquisitions, et cetera it’s just very hard to get a view on what we should be looking at here, going forward.

And you will probably think, I’m a bit blurry in my answer, because I know where you’re coming from, but I would say that we have been hovering around 17% to 21% margin. And even if it’s a gap in between, we consider that bandwidth still to be a stable margin and that’s basically what we’re working within.

Okay. Thank you very much. And then, very quickly if I may still, on the offshore business, you haven’t taken any orders there for, I think, three or four quarters now, while Siemens is clearly still doing so. Can you comment on why that is? Is that a deliberate strategy? Is your backlog filled now to certain degree? That would be very helpful.

Yes. I need to check when the joint venture actually took their latest order intake. I don’t think that we have not taken any orders in the last two or three quarters, but I need to check on that. Of course, and obviously, not as close to that business as the Vestas’ business, as it is run by the joint venture. But, I mean, to comment on the order situation, the joint venture have 1.2 gigawatt in some orders. They have taken to fairly large 3 megawatt orders as we mentioned also in the presentation. Otherwise, it is very much on the 8 megawatt turbine. And as I also commented, we are now in the startup phase or the joint venture is in the startup phase on manufacturing and delivering these 8 megawatt turbines. And, of course, in that phase there is a limit on how quick you can run. So we are very confident with the 1.2 gigawatt of orders that we have. And we are also very confident on the timing and therefore the roll out of those orders, which, of course, has to fit to the plan on starting up the production of the 8 megawatt. And I must say also, a bit positively surprised of the 3 megawatt offshore orders that also still are in the market.

Okay. Thank you very much Anders.

I think your next question comes from Claus Almer from Carnegie. Please go ahead. Your line is now open.

Thank you. Yes, I have also a few questions. The first one is also about the product margins. Just to be sure, in Q1 you didn’t have any projects being either very good or very bad executed?

No, that’s correct, Claus. Well, I see where you are coming from now. Well, we are, again, happy with the margins in the quarter, but it is very, very hard. And I just underline that, to be very specific on margins in a quarter, because if you have a project slipping over or a project coming in the quarter, that could potentially change the whole picture. So it’s very hard for me to say that this is a reflection of the coming quarters what you see in Q1. It is a good level. We are happy with the improvement. What I can say as an overall comment, Claus, is that, I think that the overall Q is a reflection on that we’re working on all parameters to further improve our performance on the margin side.

Sure. Okay. And then, just answer to this question, when we look at your fixed cost base, that level we saw in Q1, is that sustainable for rest of the year or should we expect any increase?

Well, overall, the fixed capacity in cost will be in absolute numbers a reflection of the activity level in the company. And what we have said, and I think what we are proving with what we’re delivering, Q1 is slower than the remainder of the year which is a normal pattern for us. So you could see definitely changes in the fixed capacity cost.

But still overall in smaller size.

Very controlled.

Yes. Okay. And then, my second question goes to the order intake, which again was very strong in the first quarter. Also, when we look at the smaller projects, maybe you get some more flavor to what you see in the market, what is driving this solid order intake?

Yeah. I mean, as I said, I mean, we see a broad based solid activity level, I would say. I mean, it’s in EMEA it’s hard to pinpoint any additional countries. But we see a good flow of order also in the Q1 that traditionally is a bit lower also on the order side. So it is fairly broad-based I must say.

Okay. Thank you so much.

Thank you. Our next question comes from the line of Pinaki Das from Bank of America Merrill Lynch. Please go ahead. Your line is now open.

Hi, good morning, Anders and Marika. Thanks for taking my questions. I’ve got two questions. The first one is on SunEdison. I believe some in the market, but worried about SunEdison’s bankruptcy. You’ve already said that it should not have any material impact or may not have any impact at all. Could you give us some color around what’s happening, why you feel so confident around it? What are your orders pending from SunEdison or any other framework agreements, some color on that whole thing? And my question is regarding your June 21, Capital Markets Day. Now on that, could you give us some color for what prompted you to do that Capital Markets Day? Is it that you are seeing more activity levels that you need to plan forward, or what are sort of triggers that you had do a Capital Markets Day? Thank you.

Okay. If I start with SunEdison and Anders can fill in. We don’t have, or if we have very insignificant exposure towards SunEdison, because it’s all guarantee, we have the relevant guarantees for any exposure. And then, I think that if SunEdison have an impact on our future activities in the U.S., I mean we have a five year PTC extension that obviously is very beneficial for us. So we don’t see that as a big impact on the overall business for Vestas. I don’t know, if you have anything else, Anders?

No, I agree. As you say, I mean we don’t have any impact, we think that, I mean the projects and ownership structure of the project is solid, and the projects that are good with most likely go ahead in a different shape or form, also when it comes to future project. But that, of course, that remains to be same and as normal, we will announce orders when they are firm and unconditional. On the Capital Markets Day, nothing dramatic, but of course I hope you still will attend. So we typically do a Capital Markets Day, every other year. So it’s a definitely time to do it, and our intention is of course to do a general update on our business and on our outlook for the business.

Okay, good. Can I probably just follow-up on a very small one? You mentioned Sweden - the order in Finland, the 1 gigawatt order, and the pricing is lower, but obviously you’ve got lower costs as well. Can we just assume that the margins would be similar on that order, given the costs are a little lower?

Yes. So it was in Norway, in fact, but I can understand it’s a Scandinavian country, so almost the same, but as I said the margin depends, of course on a number of different factors as I also described, and the uniqueness of the turbine to the specific site. And I will not comment on margins in a specific project, but I can, of course say that, this project passed through our normal margin approval process. So it is within the expected margins that we have for the company. So nothing that went outside our normal process.

Thank you so much.

Thank you. Our next question comes from the line of Patrik Setterberg from Nordea. Please go ahead, your line is now open.

Yes, hello. A couple of questions from my side as well. I just wanted to pick up on the previous questions regarding the ASP trend. It is clearly stated that this big Norwegian contract is taking down the ASP in the quarter. I’m just wondering, is it due to the fact that the volume is so big in this contract, or is it due to the fact that the turbines are going to be delivered in quite a distance future, and was this going to be between 2018 and 2020? That is my first question.

Yes. So, I mean, again without going into specific of a single project, also for customer and competitive reasons, of course, that the volume as such is one parameter that makes it possible to optimize. You can optimize the transportation, you can optimize the construction. It’s also happens to be very good situated compared to our production facilities, so of course, you can do a lot of optimization on pure volume at one project. The other thing that I talked about is, of course, the turbine match to the site. And in this case, we have a power mode of our 3.45 megawatt turbine that can run that turbine up to 3.6 megawatts, and of course, it’s not something as you know that we always work on different power modes. And if you can match that very well to that specific site, you of course get also a big boost from the specific turbine site - the specific turbine type to the site.

Okay. Thank you, very clear. My second question is regarding to the service revenue. Could you split up how much the acquisitions was contributing in the first quarter and how much was organic growth?

So when you look at the comparison it is - I think to be very precise, Patrik, it’s 17.5 that is coming from the two acquisitions, 12 5 from UpWind and 5 from Availon. So that is the revenue part in Q1 from the two acquisitions.

Okay. Thank you. And my last question, income from the joint venture negative in the quarter, is this the run rate we’re going to expect for the coming quarter or do you see any bigger payments going to come in as well during 2016?

Well, that obviously depends on the overall activity level in the company for the coming quarters. But what I can say is that, again, depreciations obviously for the V164 will continue and they are, as you can see, on a higher level.

Okay. Thank you. That’s all from my side.

Thank you. Our next question comes from the line of Sebastian Growe from Commerzbank. Please go ahead. Your line is now open.

Yes, good morning everybody. Two questions also from my side obviously. The first one is on the reference that you make in the report to strong market demand in the country when it comes to Germany in particular. Could you comment please on the full year expectation for the market, i.e., what installation volume do you see in 2016 more for the market rather than for yourself to just get a better sense of what you really see in the market, if it is going up, if it’s going to be just stable or if it’s going down. Yes, please your answer on this one.

Yeah. I think, as we said before, we see a fairly stable market in Germany. So fairly stable on same levels as last year as an overall market.

Okay. And that is also a prediction so to speak that you would also see them for 2017, yes, just reflecting then that the auction scheme is kicking in not before 2018, is that basically what you have on mind?

No, I think that, of course, there are currently proposals on auction, and both sort of rules of the auction in sales and also the transition rules to the auction. So I think, of course, that will or could have any impact on the market short-term when things change. But - and I don’t really have the forecast for 2017. So I think that we have to wait for clarity on those rules. But having said that, I think, when I look at renewable energy targets for Germany, if I look at it more average on a number of years going forward, I look at a fairly stable market.

Okay. Fair enough. And the other question is on the order intake. Sorry to get back to this one. If I just do the math and I was to ignore the 1 gigawatt order from Norway, is it fair to assume that pricing on the remaining orders has been on about the same level as last year, i.e., somewhere at €0.92 million per megawatt.

I mean, we don’t comment too much again on specific project. I will say that if we take out that, we continue to see a fairly stable price development in a competitive market. So no changes from what I talked overall from previous quarters.

All right. Thank you very much.

Thank you. Our next question comes from the line of Dan Togo from Handelsbanken. Please go ahead. Your line is now open.

Yes. Thank you and good morning. One question regarding the JV, you mentioned, Anders, that you will see Burbo Bank coming on or deliveries to Burbo Bank coming on second-half. Will this mean that here in the short-term on this quarter there will be fairly limited transfer or risk, i.e., we should expect a more or less similar effect from the JV?

I mean, of course, again, it depend a lot on the activity levels. But, of course, and again, I mean, they are separate company. So I have a very hard time commenting on specific quarters for them. But they will continue to depreciate 8 megawatt. And as you said and as I said, the delivery there is expected in the autumn. Then, of course, there is a run rate business in the joint venture since before. But I will not really go in and comment on separate companies’ different quarters.

Okay, understandably. Then on the 2.5 gigawatt you were saying you have - and are working on right now and are building up on inventory side. Could you give some indication of how we should expect that delivered? Will that be throughout the remaining course of this year and very front-end loaded; how should we see the impact, so to say, in coming quarters from that? Thanks.

Well, you will see the same pattern as we normally do. We have a high activity level in the coming quarters. Then how that specifically will be divided we cannot comment on. But you also know our guidance for the full year which Anders have not changed. So it means there is going to be high activity level and that’s what it is what we’re preparing for with the working capital and inventory levels.

Okay. Thank you.

Thank you. Our next question comes from Klaus Kehl from Nykredit Markets. Please go ahead. Your line is now open.

Yes, hello; Klaus Kehl. I have two questions, please. The first one is again related to the service business. Could you just confirm whether there are any one-offs in this quarter due to the acquisitions and perhaps some integration costs? That will be my first question. And, secondly, Anders, you mentioned that you’re still awaiting the IRS guidelines in the U.S. Is it your impression that that is holding back the order intake? So in other words, when this guideline is out we could then expect the order intake from the U.S. to pick up?

Well, if I start then with the service business, as I said earlier, yes, you will see some depreciations going forward. And, obviously, in an acquisition you have some cost for integration. So - and that is also what I alluded to, that will be a pattern in 2016. So you will see some additional costs for those two acquisitions.

Okay. But could you give us a number, are we talking about €5 million or what are we talking about?

It’s not - we will not provide a number. But it’s below double digits.

The integration cost?

Okay. Well, we are not commenting on any specific thick number on the integration cost. It will be - as I said, in Q1 you didn’t see accretive performance from the two acquisitions due to integration cost and also depreciations.

On the IRS, I mean, it’s of course very hard to say. I think it’s of course a fair assumption that you make, that of course the market and the customers are as anxiously waiting on the IRS clarifications as we are. And, of course, the more clarity you get on that earlier, the more secure you are in your decision-making on projects going forward, and therefore, of course, placing order. So I think there is a very high activity level in the U.S. market. There is a lot of discussions ongoing, but - and I think it’s a fair assumption to make that, of course, as always you want as much clarification of the rules as possible before you make the final decisions.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Sean Mcloughlin from HSBC. Please go ahead. Your line is now open.

Thank you. Two questions, just circling back to the U.S., I’m trying to understand, are your customers gunning to get projects construction-ready by the end of the 2016, in order to qualify for the 100% PTC before the first scale-down? Or do you get a sense that customers are more relaxed about booking orders through next year, through 2018, provided they still have 60%, 80% of the PTC? And, secondly, a more general question around pricing and auctions. I mean, we’ve seen very competitive bids for solar projects at auctions in LatAm. Do you see this as a competitive threat? And do you see greater pricing pressure in countries where capacity is being allocated, auction?

Yeah. I mean, on your first question, I mean, of course there is a benefit of getting the full PTC. So of course there is an interest to lock down projects on the 100% level if possible and if projects are mature. But that, of course, have to then be weighted with more longer term projects that - and actually also the continuous reduction in levelized cost of energy that we see all the time. So it is not a straight yes or no answer. And of course it depends on the maturity of the project you have in the pipeline. And if they are mature enough, of course, it’s likely that you wanted to get them in on 100% PTC. But there are also projects that are less mature and maybe are stretching over more years from a pure timing point of view. And then, it’s to look at the benefit of continued levelized cost of energy improvement to see what is the most attractive scenario. So I will say that there are all those discussions ongoing with customers in the U.S. market, but probably fair to assume that if you by pushing a little bit can you get to 100%, then of course that is a desirable situation. On competitive tendering, I think, I mean, it’s nothing new. We see that in many markets. As you say in Latin America we’ve seen it for quite some time in South Africa. So we have a lot of experience of that in Vestas. They are, quite often, what you would call technology-neutral both from a renewable point of view, but actually also from a fossil fuel point of view. Overall, I think it’s a healthy development in the market and it, of course, shows that renewable can compete on equal terms as fossil fuel. And I also feel that in most cases wind and solar complement each other well. You shouldn’t forget that last year 20% of all new electricity generation being built was wind and still wind is only 4% of the mix. So I think there is a lot of opportunity going forward. You will always find sites, places where solar is more attractive and you will find sites and places where wind is more attractive by the nature of the natural resources that both of us rely on. And you will actually find in many places where it’s fairly complementary where actually the wind is generated by temperature difference and not by pressure systems. So, yes, you will find - even in any given country, you will find sites that are more suited to solar and sites that are definitely more suited to wind.

Super. Thanks.

Thank you. Our next question comes from the line of Mark Freshney from Credit Suisse. Please go ahead. Your line is now open.

Hello, I have two questions. The first one is following up on the backlog in North America and the U.S. Are you seeing customers seek to delay projects that are firm and unconditional and push them back into 2017. Just also on your own experience - developing turbines you clearly can’t talk in depth about the MHI Vestas JV and the operational gearing there and the increased amortization. But is it fair to say that the offshore business needs substantially more orders in order to cover the development costs of the 8 megawatt platform? Thank you.

Now, let me start, again, comment on the Mitsubishi Vestas joint venture. I mean, the plan that we put together for the joint venture, the joint venture is following that plan. And so that means both from a commercial point of view, so from an order point of view, from a technology point of view and from the rollout point of view. So our original plan holds. And I think, as I have talked about before, the payment from Mitsubishi Heavy Industry into the joint venture were milestone payments that was triggered both by order intake on expectation and on technology milestones. And all milestones have been fulfilled and those payments have been done to the joint venture. So it is on our original plan, both when it comes to commercial activity and technology rollout activity. Your second question was around the U.S. and, again, if I go back to the PTC, I think it’s fair to say, as I said before that the next milestone in sort of firming up the decision making on orders and, therefore, timing of orders and therefore rollout will, to a large extent to be dependent on the IRS rules. And if they are as before, then you can - which I would say most people in the industry believe, then you can qualify again in 2016 by two different means for rollout in 2017 and 2018. And then you can qualify either as the safe harbor, which is 5% of the project value, purchase and delivery within 2016, then you qualify for rollout in 2017, 2018, or you can rely on the continuous construction language. So the timing of both firming up the orders and the method that the customers then rely on for the qualification will, to a large extent, be influenced by the IRS ruling.

Thank you for that. But just to follow-up my point is that, for 2016 orders middle of the year for IRS confirmation is probably too late. A lot of the construction of the machines, site preparation, needs to be done now. So for orders that you expect to do in 2016, is there any risk at all that those orders could be deferred to 2017?

No, I wouldn’t say so. I think that there are still plenty of time to do 5% and start the construction, or start the delivery of a fairly low volume that then would enable a very big project.

Okay. Thank you.

Thank you. Our next question comes from the line of Phuc Nguyen from Citigroup. Please go ahead, your line is now open.

Hi, guys. Thanks for taking my question. My first question is on the working capital situation. You guys mentioned that you have a lot of projects under completion, and my question would be, should we expect inventories to be monetized in the second quarter, and then also payables to pull back? Maybe you can provide us some color on how you see working capital developing throughout the year?

Okay. We are not commenting or guiding for any specific working capital levels. What we have communicated is that this is a key focus area for us, and we are - again, the negative working capital is not a surprise, it was planned for because of high activity level. The high activity level that I am referring to is for the remainder of the year and, as you know that we are guiding for high revenue, obviously that is pointing at a high activity level for the remainder of the year. We are not talking about a specific quarter in terms of activity level. Do I feel confident on the guidance? Yes, I can just reiterate that. On the payable side, we are - again, it’s a relation to the overall activity level, so that is on a high level and obviously, with the activity level anticipated, it will continue to be that.

And then my second question is on your guidance policy. Can you comment on how frequently you assess this and which metric you guys generally look at?

Okay, that’s a different question. We are doing regular forecasts and, obviously, in those forecasts we evaluate if we are continuously confident on what we have guided for, for the full year. And as we are not changing the guidance, we are confident on the guidance that we have provided.

Okay. Thank you.

Thank you. Our next question comes from the line of Jacob Pedersen from Sydbank. Please go ahead, you line is now open.

Hi. A couple of questions from our side. First of all, your view on the provisions, how low can you go on this? You had a very limited consumption of warranty provisions for the past year. And my second question would be concerning the impact of fluctuations, for example, the steel price. Have you got any meaningful tailwind from the input costs in the quarter?

Okay. On the provisions for warranty we actually did reduce the percentage level last year. This is - we are at the level that we feel comfortable on, and remember, the provisions are based on obviously the turnover in a specific quarter. So you will never see an even spread of provisions throughout every quarter. And when you calculate the overall provisions for warranty, you look at the average type of contract, so we are confident that we are at the right level with the provisions that we are making. Obviously, we have slightly reduced it, simply because quality overall is on improvement is throughout the company. And then if we go to steel prices, what we have made very clear to the market is that we don’t have any headwind or tailwind when it comes to raw material, so we don’t feel that we have a great exposure on steel. Having said that, we obviously monitor the development on raw material in general, because ultimately, it would be the customer that, it could be beneficial for.

Okay. Thanks so much.

Thank you.

Thank you. Our next question comes from the line of Fasial Ahmad from SEB. Please go ahead.

Yes. Hi, Anders and Marika. Two questions from my side. Firstly on the U.S., the window for taking orders under the old PTC, what is that, and do you still expect some orders to receive under the old PTC? That’s the first question.

Sorry, I don’t know if I quite understood it, the old…?

Yes, I mean, I’m thinking about the - not the extension of the PTC, but under the regimes orders which have maybe been safe harbored before the current PTC was extended?

No, I would say that, I mean of course, as usual we announce orders when they are firm and unconditional, and we had those kinds of orders in Q1, we actually had a fairly good stable order intake in the U.S. in Q1, and then, of course, we will see.

Okay. So we can still expect something in Q2?

That remains to be same. I mean, we haven’t changed policy, we announce orders when they are firm and unconditional.

Okay, sure enough. Second question relating to the headcount development, I mean, your headcount is up both year-on-year and quarter-on-quarter. What should we expect you will be expecting for the coming quarters?

Yes, you are absolutely right and, of course that is a reflection of the increased delivery that we have seen, and it follows the pattern that we’ve seen also during last year. With the higher delivery level, of course. Of course, we need to increase, and this is as before to the very, very, very large extent the blue collar worker for delivery. We also, of course, now in the quarter had some addition headcount from the acquisition as we had in Q4 than was for UpWind.

Sure. Okay. That’s all from my side. Thank you.

Last question then, please, go ahead.

Thank you. The next question comes from Jose Reliregress [ph] from Exane BNP. Please go ahead. Your line is now open. José Arroyas: Yes, it’s José Arroyas actually from Exane. Thanks very much. It’s a couple of questions. First one, a follow up on the German market this year, you mentioned before, you see a stable market. Does this comment apply to your - to the order activity you see in the market or are you referring to your actual installations this year? That’s question number one. And question number two is again on the profitability of the service segment, to clarify the impact of the acquisitions. But you also mentioned the release you were hit but less by less favorable mix. What that does mean exactly and if, hits, that’s related to any impact on the margin from availability warranties you’re providing to your customers? Thanks very much.

Yes, so let me start with Germany. If you look at what we said, in the order intake we see a strong development Q-on-Q, driven by Norway, France and Germany. So Germany definitely contributes positively on a Q-on-Q on orders. And actually, the picture on delivery as well is that Germany is doing well in Q1 compared to Q1 last year. So I think that also confirms what I said about that we see a stable market in Germany.

And if we go to the service business, I think I did explain the - this is the last question, yes - I explained the impact from the two acquisitions, so I will not dwell on that. But what we said on the favorable - overall, the mix situation in the quarter could be actually that you have plan for a bigger repair that doesn’t materialize in the quarter. That means that you take the income but not the cost, so that is the type of fluctuations that you can see in a quarter. And that will be the case and that’s why I’m also talking about the spread in margins, because as it’s not a super-big business, so smaller cost in terms of being beneficial or the opposite will have an impact in a specific quarter. And that you will continue to see.

Okay. So with that, I would like to thank you for your interest. Thank you for calling in. And then, we end the call. Thank you.