Anders Runevad - Group President and CEO Marika Fredriksson - EVP and CFO

Claus Almer - Nordea Markets Kristian Johansen - Danske Bank Akash Gupta - JP Morgan David Vos - Barclays Casper Blom - ABG Marcus Bellander - Carnegie Alok Katre - Societe Generale Klaus Kehl - Nykredit Markets Pinaki Das - Bank of America Merrill Lynch Sean Mcloughlin - HSBC Gurpreet Gujral - Macquarie Securities Fasial Ahmad - SEB

Good morning, everyone. Welcome to this First Quarter 2017 Reports. As usual, I appreciate your interest calling in. The usual disclaimer slide and then let's dive into straight into the first quarter and highlights, so overall solid quarter executing on our strategy and a good start of the year. Revenue close to €1.9 billion, so 29% up year-over-year so it was very good and also we got help in the quarter from PTC components delivery as expected. Also improved earnings very solid EBIT margin at 11.2%. Order intake approximately 2 gigawatt so also that solid, leading then to increase in the backlog that now stands at €20 billion. As usual, then the same agenda as the - we usually have. I will talk about orders and market. Marika will talk to the financials and then, I come back to the outlook and then we have the Q&A. This is the time of the year where we usually get external reports on market share and of course it's been pleasant trading for us at Vestas. Vestas remains the market leader and we - according to this analyst then [ph] about 16% market share global market share and also a good percentage improvements 3% to 4% year-over-year. If I then move into the regulatory and policy environment, I will first say that actually not much changes compared to a quarter ago, so very much the same overall drivers for the industry remains favorable for renewable also the same as before, of course as wind becomes more and more competitive against other energy sources and we also see the trends to auctions system that we now have present in most regions. A little bit more into details, Americas continue strong US demand driven by the current PTC structure. Latin America tendering regions been for quite some time. We see new auctions in several markets such as Argentina, Chile and Mexico. Also actually the same short-term challenges in Brazil with the macro conditions and there we saw it postponed until one planned auction. In EMEA, also the overall framework for Europe continues to be the renewable energy target in 2020 and 2030. Also here we see general movement towards auctions. First bids in the Germany auction was submitted very recently and we expect results in mid-May. There's also an auction coming up soon in Spain, so another example of the market moving to an auction system. Repowering start to add some meaningful volumes, it's still in Germany primarily to some extent of course in Denmark, but too much smaller market and also repowering we see it in the US, with the current PTC structure. In Middle Eastern Africa, we see a continued good development from a low base and also here we see many market I will say planned for auction one example is Saudi Arabia where an auction is expected towards more the end of year. In Asia Pacific then, China driven by the 13th 5-year plan with wind target of 210 gigawatt up to 2020 and if this pans out, it would mean annual volumes in China around 20, 25 gigawatt. Is also curtailment in the Chinese market, but that is being addressed. India also remains very interesting target of 60 gigawatt up to 2022 and that remains in place, we saw India was strong market last year. The first auction has been held and short-term of course we see some normal uncertainty when we switch from one system to another. And also positive in the broader Asia Pacific region where we see renewable energy targets in place in most markets. Then we had a solid order intake in the quarter of approximately 2 gigawatt and the average selling prices at €0.88 million per megawatt also remains fairly stable. Looking at it year-on-year the order intake was down 354 megawatt but of course then we have to consider that it was hold comparison for us because we booked 1 gigawatt Norwegian order in Q1 of last year. In US, Germany and China were the main contributors to the order intake in the first quarter accounting for more than 70%. As I said, average selling price and order intake at 0.88, so very much in line with the previous four quarters. We should remember as usual that the price per megawatt depends on a number of different factors turbine type, geography scope and in the end of the day of course the uniqueness of the offering. Looking at order intake a bit more in detail, we saw a big increase in the US or in Americas I should say, but it was driven by strong US order intake was to some good development in Argentina so up to 100%. EMEA down 57% also of course the decline very much impacted by the 1 gigawatt in Norway, but good activities in many markets actually across Europe, but primarily Germany and France. Asia Pacific very big percentage increase but of course from a very low level, but we saw some good solid development in China, in the first quarter order intake and we also took, the first order in India after opening the Blade factory. Looking at delivery then, again Americas very strong up 63%, we definitely got the tailwind from the PTC components that was delivered to the US markets but also good activity levels in Uruguay and Mexico all contributing to the growth. EMEA up 10% till year-over-year we had strong deliveries in the UK, but again good activity levels in Germany, France and Turkey. And in Asia Pacific we saw decline in delivery of 36% from low base. As I said order backlog at €20 billion with an increase of €0.8 billion sequentially for the quarter and off that €0.5 billion on the turbine side and €0.3 billion on the service side taking it to €11 billion for service and €9 billion for the wind turbine. The 50-50 venture that we have with MHI was also off to a good start over the year. Highlights is that the biggest order ever for the joint venture was taken 450 megawatt Borkum Riffgrund 2 order taking the total announced for order intake up to 2.5 gigawatts and on top of that, a gigawatt in announced conditional and preferred supplier agreement. So a good position in the market. Also busy from an operational delivery point of view and added now two more project on the 8 megawatt to the start of the project which was to double back and continue to deliver on the two 3 megawatt projects. Also on the technology side, joint venture upgraded 8 megawatt platform to each 9 megawatt at specific site condition making it the biggest offshore turbine in the market. So with that I hand over to Marika. Please.

Thank you, Anders. So in the both the P&L as well as the balance sheet you will see another solid quarter for Vestas and as Anders highlighted earlier the revenue increase by 29%, but even more worth highlighting is obviously the continued work on the continuous improvements and also the cost control, which gives us a leverage in the EBIT line so that there you've seen improvement in absolute numbers from €85 million to €211 million. The income from investments is less negative this quarter, so we're talking €11 million compared to €19 million, Q1 of last year. And just to summarize then, we basically see or you see improvements of both on the gross margins. The EBITDA and also the EBIT margin which is one of our target, so we delivered 11.2% EBIT in Q1 of this year. if we go back to how we leverage or how we do the cost control and how we're leveraging the SG&A and here you can see we are down to 6.6% of revenue and again here bear in mind that it is from a revenue perspective a high level and thanks to the PTC components that we said were going to be delivered in Q1 of this year and so have happened, so the cost control continues and we are down to very good level despite the increase in activity overall in the quarter. The service business continues to deliver good growth, so you see 23% improvement compared to Q1 of last year and we also continue to deliver solid stable margins at a high level of 19% also in this quarter. If we go to the balance sheet as I said, another solid quarter when it comes to the balance sheet. Net debt continue to be at a very low level, you also see compared to Q1 of last year you see improvements in the working capital and solvency ratio is well within our target frame of 30% to 35%. So still a very strong balance sheet. The change in net working capital, if you look at the change over last three months we are building up inventory as we are in that period of the year, so nothing strange from that perspective and that is for mainly driven by higher activity. You also see, obviously the same pattern if you look at development over the last 12-month you see also higher inventories and trade payables increasing and that is reflection of the activity level that you see at this time of the year. The focus and control of net working capital obviously continues and is very important parameter for us. If we go to the warranty production, the quality focus continues. You see that we have taken down the warranty positions here in Q1 as also communicated on the back of Q4. That's the assessment we have done and we continue to consume less than what we provide for, you also see that lost production factor due to the focus on quality continues at a low level below 2%. If we have a look at the cash flow here you see that cash flow from operating activities continues to improve, obviously consequence also of the good performance and activity level of the company. And the free cash flow in the quarter is positive €8 million but primarily driven from the divestment of the facilities in Aarhus, as we communicated I think as early as 2014 and that is now concluded and we got the offer we wanted. So you see a positive impact of €99 million from that divestment. If we look at the total investment and I think this slide is valid as you both in Q1 of last year as well as Q1 this year have some extraordinary items. Last year we concluded the acquisition of Availon in Q1 and this we conclude the divestment of the facilities. So therefore a positive on €99 million in the quarter, but if you look at the comparable numbers of CapEx, we continue to invest as we've done previously in primarily capitalized R&D as well as the amounts [ph], as we've communicated. We have a look at the capital structure. Net debt to EBITDA continue after a very low good level for Q1 and the solvency ratio is also here as I said earlier well within the boundaries of 30% to 35%, so we managed to be slightly better than Q4, but at 32% level. So very good solid performance also on that parameter. If we go to our ROIC, It's obviously and I don't think I have to highlight at the very high level and that is obviously a consequence of the improvement that you see both in our operating result as well as our focus on the balance sheet and by that I'll leave the word to Anders.

Thank you, Marika. So looking at the outlook is unchanged for 2017 meaning revenue between €9.25 billion to €10.25 billion and EBIT margin before specialized terms between 12% and 14%. Total investment approximately €350 million and free cash flow of minimum €700 million. At the last Q update full year and a strategy outlook, I talked about our ambition in market leadership and I also talked about the three business areas that we are in on shore business, the service business and offshore businesses with our 50-50 joint venture with MHI. And looking at 12-month rolling we're clearly executing on our ambition and our strategy with combined revenue of €11 billion good indication from the external market share reports. We feel that we're growing faster in the market which is our mid-term ambition. On EBIT €1.4 billion and of course our ambition generate first in class margins which we feel we are and that is of course also important to maintain the largest R&D investment in the industry and reason why we can generate is an key difference for us, is for asset-light and flexible, low-cost manufacturing footprint. A combined backlog up to €22 billion and order intake of 11 and our leverage for us is our installed base of more than 83 gigawatt combined and over that and 74 gigawatt under service. So with that, we go over to Q&A.

[Operator Instructions] our first question comes from the line of Claus Almer from Nordea Markets. Please go ahead your line is open.

And first of all congratulations for the strong first quarter. I have two questions, the first goes to the margin you achieved in first quarter. Has any product mix or regional mix impacted the margin? That will be the first one.

So if we look at the overall gross margin in the quarter. I mean you'll always have certain mix but nothing extraordinary in this quarter. But we have good volume increase obviously and then I will say that the continuous improvement that we work with both on the gross profit line as well the fixed capacity cost continues and obviously that's why you see a very good leverage from the overall volumes in the quarter.

Sure from last three or four quarters has not been any unusual favorable or unfavorable projects delivered.

I will say it's a solid normal fairly normal quarter in Q1, but you also remember that you growth compared to last year in the service business that obviously with these type of margins also have a very positive impact on the quarter. But as a general remark I will say it's a fairly normal quarter.

Okay and then my final question or last question is about the order in fact you showed a slide with market shares and order continues to exceed consensus or expectations but how does it evolve compared to your own expectations?

As I said I'm happy with order intake in Q1, so and I'm happy with our position in the market overall and of course the performance in market share during last year. I mean those reports that we show and refer to methods differ little bit between grid connectivity, instalments so on, but of course I'm really pleased with the overall trend that I think is pretty clear.

So should we read that as an order intake is also exceeding your own expectations?

I would say order intake is, in Q1 is solid.

Okay, thanks.

Thank you. Our next question comes from the line of Kristian Johansen from Danske Bank. Please go ahead your line is open.

So first question is on the US outlook and as back in November you stated that you expected US market to decline in 2017, which you repeated in February. I would assume you have much better visibility being in May now, so do you still expect the US to decline in 2017 and obviously we've seen you take these market share in the US. So is it fair to assume that your delivery should not retire in 2017.

No I mean, I haven't changed my view since as you said, I mean we still expect and by the way, I mean it wasn't just my view it was actually the external market analyst that we collected and expected 2017 to be lower than 2016 in the US from delivery point of view, so no change there. And I mean I will not comment on our specific volumes in the market, I mean during the year.

But if you look forward on the US for 2017 now and compare to how your outlook was in November, is it still the same outlook or has anything changed?

No it's still the same outlook, so as I said I mean our expectation is build up to 2020 as we communicated last year and I mean that's still our best estimate as well.

Fair enough then my second question is service margin. If you adjust for these €14 million in inventory write-downs, you have an EBIT margin of 23% which is of course extremely strong compared to what you have delivered after the acquisitions. Can you just elaborate a bit on what rise this margin level?

I will say that the overall performance as obviously in the service business is good, the continuous improvement and the leverage also here from a cost out perspective continuous and starting to pay off because the volume is certainly getting bigger. So that gives definitely a leverage then the integration of the two acquisitions have been quicker than what we anticipated and also as we communicated although is not fully integrated that has been quicker than the plan that the regional plan that we have and then the write-off as you rightly point out, is €14 million in the quarter, but I will say that the write-off of obsolete inventory is the regular assessment we do every quarter and this quarter we decided or it was the right decision to make the write-off of obsolete inventory, of €14 million. But overall it's continuous improvement and focus on the cost level also in the service business.

Would it be fair to assume that this margin level should continue going forward?

I mean we say stable margins, so and that is what we have communicated so that is continuous answer.

Thank you, that was all from me.

Thank you. Our next question comes from the line of from Akash Gupta from JPMorgan. Please go ahead your line is open.

My first one is on China where you're looking to increase market share there were some headlines and around AGM that you're looking for partnership in the country to get a bigger share of the market. So maybe if you can update on what you mean by that?

I'm really pleased with the performance of course in China and in the first quarter on order intake and to be honest not just the first quarter. We have said or I have said, that the objective is year-on-year growth and I have also said that we need to put enablers in place just to save that which is deep localization of our products bringing latest technology and products to the market including the 3 megawatt and we have also done some changes on the setup at organizational set up. But at the same time, I'm also being clear we are also dependent on that, the segment of the market that this sort of 20-year IRR segment that which is the segment that we address that also grows overtime. So of course it's I'm really with the performance in Q1. I must say that of course I expect order to be by nature orders is lumpy and probably even lumpier from our point of view in China. So I prefer to still look at the development year-on-year in China but off to good start. When it comes to partnership I think nothing has changed in our strategy on how to address China it is about organic growth, then of course to partner with customers in a deeper sense in China. I think it's always an objective for us, so we will continue to work on that side and as you know, many of the big customers in China are conglomerate in the utility industry, but for it's the strategy is to sell our products to those customers.

And my second question is on, US. I'm just wondering have you delivered all the PTC components order in Q1 or is there any left in, left for Q2.

Our absolute priority is deliver in Q1, the grace period of 105 days, so absolutely priority in Q1.

Thank you.

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

I would like to look a bit more into the US really and surprisingly perhaps what are you hearing about the developers pipeline for 2017. I mean I hear your comments on a slow ramp up towards 2020, but it appears to me that now as we're in May we should be firming up on what 2017 is going to look like. Certainly I would expect you to be quite on the bull there and be looking into your on production plans for 2017. So if you could provide us just with a little bit more color than that you have so far, I think it would make it a lot easier for us. I'll have a second question after that.

I mean as I said or I may have already said that, but I mean if you look at order intake in Q1 in the US we're definitely happy with our order intake. And as usual with the US we are in constantly close contact with all our customers and of course also use the flexibility we have with a very US-based supply chain. So I mean there is nothing sort of new in that I will say, so I mean from my point of view we're happy with as I said before, with the market share that we've taken, we're happy with the share of PTC components that we have secured, we're happy with order intake in Q1 that we've done and it's full speed ahead no to firm up project according to customers demand.

Okay fair enough then, question on the service business. I noticed that you increased your megawatts on the service by quite a large number but speaking about - for just Q4 that clearly triggered a lot of volume increase which in turn then drove that great margin. Could you comment on the big increase firstly? And then secondly maybe going back to the inventory write-off, is that a problem that has been generated in the past where you know you build up a lot of, a lot of inventory and that is now needing - in need to written off or is that something that is still occurring, you still need to be building up those inventories ahead of some future five or 10 years out and you just can't see when you need or if you would need it and therefore, this write-off issue that we have would continue for the foreseeable future. Maybe long one, winded way of asking. Will the write offs end somewhere in the near term or will they continue for us, for as long as we're doing this business because it's just business as usual. Thank you.

Okay, thank you. We will start with the inventory write-off which was your longer part of the question. Then I mean, to start from the beginning, we - Anders decided to divide the two businesses, so you have a turbine business and you have a service business. Obviously the service business both by experience and volume get more experience and get more around as a regular business and the inventory write offs have happened before, maybe in a more lumpy way. But it's not that we're building up for anything it's just that, we do a regular assessment of the service business, we also get more experience on what is obsolete inventory and what is not because we run it in a different way and therefore you will see write offs when we need to make them and when we obsolete inventory. So it's nothing random or surprising in the quarter, it's just a regular run of business from that perspective. And then your order intake question, David. If you can repeat that one.

No, so it's just more on the megawatt under service in the service business clearly which ticked up to 74 gigawatts versus 71 at Q4 and I was just wondering whether there was anything unusual there given deliveries in the quarter where only gigawatt and a half.

No it's nothing unusual and there is no relation to that. So nothing extraordinary.

I mean we see lumpiness and that's for sure because of course it depends on what kind of renewals that comes up in the size of those, in the megawatt number that you will be - fairly lumpy.

Okay, so there were no kind of big project wins or you know off the type that you announced last year with Berkshire something like that.

No and that's what basically as Anders said, that's what I said before there will always be a certain lumpiness and obviously you try to have as even quarter as you possibly can, but there is, it's a type of business where you will see lumpiness, that's why it's probably easier to see it on 12-month rolling.

Yes, perfect thank you so much.

Thank you. Our next question comes from the line of Casper Blom from ABG. Please go ahead your line is open.

Thanks a lot, a couple of questions from my side also. First of all regarding the market and then consolidation we saw a lot of acquisitions and mergers happening last year, this year we've heard some of the smaller players talk a little bit about the price pressure probably because of technology. We also hear you talk that we see more and more markets moving towards auction based systems. Do you think that we're now sort of at a point in time where consolidation starts to be driven more organically where you basically reach the point where you need to be big to really make it in this industry. What is your view on that, that's my first question?

I think I mean from an industry perspective. I think that the consolidation that we've seen is probably fairly natural. I mean that's I think what we've seen in other industries there were quite a lot of players with then limitation when it comes to footprint and dependent on sort of strong home market, so I think that we see a consolidation in the industry overall I think it's fairly natural development. Then of course it remains to be seen, if this is it, so to speak I mean remember we did our joint venture with MHI fairly earlier on the offshore side because we felt that made a lot of sense on the size of the offshore type of project. So I think natural development then it's always hard to speculate on the future. I mean for Vestas point of view the key differentiators for us is the global reach that we had established since before, it is about scale which we have, both the flexibility in manufacturing and a good manufacturing footprint with scale and geographical spread. It's about the scale in the installed based and number of people and it's about technology and service leadership. So I feel as I've said before comfortable with our position and then of course I also think it's a natural thing that this industry is consolidated.

Okay understood but wouldn't you say that sort of these sort of recent trends for example auctions is something that makes it even more important to be large and to have scale than it has been before.

I will agree to that, I think the auction and it's not and maybe it was me, who expressed myself bit unclear. I think auctions and competitive tenders is for me about the same thing. It just, so I think if you look at - it's not new, it's just that it's sort of penetrate more and more market. I mean I would argue US with competitive tendering now, is the same kind of system that we had for long time, Latin America has been an auction continent for quite sometime and I mean we've seen the same thing in Europe and Middle East. So it's a trend that has been ongoing for I will say the last one and half year, at least maybe two probably and US even longer, so but I agree with you that market based tendering system overall of course, makes it even more important really factors that I have talked about.

Okay that's clear and then my second question is a bit about repowering, you mentioned that you're starting to see some of that in Northern Europe and could you comment a bit on what do you see in these repowering projects, how much of the projects that are being dismantled are actually being replaced by onshore wind power, is there any threat of sort that market share being loss to contemporary [ph] solar or offshore wind?

No, that's not what we see. I mean it's still I will say the market weather is more substantial share of the market that is wind power, is Germany in Northern Europe and then, of course sorry in Denmark where the fleet is yes, the ageing. So and then the repowering in that we've seen in the US is very much built on how you can qualify under the current PTC system with the repowering. So there are still market specific, I have to come back if we have some estimate of Germany on how much is repowering because I don't have that on top of my head, but there its more substantial part of the business and but then you're repowering the same park but with the latest technology and that is of course with the development that we've had in the technology for the last 20 years, it's of course provided that you can get permitting and so on, it's usually very positive businesses case, I expect after 2020 we will say substantial repo in market more broad based when we start the reach the 20, 25-year lifetime of the installed base. But I haven't seen any examples of, okay we skip the park and other technologies so to speak, it's usually wind park, by wind park so to speak.

Okay, that's good to hear. Thanks a lot.

Thank you. Our next question comes from the line of Marcus Bellander from Carnegie. Please go ahead, your line is open.

Two questions for me as well, please. First of all, your revenue in Q1 was €400 million higher than last year and your order backlog at the end of the quarter was about the same level as last year, in which scenario do you see your revenue for 2017 end up in the lower end of our guidance range?

Okay, so yes, you're right. The revenue is 29% higher in the quarter and as both me and Anders alluded to, we had the PTC components for natural reasons also delivered here in Q1, but I will say also you have a good spread in the quarter if you so like. And then the guidance that we have provided and Anders said earlier, it's something that we feel comfortable with and what we normally - what we will do this year as well as previous year is obviously going for the higher range of the guidance. But I mean, there is no changes in the methodology that we have used and we do the regular risk assessment and the more that passes throughout the year in terms of quarters obviously the more comfortable you feel with exactly what you deliver in, but the risk assessment remains and is hard to say exactly how that will pan out as only one quarter has passed so far.

All right, understood. Thank you and second question, some offshore developers just about to build wind farms at [indiscernible] subsidy in Germany. What do you think the implications for onshore of that will be or risks that will be additional price pressure on the onshore segment?

I think that, first of all I think it's of course very encouraging that also in offshore we see a path to grid parity or subsidy free or many name on a state where we want to all want to come to, so I think that's my first comment. If you look at the timing of this I think it's also very clear that from a leverage cost or revenue point of view. Well I'm sure has some big advantages. So I don't expect that to disappear sort of levelized cost one of the advantages that we see in onshore compared to offshore in the mid-term. So I mean for me it's a role of course a positive development that we actually get access to more sites than what we have in pure onshore scenario and that see other that the industry see a path to grid parity also for offshore even if those estimates is that will take little bit longer time. And I also feel that we greatly contribute to that of course with the bigger turbines that we can deliver to the market and that we have in the market.

Okay, thank you. Just a follow-up, so do I interpret that correctly, you're saying basically that onshore wind will reach grid parity before offshore wind?

I mean grid parities of course are very, it's another big discussion, but yes I mean everything else equal. I'm saying that the levelized cost of energy on onshore wind is of course to-date considerably more favorable than offshore.

All right, understood. Thank you.

Thank you. Our next question comes from the line of Pete Dcosta [ph] from [indiscernible] Investment. Please go ahead your line is open.

Two questions. One is just on China, where you talked about, you obviously had a good quarter and you gave some conversation, just to be clear. Are you suggesting that Chinese business pick up is now going to return in the sustainable? I understand it will be lumpy but is it sustainable pick up now and if so, it will just change in either the official set up or your set up to lead to this. And the second question is just looking at Europe or Germany and given the set up changes and quotas and so on. Do you have any census to whether orders are being front loaded or back loaded this year?

I mean on China, what I can I say is that objective on or ambition on year-on-year improvement that remains and we deliver on that last year and we're off to a good start, this year. So and that will remain as part of our strategy mid-term strategy going forward. And I said also that I'm confident in the enablers that we have put in place because we have seen result of that when it comes to localization, new technology annual go-to-market model and then I also said that of course the segment that we are relevant in China is the segment that look at the 20 years, 20, 25 years IRO [ph] segment, we're less relevant in the pure CapEx segment, so we're also dependent on how those different segments develop overtime in the Chinese market. On your questions on Europe or Germany, I mean as I said we have the first auction in Germany. Yes I think it was the other week and we expect the result of that in mid-May, so I think it's and on the other hand and we have very what I say a very controlled phase out, phase in from - so we have the current feed-in tariff system that is and has been for some time and dropping down overtime. And then, you have the auction system kicking in before the feed-in tariff system so to speak completely dropped off because it - the trigger point is permits that you have got in under the different schemes. So I mean our expectation is that, in 2017 of course you'll see a lot of volumes will come from the old system and the old permitting and you'll probably see those volumes also coming into '18 in the market and then towards the mid-end of '18, the auction system and auction targets is going to be the one that dominates the market.

Right, but don't have a sense on how the tax phasing?

No, I think that remains to be seen, the best indications on that on the total market size is to look at the permitting volume in Germany and there is, I don't remember exactly but I think there is about six-month lag on those numbers coming out.

Okay, thanks very much.

Thank you. Our next question comes from the line of Alok Katre from Societe Generale. Please go ahead your line is open.

Sort of couple of ones. One is just the follow-up on the PTC just wanted to confirm you said you delivered most of the PTC components in the first quarter because I was trying to reconcile that with the prepayment changes in the working capital bridge on Slide 17 okay there wasn't much, that didn't seem like there was much of reversal within that and then also, in the context of that looking at deliveries and the product where the differential is quite large and this quarter versus what we've seen previously. So just wanted to confirm how those dynamics are sort of playing out. And the second question was just a bit on the capital allocation and I think there was some comments from Burt, not but recently about investing in energy storage and related area, so just wondering what is driving this thinking, are we talking a big sort of M&A related investments there or more R&D style investments? And then just what's driving this diversification outside of Finland, are we sort of looking a bit more beyond wind into other renewable energy areas as well? Thanks.

Okay, if I start with your question on the prepayments or the down payments for the PTC and as you rightly point out, we delivered here in Q1, but we're paid in Q4 of last year. so no cash flow impact from that and I would say that the overall cash flow that you see in the quarter from a positive point of view is primarily because of one-timer divestment of the offices in Aarhus as I pointed out and then the overall working capital element that you allude to here in the first quarter. If you compare to last year, I mean it is regular development in the overall working capital, so we're building inventories. We see an increase in payables, which is normal in a quarter, in a Q1 assets when you prepare for the remainder of the year.

I just wanted to - I mean if the prepayments came into the fourth quarter and then they flow out in the first quarter and then you just produce and sell the inventories in the first quarter, then sorry shouldn't that have a sort of negative impact on the cash flow line. That's what seemed to be within the consensus estimates.

I'm not sure, I fully capture your question but maybe you can take that afterwards.

Offline, yes.

Okay, on the second question. I'm happy I got that one. A bit more easier. I mean our investment strategy hasn't changed as we said before or our M&A strategy. I mean bolt-on acquisition, service space, technology space. I mean the normal make or buy type of decision only on in the technology process so that hasn't changed. We are, as I also said in the strategy update the type of technology that we can integrate winter but in order to increase penetration of wind or for that matter in order to continue lower levelized cost of energy for wind that is of course of interest for us. But yes also to be clear on that, I mean I don't see Vestas a battery manufacturer or as a solar panel manufacturer, but on the other hand I think it's very important that we for example have technology corporation with leading storage battery provider, so that we are sure that we can optimize our part of that energy system and that energy management system and that if we can also find ways to reduce the total cost in hybrid type of system integration between as we see in the market order from a scale point of view, they are very small. But we see request or proposals in the market of hybrid wind solar storage and that we participate in those projects always with wind angle, that I think is definitely of interest for us.

Yes, thanks and sorry, if I could just follow-up in the auction and the pricing and as well as just from discussion previously. Simple question or there is, are we getting to a stage where customers are getting more aggressive with the - let's say with the hopes for levelized cost of energy reduction on the onshore and offshore side and therefore, to a point where this becomes a bit of unsustainable decline for the wind industry as a whole because some of the auction number seem very, very low.

I think I mean as you saw of course the auctions, it's the thing that we see all over the market, but it's not new. I mean our estimate is that we have taken a considerable amount of gigawatt in auctions during the last two years and of course deliver lot of auction projects already. So probably around 45 gigawatt something like that is what we have taken in auction system and if you don't put on competitive tendering like we've seen in the US, I mean we have a big volume there but it's a very competitive market, I mean both competitive tendering and auction and as I said last quarter it's for sure, so that we have to fight for every deal and it's also so that an auction type of system compared to the old feed-in tariff system. And you simply put in the old feed-in tariff system the projects that could get under the hurdle rate they got billed, so you have many winners so to speak. And auction type of system of course you have fewer winners, so for us that's influenced on way go-to-market, how to partner only with the customer, how to optimize our offer together with the customer and of course there is a pressure on all parties in the same [ph] to get to the lowest possible energy prices and therefore win the auction. So it becomes even more important with the fit of the turbine to decide that you time your turbine offering when the progress is going to build that cost of capital on the customer side is optimum that IRR rates reflects markets and so on. I mean there is so many parameters in an auction to reach an altruistic [ph] prices and turbine prices is one of those parameters, but there is a lot of parameters in that kind of set up.

Thank you.

Thank you. Our next question comes from the line of Klaus Kehl from Nykredit Markets. Please go ahead your line is open.

I have a follow-up question to [indiscernible] discussions about the auctions. I was just wondering whether you are prepared with new turbines for the auctions in Germany, France and Spain and I believe actually that you launched an optimize version of the turbine the other day, that would be my first question. And secondly you had a pretty low cost base here in Q1 and yes, very tight cost control. I was just wondering can you keep cost at current level for the coming quarters or should we expect an increase. That would be my questions.

Yes, I mean if I thought the product side, you're right. I mean we launched some new 2 megawatt turbine variance last week and where we again don't take another step in lowering the levelized cost of energy by increasing the rotor sizes and also then that we cover the different wind classes and you will continue to see new product releases from us because of course that is old way as we've shown the last four, five years. There is a difference between price per megawatt and levelized cost of energy. So I mean no doubt that levelized cost of energy for the wind industry has allot very favorably and that is to [indiscernible] extent to introduce this new technology and of course our aim is to have as good fit as possible in today's different auction and competitive tendering markets and therefore you need a broad portfolio which I feel confident that we have on above the 3 megawatt side and 2 megawatt side with different rotors and different power rating. So that's going to be the ambition going forward as well to have a competitive portfolio.

And then the cost control as you were saying, for me the cost control is really efficiency and also flexibility so we can adapt to changes in the market, there is also obviously flawless execution and as Anders alluded here also on the LCoE cost control is essential also from that perspective. So to answer your question in very short, it's yes that will continue and we see continuous improvements possibility also on that side.

Okay, thank you very much.

Thank you. Our next question comes from the line of Pinaki Das from Bank of America Merrill Lynch.

I've got two questions. The first one is on orders mainly around intra-year orders for 2017 delivery. I remember when you have the full year results I think you mentioned that the lower end of the guidance is already covered by your orders and in the next few months, you'll have some intra-year orders which would sort of support or which will impact what happens for the year. I just wanted to get some color on for the orders that you've announced for Q1, could you give us some indication around how much of that is 2017 delivery? Perhaps some additional color around the US because there is obviously some continuous construction type orders or conversion from your PTC component orders. And also in Germany there was, there were the billing permits at the end last year, so and orders were expected this year, so some color around the intra-year orders will be quite helpful. That's my first question and follow-up with the second one.

I don't think we said our order coverage for the year last quarter or related at to any range in the guidance. So at least not to my memory. So I mean what I can say on the [indiscernible] and on the order coverage in the annual is that, we're in line with our internal expectation, we're in line sort of what you could consider a normal pattern and you're right. I mean that is of course one key parameter in our revenue guidelines. So it follows our normal pattern and of course it's, as I said it's a parameter on that but we don't talk about the type of percentage order coverage over the year, it's part of the equation to come up with the outlook that we have and the other part is of course the normal risk assessment that Marika talked about on what [indiscernible] finally will be transferred to the customer within the year. I'm thinking Germany. I've talked about and for your questions there and I mean we saw and see, high permitting rates Germany that of course then it's beneficial for the customer probably. I mean that of course we don't know since there is also a fall in the feed-in tariff and we don't know the prices in the auction, but if it follows a normal pattern then it's probably beneficial to get it in the older feed-in tariff, if you have a permit and then, but again it's really question for our customer [indiscernible] in the end of that period with the falling tariff and their expectation on the prices in the auction on how that's volume transition will play out. From our point of view, we have good activity level in Germany as I talked about in Q1 and I feel we have a good position in the market and we have the ability to deliver on customer request and also the parameters that we are working onto to optimize for Vestas part.

So would you still kind of expect some intra-year or 2017 delivery orders in the coming months? Is that reasonable to expect?

Yes, I mean that's probably reasonable to expect, but I mean we haven't changed our order announcement policies so we announce orders when they are affirm and on condition.

Cool. Thank you moving onto my second question in your comment on the press release you mentioned that you got a good start to the year which is quite obvious and then towards the end you also said that you know there is a lot of hard work to be done for the rest of the year, while you maintain the guidance. It feels as if you're a bit cautious on delivery into the rest of the year. But what prompted that sort of lot of hard work left.

Maybe, I shouldn't reel too much into that maybe I've pointed that we always work hard. So I mean it was nothing - no other consideration or secret code words in our work. It was - I mean yes concluding that for the organization as well, that we are off to a good start we have a solid quarter, good start of the year but of course as everyone knows it hasn't come by itself, you have to continue to work hard as always. Nothing - not harder or but yes to make sure that we continue with executing really well and that is hard work.

Just a small sort of accounting, sort of reporting question. You used to report this megawatts under completion and we see from the report that is no megawatt on the completion now. And that is quite a useful indicator for the market to understand sort of the next few quarters and you stop reporting that so, can we expect it to come back at some point or you're not going to report it.

Point taken Pinaki. I actually have - yes, it will come back so we understand.

Cool, very good. Many congratulations. Thank you.

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

Firstly on the Indian market, good to see the first order coming through. How is this market shaping up for you? And how much are you investing in project development to compete in this market? There's a mention in the annual report that you might be increasing development spend, so just curious to get comments around that. Secondly, are you surprised by DONG's expectation that 13, 15 megawatt offshore turbines will be available by 2023, 2024.

If I take in your first, I think for sure I mean it's a very interesting market. I mean the 60 gigawatt target that Indian government have to 2022 I think it's ambitious target and if I look at the delivery that went into India lost, yes from a market perspective. It's definitely a very interesting market for us and that's of course the reason why we've done the investment we have in the factory and also now in the setup. So we are working to get our enablers in place and when we those enablers in place then of course we can, we'll get more relevant in the market. The market is, then what has also happened in India very short-term than is that, there was an auction sometime back, where we saw a drop again not in the necessarily turbine prices but in the energy prices in the auction and as you shall, I was about to say and I think you heard me talk about this before that if you don't have a very, very clear face in, face out type of rules in the market, of course when you change regime for natural reasons you get a little bit of short-term uncertainty until the new regime then kicks in. and that is I will say what we see short-term in the Indian market now because of this change in going to auction but not auctioning out the full volumes of the market. So short-term I think that it's fair to say that, little bit uncertainty on volumes, but mid-term I'm confident that it will be a big market. When it comes to development we have done none or extremely little on development so far in India. It's something that we're looking at, I mean we are as I think, I've said before we prefer to work with local developers that set up that is difficult in India because it doesn't exists to the same degree as in many other markets. So we're still working on finding therefore for us way forward on that, we have signed agreement with some local development [indiscernible] the normal development work, if that is enough to cover the market that remains to be seen. I mean it comes back to what we discussed before, I think it's also important to remember that. In those predictions through 2024, 2025 of course the turbine part of that compared to also and onshore project is fairly small part maybe 35% of the levelized cost of energy and then, you also don't have to predict what you think about the gas prices in 2024, you have to think about what you think about electricity prices in a big electricity market. So I mean for me, looking at it from a pure turbine point of view, of course I have a piece of that parcel that we control, but [indiscernible] from the overall assumption that you refer to DONG has done in this case. When it comes to turbine sizes and so on for us, we haven't changed our policy when we a new turbine to announce we will announce that new turbine and we haven't changed our methods at all on that. We are actually fairly happy I must to have the biggest turbine for offshore market today in the 9 megawatt.

If I could just come back to the Indian point or rather on project development. I mean where are you spending more on project development, which markets?

We're not spending, what you mean with project development?

In the annual report I believe you had mentioned that there would be greater project development spend.

Well if you look at the core development, Sean I mean it's more of what we said, in the annual report is that we will follow the market and in particular our customer, so far - it's an insignificant participation we're talking about.

Got it. Thank you.

Thank you. Our next question comes from the line of Gurpreet Gujral from Macquarie Securities. Please go ahead your line is open.

Two questions from me. Firstly, global steel prices have fallen quite a lot since your four-year guidance was set earlier this year. Could this be a possible tailwind for 2017? Or you effectively hedged in this regard and then I'll follow-up with the second, if I can.

Okay, yes and I think you. We actually had that discussion today as well obviously that is positive but we will say, what we have said previously and that is that, we are effective still in capturing that so we don't see that as a tailwind or an obstacle than long-term that is obviously a different question. But how we negotiate prices with both suppliers and customers we feel comfortable with what we have said in the guidance as of now.

Okay. My second question is about ASPs in terms of your work view this quarter. You saw an 6% increase on the quarter in terms of your revenue ASPs for turbine. What's happened here, is this product mix mainly or and secondly how should we see this going forward?

Okay, so you're talking about the average sales price on the turbines I guess.

Yes, but in terms of revenues recorded in Q1, not your order intake.

Okay, well I think I know what you're referring to, but there is nothing exceptional. You'll just see the regular fluctuations in the quarter. So you shouldn't read too much into that average price, sales price.

Good and can I follow-up just with one more, in terms of your turbines and your products development I know you talked about it earlier on the call. And you had a couple of [indiscernible] new turbines being commissioned in the last few days. Could you give us a bit of color as to where you see the further hold in your portfolio in terms of turbine and iterations of your turbines for specific market? Can you give us a bit of color on that?

I mean overall I'm very happy, confident with our turbine product portfolio and our technology. So I mean in the market today, you basically have 2 megawatt platforms and variance of 2 megawatt platforms and 3 megawatt platforms and variance of 3 megawatt platforms and from a Vestas point of view, we have for long time been active in both the 2 megawatt platform and the 3 megawatt platform and of course that is also what has enabled us to have a very good geographical reach. So it's traditional [indiscernible] that the 3 megawatt platform has been more in markets with pad constraints, so with land constraints then that market has gone on the 3 megawatt platform and it's been where you have sort of no pad constraints, so plenty of land you have, the 2 megawatt platform has been dominating. What we see now overtime is of course that you start to get actually, you start to get down the levelized cost of energy also on the 3 megawatt platform to the extent that where it becomes a little bit less clear cut that it is this pad constraint that determine the platform. So we see for example US has been traditional varies for 2 megawatt platform market. We now start to see that the 3 megawatt platform comes in, but it depends all on the wind speed and the turbulence of the air, the impact you can have and so on. So what's important for us is that we have a broad portfolio the cover different market characteristics and that we continue to upgrade the production in those portfolios as an example then you see there the announcement for us [indiscernible] 116 and 120. And that development will not stop so to speak I mean that's a development that we will continue to do and that determines then that you can cover as many markets and wind regimes as possible and of course time to market is also important and because of course it's also against the competition.

Okay, thank you.

So I think then we go to the last question.

Thank you. Our final question comes from the line of Fasial Ahmad from SEB. Please go ahead your line is now open.

Two questions, there from my side. Firstly on headcount and both the average and quarter figures are up both year-on-year and sequentially. Can you try and help us explain what is driving this and how should this be panning out for the full year? That's my first question, please.

Okay, the headcount. I think it was fairly stable around 22,000.

It was still slightly up both year-on-year and also quarter-on-quarter so just thinking what is the explanation for this. I mean it was up quite nicely especially outside Europe and Africa.

I will say that obviously as Anders says alluding to, we see a stable workforce here in Q1, then depending on the overall activity level you can see some fluctuations but that will be adapted to the activity level. It's primarily blue color as you understand so there is basically no changes in the overall headcount.

And have you ramped up or ramped down in Q2, so far?

Not significantly. If I recall some of the numbers was, there is a slight reduction I think if I recall correctly. In the US, we are some 4,700 and in Denmark there was also small reduction of some 100 people, so we're down to 4,370-ish level. So again a stable development in the workforce.

Okay and since you're expecting stable development in the workforce, should we interpret that as, that revenues of volumes shouldn't fall [ph] significantly from last year. Would that be a fair assessment?

And then, sorry for bad memory but we also had an increase in India for obvious reasons as we inaugurated the factory, so I think we have some 300 plus people in India, that's where you see definitely an increase.

Okay, thanks. That's clear. And the second question that's relating to the US market. Can you [indiscernible] maybe comment on discussions regarding PTC components for the 80% PTC? Have you actively started those discussions with your US customers?

Yes, I mean for sure the discussion has started but I will say it's way too early to have any firm opinion on that. My expectation is that we will not really been able to conclude until Q4 or end of Q4 but of course we discuss it with our customers.

Okay that's clear and then just follow-up question on the US market and PTC. I noticed two out of three US orders which you won in Q1 they were not PTC components orders, but they were started by start-up construction and is that according to what you have been expecting originally won them in a competitive tender?

I don't want to confirm, what you say until I've checked it myself. But I think generally speaking of course it's natural that the earlier projects so to speak is more continuous construction and then overtime it will be more PTC components but it's hard to judge because you also have potential flow in between, that you start to continuous construction and you could potentially use PTC components. But I think generally speaking I think it's fair to assume that you will see of course for good reason and how you qualify it, you will see more continuous construction in the beginning of the period and then it will turn to more PTC components towards the end of period. But it's also actually bit of cannibalization probably in between.

Okay, that's clear. And everything from my side. Thank you.

Okay, thank you so much and again. Thank you all for your interest and for calling in and I'm sure that we will see some of you during this next coming days at least. So thank you very much.