OFFERING MEMORANDUM Global Offering of up to ... - Nordex

Market Environment and Regulatory Background
The market environment for the manufacture and sale of wind turbines is characterized by a range of
environmental and regulatory factors, some of which vary greatly at a regional and national level.
Factors having a significant effect upon the market environment are: the local wind conditions (wind
regime), as wind turbines can only be operated economically in regions with appropriate wind
conditions (see ‘‘Business—Technical Background’’), and state subsidies provided for generating
electricity from wind energy.
The costs of generating electricity using wind energy can currently only compete with the costs of
generating electricity from non-renewable energy sources in regions with excellent wind conditions,
such as the coastal regions of Denmark and the UK. It is not possible to predict if and when the costs of
generating electricity using wind energy in non-coastal regions, such as Germany, will be able to
compete with the costs of generating electricity from conventional energy sources. In most regions,
accordingly, electricity generation depends on state support for wind turbine operators to be able to
run their farms economically. This support depends on the relevant environmental policies and on
specific wind conditions in the region.
Furthermore regional markets are at varying degrees of maturity – although there are already a large
number of wind turbines in operation in Germany, Denmark, The Netherlands and the US that have
been erected over the last 10 years, the market for wind turbines in Spain, Greece, Egypt and China has
grown, inter alia, in the last 2-3 years as these countries have introduced subsidies. The nominal output
required by the various markets corresponds to the relevant market’s degree of maturity. In Germany,
for example, the greatest demand is for turbines with a high nominal output, whereas in markets
where the electricity generation by way of wind turbines is still in its early stages, demand is for smaller
turbines with a lower nominal output. In this regard, it should also be taken into consideration that
establishing and operating high output wind turbines, such as the Nordex N-80 model, requires
sophisticated infrastructure such as fully developed road connections, heavy lifting cranes, etc. (see
‘‘Business—Logistics’’).
Globally, the market for wind turbines depends on a small number of international manufacturers of
wind turbines and accordingly, other local manufacturers have a large number of operators as
potential customers (see ‘‘Business—Competition’’).
Environmental Policy – Background
The Earth does not have an unlimited supply of fossil energy sources such as oil and gas which are
used currently, and generating electricity from fossil energy sources releases carbon dioxide (CO2),
which is thought to be responsible for the so-called greenhouse effect.
In order to combat the greenhouse effect at a global level, the Kyoto Climate Summit was held in 1997
to further implement the commitments agreed upon at the Rio Earth Summit in Rio de Janeiro, Brazil.
According to the minutes of the Kyoto Summit, the participating countries agreed to a long-term
reduction of their CO 2 emissions. The minutes contain, inter alia, a resolution which provides that by
2010, all countries signing the minutes would reduce their CO2 emissions by an average of 5%
compared to the level of emissions for 1990. In addition, countries of the European Union entered into
an agreement to reduce CO2 emissions in 1998. As a result, the Federal Republic of Germany has to
reduce its CO2 emissions by up to 21% by 2010. In order to reach this target, the Gesetz über den
Vorrang erneuerbarer Energien (The Act on Granting Priority to Renewable Energies (EEG)) came into
effect in Germany on April 1, 2000. At European level, the Altener Program was implemented on
February 28, 2000 (Decision No. 646/2000/EC of the European Parliament and the European Council).
This long-term program introduced a comprehensive concept for the promotion of renewable energy.
In contrast to fossil energy sources and nuclear energy, wind power is clean, inexhaustible and freely
available. As a result, with the exception of investment costs, the costs of operating wind turbines are
comparatively low. In the Company’s view, wind energy thus represents a promising future market.
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