Wind turbine maker Vestas (VWS.CO) today confirmed it will cease production at the company's sites on the Isle of Wight and in Southampton, UK resulting in the release of 425 employees.

The company did not give an exact date for shut-down.

Vestas will continue research and development activities on the Isle of Wight, and maintains its sales and service business in the UK.

The decision follows Vestas' announcement in April that it would reduce production capacity in Northern Europe as conditions in these markets have not met the company's expectations. At the same time, Vestas is investing in a significant production base in the US. The expansion in the US has created substantial excess production capacity in Northern Europe. In recent years all the blades produced by Vestas on the Isle of Wighthere have been exported to the US.

Plans to convert production at the factory to a blade type more suitable for the UK market were discontinued due to the current unfavourable market conditions caused by the credit crunch, weak currencies and lacking political support at a local level.

“The decision to close the factory was very difficult, and we fully recognise the impact this will have on employees, their families and on the Isle of Wight. Nonetheless, this commercial decision was absolutely necessary to secure Vestas' competiveness and create a regional balance between production and the demand for wind turbines,” says Ole Borup Jakobsen, President of Vestas Blades.

Vestas said it has organised training courses and qualification programs for outgoing employees and facilitated employment opportunities with local, national and international companies.

The company said it will consider investing in new manufacturing capacity in the UK if this market develops into a strong and stable market. The UK has very favourable wind conditions, Vestas said in a release, but the present market is not large enough to justify the required investment to convert the Isle of Wight factory to produce blades for the UK market. In particular, the local planning process for onshore wind power plants in the UK remains an obstacle to the development of the market. Since offshore wind power is still on a project basis, a large and stable market for onshore wind power is vital to secure a stable production flow, the company said.

Vestas has installed almost 900 turbines with a total installed capacity of about 1,080 megawatts in the UK (as of the end of 2008).

Last week, Vestas employees ended a 19-day sit-in protest at the Isle of Wight facility.

Website: www.vestas.com

Reprinted with permission from SustainableBusiness.com