Untitled

Annual

Report

2023

Vestas Wind Systems A/S, Hedeager 42, 8200 Aarhus N, Denmark

Company reg. no.: 10403782

RReemmuunneerraattiioonn

RReeppoorrtt 22002233

This report is prepared according to section 139b of the Danish Companies Act

- the accounting period 1 January 2023 - 31 December 2023

Corporate

Governance 2023

This report is prepared according to section 107b (1) and (3) of the Danish Financial Statements Act

- the report covers the period 1 January 2023 - 31 December 2023

Vestas Wind Systems A/S – Company reg. no.: 10403782

Hedeager 42, 8200 Aarhus N, Denmark

Sustainability

Report

2023

Letter from the Chair & CEO �� 3

In brief �� 5

Highlights for the year �� 6

Our people �� 9

Financial and operational key figures �� 10

Sustainability key figures �� 11

Outlook �� 12

Strategy and ambitions �� 14

Who we are �� 15

Market outlook �� 16

Corporate strategy �� 18

Business area strategy �� 20

Capital structure strategy �� 22

Business area progress �� 23

Customer partnerships �� 24

Onshore �� 25

Offshore �� 26

Service �� 27

Development �� 28

Our footprint �� 29

Governance �� 30

Shareholders �� 31

The Board of Directors �� 32

The Executive Management team �� 37

Governance principles �� 38

Diversity �� 40

Sustainable business governance �� 42

Risk governance and main risks �� 43

Tax governance �� 46

Financial statements �� 47

Consolidated financial statements, financial performance,

and notes �� 48

Parent company financial statements and notes �� 104

Statements �� 114

Management’s statement �� 115

Independent Auditor’s Reports �� 116

Independent limited assurance report on the Sustainability

key figures �� 119

Additional information �� 120

Quarterly financial and operational key figures �� 121

Overview of deliveries �� 123

Definition of terms �� 124

Selected tax data �� 125

TCFD reporting overview �� 127

Notes to Sustainability key figures �� 128

Disclaimer and cautionary statement �� 130

Front cover: Our V236-15.0 MW™

offshore

turbine at test center Østerild, Denmark.

Contents

Find all our

2023 reports

→

2

Dear stakeholder

We are very pleased that we achieved our overarching goal for 2023

and returned Vestas to profitability� Getting ‘back in black’ was our

mantra for the year, and our success in taking this important first step

is testament to the engagement, hard work, and expertise of every-

one at Vestas� The progress we made in 2023 to achieve an EBIT

margin before special items of 1�5 percent would also not have been

possible without the support of our shareholders, partners, custom-

ers, and other stakeholders� We are also very pleased to be able to

pay out bonus to all Vestas colleagues for the first time since 2019�

But our vision and ambitions go well beyond this initial landmark, and

we look forward to achieving our wider goals in collaboration with you�

The first, pivotal step

towards double- digit

profitability

Letter from the Chair & CEO

We ended 2023 in much better shape than we began the year� The

busi ness environment in the industry improved markedly over the 12

months, and we worked our way through low-margin projects booked

from 2020 to 2022� During the year, we underlined our industry

leadership, demonstrating what the industry needs to do to become

successful and to continue playing a key role in the energy transition�

Our commercial discipline to capture the true value of our wind energy

solutions was impressive; and we underscored our onshore leadership

while firmly reinstating ourselves in offshore wind� Simul ta neously, we

continued to lead the industry on sustainability, introducing a circular

blade solution, producing turbines that are expected to avoid 396m

tonnes of CO

2

, and being named the most sustainable energy compa-

ny in the world by Corporate Knights for the third year in a row�

As we returned to profitability, 2023 also proved the value of conti-

nuity as we thanked our previous Chair, Bert Nordberg, for his 10

years of excellent service and leadership� Despite Bert’s departure,

our strategic direction and operating model remain unchanged, and

continuity and clarity were key to our progress in 2023� We believe

they will also be key to achieving our 2024 financial outlook, as well

as reaching our long-term financial ambitions�

Vestas Annual Report 2023 3

Wind energy to grow despite geo-political turmoil

The world is more uncertain today than many people have ever experi-

enced in their lifetime� As a result, it is also becoming less globalised

and more regionalised� For decades, stable global supply chains, ener-

gy supply and costs have been taken for granted, but today govern-

ments and societies need to rebuild energy security and stability� Wind

energy can make a unique contribution to addressing this challenge, as

it is sustainable, cost-competitive, fast to deploy, and independent�

The world needs green and affordable energy infrastructure, and

wind energy can and should be the backbone of this system� We have

the solutions to succeed, but in order to scale the industry to meet the

demands of the energy transition, positive political momentum

needs to be maintained� The energy transition needs more policies

like the Inflation Reduction Act in the USA and the EU’s Wind Power

Package, in which policymakers provide clear line of sight, realistic

auction pricing, and faster and simpler permitting, instead of just

higher climate targets� The ‘say-do-gap’ has grown larger in recent

years, but it’s very encouraging to see how governments are increas-

ingly listening to the industry to find ways to enable faster deploy-

ment of wind and other renewables� Through this kind of collabora-

tion, we avoid repeating the mistakes of recent years, where projects

have stalled or been discontinued�

Our return to profitability was driven by a relentless focus on our

core business

In 2023, we managed significant improvements within our four busi-

ness areas: Onshore Wind, Offshore Wind, Service and Development,

while continuing to become sustainable in everything we do� The im-

provements were driven by a relentless focus on strengthening our

core offerings and culture and enabling enhancements across the

value chain�

We underlined our technology leadership within onshore and off-

shore through good commercial traction that resulted in a record or-

der intake with a value of EUR 18�5bn� In particular, our V163-4�5

MW™, which will feature at the SunZia giga-project in the USA with our

partner Pattern Energy, and our flagship offshore turbine, the V236-

15�0 MW™, made a strong mark on 2023� Both turbines exemplify

how we mature the value chain by leveraging modularisation and

standardisation, which enable both Vestas and our partners to

industrialise and scale all steps – from turbine design to operations to

decommissioning and recycling� Another example of driving industry

maturity is the divestment of our converter and generator business

to KK Wind, which created a strong, global and strategic supply chain

partner for the industry, as well as providing a EUR 147m contribution

to our EBIT from sale of technology�

Over the last couple of years, quality has not been at the levels we ex-

pect, but in 2023 we began moving in the right direction, as evidenced

by the improvement in our Lost Production Factor and our new Quality

organisation, which leads the strengthening of our own and our value

chain’s quality setup and processes� We are proud of our contribution

to making the industry more sustainable, and with a sustained high

Customer Net Promoter Score we believe our customers appreciate

our solutions and the broader responsibility we take on�

Sustainability remains key to the industry’s short- and long-term suc-

cess, and in 2023 we made further leaps by pioneering circular

blades together with our partners� We also made progress in decar-

bonising our operations, developing low-emission turbine towers,

and winning Hollandse Kust West with our partner Ecowende, which

included sustainability criteria�

For 10 years, Service has delivered solid growth and profits to Vestas�

With an unparalleled 152 GW of turbines under service, as well as

continued focus on streamlining the business area – for instance, by

fully integrating Utopus – Service remains a key pillar in our sustained

profitability� Similarly, Development continues to be a strong origina-

tor of high-quality projects for our customers, providing returns on

project and turbine sales, and contributing significantly to the

achievement of our long-term targets�

Developing the people and organisation to succeed

To keep Vestas on the right track and prepare for the future, we con-

tinue to invest in attracting, engaging, and developing our Vestas

colleagues� Whether it’s to employ multiple service technicians for a

new giga-project, attract factory workers for the expansion of our

manufacturing footprint, or develop colleagues to take on new and

potentially larger responsibilities, we must continue to improve our

employee experience� We retain a strong focus on talent develop-

ment and succession planning, and in 2023 we ensured we reached

our internal promotion goals, while expanding our diversity and inclu-

sion efforts to include gender, nationality, and age� We are also very

pleased to have welcomed Anne Pearce as our new Chief People &

Culture Officer� Anne joins from Shell, which underlines Vestas’ grow-

ing reputation within the energy industry� Supported by a stable and

high employee Net Promoter Score, we will continue to take a strate-

gic and incremental approach to sustaining and developing our peo-

ple and organisation�

Leading the way towards a sustainable energy industry and planet

The market conditions for wind energy improved significantly in

2023� But with continued geopolitical tensions starting to disturb

global supply chains, Vestas and the industry aren’t out of the woods

yet� The political momentum and investment appetite for wind ener-

gy continue to grow, and with sustainable products and solutions

that address today’s key global challenges, we are in a great position

to increase momentum in 2024� In the years ahead, we must there-

fore sustain the strong focus and discipline we displayed in 2023 and

maintain our momentum – especially our record fourth quarter – as

we aim to get Vestas back on track to double-digit profitability� Our

strategy is clear and has shown what we need to do to drive improve-

ments� The industry is going through a challenging period, but still

holds tremendous potential if we keep our focus and execute on our

strategy in the right order, at the right pace�

A big thank you to our employees, partners, customers, shareholders

and other stakeholders who have supported us throughout 2023,

and who will continue to create value and drive the energy transition

forward, together with us, in 2024 and beyond�

Thank you�

Anders Runevad

Chair of the Board of Directors

Henrik Andersen

Group President & CEO

Vestas Annual Report 2023 4

Letter from the Chair & CEO

177 GW

Leading the energy transition

Over four decades, we have been

leading the energy transition with

more than 177 GW of wind power

installations in total.

5Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernance Statements Additional informationIn brief

→ Financial highlights

→ Operational highlights

→ Sustainability highlights

→ Our people

→ Financial and operational key figures

→ Sustainability key figures

→ Outlook

In brief

15�6

14�5

15�4

2021 2022 2023

2�3

10�8

0�9

10�4

1�1

10�7

2�5

3�2

3�6

2�8% 1�5%

(8�0)%

577

188

750

675

(1,512)

(141)

45�9

49�5

60�1

2021 2022 2023

Financial

highlights

Revenue

bnEUR

EBIT and EBIT margin

before special items, mEUR and percent

Value of order backlog

bnEUR

In 2023, Vestas successfully managed to

get ‘back in black’ and return to profitability

with an increase in EBIT margin of 9�5

percentage points compared to last year�

As a consequence of our operational

and commercial discipline paying off, our

Power Solutions segment showcased strong

improvement in profitability, while our

Service segment saw continued growth in

both revenue and value of order backlog�

In 2023, Vestas achieved a total revenue of EUR 11�8bn in the

Power Solutions segment, with increases in both Onshore and

Offshore revenue due to higher pricing� The Service segment saw

increased activity and continued its growth trajectory as revenue

increased to EUR 3�6bn in 2023�

Vestas returned to profitability in 2023, with an EBIT margin of

1�5 percent compared to (8�0) percent in 2022� Profitability

was positively impacted by increased revenue in both segments,

improved margins in Power Solutions, lower warranty costs,

activity in the Development business and the sale of our converters

and controls business to KK Wind�

In 2023, the value of Vestas’ combined order backlog amounted

to EUR 60�1bn by the end of 2023� We had a record year for firm

and unconditional order intake in Power Solutions, driven by

strong Onshore activity in the USA and good momentum in EMEA

and Brazil, as well as the first firm orders for our V236 turbine in

Offshore, and a record-high Service backlog�

Offshore

Onshore

Service

Power Solutions

Service

EBIT margin

Power Solutions

Service

18�1

19�1

26�0

34�1

27� 8

30�4

6

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

Operational

highlights

2023 2023 2023

2022

Service

Onshore

Offshore

12.4

10.5

17.4

0.9

0.6

2.2

144

11

30.4

11.7

15.3

21.0

1.0

3.1

4.3

152

11

34.1

Deliveries (GW)

Order intake (GW)

Order backlog (GW)

Deliveries (GW)

Order intake (GW)

Order backlog (GW)

GW under service

Value of order backlog (bnEUR)

Average backlog contract duration

(years)

Restoring profitability

Vestas continued to prioritise

value over volume throughout

2023, with the overarching

goal of restoring profitability�

We saw good commercial

traction of our onshore solutions,

leading to a strong 15�3 GW

order intake during the year�

Read more on page 28�

The core of our business model

consists of Onshore Wind, Offshore Wind,

Service, and Development� In 2023, we

achieved considerable progress in all four

business areas, as Vestas remains the

global leader in wind power with 177 GW

of total installed wind power capacity�

7

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

Sustainability

highlights

Vestas continues to lead the industry on sustainability

and to execute on our ambitious sustainability strategy.

In 2023, we took a big step towards lowering our supply

chain emissions by introducing a low-emission steel

offering, on which we have received the first order for the

offshore Baltic Power project in Poland. Furthermore, we

are continuing the industrialisation of our innovative blade

recycling technology with our partner Stena Recycling.

Sustainability Report 2023

Additional information is available in our Sustainability Report 2023,

which includes our reporting in accordance with the Danish Financial

Statements Act on 99a, and the EU Sustainable Finance Taxonomy.

Go to: vestas.com/en/investor/reporting/2023.

2023 2023 2023

2023 2023

2022

100

6.46

408

1.6

17

55

3.3

23

109

6.30

396

1.2

17

68

3.0

24

Emissions from own operations

(scope 1&2) (k tonnes)

Emissions from supply chain

(scope 3) (kg/MWh generated)

Expected emissions avoided

(m tonnes)

Material efficiency rate

Refurbished component

utilisation (%)

Materials recycled (%)

Injury rate (TRIR)

Women in leadership (%)

Low-emission steel offering

More than 98 percent of our

total emissions stem from our

supply chain, of which steel and

iron contribute more than 50

percent. In 2023, we estab-

lished a partnership with steel

supplier ArcelorMittal to offer

low-emission steel towers.

Industrialising blade recycling

We remain on target with the

circularity roadmap to produce

zero-waste turbines by 2040.

In 2023, we continued our

partnership with Stena Recycling

to industrialise a circular blade

recycling solution for epoxy-

infused blades.

Steady progression

Safety is a top priority. In 2023,

the incident rate (TRIR)

decreased by 9 percent. Sadly,

Vestas had one fatality during

the year.

The share of women in leadership

positions is steadily increasing.

Carbon

neutral

Safety

and inclusion

Circularity

2022 2022

2022

8

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

Our people

At Vestas, we believe that our talent is a key enabler to deliver

on our strategy ambition� Our people define us as a company, and

we strive to be the employer of choice in the renewable industry�

In 2023, we strengthened our work around attracting, developing,

and retaining the best talent� With these initiatives in place, we

reached an all-time high number of applications for our Global

Graduate Programme, 15,000 in total� We rolled out mandatory

inclusive leadership training for all people managers and took

the next step in our Diversity, Equity, Inclusion and Belonging

journey� And we continued to work strategically on talent mobility

and succession plans, making sure we future-proof Vestas�

Tackling constant changes as a team

“While wind energy has been around for a few

decades, it is continuously evolving and each new

project requires us to tackle a different set of

challenges� This, however, is made easier because

of all the hardworking and helpful people I’m sur-

rounded by� Like everyone else at Vestas, I proudly

wear the badge of being a green ambassador�”

Tomio, Offshore Pre-installation Technical

Project Manager, Vestas Japan

A diverse group of people with a common purpose

“I feel super honoured to work at Vestas� I am

surrounded by highly skilled individuals who come

from very different backgrounds but share a

common purpose: to make the world a better

place and contribute to a sustainable future� In my

department, the mission is clear: By dedicating

our expertise to develop wind farms globally, we

support the acceleration of the energy transition

towards a decarbonised society for future

generations�”

Teresa, Senior Director of Development in

Vestas Northern and Central Europe

What motivates me

“What motivates me the most is the career

path at Vestas� As a junior technician, I can

evolve and learn new things, eventually

becoming a standard or senior technician

or even moving to technical support� My

team shows a great partnership, and there

is an awesome interaction, which provides

great camaraderie� I really enjoy the

belonging feeling I have at Vestas�”

Samara, Junior Service Technician,

Vestas Brazil

9

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

1 Comparative figures for 2021 have been adjusted following the accounting policy change for configuration and customisation cost in cloud

computing arrangements.

Financial ratios

3

2023 2022 2021

1

2020 2019

Gross margin (%)

8.3 0.8 10.0 10.4 14.5

EBITDA margin (%) before special items 6.7 (0.4) 8.6 9.4 12.8

EBIT margin (%) before special items 1.5 (8.0) 2.8 5.1 8.3

EBITDA margin (%) 7.1 (1.2) 8.0 9.3 12.8

EBIT margin (%) 1.9 (11.0) 1.9 4.7 8.3

Return of capital employed (ROCE) (%)

before spcial items

2.9 (18.5) 4.5 13.5 19.7

Interest-bearing position (net)/EBITDA

before special items

0.0 NA (0.9) (1.4) (1.6)

Solvency ratio (%) 13.5 15.2 23.9 25.9 23.3

Return on equity (%) 2.6 (43.9) 3.6 21.4 22.1

Share ratios

Earnings per share (EUR)

0.1 (1.6) 0.1 0.8

4

3.6

Book value per share (EUR) 3.0 3.0 4.7 4.7

4

16.8

P/E ratio 356.6 (17.4) 200.2 49.6 25.4

Dividend per share (EUR)

-

5

- 0.1 0.23

4

1.06

Pay-out ratio (%) -

5

- 36.0 30.0 30.0

Share price at the end of the period (DKK) 214.3 202.1 200.0 287.9

4

134.6

4

Number of shares at the end of the period 1,009,867,260 1,009,867,260

1,009,867,260

5

198,901,963

Operational key figures

Order intake (bnEUR)

18.5 11.9 11.6 12.7 13.8

Order intake (MW) 18,386 11,189 13,896 17,249 17,877

Order backlog – wind turbines (bnEUR) 26.0 19.1 18.1 19.0 16.0

Order backlog – wind turbines (MW) 25,315 19,623 21,984 24,630 20,974

Order backlog – service (bnEUR) 34.1 30.4 27.8

6

23.9 17.8

Produced and shipped wind turbines (MW) 11,666 13,106 17,845 17,055 12,618

Produced and shipped wind turbines

(number)

2,554 3,126 4,456 5,239 4,185

Deliveries (MW) 12,685 13,328 16,594 17,212 12,884

Financial key figures (mEUR) 2023 2022 2021

1

2020 2019

Income statement

Revenue

15,382 14,486 15,587 14,819 12,147

Gross profit 1,283 118 1,556 1,538 1,761

Operating profit/(loss) before amortisation,

depreciation and impairment losses

(EBITDA) before special items

1,028 (63) 1,342 1,391 1,550

Operating profit/(loss) (EBIT) before

special items

231 (1,152) 428 750 1,004

Operating profit/(loss) before amortisation,

depreciation and impairment losses

(EBITDA)

1,089 (437) 1,271 1,382 1,550

Operating profit/(loss) (EBIT) 292 (1,596) 289 698 1,004

Net operating profit after tax (NOPAT) 223 (1,071) 275 619 773

Net financial items (164) (110) (101) (95) (98)

Profit/(loss) before tax 102 (1,696) 224 934 909

Profit/(loss) for the year 78 (1,572) 143 771 700

Balance sheet

Balance sheet total

22,514 20,090 19,648 18,160 14,331

Equity 3,042 3,060 4,697 4,703 3,345

Investments in property, plant and

equipment

457 371 476 379 451

Net working capital (1,507) (1,349) (1,049) (1,127) (1,583)

Capital employed 6,429 5,487 6,133 6,057 4,165

Interest-bearing position (net), end of the

period

32 46 1,200 1,920 2,452

Interest-bearing debt, end of the period 3,387 2,427 1,436 1,354 820

Statement of cash flows

Cash flow from operating activities

1,027 (195) 956 743 823

Cash flow from investing activities before

acquisitions of subsidiaries, joint ventures

and associates, and financial investments

(823) (758) (773) (687)

2

(729)

Free cash flow before acquisitions of

subsidiaries, joint ventures and associates,

and financial investments

204 (953) 183 56

2

94

Free cash flow 245 (874) 57 476 332

2 Comparative figures have been restated to reflect change in classifications of investments. Comparative figures for 2019 have not been restated.

3 The ratios have been calculated in accordance with the guidelines from “Finansforeningen” (The Danish Finance Society) (Recommendations

and Financial ratios).

4 As of 28 April 2021, a share split at a ratio of 1:5 of the Vestas share was carried out. Comparative figures for 2020 have been restated.

Except for the share price, comparative figures for 2019 have not been restated.

5 Based on proposed dividend.

6 The number disclosed in the 2021 annual report for the Service order backlog has been corrected from EUR 29.2bn to EUR 27.8bn.

Financial and operational key figures

10

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

Sustainability key figures

1 'EthicsLine cases' here represents the total number of unsubstantiated cases, plus the number of substantiated cases and cases still under

investigation at the time of reporting. For the years 2022 and 2023, at the end of 2023, 78 cases from 2023 and one case from 2022 were still under

investigation, and hence the substantiation rate for the two years may change.

For definitions and accounting policies for the Sustainability key figures, see the Notes on pages 128-130.

Comments to the development can be found in the Sustainability Report 2023.

Environmental 2023 2022 2021 2020 2019

Utilisation of resources

Consumption of energy (GWh)

658 641 738 621 638

– of which renewable energy (GWh) 213 231 283 295 258

– of which renewable electricity (GWh) 166 187 233 261 227

Renewable energy (%) 32 36 38 48 40

Renewable electricity for own activities (%) 100 100 100 100 82

Withdrawal of fresh water (1,000 m

3

) 279 341 378 421 473

Waste

Volume of waste from own operations

(1,000 t)

44 47 70 89 85

– of which collected for recycling (1,000 t) 30 26 35 46 43

Recyclability rate of hub and blade (%) 90 42 42 41 42

Material efficiency (tonnes of waste excl.

recycled per MW produced and shipped)

1.2 1.6 2.0 2.5 3.3

CO emissions

Direct emissions of COe (scope 1) (1,000 t)

108 98 99 83 66

Indirect emissions of COe (scope 2) (1,000 t) 1 2 3 14 48

Indirect emissions of COe from the supply

chain (scope 3) (million t)

7. 66 8.18 10.56 10.59 7.83

Indirect emissions of COe from the supply

chain (scope 3) (kg per MWh generated)

6.30 6.46 6.65 6.63 6.82

Products

Expected COe avoided over the lifetime of

the capacity produced and shipped during

the period (million t)

396 408 532 493 322

Expected annual COe avoided by the total

aggregated installed fleet (million t)

231 219 210 186 154

Social 2023 2022 2021 2020 2019

Safety

Total Recordable Injuries (number)

216 200 201 185 213

– of which Lost Time Injuries (number) 91 73 67 65 67

– of which fatal injuries (number) 1 0 0 0 1

Total Recordable Injuries per million working

hours (TRIR)

3.0 3.3 3.1 3.3 3.9

Lost Time Injuries per million working hours

(LTIR)

1.3 1.2 1.0 1.2 1.2

Employees

Average number of employees (FTEs)

29,463 28,779 29,164 26,121 24,964

Employees at the end of the period (FTEs) 30,586 28,438 29,427 29,378 25,542

Diversity and inclusion

Women in the Board and Executive

Management team at the end of the period (%)

21 25 27 27 23

Women in leadership positions at the end

of the period (%)

24 23 21 19 19

Human rights

Community grievances (number)

3 13 17 20 10

Community beneficiaries (number) 9,769 7,572 8,236 14,770 6,093

Social Due Diligence on projects in scope (%) 59 65 0 78 32

Governance

Whistle-blower system

1

EthicsLine cases (number) 667 539 465 287 226

– of which substantiated (number) 128

152 129 65 58

– of which unsubstantiated (number) 461 386 336 222 168

11

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

Outlook

Outlook 2024

Revenue (bnE UR) 16-18

EBIT margin (%) before special items 4-6

Total investments

1

(bnEUR) approx. 1.2

In 2024, continued geopolitical volatility is expected to cause uncer-

tainty. Nonetheless, we expect a combination of higher installations

and increased pricing to drive growth in revenue. Our profitability

should also continue to improve gradually but will still be held back by

execution and completion of low-margin projects from the backlog.

Revenue is expected to range between EUR 16bn and 18bn, including

Service revenue. Vestas expects to achieve an EBIT margin before

special items of 4-6 percent, and total investments

1

are expected to

amount to approx. EUR 1.2bn in 2024.

The Service segment is expected to generate EBIT before special

items in 2024 in the range of EUR 800m to 880m.

In relation to forecasts on financials from Vestas in general, it should

be noted that Vestas’ accounting policies only allow the recognition

of revenue when the control has passed to the customer, either at

a point in time or over time. Disruptions in production and challenges

in relation to shipment of wind turbines and installation hereof, for

example bad weather, lack of grid connections, and similar matters,

may cause delays that could affect Vestas’ financial results for 2024.

Further, the full-year results may also be impacted by movements

in exchange rates from current levels.

1 Excl. acquisitions of subsidiaries, joint ventures, and associates, and financial investments.

Outlook for full year 2024

12

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

General ambitions

Our industry needs structural change to increase profitability,

especially within the wind turbine segment. The structural changes

primarily entail strengthening the commercial discipline in customer

dialogues, working closer across the industry supply chain, and

lowering the frequency of new technology introductions as well as

maturing the assessment of risk.

In 2023, Vestas managed to get ‘back in black’ as our commercial and

operational discipline is paying off. The year underlined that Vestas

is on the right strategic path to improve the industry structurally and

continue to build the commercial and operational maturity to achieve

our financial ambitions. In that context, a 10 percent EBIT margin

remains achievable in the mid-term.

Sustainability ambitions

Vestas is leading the industry with a number of groundbreaking

sustainability innovations and technologies.

We are committed to carbon neutrality of our own operations by

2030 – without using carbon offsets. This requires that all our

offices, factories, vehicles, vessels, and other operations are fully

decarbonised through our own actions. At the same time, we are

working to decarbonise the entire wind energy supply chain by

working with strategic suppliers to lower the carbon intensity of

energy generated by our turbines by 45 percent by 2030.

We are committed to creating zero-waste wind turbines by 2040.

Through our industry-leading Circularity Roadmap, we have outlined

our pathway and interim targets towards this goal, one of which is

to improve our material efficiency rate to 0.2 percent by 2030.

We are also committed to reducing our injury rate to 0.6 by 2030,

and to increase the share of women in leadership positions to

30 percent by 2030.

Read more about the Sustainability strategy

and all targets in our Sustainability Report.

* Excl. acquisitions of subsidiaries, joint ventures, and associates, and financial investments.

** Baseline year 2019.

Financial ambitions

Wind power has outcompeted fossil fuel alternatives in most parts

of the world, and the prospects for the coming years are promising,

with wind power’s increasingly central role as critical infrastructure.

Consequently, Vestas’ addressable market is expected to grow

significantly in the years ahead. More information about the market

outlook can be found in this report on pages 16 and 20-21.

Onshore

The demand for onshore wind power globally is expected to grow by

7-9 percent per year until 2030

1

driven by new increased ambitions

for renewable energy, increased electrification, and wind as an in-

dependent cost-effective source of electricity. On this background,

Vestas maintains its long-term ambitions to grow faster than the

market and be a visible market leader in Onshore wind.

Offshore

In 2023, a changing and dynamic reality became evident, with in-

creasing costs, rising interest rates, and government offtake agree-

ments that were disconnected from reality. These conditions led to

project delays or renegotiations for our customers and the long-term

market growth has been adjusted to the new reality, with offshore

wind now expected to grow by 20-25 percent per year until 2030.

1

Based on these assumptions, Vestas' revised ambition is to achieve

revenue in Offshore of EUR +2bn by 2025, and when the volume

in Offshore has reached scale, we expect to achieve an EBIT margin

on par with Onshore.

Service

The global market value for service solutions is expected to grow

by 8-10 percent per year until 2030

1

and Vestas expects to remain

a global leader in wind power service. We maintain our ambitions for

the long term for revenue in Service to grow faster than the market.

In the longer term, the Service EBIT margin is expected at a level of

around 25 percent, taking into account the integration of the Offshore

business, which currently generates lower margins than Onshore.

Long-term ambitions

Long-term financial ambitions

Revenue Grow faster than the market and be

market leader in revenue

EBIT margin before special items At least 10 percent

Free cash flow* Positive

ROCE 20 percent over the cycle

Long-term sustainability ambitions 2025 2030

Reduce scope 1 & 2 emissions** ↓25% ↓100%

Reduce scope 3 emissions** – ↓45%

Increase material efficiency rate to 1.2 to 0.2

Increase share of women in

leadership positions to 25% to 30%

Reduce injury rate (TRIR) to 1.5 to 0.6

1 Market forecasts adapted from Wood Mackenzie: Global wind power market outlook

update: Q4 2023. December 2023.

13

In brief

Vestas Annual Report 2023

Strategy and ambitions Business area progress Governance Financial statements Statements Additional information

Outlook

Business area progress Financial statements Statements Additional informationGovernance

14

Vestas Annual Report 2023

In brief Strategy and ambitions

→ Who we are

→ Market outlook

→ Corporate strategy

→ Business area strategy

→ Capital structure strategy

Strategy

and ambitions

Who we are

Our vision is to become the Global Leader in

Sustainable Energy Solutions� We believe in the

power of renewables to ensure long-term energy

security, and in building a more sustainable

planet for future generations� By leading across

our four business areas, Onshore, Offshore,

Service, and Development, we aim to lead the

energy transition forward�

Onshore

Vestas is the market leader with more than 40 years

of experience in Onshore wind. Based on our own

onshore wind turbine product design and devel op ment,

we offer customers wind power solutions and we take

care of everything from siting, manufacturing, con-

struction, and installation to final commissioning in

cooperation with our partners.

Offshore

Vestas is becoming a leading player in Offshore

wind with almost 30 years of experience. Based on

our own offshore wind turbine product design and

development, we offer customers wind power

solutions and we take care of all stages from siting

through final commissioning.

Service

Vestas is the global market leader in

Service within wind power with around

15,000 employees across 77 countries.

Our people service 152 GW for our

customers on long-term subscription-

based contracts leveraging our digital

and AI capabilities.

Development

Development, our newest business

area, helps our customers grow their

business, which in turn generates order

intake for Vestas. More than 100

employees across 15 countries secure

land rights and permits, design sites,

ensure grid connection, and secure

project offtake agreements to create

quality projects.

+30,000

Vestas has more than 30,000

employees and utilises more than

60 manufacturing facilities globally�

15

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

1

P

e

n

e

t

r

a

t

i

o

n

Wind electricity

1�5%

Other electricity

18�5%

Fuels and heating

80%

2

D

i

r

e

c

t

e

l

e

c

t

r

i

f

i

c

a

t

i

o

n

&

3

I

n

d

i

r

e

c

t

e

l

e

c

t

r

i

f

i

c

a

t

i

o

n

Market outlook

Decarbonisation of the future energy mix

Percent and Exajoule (EJ)

Source: International Energy Agency: World Energy Outlook 2023 (dataset). October 2023.

Total

442 EJ

←

Today, of the current total annual

energy consumption globally (442 EJ),

electricity from wind power and elec-

tricity in general only account for 1.5

and 18.5 percent, respectively.

Vestas plays a key role in accelerating

the shift to clean energy consumption

by increasing the renewable energy

penetration of electricity (1).

Furthermore, we help power the direct

electrification of fossil use in industry,

heat and transport (2); and develop

solutions for indirect electrification to

replace non-electrifiable fossil fuels

with e-fuels (3).

Green transition holds tremendous growth potential for wind

Today, wind electricity accounts for just 1�5 percent of the global

energy mix�

1

We expect this figure to increase substantially in the

years ahead, as wind begins to represent a greater portion of the

electricity mix, and as electricity achieves a higher share of the

overall energy system through direct and indirect electrification�

According to the International Energy Agency (IEA), wind energy

needs to be expanded from around 900 GW of installed capacity

in 2022, to more than 2,700 GW by 2030, rising to 7,600 GW by

2050 if the world is to achieve net zero by mid-century�

1

Energy policy is security policy

In 2023, the world bore witness to a number of geopolitical threats

and challenges, including a new conflict in the Middle East, the

ongoing war in Ukraine, continued tensions between major econo-

mies, and the ever-present threat of cyber attacks� The need for

energy security in import-dependent markets is increasing, along

with the risks of supply chain disruptions in the deployment of

renewable energy� Energy security will remain high on the political

agenda worldwide, making it essential to build out and safeguard

renewable energy generation and transmission�

Vestas’ addressable market is expected to grow

significantly in the years ahead� Electrification,

decarbonisation, and wind as an independent

cost-effective source of power generation are

structural tailwinds that fuel our market growth�

16

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

Offshore

Market expectation 2023-30

New installations (GW)*

CAGR:

↑2 0 -2 5 %

Global expansion

• Expansion in Europe and new

markets such as the USA, South

Korea and Japan

• Growth to accelerate post 2025

Onshore

Market expectation 2023-30

New installations (GW)*

CAGR:

↑7- 9 %

Restarting growth

• Increasing activity expected in

2024 driven by the USA and Europe

• Further increase in activity in 2025

driven by all major wind markets

Development

Vestas’ expectation 2023-25

Order intake generated (GW)

CAGR:

>10 %

Foundation in place

• Ambition to outgrow the total

onshore market in firm order intake

generated

• Strategic focus on converting quality

project pipeline to firm order intake

Service

Market expectation 2023-30

Market value (EUR)*

CAGR:

↑8-10 %

Solid growth

• Solid growth driven by installed base

and higher share of offshore

• Power price increases and electricity

shortage to drive higher need for

output optimisation

Business area growth expectations

Growth prospects

remain robust, and

market fundamentals

continue to move

in the right direction�

Supportive political environment

There is political momentum for the wind industry� In October 2023,

the EU launched a Wind Power Package to accelerate the build-out

of wind energy in Europe and strengthen the competitiveness of

European wind energy manufacturing� The US Inflation Reduction

Act, signed in 2022, has spurred an acceleration of domestic

renewable energy plans� Meanwhile, Germany, another major wind

power market, is moving forward with ambitious targets and

attempting to address its permitting challenges� Also, the UK

government announced in November 2023 that it would raise the

price cap in the upcoming offshore CfD auction in 2024� Vestas

continues to take a leadership role in shaping the future market of

the wind industry�

Industry recovery

Despite the political support, the wind power industry has faced

strong headwinds in recent years, with supply chain shocks, rising

inflation and interest rates, plus permitting and grid bottlenecks, all

of which has created challenging conditions� We have also seen an

industry environment, particularly in offshore, where offtake prices

and power purchase agreements (PPAs) have not reflected new cost

realities, although progress has been made towards the end of the

year� These recent market challenges have led to a downward

adjustment in the expected pace of growth� However, growth

prospects remain robust, and market fundamentals continue to

move in the right direction�

Business area market outlook

With more than 40 years of experience in wind energy, we have

established a leadership position within the wind power industry�

Our four business areas, Onshore Wind, Offshore Wind, Service, and

Development, are all expected to benefit from the energy transition

from fossil-based energy systems to resilient renewable energy

systems�

1 Source: International Energy Agency:

World Energy Outlook 2023. October 2023.

* Adapted from Wood Mackenzie: Global wind power market outlook update:

Q4 2023. December 2023.

17

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

Market outlook

8,000 –

7,000 –

6,000 –

5,000 –

4,000 –

3,000 –

2,000 –

1,000 –

0 –

203020202010 20502040

Corporate

strategy

To meet growing global energy demand, Vestas

is focused on maturing the industry, strengthening

commercial discipline, and preparing to scale for

future growth� Through incremental innovation,

partnerships, modularisation, and digital solutions,

we will lead the global energy transition�

Sustainability in Everything we Do

In order for Vestas to succeed, and for the industry to reach maturity

and deliver on climate targets, it is essential we build sustainability

into everything we do� We must develop our products and solutions

with sustainability in mind, ensuring that a carbon-neutral energy

system is also resource efficient and circular� Our operations, whether

in our factories, at our sites or in between, must be safe and carbon

neutral� Our blades must achieve circularity; we must produce zero-

waste wind turbines, and we must maintain an inclusive culture

where everyone can be their true self�

Net zero requires Vestas to scale

To reach net zero, we estimate wind power installations will need

to increase to more than 290 GW per year by 2050

1

, from 78 GW in

2022�

2

Even as stated policies and announced pledges indicate a

significant increase compared to current levels, the discrepancy is

striking� Compounding the challenge, some countries are falling

behind with their own renewable buildout plans� Nonetheless, global

wind power installations continue to grow, and Vestas is ready to

meet demand� Through partnerships with both suppliers and cus-

tomers, through modularisation and the development of digital solu-

tions, we are laying the foundation for a Vestas that is ready to scale�

Reaching net zero: Global wind energy capacity scenarios

Accumulated capacity (GW)

The illustration is based on data from International Energy Agency: World Energy Outlook 2023, October 2023

(forecasts related to three sketched scenarios); from GWEC: Global Wind Statistics 2023, March 2023 (historic data);

and Vestas' own estimates (calculations of estimated required annual installations for the Net zero scenario).

Net zero

>290 GW annual installations

Announced pledges

>230 GW annual installations

Stated policies

>150 GW annual installations

Securing the right talent and capabilities

To help drive the energy transition, Vestas needs to attract the right

talent and capabilities, and create a work environment in which each

and every employee thrives and has the preconditions to put their

full resources and skills into power� We want to offer our employees

the most inclusive work environment in the energy industry and

continuously have a strong focus on increasing diversity and

inclusion, as we nurture cross-functional collaboration and unity in

“One Vestas”� To secure a strong leadership pipeline, we invest in

fostering and developing talent internally�

↑

If stated policies are to be met, more

new wind energy capacity will need to

be installed globally in the next decade

than in the entire history of the industry

over the previous half century.

Accumulated capacity

by end of 2022

906 GW

Vestas total installations

by end of 2023

177 GW

18

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

3 1

2

A B

C

D

E

G G

F

G

F

E

C

F

Supply chain partnerships support quality focus

To build an industry capable of delivering a net-zero future, Vestas

must, as the leader in wind energy, create partnerships with

companies that share our ambition� By partnering with suppliers, we

intend to improve quality standards and build operational resilience�

Partnerships ensure the right pace of development, allowing the

industry to industrialise and optimise existing solutions before

introducing new ones� This is particularly important as we prepare to

scale in Offshore� Incremental innovation and optimisation will

protect value creation in the industry, and allow us to maintain our

relentless focus on quality, ultimately delivering shareholder returns�

Tying even stronger bonds with long-term global customers

Partnerships are essential across the entire value chain� They are a

prerequisite to ensuring the industry becomes profitable in a way

that enables key players to scale with demand� We invest, cultivate

and reward key customer partnerships that gain access to new

development projects and benefit from Vestas’ full suite of

knowhow and capabilities� Key to these efforts is close collaboration,

characterised by a high level of trust, a clear line of sight on strategic

priorities, and an acknowledgement that we win together, and we

lose together�

Modularisation enables customisation and industrialisation

To build the technological foundations to support customer-centric

solutions and scale, we continue to lead the way in modularisation�

Combining customisation and standardisation, modularisation makes

it possible to serve broad market requirements, while industrialising

our supply chain and ensuring competitive costs� We will continue to

work towards our end-goal of a completely modular portfolio�

You can read more about the strategic priorities in each of our four

business areas on pages 20-21�

Rotor

Nacelle

→

By using the same footprint as

a standard container, we ease the

road transport, shipping and

lifting of the side compartment.

The same side compartment is used

in both onshore and offshore

turbines. Design, test & verification,

and improvements are all shared,

leading to the highest possible level

of quality across our products.

By using two of the side compart-

ments the power output is doubled,

while keeping the design intact.

Future concepts could include new

added functionality as the onshore

nacelle design is prepared for one

more side compartment.

1 2 3

Offshore

V236-15 MW ™

A

Blade

B

Hub

C

Main bearing

arrangement

D Gearbox

E

Generator

F

Transformer

G

Converter

Onshore

V162 /172-7.2 M W ™

Modularised nacelle synergies

Side compartment

Main nacelle house

1 Estimates based on International Energy Agency:

World Energy Outlook 2023. October 2023.

2 Source: Global Wind Energy Council:

Global Wind Statistics 2023. March 2023.

19

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

Corporate strategy

We are accelerating the deployment of wind

energy by strengthening the core of our

busi ness model – Onshore, Offshore, Service,

and Development� Through these business

areas, we aim to drive the energy transition

and achieve a sustainable future�

Business

area strategy

Onshore strategy

Growing Onshore while restoring profitability

Onshore wind energy forms the backbone of tomorrow’s sustainable

energy system� Due to its highly competitive cost and independence,

onshore wind offers affordable electricity, which is key to building

sustainable and prosperous societies�

With 167 GW of installed onshore capacity, Vestas continues to lead

the industry with a focus on sustained, profitable growth� This

growth is achieved through timely and customer-centric technology

and commercial discipline, which enable us to capture the true value

of our onshore wind energy solutions and services�

Expectations and strategic priorities

Onshore wind’s position in the future energy system continues to

strengthen in outlook, with around 63 GW new wind capacity outside

China projected to be added annually towards 2030�

1

These pro-

jec tions are linked to new policy frameworks in the EU, the USA, and

Australia� Due to the need to accelerate the energy transition and

create new, long-term green jobs, key markets such as Germany and

France have improved renewable auction designs, while the USA and

Australia are moving towards larger onshore projects of 1 GW or more�

In the short term, the continued expansion of onshore wind requires

grid infrastructure to be expanded and permitting to be simpler and

faster� Larger and more efficient storage and balancing solutions are

also required� While timing is still uncertain, Power-to-X offers inter-

esting opportunities for onshore wind energy, with green hydrogen

expected to become increasingly competitive�

Our strategic priorities in Onshore continue to be a focus on value

over volume, driving modularisation to ensure highly competitive

products at high quality and lower cost, and working with digitalisa-

tion and efficiency measures across the value chain� Further, we will

cultivate strategic customer partnerships, and continue to mature

industry dynamics to improve some of the fundamentals in onshore

wind� This means we must continue to lead the effort to industrialise

the wind energy industry, with the aim of restoring and improving

profitability�

Offshore strategy

Ramping up Offshore and succeeding with first V236 projects

The global climate crisis, and the growing need in Europe for inde-

pendence from Russian oil and gas, has increased the appetite for

offshore wind� Vestas is taking responsibility for enabling the neces-

sary rapid expansion to meet energy transition goals� Since 2020,

when we re-entered the segment, we have demonstrated our commit-

ment and ability to lead offshore wind by commercialising our flag-

ship V236-15�0 MW™ offshore turbine for which we have now

secured the first orders� We are now fully focused on ramping up

operations ahead of planned first deliveries in 2025�

Expectations and strategic priorities

In 2023, a changing and dynamic reality became evident, with in-

creasing costs, rising interest rates, and government offtake agree -

ments that were disconnected from reality� These conditions led to

project delays or renegotiations for our customers to secure a

financially sustainable business case�

Considering the current situation, long-term market growth has been

adjusted to the new reality, with offshore wind now expected to reach

27 GW annual installations (excluding China) in 2030�

1

This still re-

presents a five-fold increase for the industry� Today, only nine markets

have more than 1 GW of installed offshore capacity, and it is expected

that another five markets will exceed this volume by 2030� These

new markets are Poland, Ireland, the USA, Japan, and South Korea�

Given the political will to adjust offtake price levels where necessary,

certainty around long-term project pipelines can now be reestab-

lished to the benefit of consumers, society, and the industry�

Vestas is committed to becoming a global leader in offshore wind, and

we are determined to lead the sustainable development of the indus-

try through our customer partnerships� Ramping up offshore to deliver

on significant market ambitions require discipline and continuous

attention to our business plan� To achieve our goals, we must secure

profitable order intake, sustainably scale up our manufacturing ca-

pacity, and ensure operational readiness and execution capabilities

for the new V236 platform� At the same time, we will lead a market

that is profitable and sustainable in the long term�

20

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

Service strategy

Providing resilience and stability in a fluctuating environment

Vestas is the global leader in wind energy service solutions, with

more than 152 GW under service, across more than 50,000

wind turbines� Growing and developing our Service business will

strengthen the stability of wind energy and help to accelerate

the deployment of wind power across the global energy system�

The consistent performance and steady growth of our Service

business is key to supporting our ongoing profitability, as well our

efforts to drive industry maturity�

Our size and scale remain a key differentiator in providing customer-

centric solutions and improving efficiency and profitability� The

con tinued expansion and scalability of our Service business remains

paramount to realising our full potential in this area� Our Service

business growth also remains closely aligned to annual new capacity

volumes� It also provides our customers with opportunities to

strengthen their sustainability performance, and digitalise asset

management and planning around spare parts and repair solutions,

leveraging Vestas' digital and AI capabilities as we strive to make our

operations more efficient and carbon neutral by 2030�

Expectations and strategic priorities

The global market value for service solutions is expected to grow

at around 8-10 percent per year to 2030�

1

This growth will primarily

be driven by the increase in global installed volume, as well as the

higher value of offshore service solutions�

Given the significant market potential and new requirements in

offshore wind, we are implementing commercial and operational

levers to fulfil customers’ needs efficiently� To extend our leading

position in wind energy service solutions, we remain focused on

maximising customer returns and energy production when electrici-

ty demand is highest� To achieve this goal, we are employing an

incremental approach to scaling our operations efficiently� This

enables us to reap the full benefit of our unparalleled service

backlog and prepare for expected growth, onshore and offshore�

Development strategy

Quality projects to accelerate the energy transition

A key challenge for ramping up renewables is the availability of

high-quality projects� Therefore, and in order to help accelerate the

energy transition, our Development business has built a 30+ GW

project pipeline over the past couple of years� By engaging in project

development, we are expanding the addressable market for our

wind energy solutions while helping our global partners grow their

businesses�

Development covers the phases from initial site identification

through to the commencement of construction� Key activities

include securing land rights and appropriate permits, designing

sites, ensuring grid connection, and securing power offtake

agreements�

Expectations and strategic priorities

With our strong project pipeline and the political momentum behind

renewable energy, the outlook for our Development business con-

tinues to improve� The demand for high-quality projects is growing,

together with the range of potential investors� However, short-term

uncertainty around permitting, grid buildout and increasing interest

rates remain challenges�

Most of our projects are still in early stages of development� To grow

our Development business profitably, our strategy focuses on ma-

turing the project pipeline while ensuring project quality� Building on

our industry expertise and experience, we will de-risk projects and

maximise the value of our pipeline while maintaining commercial and

financial discipline�

In addition to our own Development business, Vestas has a 25

percent ownership in Copenhagen Infrastructure Partners (CIP)� This

gives us indirect exposure to the value added from de-risking of

projects though the construction phase as well as the potential for

partnerships on a project-by-project basis�

1 Source: Wood Mackenzie: Global Wind Power Market Outlook

Update: Q4 2023. December 2023.

↑

Vestas services 8 GW of offshore

turbines, located mostly in the UK,

Belgium, and Germany.

21

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

Business area strategy

5,750

1,140

2,150

480

1,980

Capital

structure

strategy

supplement our existing Eurobonds, which were issued in 2022, and

our EUR 2,000m sustainability-linked revolving credit facility, which

was signed in 2021 with final maturity in 2028.

Sustainability-Linked Bond Progress Report 2023

The report will be made available on our corporate website

in March 2024.

Our current credit rating, from Moody’s Investors Service, is Baa2

with a stable outlook. Our current liquidity reserve is based on a

diversified composition of funding and credit facilities, providing the

financial stability and flexibility to execute our corporate strategy.

Capital structure targets

As a key player in a market where projects, customers, and wind

energy investors are increasing in size and number, we want to be

a strong financial counterparty. We aim to maintain sufficient capital

resources to ensure financial flexibility and stability, enabling us

to operate efficiently and achieve our strategic goals. At the same

time, we are targeting net interest-bearing debt to EBITDA below

1x through the cycle, as we do acknowledge the cyclical nature of

our industry.

Capital allocation priorities

In our capital allocation, we apply the following principles:

• Allocate the investments and R&D required to realise our

corporate strategy and long-term vision of being the Global

Leader in Sustainable Energy Solutions.

• Make value-creating acquisitions to accelerate or increase

profitable growth prospects. All investments in organic growth

and acquisitions must support our long-term financial ambition

of achieving return on capital employed of 20 percent. We will

also explore divestments of non-core assets to strategic owners

who support the scaling of the industry.

• Pay shareholder dividends based on the Board’s intention to

recommend 25-30 percent of the company’s annual net result

after tax, which will be paid out following shareholder approval

at the Annual General Meeting.

Liquidity reserve composition, end of year*

mEUR

Cash

Bonds & deposits

* The figures in the graph have been rounded to the nearest ten.

** The total RCF amounts to EUR 2.75bn, of which EUR 770m is reserved

for bonding purposes.

The Vestas Board of Directors and Executive

Management frequently assess whether our

capital structure, i.e. how the company funds

its overall operations and growth, is in the

shareholders’ best interest and how it supports

our corporate strategy.

Financial management

When it comes to financial management, our objective is to create

the necessary flexibility and stability to implement strategic devel-

opment work, while achieving our financial ambitions in the long term.

At the same time, we aim to have the most effective cost of capital.

In March and November 2023, we issued new sustainability-linked

Eurobonds of EUR 500m each with maturity in 2026 and 2031

respectively. In March 2023, we also signed a new EUR 750m revolv-

ing credit facility maturing in 2024. We used the proceeds of the

bonds to strengthen our liquidity position and the new revolving credit

facility to further enhance our financial flexibility. These issuances

• From time to time, initiate share buy-back programmes to adjust

the capital structure. Any decision to distribute cash to share-

holders will be based on the capital structure target and availabil-

ity of excess cash. The level of excess cash will be determined in

line with our growth plans and liquidity requirement. In 2023, we

decided not to initiate a share buy-back programme considering

our journey to reestablish profitability.

The Board of Directors and Executive Management consider that

our current capital and share structure serve the interests of our

share holders and Vestas. They also provide strategic flexibility to

pursue our vision to become the Global Leader in Sustainable

Energy Solutions.

Undrawn money market facilities

RCF available for liquidity* *

22

Strategy and ambitions

Vestas Annual Report 2023

Business area progress Financial statements Statements Additional informationGovernanceIn brief

EUR 60bn

order backlog

Record 2023 order intake led to the

highest-ever achieved combined order

backlog for wind turbines and service.

Strategy and ambitions Financial statements Statements Additional informationGovernance

23

Vestas Annual Report 2023

In brief Business area progress

→ Customer partnerships

→ Onshore

→ Offshore

→ Service

→ Development

→ Our footprint

Business area

progress

↑

From left: Henrik Andersen, CEO of Vestas, Eduardo Ricotta, President of Vestas Latin

America and Lucas Araripe, CEO of Casa dos Ventos visit our Vestas factory in Ceará, Brazil.

↑

Inside the cutting department at our Windsor Blades Factory in Colorado, USA.

Vestas’ Colorado manufacturing footprint will supply the majority of components

for the 242 V163-4.5 MW™ turbines required for the SunZia Wind Project.

Customer

partnerships

Customer: Casa dos Ventos

Projects: Serra do Tigre & Babilônia Centro, Brazil

Size of order: 1,310 MW

Casa dos Ventos' CEO on the partnership:

"We are a leading company in the renewable energy

landscape in Brazil, with the largest portfolio of

projects and acting as protagonists in the country's

energy transition� We have recently signed Vestas’

largest onshore contract for the delivery of equip-

ment and services, totalling 1�3 GW of capacity,

which has made our partnership surpass 3 GW�

The collaboration between our companies in areas

such as technology development, project optimi-

sation, execution and asset management have

been key for the achievement of our growth plan

and for the promotion of an even more renewable

energy mix in Brazil”�

Lucas Araripe, Executive director, Casa dos Ventos

Customer: Pattern Energy

Project: SunZia Wind, New Mexico, USA

Size of order: 1,089 MW

Pattern Energy's CEO on the giga project SunZia:

“Our turbine order with Vestas is a huge step towards

building the largest wind power facility in the country,

SunZia Wind, that will generate clean energy for three

million Americans across western markets� The majority

of the Vestas turbines will be made right here in the

United States, helping SunZia create thousands of new

jobs in manufacturing and construction� We’re proud to

be building this milestone project together with Vestas

that will help America transition to renewable energy�”

Hunter Armistead, CEO, Pattern Energy

Customer partnerships

will allow us to unlock value,

distribute risks, collaborate

better, scale faster and

succeed with giga-projects�

Under the headlines of mutual commitment,

shared foundation, long-term perspective and

open dialogue, Vestas is placing an increasing

focus on strategic customer partnerships�

The political uncertainty, lack of industry maturity

and uneven value distribution across the value

chain calls for long-term partnerships with trusted

customers� This will allow us to unlock value,

distribute risks, collaborate better, scale faster

and succeed with giga-projects, such as the

1�3 GW order from Casa dos Ventos in Brazil, and

the 1�1 GW SunZia project with Pattern Energy,

both signed in 2023�

24

Business area progress

Vestas Annual Report 2023

Strategy and ambitions Financial statements Statements Additional informationGovernanceIn brief

Onshore

An improving market

In 2023, the market environment for onshore wind solutions was

challenging but showed signs of improvement�

In Europe, the need for more independent power generation has

arguably never been greater, as electricity prices linger above historic

norms and energy security remains a key concern� And yet, slow

permitting processes and undersubscribed auctions are holding back

the buildout of renewables�

In the USA, the Treasury Department issued guidance on the Inflation

Reduction Act (IRA) in May 2023, which created strong incentives

for renewable energy� As the details of the Act became clear, we saw

a pickup in order intake in the second half of 2023� The prospects

for onshore wind in the USA now look attractive in the long term�

Commercial and operational discipline

During the year, Vestas remained focused on restoring profitability

through commercial discipline� In line with our strategy to introduce

technology in a timely and customer-centric manner, we saw good

commercial traction in 2023 of variants launched in prior years,

such as the V163-4�5 MW™, which was introduced to the market in

May 2022�

We believe that quality is a key factor to value creation� It was

therefore encouraging to see that our Lost Production Factor (LPF),

while still elevated, improved in 2023 for the first time in several

years� Maturing our own supply chain will enable quality improve-

ments as we prepare to scale� In 2023, for example, we finalised the

sale of our converters and controls business to KK Wind in line with

our strategy of building partnerships in the supply chain�

Onshore order intake of 15 GW

We maintained our market leadership with an onshore order intake

of 15�3 GW in 2023� Our top three onshore markets during the year

were the USA, Germany, and Brazil� In the USA, we saw a considerable

increase in orders to 6�8 GW, compared to 2�0 GW in 2022, driven

by the IRA and our domestic Colorado-based manufacturing footprint�

Germany provided another year of solid order intake with 2�3 GW of

firm and unconditional orders compared to 1�0 GW in 2022, as

onshore wind auctions awarded higher volumes� In Brazil, we

recorded 1�3 GW of order intake compared to 1�9 GW in 2022,

owing to our largest onshore order to date from long-standing

customer, Casa dos Ventos�

Supply chain disruptions

In 2023, we set up a new Global Supply Chain & Transport organi-

sation to simplify planning and execution and build resilience into

our supply chain� Overall, we experienced easing of supply chain

bottle necks and disruptions, which led to improved project

execution through-out the year�

Restoring profitability

We continued to prioritise value over volume, with the overarching

goal of restoring profitability and achieving an adequate return

on our investments, while offering onshore solutions that meet cus-

tomer needs�

During the year, we received an order

for the Bad Lauchstädt Power-to-X

project, which will utilise our EnVentus

V162-6�2 MW™ turbine to produce

green hydrogen�

V162-6.2 MW ™

25

Business area progress

Vestas Annual Report 2023

Strategy and ambitions Financial statements Statements Additional informationGovernanceIn brief

→

A single V236-15.0 MW™ is capable of

producing 80 GWh per year, depending on

site-specific conditions.

Offshore

A year of reckoning

During 2023, the offshore wind market experienced two opposing

forces: continued growing demand for independent power generation

and political ambitions to drive the energy transition, contrasted

with the stark reality of increasing costs, higher interest rates, and

regulatory uncertainty, all of which presented major challenges to

project economics�

Consequently, the offshore wind energy market saw select planned

projects in Europe and the USA getting terminated or delayed due

to the disconnect between aspirational government price levels and

increasing private sector project costs� To reaccelerate the transi-

tion, governments must acknowledge the current challenges and

mobi lise the necessary adjustments and commitments to overcome

them, as we have seen in the UK with the improved auction design

in relation to the upcoming CfD Auction Round 6�

Partnering with offshore customers

Our V236-15�0 MW™ offshore turbine remains highly competitive

on both fixed and floating foundations� During 2023, we won our

first firm orders for the V236 turbine with the 1,140 MW Baltic

Power project in Poland, the 960 MW He Dreiht project in Germany,

and the 780 MW Hollandse Kust West VI project� In addition, as of

31 December 2023, Vestas had 10+ GW of preferred supplier

agreements (PSAs) or conditional orders for this particular wind

turbine� Our partnering approach with our offshore customers

successfully secured us preferred supplier agreements for projects

such as Nordseecluster (1�6 GW) in Germany, Norfolk Vanguard

West (1�4 GW) in the UK and Wando Geumil (0�6 GW) in South Korea�

V236 sets world record

The V236-15�0 MW™ prototype has been producing power for more

than a year, and performing well at full power in high wind speeds�

In August 2023, the turbine set a world record for most power

output by a single wind turbine in a 24-hour period: 363 MWh�

In November, the V236-15�0 MW™ platform received DNV type

certification – ensuring safety, quality, and regulatory compliance�

Offshore manufacturing footprint

During 2023, Vestas continued to build internal competencies and

operational readiness ahead of serial manufacturing of the V236-

15�0 MW™ turbine� We advanced our investments in a new offshore

nacelle assembly facility in Poland, for which hiring will begin in

2024, and operations start in early 2025� In January 2024, we

furthermore announced our plans to establish a new blade factory in

Poland, expected to start operations in 2026, supplementing our

existing offshore manufacturing footprint in Denmark, the UK, Italy,

and Taiwan�

Vestas continues to evaluate further capacity expansion opportunities�

Any decisions made will be based on creating a long-term, financially

sustainable, efficient, and resilient manufacturing setup�

Total offshore order intake in 2023�

3.1 GW

26

Business area progress

Vestas Annual Report 2023

Strategy and ambitions Financial statements Statements Additional informationGovernanceIn brief

↓

We are transitioning our service vehicle fleet to

electric vehicles and have added 465 sustainably

fuelled cars to the fleet in 2023 alone.

152 GW

Wind turbines under

Vestas service�

10x10 mm

Service

Scalability in a global service business

At the end of 2023, we reached 152 GW under service compared

to 144 GW in 2022, solidifying our position as the largest Service

business in the industry� Our active service contracts span more

than 50,000 wind turbines across 77 countries�

Service is a network business and scale matters for both operational

efficiency and profitability� Our size continues to be a key differenti-

ator, and it was encouraging to see further growth and activity in our

Service business during the year�

Maximising customer return

In line with our strategic priorities for Service, we remain focused on

maximising value creation with our customers, particularly when

electricity prices are high�

During 2023, we decided to close down Covento, our digital market-

place for wind turbine spare parts, and adjusted our operational focus

to strengthen the core business� We have collected many valuable

insights about the renewable aftermarket through our work on

Covento, and we will leverage these insights across our more mature

digital sales channels, such as Shop�Vestas�

Customers worldwide continue to appreciate Vestas’ service offer-

ings, and our strengths within digital solutions and AI, as evidenced

by our Service order backlog, which stood at EUR 34�1bn at the end

of 2023� Our annual Customer Loyalty Survey results also continued

with high scores� The average contract duration in the backlog is

stable at 11 years�

Green fuels in offshore service

At the end of 2023, offshore service accounted for 8�3 GW of our

active service contracts, compared to 7�5 GW a year earlier�

In 2022, we tested the world’s first hydrogen-powered crew transfer

vessel (CTV) to explore how green fuels can help reduce carbon

emissions from offshore service operations� In 2023, these learn-

ings enabled us to expand our collaboration with Northern Offshore

Services� We now have a 10-year charter for a sustainably powered

CTV, which runs on 100 percent bio-methanol� This vessel is the first

and, at the end of 2023, still the only CTV used for servicing

offshore wind turbines to run entirely on methanol� Carbon emis-

sions associated with offshore operations (service and installation)

currently account for around 40 percent of combined scope 1&2

emissions at Vestas� Reducing offshore-related emissions is

therefore necessary to reach our company-wide goal of becoming

carbon neutral by 2030�

Electrifying our service fleet

In cooperation with industry leaders in Europe and the USA, we are

transitioning our service fleet to electric vehicles� For our onshore

service activities, we aim to make all new service vehicles

zero-emission from 2025� During 2023, we added 465 sustainably

fuelled vehicles to our service fleet, including EVs and biofuel

vehicles, more than we introduced between 2020 and 2022

combined�

Modularisation and serviceability

We have strengthened our collaboration between Service and Power

Solutions (Onshore and Offshore) to ensure serviceability is a core part

of product development as we implement modularisation� This effort

is key to our ambition to drive industry maturity� In 2023, for example,

we re-used our hub design across two onshore platforms� As well as

simplifying the design process, this also increased serviceability; we

can now lower replaceable components directly from the hub, rather

than having to carry them into the nacelle and lower them from there�

As illustrated by the continuity of our Service operations during the

Covid-19 pandemic, logistics, and availability of spare parts and

skilled service technicians, are all vital for ensuring optimal asset

performance�

27

Business area progress

Vestas Annual Report 2023

Strategy and ambitions Financial statements Statements Additional informationGovernanceIn brief

Development

A year of successful transactions

The Vestas Development business continued to generate value in

2023 with almost 3 GW of exits, including several projects in

mid-stage development, two project portfolios in Italy and Ireland,

and a fully developed in-house project in the USA� In addition,

projects in our Development portfolio provide a value-added

exclusive offering to our global partners�

Development pipeline

In 2023, we originated 7�6 GW of new projects� At the end of the

year, our Development pipeline stood at 30�2 GW, versus 32�1 GW

at the end of 2022� Our focus on the quality of the projects in our

pipeline as well as continued development progress and de-risking,

led to closing of several early-stage projects, which offset the

additions during the year� Most of the pipeline is located in our main

markets of Australia, the USA, Italy, Brazil, Spain, and South Korea�

342 MW of orders generated

During 2023, a total of 342 MW of order intake was generated for

Vestas from projects in the USA, Finland, and Brazil�

In-house collaboration to ensure project quality

Building on Vestas know-how, we are increasingly developing our

projects in-house in our main markets to ensure project quality� This

enables Vestas to capture more of the value-added from de-risking

projects during development� To this end, we are building on existing

capabilities within Vestas, including our expertise in site identifica-

tion using SiteHunt®, wind resource assessment as well as grid

capabilities�

Exploring next generation project opportunities

The future opportunities for Vestas to capture value and support

our customers in the development space remain significant� In line

with our strategic ambitions to maximise project value, in 2023 we

explored the development of next generation large-scale projects,

such as hybrid projects in the USA and Power-to-X projects in

Australia�

Benefits of CIP ownership

Copenhagen Infrastructure Partners (CIP), in which Vestas has 25

percent ownership, continues to provide Vestas and CIP with

benefits beyond financial returns� Building on each party’s capabili-

ties, Vestas has jointly with CIP been able to progress towards fully

permitted projects on two large projects in Australia� We continue to

explore additional opportunities for joint development

collaboration�

→

It typically takes from two to seven

years to develop a wind project from

site identification to commencement of

construction.

30 GW

Development pipeline�

28

Business area progress

Vestas Annual Report 2023

Strategy and ambitions Financial statements Statements Additional informationGovernanceIn brief

China

Denmark

Poland

Czech Republic

IndiaUK Belgium

South Africa

USA

Mexico

Brazil

Argentina

Spain

Vietnam

Italy

Taiwan

Turkey

Portugal

Germany

Cumulative capacity

installed per country:

1-999 MW

1,000-4,999 MW

5,000 MW and above

Vestas facility

Vestas partnership

Tower manufacturing

Blade manufacturing

Power converter manufacturing

Generator manufacturing

Powertrain manufacturing

Nacelle and hub assembly

Research and development

Our footprint

Americas

Order intake

8,942

MW

Wind turbines

delivered in

9 countries

Under service

61.1 GW

Service contracts in

23 countries

Europe, Middle

East, and Africa

Order intake

8,545 MW

Wind turbines delivered in

23 countries

Under service

75.0 GW

Service contracts in

42 countries

Asia Pacific

Order intake

899 MW

Wind turbines delivered in

10 countries

Under service

16.3 GW

Service contracts in

12 countries

29

Business area progress

Vestas Annual Report 2023

Strategy and ambitions Financial statements Statements Additional informationGovernanceIn brief

Geopolitical environment on the agenda

At the Vestas Leadership Forum 2023,

a gathering of Vestas’ top leaders, board

member Helle Thorning-Schmidt and CEO

Henrik Andersen had a panel discussion

regarding the energy transition and the

policy landscape in which Vestas operates.

Financial statements Statements Additional informationStrategy and ambitions Business area progress

30

Vestas Annual Report 2023

In brief Governance

→ Shareholders

→ The Board of Directors

→ The Executive Management team

→ Governance principles

→ Diversity

→ Sustainable business governance

→ Risk governance and main risks

→ Tax governance

Governance

Our shareholders represent the supreme governing body of Vestas

Wind Systems A/S� They exercise their right to make decisions at

general meetings and, with a few formal requirements, are entitled

to submit proposals, vote, and speak at these meetings� Resolutions

can generally be passed by a simple majority� However, resolutions

to amend the Articles of Association require two thirds of the votes

cast and capital represented, unless other adoption requirements

are imposed by the Danish Companies Act�

Share capital and ownership

According to our shareholder register, we have shareholders from

over 100 different countries, dominated by shareholders from the

USA, UK, and Denmark, respectively� At the end of 2023, institution-

al investors accounted for around 85 percent of the share capital�

Shareholders

Together with our more than 200,000 share-

holders, we bring prosperity and sustainable

energy solutions to societies worldwide�

Authorisations granted to the Board

According to article 3 of the Articles of Association, the sharehold-

ers have authorised the Board of Directors (the Board) to increase

the company’s share capital in one or more issues of new shares up

to a nominal value of DKK 20,197,345� The authorisation is valid

until 1 April 2026�

At the Annual General Meeting in 2023, the shareholders author-

ised the Board to let the company acquire treasury shares in the

period until 31 December 2024 equal to 10 percent of the share

capital at the time of the authorisation, provided that the nominal

value of the company’s total holding of treasury shares at no time

exceeds 10 percent of the company’s share capital at the time of the

authorisation�

At the Annual General Meeting 2024, the Board will propose that the

Board is granted authorisation to acquire treasury shares in the

period until 31 December 2025 up to an aggregate of 10 percent of

the company’s share capital�

Dividend

The general intention of the Board of Directors (Board) is to

recommend a dividend of 25-30 percent of the company’s

annual net result after tax

The Board recommends no dividends will be distributed to the

shareholders for the financial year 2023 due to the low level

of profit that would result in a mere token dividend�

Election of new auditor in 2024

Due to legal requirements, the company’s auditor must be rotated at

the Annual General Meeting in 2024� The Board propose that

Deloitte is elected as Vestas Wind Systems A/S’ new auditor�

Shareholder and stakeholder engagement

In 2023, the Chair met with several shareholders and stakeholders

to gain insights into their expectations and perspectives� Further-

more, board member Helle Thorning-Schmidt participated in Vestas’

Leadership Forum to discuss the energy transition and the policy

landscape in which Vestas operates�

Holding of treasury shares

Number

Treasury shares as at 31 December 2022

3,689,702

Purchases in May 2023 398,924

Vested treasury shares (695,021)

Total holding of treasury shares as at 31 December 2023 3,393,605

The Vestas share

Stock exchange Nasdaq Copenhagen

Stock exchange quotation 1998

ISIN code DK0061539921

Ticker symbol VWS

Share capital 201,973,452

Nominal denomination DKK 0.20

Number of shares 1,009,867,260

Share classes One share class

Voting rights One share carries 20 votes

Free float 100% free float

Trading lot (minimum) None, one share is tradeable

Share price, year-end DKK 214.30

Major shareholder BlackRock, Inc.

(Wilmington, DE, USA)*

Annual General Meeting 2024

Date: 9 April 2024

Time 4:30 p.m. (CEST)

Venue: Vestas headquarters in Aarhus, Denmark

Webcast: The meeting will be broadcast live via our corporate website.**

* BlackRock, Inc. informed about the passing of the 5 percent threshold in October 2020,

at which point in time its holding was 5.36 percent.

** The live webcast is publicly accessible and requires no registration. The webcast does not

offer possibilities for voting, expressing opinions, or asking questions at the Annual

General Meeting itself.

31

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

The Board

of Directors

In 2023, the Board elected a new Chair and

Deputy Chair� At the annual strategy seminar, the

Board confirmed that Vestas is on track with its

main priority of restoring profitability to ensure

sustainable growth going forward� The Board

agreed to the identified priorities in the short and

medium term�

The shareholders have decided that the company must be managed

by a board composed of five to 10 members, elected by the

shareholders and may be recommended for election by our

shareholders or by the Board�

In addition, the Board includes members elected by our employees

under the relevant provisions of the Danish Companies Act,

equalling half of the shareholder-elected members�

Corporate Governance Report 2023

Read more about the roles and responsibilities of the

Board, as well as the 2023 focus areas of the Board

and its committees�

Strategy

The Board is responsible for setting Vestas’ corporate strategy and

sustainability strategy� The Board also monitors the strategy

implementation, carried out by the Executive Management team,

and ensures that Vestas maintains effective risk management and

internal control systems�

Board Strategy Seminar 2023

The Board’s Strategy Seminar is an important part of its annual

cycle� The 2023 seminar focused on Vestas' return to profitability

and sustainable growth in the next couple of years� In addition to

strategic presentations from the Executive Management team, the

seminar included a customer panel and site visit� A financial analyst

also shared his perspective on the current business environment�

As the seminar was held in Germany, the two days concluded with an

in-depth session on strategic opportunities in the Northern and

Central Europe Region�

The seminar also enabled participants to align on:

• Short-term performance and priorities

• Industry outlook and challenges towards 2030

• The Vestas business plan 2024-2026

• Selected global strategic priorities

Annual strategy wheel

Q4

Executive Management team

Budget process

Q1

Executive Management team

Strategy offsite

Board of Directors

Approval of budget and

outlook

Q2

Extended Leadership team

Strategy brief

Regional Presidents and

Executive Management team

Strategy review for each

Vestas Region

Q3

Executive Management team

Strategy offsite

Vestas Leadership Forum

Strategy brief

Board of Directors

Annual strategy seminar

Executive Management team

Board of Directors

Extended Leadership team

Regional Presidents and

Executive Management team

Vestas Leadership Forum

32

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Board remuneration

We prepare a separate Remuneration Report describing the

remuneration awarded to the Board and Executive Management

(the CEO and CFO)�

In 2023, our shareholders approved that the remuneration of board

members and board committee members remains unchanged from

2022� They approved the Remuneration Report 2022 with 94

percent of the represented votes�

Remuneration Report 2023

The report is prepared in accordance with section 139b

of the Danish Companies Act and will be submitted to

the Annual General Meeting 2024 for an advisory vote�

Board evaluation

Evaluation process

Once a year, the Board and its committees carry out an evaluation of

their work� The purpose is to further develop the Board’s efficiency

and working procedures� As part of the yearly evaluation, board

members are asked to complete a questionnaire to guide them in

their preparation� The areas covered by the evaluation may differ

from year to year to reflect the development of the Board’s work�

The result of the evaluation of the Board itself is discussed by board

members� The result of the committees’ evaluations is discussed by

the relevant committee and reported to the Board� The Board brings

in external consultants to support the evaluation at least once every

third year�

Main conclusions and outcomes of the

board evaluation 2023

In October and November 2023, the three board committees and

the Board evaluated their performance� The evaluations were

conducted as an open dialogue among the members and facilitated

internally by the respective chairs�

Board committees

The evaluations carried out in the three board committees revealed

that all three committees are found to be well organised� There is a

high participation rate in the committees, the Chair of each

committee is running meetings in a structured way, and the number

of meetings is considered adequate�

The Board finds itself well informed by each committee Chair about

the topics discussed by the committees, and the Board expressed

support for maintaining the current committee structure�

Board of Directors

The evaluation of the Board amongst its members concluded that

meetings are found to be run in a structured way by the Chair,

creating a framework for open and direct dialogue� There is a high

participation rate in meetings of the Board, which indicates that

members allocate sufficient time to discharge their responsibilities

to Vestas, see also the table of meeting attendance on page 34�

The Board in its current composition has achieved equal gender

distribution among the shareholder-elected members, but it still

lacks geographical diversity�

It is the board members’ opinion that there is a good interaction with

the CEO and CFO, both in and outside board meetings� The Board

expressed an intent to increase engagement with the broader

Vestas organisation, including other members of senior manage-

ment as well as upcoming talents�

Expertise and skills

In connection with the board evaluation, the Board also reviewed

and evaluated its expertise and skills� The result is illustrated in the

table on page 34� Each indicator is based on the individual board

member's education, job experience, or management duties during

their careers� To expand the Board's skills and competencies within

areas such as cyber security, sustainability matters, and human

rights, a board education seminar will be organised in February

2024 in collaboration with an external advisor�

Board Performance Evaluation Report 2023

The full report is available at our corporate website�

Diversity in the Board 2023 2022

Number of board members

Elected by the shareholders

*

7 8

– received valid votes (percent) 90-100 92-99

Elected by the employees

**

4 4

Total 11 12

Nationalities, all board members

Danish

6 6

Swedish 3 4

American 1 1

Japanese 1 1

Age, all board members

40-49 years

1 1

50-59 years

5 5

60-69 years 5 6

Tenure, all board members

1-5 years

9 9

6-10 years

0 1

More than 10 years

2 2

Gender, all board members

Women

5 5

Women (%)

45.5 41.7

Men

6 7

Men (%)

54.5 58.3

Board Committees

Number of members (women/men)

– Audit Committee

1 / 2 1 / 2

– Nomination & Compensation Committee

2 / 2 2 / 2

– Technology & Manufacturing Committee

1 / 2 1 / 2

Independence

– Independent (%), elected by shareholders

85.7 87.5

– Independent (%), all board members

54.5 41.7

* Shareholder elected board members serve for a one-year term.

** Employee elected board members serve for four-year term. Next ordinary election has to

take place before the Annual General Meeting 2024.

33

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

The Board of Directors

Skills matrix based on

background and experiences

Global business

leadership, change

management and

governance

Society, politics

and geopolitics

People

leadership and

organisational

transformation

Human rights

and social

responsibility

Industry,

technology and

energy markets

knowledge

Strategy

and strategic

operations

Finance, risk

and trading

(accounting,

financial and

capital markets)

Legal and listed

company

Digitalisation

and cyber

security

Manufacturing

Operational

excellence and

risk management

Service and

aftermarket

Climate

change and

sustainability

Environmental

responsibility

Anders Runevad ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫

Karl-Henrik Sundström ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫

Bruce Grant ⚫ ⚫

Eva Merete Søfelde Berneke ⚫ ⚫ ⚫ ⚫

Helle Thorning-Schmidt ⚫ ⚫ ⚫ ⚫

Kentaro Hosomi ⚫ ⚫ ⚫ ⚫ ⚫ ⚫

Lena Olving ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫

Attendance in 2023

*

Meeting attendance and

trading matrix

Board

Audit

Committee

Nomination &

Compensation

Committee

Technology &

Manufacturing

Committee

Elected by the shareholders:

Mr Anders Runevad

10/10 (Chair) (100%) - 4/4 (Chair) 4/4

Mr Karl-Henrik Sundström

10/10 (Deputy Chair)

(100%) 5/5 (Chair) 4/4 -

Mr Bruce Grant 8/10 (80%) - - 4/4

Ms Eva Merete Søfelde Berneke 8/10 (80%) 5/5 4/4 -

Ms Helle Thorning-Schmidt 10/10 (100%) - 4/4 -

Mr Kentaro Hosomi 10/10 (100%) 3/3 - -

Ms Lena Olving 9/10 (90%) - - 4/4 (Chair)

Elected by the employees:

Mr Claus Christensen

10/10 (100%) - - -

Mr Michael Abildgaard Lisbjerg 10/10 (100%) - - -

Ms Pia Kirk Jensen 10/10 (100%) - - -

Ms Sussie Dvinge 9/10 (90%) - - -

Board member who stepped down

in 2023:

Mr Bert Nordberg

3/3 (100%) 2/2 - -

* The first figure represents attendance, the second the possible number of meetings.

↑

Anders Runevad (right), our new Chair, thanking our previous Chair,

Bert Nordberg (left), for his 10 years of excellent service to Vestas.

34

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

The Board of Directors

Mr Anders Runevad

Chair

Born: 1960

Nationality: Swedish

Residence: Sweden

Position: Professional board member

Position with Vestas Wind Systems A/S

First elected: 2020

Term: 2024

Positions: Chair of the Board. Chair of the

Nomination & Compensation Committee.

Member of the Technology & Compensation

Committee.

Independence: Not considered independent*

– as he was the Group President & CEO of

Vestas from 2013 to 2019.

Positions and management duties in listed

companies

Chair of the board of Peab AB. Member of the

board of Schneider Electric SE.

�

Positions and management duties in not

listed companies

Chair of the board of PGA Sweden National

AB. Member of the boards of Copenhagen

Infrastructure Partners GP Interests Holding

K/S and Copenhagen Infrastructure Partners

Holding P/S.

Education

1985-1989 MBA studies, University of Lund

1980-1984 Master of Science in Electrical

Engineering, University of Lund

Holdings in Vestas securities

Trading in Vestas shares, 2023: None

Number of shares, end 2023: 40,480

Mr Bruce Grant

Born: 1959

Nationality: American

Residence: USA

Position: Executive Chair, Applied Value LLC

Position with Vestas Wind Systems A/S

First elected: 2019

Term: 2024

Positions: Member of the Board and the

Technology & Compensation Committee.

Independence: Considered independent.

Positions and management duties in not

listed companies

Chair of the boards of Applied Invest LLC,

Applied VenCap LLC, and Human Care

Corporation. Deputy chair of the board of

CosmosID, Inc. Member of the boards

of RiverMeadow LLC and Swedish-American

Chamber of Commerce, Inc.

Education

1981-1984 PhD Cand. Industrial

Management, Chalmers University of

Technology

1977-1981 MSc., Business Economics,

University of Gothenburg

Holdings in Vestas securities

Trading in Vestas shares, 2023: None

Number of shares, end 2023: 0

Ms Eva Merete

Søfelde Berneke

Born: 1969

Nationality: Danish

Residence: France

Position: Chief Executive Officer, Eutelsat SA

Position with Vestas Wind Systems A/S

First elected: 2019

Term: 2024

Positions: Member of the Board, the

Nomination & Compensation Committee, and

the Audit Committee.

Independence: Considered independent.

Positions and management duties in not

listed companies

Member of the boards of École Polytechnique

and LEGO A/S.

Member of the audit committee of LEGO A/S.

Education

1994-1995 MBA program, INSEAD

1988-1992 Master of Mechanical

Engineering, Technical University of Denmark

1990-1991 Master studies, Economics,

École Centrale Paris

Holdings in Vestas securities

Trading in Vestas shares, 2023: None

Number of shares, end 2023: 17,295

Mr Kentaro Hosomi

Born: 1957

Nationality: Japanese

Residence: Japan

Position: Advisory Fellow, Mitsubishi Heavy

Industries, Ltd

Position with Vestas Wind Systems A/S

First elected: 2021

Term: 2024

Positions: Member of the Board and the Audit

Committee.

Independence: Considered independent.

Education

1976-1980 Bachelor of economics degree

from University of Tokyo

Holdings in Vestas securities

Trading in Vestas shares, 2023: None

Number of shares, end 2023: 0

→

The members of the Board

have informed the company of

the following competencies and

fiduciary positions in Danish

and foreign listed and non-listed

companies, and organisations�

Mr Karl-Henrik

Sundström

Deputy Chair

Born: 1960

Nationality: Swedish

Residence: Sweden

Position: Professional board member

Position with Vestas Wind Systems A/S

First elected: 2020

Term: 2024

Positions: Deputy Chair of the Board. Chair of

the Audit Committee.

Independence: Considered independent.

Positions and management duties in listed

companies

Chair of the board of Boliden AB. Member of

the board of NXP Semiconductors N.V.

Positions and management duties in not

listed companies

Chair of the board of Mölnlycke Health Care

AB. Member of the board of Ahlström Munksjö

Oyj. Chair of Climate Leadership Coalition.

Member of the board of the Marcus

Wallenberg Foundation.

Education

1997 Advanced Management Program,

Harvard Business School

1985-1987 Trainee Financial Management,

LM Ericsson Group

1982-1985 Business Administration,

specialising in Finance and Accounting,

Uppsala University

1979-1981 Royal Coast Artillery, Rank

Master Sergeant and Boat Chief, Military

Service

Holdings in Vestas securities

Trading in Vestas shares, 2023: None

Number of shares, end 2023: 8,200

* In accordance with recommendation

3.2.1 of the Danish Corporate

Governance Recommendations as

designated by Nasdaq Copenhagen.

35

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

The Board of Directors

Ms Helle Thorning-

Schmidt

Born: 1966

Nationality: Danish

Residence: UK

Position: Professional board member

Position with Vestas Wind Systems A/S

First elected: 2019

Term: 2024

Positions: Member of the Board and the

Nomination & Compensation Committee.

Independence: Considered independent.

Positions and management duties in not

listed companies

Chair of the Danish Football Union (DBU)’s

Governance and Development Committee.

Co-Chair of The Oversight Board. Member

of the boards of Islamic Development

Bank and Schwab Foundation for Social

Entrepreneurship.

Member of foreign policy think tanks,

including the US Council of Foreign Relations,

the European Council for Foreign Relations,

and the Atlantic Council International

Advisory Board. Member of the Berggruen

21st Century Council.

Member of the Pan-European Commission

on Health and Sustainable Development

convened by the WHO Regional Office for

Europe.

Education

1992-1993 Master’s Degree in European

Studies from the College of Europe in Bruges

1987-1994 Master’s Degree in Political

Science from the University of Copenhagen

Holdings in Vestas securities

Trading in Vestas shares, 2023: None

Number of shares, end 2023: 2,770

Mr Claus Skov

Christensen

Employee representative

Born: 1968

Nationality: Danish

Residence: Denmark

Position: Lead Technician – Shop Steward for

Danish Service Technicians, Vestas Northern

Europe A/S

Position with Vestas Wind Systems A/S

First elected: 2022

Term: 2024

Position: Member of the Board.

Independence: Not considered independent*

– due to employment in Vestas.

Positions and management duties in not

listed companies

Member of the board of DM Skjern-

Ringkøbing P/S.

Ms Pia Kirk Jensen

Employee representative

Born: 1966

Nationality: Danish

Residence: Denmark

Position: Global Travel Manager, People

& Culture, Vestas Wind Systems A/S

Position with Vestas Wind Systems A/S

First elected: 2020

Term: 2024

Position: Member of the Board.

Independence: Not considered independent*

– due to employment in Vestas.

Mr Michael

Abildgaard Lisbjerg

Employee representative

Born: 1974

Nationality: Danish

Residence: Denmark

Position: Skilled Worker – Production and

Shop Steward, Vestas Manufacturing A/S

Position with Vestas Wind Systems A/S

First elected: 2008

Term: 2024

Position: Member of the Board.

Independence: Not considered independent*

– due to employment in Vestas.

Positions and management duties in not

listed companies

Deputy chair of the boards of DM

Skjern-Ringkøbing P/S and DMSR af 24.

oktober 2016 ApS.

Ms Sussie Dvinge

Employee representative

Born: 1970

Nationality: Danish

Residence: Denmark

Position: Management Assistant, Power

Solutions, Quality Improvements, and

Processes, Vestas Wind Systems A/S

Position with Vestas Wind Systems A/S

First elected: 2005

Term: 2024

Position: Member of the Board.

Independence: Not considered independent*

– due to employment in Vestas.

Ms Lena Olving

Born: 1956

Nationality: Swedish

Residence: Sweden

Position: Founder & Partner of Olving

& Ohberg AB

Position with Vestas Wind Systems A/S

First elected: 2022

Term: 2024

Positions: Member of the Board. Chair of

the Technology & Manufacturing Committee.

Independence: Considered independent.

Positions and management duties in listed

companies

Member of the boards of Assa Abloy AB,

Investment AB Latour, and NXP Semiconduc-

tor NV.

Positions and management duties in not

listed companies

Chair of the boards of ScandiNova Systems

AB and The Royal Swedish Opera. Member

of the board of Stena Metall AB.

Education

1981 Master of Science, Mechanical

Engineering, Chalmers University

of Technology

Holdings in Vestas securities

Trading in Vestas shares, 2023: +380

Number of shares, end 2023: 730

* In accordance with recommendation 3.2.1 of the Danish Corporate Governance

Recommendations as designated by Nasdaq Copenhagen.

36

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

The Board of Directors

The Executive

Management

team

In 2023, the Board and CEO decided to

strengthen the team with a new Chief People

& Culture Officer, Anne Pearce, who joined

the team at the beginning of 2024�

All members of the Executive Management team are appointed by

the Board, with none of the members representing a stakeholder

group� Furthermore, the Board decides in collaboration with the CEO

on the split of responsibilities between individual executives�

The Executive Management team is responsible for the overall day-

to-day management of the company� It observes the guidelines and

recommendations issued by the Board and ensures timely reporting

and provision of information to the Board, our shareholders, and

other stakeholders� The Executive Management team strives to be

globally visible to all Vestas’ stakeholders, demonstrating the

company’s values and conveying its vision and strategy� The team

meets at least once a month and often more frequently with at least

two offsite gatherings annually�

In 2023, Kerstin Knapp stepped down as Chief People & Culture

Officer (CPCO)� Her replacement, Anne Pearce, joined the Executive

Management team as of 2 January 2024�

Composition, meetings, and shareholding of the Executive Management team

Key areas

Members of the Executive

Management team Born Nationality Appointed

Meeting attendance

in 2023

*

Fiduciary positions

Vested

performance

shares Purchase Sale

Holdings

end year

(number)

Mr Henrik Andersen (CEO) 1967 Danish 2019 19/19 (100%) Member of the boards of Copenhagen Infrastructure Partners GP Interests

Holding K/S, Copenhagen Infrastructure Partners GP Interests Topco ApS,

Copenhagen Infrastructure Partners Holding P/S, MHI Vestas Japan Co.,

Ltd., and Saxo Bank A/S. Member of the investment committee of Maj Invest

Equity 4 & 5 K/S.

21,549 5,750 - 144,071

Finance Mr Hans Martin Smith (CFO) 1979 Danish 2022 19/19 (100%) Member of the Board of Aktieselskabet Schouw & Co.

5,214 - - 12,652

Chair of the Audit Committee of Aktieselskabet Schouw & Co.

Technoloy Mr Anders Nielsen 1962 Swedish 2020 19/19 (100%) Chair of the board of Concentric AB.

6,743 - - 12,743

Operations Mr Tommy Rahbek Nielsen 1970 Danish 2020 19/19 (100%) -

10,854 - 4,500 36,307

Sales Mr Javier Rodriquez Diez 1974 Spanish 2021 19/19 (100%) -

5,747 - 4,204 8,981

Service Mr Christian Venderby 1969 Danish 2019 19/19 (100%) Member of the board of DNV.

23,150 - - 42,529

Digital Solutions

and Development

Mr Thomas Alsbjerg 1973 Danish 2022 19/19 (100%) -

3,235 - - 5,120

People & Culture Ms Anne Pearce 1974 New Zealander/

Australian

2024

Diversity in the Executive Management team* 2023 2022

Number of Executive Management team members

7 8

Nationality diversity

Danish

5 5

Swedish 1 1

Spanish 1 1

Austrian 0 1

Age diversity

40-49 years

2 4

50-59 years

5 4

Gender

Women (number)

0 1

Women (%)

- 12.5

Men (number)

7 7

Men (%)

100 87.5

* The first figure represents attendance, the second the possible number of meetings.

* As of January 2024, Ms Anne Pearce joined the Executive Management team, now consisting

of eight members, representing four nationalities, and out of which six members are between

50-59 years old. The gender distribution is 12.5 percent women/87.5 percent men.

37

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

2023202220212020

667

539

465

287

65

129

128

152

2019

226

58

Governance

principles

The Board ensures that guidelines and

pro cesses are in place so that management

has the necessary framework to conduct

business in line with Vestas’ values

– Accountability, Collaboration, Simplicity,

and Passion.

To achieve our strategy and vision, it is essential we build and main-

tain strong foundations through our organisational principles and

values. We therefore emphasise leadership and good corporate gov-

ernance to anchor and embed these values. Underpinning everything

we do, our values guide the actions we all need to take, individually

and as one. To ensure our management’s responsibilities are clearly

defined, we have drawn up a number of policies and guidelines.

These are reviewed by management on an annual basis to confirm

we have the right governance processes in place.

Corporate Governance Report 2023

We report in accordance with the Danish Corporate Governance

Recommendations designated by Nasdaq Copenhagen. In 2023,

we followed these recommendations, either complying with them

or explaining our approach. Further information about our corporate

governance practices can be found in our Corporate Governance

Report 2023, which is prepared in accordance with section 107b of

the Danish Financial Statements Act.

C

orporate Governance Report 2023

Our comments on each recommendation are available

in the Corporate Governance Report. Find the report at:

vestas.com/en/investor/reporting/2023

Business ethics

Communities, suppliers, and customers place their trust in Vestas

to conduct business with integrity. They also expect us to respect

human rights wherever we operate.

In January 2023, we launched our third Global Compliance Survey.

This anonymous survey was sent to all office employees and service

technicians to help us understand the perception of bribery and cor-

ruption risks within the business. The response rate was 57 percent,

and more than 3,500 written comments were received. This created

enough data to identify trends and improvement areas.

The results again fed into our Regional Compliance Programmes.

These programmes are updated on a yearly basis and executed

throughout the year via a series of initiatives to train, raise awareness,

improve policies and procedures, and more across our different

locations.

In 2023, we also introduced Global and Regional Ethics & Compliance

Weeks, through which we ran initiatives to raise awareness about

our Code of Conduct and business ethics topics. The initiatives

included interviews with Executive Management, panel discussions

with leaders, training sessions, awards for employee engagement

with compliance, quiz activities, and more. There was a high level of

engagement across all regions, and we will continue to drive initia-

tives to promote a good compliance culture.

Development in EthicsLine cases

Number

EthicsLine cases

– of which substantiated*

* Note that at the end of year, 78 cases from 2023 and one case from 2022 remain under

investigation. The number of substantiated cases for the two years reflect current status

and may change subsequently. See the Sustainability Report 2023, page 53, for more

information on EthicsLine, and this report, page 130, for accounting policies.

38

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

99%

97%

92%

Revenue

CAPEX

OPEX

Percent Eligible Aligned

Revenue

99 99

Capital expenditure (CAPEX) 97 97

Operating expenditure (OPEX) 92 92

Data ethics policy and report

The overall objective of our data ethics policy is to encourage and

motivate all employees to handle data with care and respect, and to

follow our guiding principles on data use and ethics�

Through the ethical use of our smart data capabilities and ground-

breaking technologies, we aim to achieve our objectives and extend

our position as the industry’s leading global partner on sustainable

energy� We report on these efforts in accordance with section 99d of

the Danish Financial Statements Act�

Transactions with related parties

A related party transaction is defined as any transaction, direct or

indirect, between Vestas or any of its subsidiaries and/or affiliates�

Any related party transaction with a value greater than the lowest

10 percent of Vestas’ total assets, and equalling more than 25 per-

cent of Vestas’ operating profit/loss, is published on our corporate

website� For 2023, the threshold corresponded to a value of EUR

81m� During the year, there were no such significant transactions�

Financial and ESG assurance

– internal control processes

We anchor internal control systems throughout the organisation to

ensure systematic identification and management of all relevant

risks� Processes and controls are continuously reviewed with the aim

of achieving further automation, optimisation, and standardisation

across Vestas�

The Board has ultimate responsibility for ensuring that Vestas has

adequate internal control systems� Meanwhile, the Audit Committee

is authorised by the Board to provide oversight of the reporting and

audit process, systems for internal controls, and compliance with

laws and regulations�

Internal control

Group Finance is responsible for the implementation, monitoring,

and reporting of our global financial processes and internal control

framework� Group Sustainability has responsibility for our ESG

reporting�

As part of our ongoing efforts to ensure robust governance and

efficient processes, it has been decided that in 2024 Group Sustain-

ability will transition the ESG data consolidation task to Group Finance�

This move will support our preparations for the new ESG reporting

requirements� Group Sustainability will remain responsible for

analysing and assessing data results, preparing and ensuring

compliance on qualitative requirements, and managing progress

reports and ESG rating platforms�

With this transition, we remain committed to ensuring the accuracy

of our financial and ESG reporting� For additional information about

our sustainability business governance, see page 42�

Audit

Our financial and non-financial reporting and internal reporting con-

trols are audited by an independent audit firm elected at the General

Meeting� As of 2024, this assurance on non-financials will be aligned

with the requirements of the EU Corporate Sustainability Reporting

Directive� The auditors' reports are available on pages 116-119�

We anchor internal control

systems throughout the organi-

sation to ensure systematic

identification and management

of all relevant risks�

EU Taxonomy alignment 2023

EU Taxonomy

Developed by the EU to direct capital into sustainable activities, the

EU Taxonomy is a technical classification system to determine which

economic activities that make a substantial contribution to

environmental sustainability� The degree of substantial contribution

to environmental sustainability is defined by the percentage of a

company’s revenue, capital expenditure (CAPEX), and operational

expenditure (OPEX) that is aligned with the Taxonomy�

Sustainability Report 2023

For the required disclosure on our eligibility and alignment

with the EU Taxonomy, see the Sustainability Report 2023,

pages 66-71�

39

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Governance principles

15

1414

16

17

2019 20212020 2022 2023

43% 19%

57% 81%

Diversity

We believe that a diverse and inclusive board,

management, and workforce are vital for

accelerating the green energy transition globally�

We know that our differences make us stronger,

more innovative, and better equipped to address

the challenges that lie ahead�

Diversity at Group level

We believe we can achieve true diversity by ensuring that Vestas

accurately reflects the diverse societies in which we operate� By

making inclusion a fundamental aspect of every part of the

employee experience, we will ensure we become the workplace we

want to be� We report on these efforts in accordance with section

107d of the Danish Financial Statements Act�

Policy for Diversity, Equity, Inclusion, & Belonging

Read more in our DEIB Policy�

Our targets for the Vestas Group

At Vestas, we are committed to diversity and inclusion� Our primary

focus is on gender diversity, which serves as a measurable indicator

of our progress, although we acknowledge that diversity extends

beyond this�

We have set clear targets to increase the representation of women

in leadership roles�

1

Our aim is to achieve 25 percent female

representation in our leadership by 2025, and 30 percent by 2030�

Currently, women constitute 24 percent of our corporate leadership,

indicating that we are on track to meet these objectives�

Over the past four years, we have seen a positive shift in gender

diversity at Vestas, with the percentage of women in our workforce

increasing from 14 percent in 2019 to 17 percent in 2023� This

trend reflects our commitment to fostering a work environment that

attracts and engages all gender identities�

This progress is not just a goal, but a cornerstone of our strategy to

build a more inclusive and innovative company, powering the future

of green energy�

Sustainability Report 2023

We report on the progress on our Group targets for gender

and diversity in general in our Sustainability Report, pages

51, 57, and 78�

Gender diversity at parent company level

In 2022, the Danish Parliament passed new legislation on gender

representation� The new laws introduced stricter requirements

around target figures and policies relating to Danish legal entities�

They include a focus on gender balance among shareholder-elected

members of company boards and the two management levels below�

2

For Vestas, reporting must now be included in our management

report and should include a short summary of our gender policy and

target, plus information about our company activities and develop-

ments in 2023� The following constitutes the reporting of our parent

company, Vestas Wind Systems A/S, in accordance with section 99b

of the Danish Financial Statements Act�

Summary of our parent company’s gender policy

– Policy for Diversity, Equity, Inclusion, & Belonging (DEIB)

Acknowledging that the majority of positions within our parent com-

pany is still taken up by male employees (a trend consistent with the

broader science, technology, engineering, and mathematics (STEM)

industries), we are focused on enhancing gender representation�

We are committed to achieving gender balance within the company’s

top management� This applies to both non-executive directors at

board level, and in the two management levels below the Board of

Directors

2

(the Board)�

Gender diversity in parent company’s management as at 31 December 2023

Female

Male

The

Board of Directors

The two

management levels

below the Board

Development in female representation

Total workforce (%)

40

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Gender diversity and targets 2030 2025 2023 2022 2021 2020 2019

The Vestas Group

Women in leadership positions* (%)

24 23 21 19 19

Targets (%) 30 25

Parent company – Vestas Wind Systems A/S

Board of Directors

Members elected by the shareholders (number)

7 8 8 8 7

Underrepresented gender (%) 43 38 25 25 43

Two management levels below the Board**

Members (number)

47 45 48 44 42

Underrepresented gender (%) 19 20 17 16 17

Target (%) 25

In the Vestas Group, and hence also in our parent company, we are

committed to ensuring that all potential, future and current Vestas

employees are guaranteed equal opportunities and fair treatment

regardless of their gender identity�

Our parent company target

We have achieved equal gender distribution

3

among the board

members elected by the shareholders since 2022� If this should

change at a future Annual General Meeting, we will define a new

target and target year according to applicable law� For the two

management levels below the Board

2

in our parent company, we

have set a realistic, yet ambitious, target to increase our share of

the underrepresented gender to 25 percent by 2025�

We recognise the unique challenges in achieving gender diversity,

especially in senior management� These challenges stem from the

operational demands of many positions in the field and the historical

underrepresentation of women in STEM educations� We are dedicated

to overcoming these challenges and attracting more women to

senior roles, despite the limited pool of female talent in the industry�

Our progress and activities in 2023

Diversity among board members elected by the shareholders

On 12 April 2023, our shareholders elected three female and

four male board members, achieving equal gender distribution

as defined by the Danish Business Authorities� Furthermore,

all three board committees have equal gender distribution�

Diversity in the two management levels below the Board

In 2023, we took a number of key steps on our journey towards

equal gender distribution among the two management levels below

the Board in our parent company�

• Increased focus on diversity in senior management positions

We increased our focus on women in senior management positions,

working on retaining and developing our female succession

pipeline� This process includes conducting a remuneration review,

which is part of our ongoing focus on pay equity, as well as

establishing a development plan and a women’s network for our

Vice Presidents�

• Improving our ability to recruit female talent

In 2023, we examined our recruitment processes for bias within

our parent company� To follow up on these results, we developed

a plan to test debiasing methods in key recruitment moments:

from the way we advertise our job openings to the way salary

negotiations are carried out when hiring new employees�

• Building an inclusive culture

To build on our efforts from 2022, and to maintain an inclusive

culture where everyone thrives, in 2023 we introduced a manda-

tory Inclusive Leadership programme� In the first phase, we rolled

out our ‘Inclusive Leadership: Foundations’ training to all of the

company’s people managers� In November 2023, we initiated the

second phase of the programme, which encompasses all of our

corporate leadership positions� This second phase also includes a

new mandatory module for all company people managers, aiming

to secure continuity in the creation of a psychologically safe and

inclusive culture�

• Salary review

Our commitment to pay equity also remains firm� In 2023, we

implemented additional measures to promote pay equity,

including comprehensive training and education for our People &

Culture teams� This extended to Business Partners and Talent

Acquisition to ensure responsible pay setting� Additionally, we

incorporated guidelines and information on this subject into

internal resources, enabling employees to access details

regarding relevant actions taken� Furthermore, we undertook

salary reviews to measure pay equity across the organisation, as

well as in selected focus areas to address any pay disparities�

1 Comprises managers, specialists, project managers, and above.

2 Comprises the Executive Management team and employees of Vestas Wind Systems A/S

who report directly to a member of the Executive Management team and who have

managerial responsibilities.

3 According to the Danish Business Authorities’ definition, see Danish Business Authorities:

Guidelines on target figures, policies and reporting on gender composition of management.

March 2016.

* Comprises managers, specialists, project managers, and above.

** Comprises the Executive Management team and employees of Vestas Wind Systems A/S who report

directly to a member of the Executive Management team and who have managerial responsibilities.

41

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Diversity

Sustainable

business

governance

Vestas’ sustainability programmes and

activities are highlighted in the company’s

sustainability strategy and is supported

by solid governance structures � They ensure

that we drive strong progress and embed

Sustainability in Everything We Do�

Key roles and responsibilities

Board of Directors – responsible for:

• Ensuring that relevant sustainability and ESG matters are incorporated

into governance, strategy, decision making, and risk management�

• Ensuring high quality ESG reporting including identification and

monitoring of targets and metrics�

Audit Committee – responsible for:

• Monitoring the integrated reporting process, including quality control,

risk management, key accounting policies and assurance�

• Practicing oversight of impacts, risks, and opportunities (IROs), including

stakeholder issues, policies, targets, actions resources, data collection,

and controls�

• Risk management and strategy�

Executive Management team:

• CSO: Responsible for defining sustainability strategy and overseeing its

implementation, including performance and monitoring of IROs�

• CFO: Responsible for integrated reporting, including ESG data, monitoring

of targets, processes, risks, and controls, and reporting on risks of

misstatement�

Risk Committee – responsible for:

• Overseeing sustainability risk as part of the overall Enterprise Risk

Management (ERM)�

Sustainability Committee – responsible for:

• Overseeing strategic sustainability activities and supporting their

implementation across the organisation�

• Acting as coordinator and facilitator for sustainability activities that

have potential impact beyond individual functions�

Group Sustainability – responsible for:

• Developing and coordinating our sustainability strategy�

• Driving and supporting on a practical level, in close collaboration with our

functional areas, the execution of the strategy�

• Driving the double materiality assessment process together with

topic-specific Subject Matter Experts�

• Reporting regularly to the Audit Committee and the Technology

& Manufacturing Committee�

Four key goals

Our sustainability strategy is entitled Sustainability in Everything

We Do� Committing to ambitious goals across key sustainability

areas, we help elevate the industry benchmark around sustainability

performance� Our strategy is divided into four key goals:

• Carbon neutrality by 2030 without carbon offsets

• Producing zero-waste wind turbines by 2040

• Becoming the safest, most inclusive and socially responsible

company in the energy industry

• Leading the transition towards a world powered by

sustainable energy

Sustainability Report 2023

We report on the progress against these four key goals

in our Sustainability Report�

Vestas’ strategic objectives are implemented via existing structures,

and we aim to manage risk and opportunity with a supporting gover-

nance approach�

We are continuously working to integrate international standards

and frameworks into our procedures and steering documents, such

as the UN Global Compact, the OECD Guidelines, the ILO Core Con-

ventions, the UN Guiding Principles on Business and Human Rights,

and now the Corporate Sustainability Reporting Directive (CSRD)�

Getting ready for the CSRD

In 2023, we began preparing for the new governance disclosure

requirements in the CSRD, especially regarding roles and respon-

sibilities in the management of impacts, risks, and opportunities�

Additional roles and responsibilities, based on requirements

targeting the governance bodies with the highest decision-making

authority, have been divided between the involved parties�

To achieve a high standard of reporting in line with the new require-

ments, this process will be handled in close collaboration with the

Audit Committee and Group functions�

42

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Risk governance

and main risks

Enterprise Risk Management

As a global company, we face various risks inherent to our industry

and the countries in which we operate� The aim of Enterprise Risk

Management (ERM) is to manage these risks and support the fulfil -

ment of our operational and strategic objectives� ERM also aims

to protect and create shareholder value, ensure risk awareness, and

balance risk against reward�

The spectrum of risks we face includes operational risks relating

to the design and manufacturing of wind turbines; execution risks

relating to the transportation, installation, and servicing of wind

turbines; commercial risks; and risks of a macroeconomic and regu-

latory nature often driven by geopolitics� We strive to ensure that

such risks are understood, monitored, and managed with a view to

preventing or minimising any negative impact on our strategic and

financial ambitions�

Risk management is an integral part of the decision-making process

at Vestas and is supported by our corporate ERM framework� The

ERM framework provides a holistic view of meeting our strategic and

operational risk position�

Main risks in 2023

The main risks for Vestas identified in 2023 are described on

page 45� For each of these risks, we have described the present risk

picture and our expectations as to how they will evolve� We have

also explained the impact of such risks and examples of mitigating

actions we deployed in 2023�

The geopolitical landscape changes rapidly these years, and with it

the risks that Vestas must manage� We have in response thereto

implemented scenario-based geopolitical risk scanning, including

response scenarios, that support the Risk Committee in deciding

what counter-measured shall be implemented by the orga nisation in

order to manage such risks�

Strategic risks

In accordance with the ERM annual wheel, we conducted a strategic

risk review in the first quarter of 2023� Strategy anchors across

the organisation were engaged to obtain a company-wide perspec-

tives on our strategic risk exposure� The input was processed and

Our risk governance and management system

supports our values and meeting our strategic

goals� It supports our short- and medium-term

objectives and help to establish the necessary

foundations for business decisions�

consolidated by Global Risk Management in collaboration with our

Corporate Strategy team� The Risk Committee review of our consol i-

dated strategic risk landscape enabled alignment with our corporate

strategy process�

Geopolitical tension and protectionism, regulatory support of renew-

able energy growth, scalability, cyber risks, and talent attraction and

retention were among the strategic risk themes identified in 2023�

Financial risks

Financial risks, including risks related to currency, interest rates, tax,

credit, and commodity exposures, are addressed in the notes to our

Consolidated financial statements� For more information, see the list

of contents on page 48�

Climate risks

We address climate-related risks and opportunities as an integral

part of our daily business, as they are directly linked to our business

model and strategy� Our processes for identifying and assessing

these risks are the same as for any other risks managed by ERM�

Going forward, these processes will be connected to our double ma-

teriality assessment, ensuring full integration of material sustaina-

bility topics to further strengthen the resilience of our risk profile�

In our approach to climate risks, we follow recommendations from

the Task Force on Climate-Related Financial Disclosures (TCFD), see

page 127� We also report on climate risks and opportunities

annually through the Carbon Disclosure Project (CDP)�

We address climate-related risks

and opportunities as an integral

part of our daily business�

43

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Our risk management reporting structureOur risk governance and reporting structure

Accountability for adequate risk and opportunity management

follows our organisational structure� Our risk management reporting

structure and roles and responsibilities are illustrated to the right�

Key risks are reported biannually by appointed Risk Officers and

Risk Owners throughout the organisation� Once reviewed, the risks

are challenged and consolidated by Global Risk Management and

presented to the Risk Committee� The aim of this process is to drive

understanding and improvements across our value chain, and to

identify actions to remedy risks�

To ensure we work systematically with the various risks identified,

whether they are assessed as short-term, medium-term or strategic

risks, we follow the framework of the Vestas ERM annual wheel� The

illustration of the annual wheel to the left shows the frequency of

our Risk Committee meetings and higher-level reporting on ERM�

The Risk Committee consists of all members of the Executive Man-

agement team, except for the CEO� It is chaired by the CFO�

Enterprise Risk Management annual wheel

Q4

Overall risk update

Focus on short- and

medium-term risks

and mitigations�

Q1

Strategic risk

review

Q2

Overall risk update

Focus on short- and

medium-term risks

and mitigations�

Q3

Top-down risk

review and outlook

Follow-up on

strategic risks�

Risk Committee

Audit Committee

Board of Directors

The aim of our reporting

structure is to drive understanding

and improvements across our

value chain, and to identify actions

to remedy risks�

Board of Directors

• Reviews the enterprise risk profile of Vestas every half year

• Oversees the effectiveness of Enterprise Risk Management at Vestas

Audit Committee

• Reviews the enterprise risk profile of Vestas every half year

• Oversees the effectiveness of Enterprise Risk Management at Vestas

Risk Committee

• Challenges and decides on the company’s enterprise risk profile

• Decides on and allocates accountability for actions to Risk Owners

• Reviews and approves enterprise risk reporting to the Audit Committee

and Board of Directors every half year

Group Enterprise Risk Management (ERM)

• Works to consolidate Vestas’ enterprise risks

• Plans and facilitates Risk Committee meetings

• Communicates feedback to Risk Owners and Risk Officers

• Promotes risk awareness and risk capabilities across

the organisation

Local Risk Owners and Risk Officers

• Implement risk management reporting flow to Group ERM across area

of responsibility

• Provide half-year briefing to Group ERM on new risks, trends, and changes

• Coordinate and monitor progress of risk mitigations

44

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Risk governance

Our main risks identified

in 2023

Risk & impact

Geopolitics & Regulatory Framework

Vestas continues to experience the effects and uncertainty that

geopolitical tensions bring� Varying degrees of protectionism result

in trade restrictions, such as tariffs and other barriers to trade� Also

during 2023 new sanction regimes were introduced impeding free

trad� Increased protectionism and trade regionalisation poses

several risk scenarios for Vestas as a global OEM�

The ability to operate a cost-efficient and quality-focused supply

chain is impacted by geopolitics and specific regulatory frameworks�

For example, the wind industry is subject to local content require-

ments that oftentimes drive up costs and create supply chain

inefficiencies� This requires particular efforts to ensure that the

associated risks are adequately mitigated� Geopolitical and

regulatory changes as well as inflation and increasing interest rates

continued to create uncertainty for the global wind market in 2023

and posed additional risk� In 2023, severe permitting delays,

developers cancelling or pausing offshore projects due to business

cases uncertainty, and volatility in electricity market policy, all had

consequences for the market in which Vestas operates�

People

With the energy transition gaining momentum, the number of jobs

within the sector continues to increase significantly� As a result,

competition for talent and specialised labour among industry

players is intensifying, with increased workforce turnover and rising

compensation expectations� In the coming years, we expect this

industry trend to become even more prevalent�

Cyber

Due to the geopolitical environment, cyber threats continued to

evolve during 2023�

Being a global provider of equipment and services to energy pro -

ducers and critical infrastructure, Vestas is a potential target for

cyber criminals and nation state-sponsored threat actors�

During 2023, Vestas’ security measures were effective and no

critical cyber security incidents took place�

Scalability

In 2023, there was a growing gap between projected targets for wind

power and the pace at which projects are being realised� Governments

around the world are increasing their targets for renewables, in-

cluding wind, but projects are currently too slow in coming to market�

Here is accordingly an imbalance between public policy, actual

demand and the supply chain needed to support such targets and

demand� Vestas perceives a risk in governments’ ability to establish

regulatory frameworks that will support renewable build-out ambi-

tions and support a sustainable, scalable supply chain�

Vestas sees potential risks around logistical infrastructure, which

may not be sufficiently developed within the required timeframe,

particularly regarding offshore ports and vessels�

Vestas sees a risk, if the wind industry fails to become more

industrial and standardised similar to what other industries have

gone through historically, for example the car industry� Failure to

industrialise and standardise, creates inefficiencies, and inhibits

scalability within Vestas and the industry�

Mitigating measures

Geopolitics & Regulatory Framework

Vestas continues to track geopolitical movements, analyse scenarios,

and implement mitigating actions� We exercise discipline in our

supply chain, procurement and sales with indexations and financial

hedging as key instruments�

We track and work with the regulatory frameworks in our regions and

markets via our global public affairs efforts� This process includes

dealing with wind-specific policies and broader energy policies, regu -

lation and legislation, local content requirements, trade and tariffs�

Vestas benefits from having a regionalised manufacturing footprint

with hubs in all major regions where we are commercially active� This

enables us to make adjustments relative to geopolitical drivers and

regulatory changes�

People

Through biannual employee engagement surveys, we measure the

engagement of our employees and gather feedback on Vestas as

a workplace� Based on the results, we prepare tailored actions to

mitigate specific problem areas�

Further, we support employee engagement and retention through

our dedicated priorities in Talent & Leadership� Key mechanisms in -

clude succession pipeline building, talent development programmes,

inclusive leadership training, and tools for retention discussions

and mitigations�

Cyber

Vestas manages cyber security cohesively within the Enterprise

Cyber Security function� We continue to invest in our cyber security

capabilities, employing a risk-based approach to medium- and

long-term solutions� Vestas is currently in the process of making

certain commercial cyber security services available, with the aim of

supporting customers in their needs and responsibilities�

Scalability

Vestas' executive leadership is actively communicating about the

need for industrialisation and standardisation� In 2023, Vestas di-

vested its converter and controls business and will thereby contribute

to standardisation and consolidation of key technology to the bene -

fit of the industry� Vestas has reduced the pace of new product intro-

ductions� We continue to execute on our product modularisation

strategy to enable a broader range of product configurations while

driving efficiencies in the supply chain� We do this by reusing compo-

nents, tools, designs, and value chain concepts� Our continued

modularisation strategy improves cost-effectiveness and product

quality, as well as execution efficiency at project sites�

Our focus on quality continues, and in 2023 we made organisational

changes to ensure continuous quality risk management�

45

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Tax governance

We are firmly committed to transparent and fair

taxes as an essential part of making a positive

contribution to local communities and creating

a sustainable planet for future generations�

By continuously engaging in dialogue with stakeholders on tax, we

reinforce our commitments and mitigate both reputational and fi-

nancial risks� We constantly strive to understand external demands

relating to tax transparency� Given our global footprint, we face

scrutiny from tax authorities competing for the same tax revenue�

This can result in tax audits, double taxation, arbitration, and lawsuits

that can create a significant financial burden for us� We therefore

recognise that reporting initiatives cannot stand alone, and focus on

developing tools and governance mechanisms to limit the risk of

double taxation� We apply withholding taxes and allocate income

between Vestas companies in accordance with international

regulations and standards�

The Vestas tax policy

As part of corporate governance, our tax policy is approved annually

by the Board� During 2023, Vestas’ tax department underwent a

reorganisation to further strengthen integration with the business in

the regions and centrally� This change was updated in our tax policy�

The new structure will further enhance scalability and resilience in

our tax function, emphasising our firm commitment to tax transpar-

ency and continued alignment with emerging best practice�

Vestas Tax Policy

Read more in our Tax Policy, which is updated annually�

In line with the commitments we set out in the 2022 Sustainability

Report, in 2023 we published our first Tax Sustainability Report�

In this report, we disclosed our tax practices and global tax footprint,

ensuring traceability between financial information, disclosures to

tax authorities, and our tax contribution report� We have therefore

based our reporting on actual tax payments, external revenues, and

employee headcount to provide an objective and transparent measure�

Tax Sustainability Report 2023

In March 2024, the 2023 report will be published at our

corporate website�

The global tax environment

With a global presence in more than 80 countries, we are affected by

international tax changes� We support fair tax harmonisation and

cooperation between governments� In managing tax disputes, we

aim to minimise the impact on cash flow through open dialogue,

although some disputes can take more than a decade to resolve�

While local tax policies influence our decisions, we don't make

operational decisions solely for tax optimisation� We advocate for a

level playing field in our industry and work with industry organisa-

tions and political stakeholders to promote renewable energy� We

negotiate agreements to mitigate significant tax risks in the

countries in which we operate, following an open dialogue with

governments and tax authorities around the world�

On pages 125-126 we have included selected tax data such as total

tax footprint representation and in note 5 to the Consolidated

financial statements you will find details on income and deferred tax�

Overview of global tax contribution

Americas

Total taxes borne

EUR 271m

Total taxes collected

EUR 133m

Asia Pacific

Total taxes borne

EUR 45m

Total taxes collected

EUR 107m

Europe, Middle East

& Africa

Total taxes borne

EUR 327m

Total taxes collected

EUR 1,442m

Summary of total taxes

mEUR 2023 2022

Europe, Middle East & Africa

1,769 1,278

Americas 404 314

Asia Pacific 152 111

Globally 2,325 1,703

46

Governance

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Statements Additional informationIn brief

Financial

statements

EUR

15.4bn

In 2023, we generated

a revenue of EUR 15.4bn.

Statements Additional informationStrategy and ambitions Business area progress Governance

47

Vestas Annual Report 2023

Financial statementsIn brief

→ Consolidated financial statements,

financial performance, and notes

→ Parent company financial statements

and notes

Consolidated financial statements,

financial performance, and notes

Financial performance �� 49

Income statement �� 51

Statement of comprehensive income �� 51

Balance sheet �� 52

Shareholder return �� 53

Statement of changes in equity �� 54

Cash flows �� 55

Statement of cash flows �� 56

1. Result for the year �� 57

1�1 Segment information �� 58

1�2 Revenue �� 60

1�3 Sale of technology �� 63

1�4 Government grants �� 63

1�5 Costs �� 64

1�6 Employee costs �� 64

1�7 Share based payment �� 65

1�8 Special items �� 66

1�9 Financial items �� 66

2. Working capital �� 67

2�1 Change in net working capital �� 68

2�2 Inventories �� 68

2�3 Contract balances �� 69

2�4 Contract costs �� 70

2�5 Other receivables �� 70

2�6 Other liabilities �� 70

3. Other operating assets and liabilities �� 71

3�1 Intangible assets �� 72

3�2 Property, plant and equipment �� 74

3�3 Leases �� 76

3�4 Impairment test �� 77

3�5 Investments in joint ventures and associates �� 78

3�6 Provisions �� 80

4. Risk management and capital structure �� 81

4�1 Financial risk management �� 82

4�2 Hedge accounting �� 86

4�3 Financial assets and liabilities �� 88

4�4 Share capital �� 90

4�5 Earnings per share �� 90

5. Tax �� 91

5�1 Income tax �� 92

5�2 Deferred tax �� 93

6. Other disclosures �� 95

6�1 Audit fees ��96

6�2 Assets held for sale �� 96

6�3 Related party transactions �� 96

6�4 Contingent assets, liabilities, and contractual obligations �� 97

6�5 Non-cash transactions �� 97

6�6 Subsequent events �� 97

6�7 Legal entities �� 98

7. Basis for preparation �� 100

7�1 Material accounting policy information �� 101

7�2 Change in accounting policies �� 102

7�3 Key accounting estimates and judgements �� 103

48

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

202 3202220212020*2019

10,276

1,871

12,664

100

2,055

10,766

2,337

10,398

933

2,484

3,155

10,680

1,134

3,568

Financial performance

Result for the year

Revenue

Revenue in 2023 amounted to EUR 15,382m, an increase of

6.2 percent compared to 2022. The increase was attributable

to both volumes delivered at higher prices in Power Solutions

and increasing Service activity. Revenue in 2023 reflected a

negative impact of EUR 760m from foreign exchange rates

compared to 2022. Vestas closed the year with revenue in the

upper end of the guided range of EUR 14.5bn-15.5bn.

Revenue in Europe, Middle East, and Africa (EMEA) delivered

50 percent of the total revenue (2022: 54 percent), the share

of revenue from Americas increased to 37 percent (2022: 35

percent) and revenue in Asia Pacific accounted for 13 percent

of the total revenue in 2023 (2022: 11 percent).

Geographical distribution of revenue

mEUR 2023 2022

EMEA

7,617 7,826

Americas 5,728 5,111

Asia Pacific 2,037 1,549

Total 15,382 14,486

Gross profit

Gross profit in 2023 amounted to EUR 1,283m, correspond-

ing to a gross margin of 8.3 percent, a 7.5 percentage point

increase compared to 2022. Gross profit was positively

impacted by increased revenue in both segments as well as

improved margins in Power Solutions from higher pricing and

easing of supply chain disruptions. Gross profit is furthermore

positively impacted by activity in the Development business,

lower warranty costs as well as lower depreciations and im-

pairments from V164/V174 offshore technology and related

assets compared to 2022.

Warranty provisions

The warranty costs in 2023 amounted to EUR 814m net

of supplier claims, equivalent to a net warranty ratio of 5.3

percent of revenue in the year, 1.0 percentage points below

the warranty ratio in 2022. The warranty costs in 2022 were

negatively impacted by additional costs related to the V164/

V174 offshore technology.

Research and development costs

Research and development costs recognised in the income

statement amounted to EUR 371m (2022: EUR 457m). The

decrease was mainly attributable to lower amortisation and

impairments from V164/V174 technology. The total research

and development expenditure prior to capitalisation and am-

ortisation decreased slightly to EUR 500m in 2023 (2022:

EUR 514m).

Distribution costs

Distribution costs amounted to EUR 452m in 2023 (2022:

EUR 462m). The decrease was primarily due to lower depre-

ciations and impairments from V164/V174 related assets,

partially offset by increasing employee costs.

Administration costs

Administration costs amounted to EUR 424m (2022: EUR

351m) and constituted 2.8 percent of revenue in 2023. The

higher costs in 2023 compared to 2022 were mainly due to

higher employee incentive-related costs.

Depreciation, amortisation, and impairment

Depreciation, amortisation, and impairment amounted to EUR

797m before special items in 2023 (2022: EUR 1,089m).

The decrease was mainly attributable to the lower deprecia-

tions and impairments in the Offshore business from V164/

V174 technology and related assets in 2022.

Depreciations can be specified as depreciations related

to transport equipment and tools EUR 246m (2022: EUR

267m), production equipment EUR 80m (2022: EUR 118m)

and other tangible assets EUR 192m (2022: EUR 189m).

Amortisations are driven by amortisation of technology EUR

191m (2022: EUR 221m) and other intangible assets EUR

81m (2022: EUR 104m).

Sale of technology

Sale of technology includes consideration received in 2023

of EUR 147m relating to a perpetual manufacturing license

granted to KK Wind Solutions under the agreement of the sale

of the converters and controls business.

Income from investments in joint ventures and associates

from core activity

Income from investments in joint ventures and associates

related to Development activities amounted to a gain of EUR

48m in 2023. The income is mainly related to sale of develop-

ment projects in the USA and Italy.

Revenue

mEUR

Onshore

Offshore

Service

* In 2020, Offshore was included from 14 December 2020.

↑27 %

In the past four years, we have managed to increase

revenue by 27 percent – from EUR 12,147m in

2019 to EUR 15,382m in 2023.

Vestas Annual Report 2023 49

In brief Financial statementsStrategy and ambitions Business area progress Statements Additional informationGovernance

202 32022202120202019

1,004

8.3

750

5.1

428

2.8

(1,152)

(8.0)

231

1.5

Financial performance – continued

Operating profit (EBIT)

EBIT before special items amounted to EUR 231m in 2023

(2022: negative EUR 1,152m), equivalent to an EBIT margin

before special items of 1.5 percent and in the upper end of

the guided 0-2 percent. The EBIT margin before special items

increased by 9.5 percentage points compared to 2022. The

increase was primarily driven by improved profitability in the

Power Solutions segment including the sale of the converters

and controls business and higher activity in Service.

Total income in special items amounted to EUR 61m in 2023

(2022: negative EUR 444m), impacted by income related

to adjustments to the manufacturing footprint change in

China and India announced in 2022. Consequently, EBIT after

special items amounted to EUR 292m (2022: negative EUR

1,596m).

Income from investments in associates and joint ventures

amounted to a loss of EUR 26m in 2023 (2022: income of

EUR 10m). The loss was mainly driven by Vestas’ investment

in Copenhagen Infrastructure Partners as well as EUR 10m

write-down of a Vestas Ventures investment.

Net financial items

Financial items amounted to a net loss of EUR 164m in 2023

(2022: net loss of EUR 110m). The increase was mainly driven

by losses from foreign currency transactions in Latin America

as well as increasing interests and other financial expenses

from increasing debt and interest levels in 2023. Currency

losses amounted to a net loss of EUR 99m in 2023 (2022:

net loss of EUR 70m).

Income tax

Income tax amounted to EUR 24m in 2023 (2022: positive

EUR 124m), equivalent to an effective tax rate of 23.5 percent

(2022: 7.3 percent).

Net profit for the year

Profit for the year amounted to EUR 78m in 2023 (2022: loss

of EUR 1,572m). The increased profitability was mainly driven

by the improved EBIT margin.

Financial ratios

Earnings per share amounted to positive EUR 0.1 in 2023

(2022: negative EUR 1.6). The increase of EUR 1.7 was driven

by improved earnings in 2023.

Return on capital employed (ROCE) was 2.9 percent in 2023

(2022: negative 18.5 percent), an improvement compared to

2022 driven by improved earnings.

Return on equity (RoE) was 2.6 percent in 2023 (2022:

negative 43.9 percent). The increase was attributable to

improved earnings.

Operating profit/(loss) (EBIT) before special items

mEUR – percent

EBIT before special items EBIT margin before special items

Profitability

Operating profit recovering after

challenging years with supply

chain instability and cost inflation

following the COVID-19 pandemic

and the war in Ukraine, resulting

in an EBIT margin in 2023 before

special items of 1�5 percent�

50

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

Income statement

1 January – 31 December

mEUR Note 2023 2022

Revenue

1.1, 1.2 15,382 14,486

Production costs 1.4, 1.5, 1.6, 2.2 (14,099) (14,368)

Gross profit 1,283 118

Research and development costs 1.4, 1.5, 1.6 (371) (457)

Distribution costs 1.5, 1.6 (452) (462)

Administration costs 1.5, 1.6 (424) (351)

Sale of technology 1.3 147 -

Income/(loss) from investments in joint ventures and associates 3.5 48 -

Operating profit/(loss) (EBIT) before special items 231 (1,152)

Special items 1.8 61 (444)

Operating profit/(loss) (EBIT) 292 (1,596)

Income/(loss) from investments in joint ventures and associates 3.5 (26) 10

Financial income 1.9 210 52

Financial costs 1.9 (374) (162)

Profit/(loss) before tax 102 (1,696)

Income tax 5.1 (24) 124

Profit/(loss) for the year 78 (1,572)

Profit/(loss) is attributable to:

Owners of Vestas Wind Systems A/S

77 (1,572)

Non-controlling interests 1 0

Earnings per share (EPS) 4.5

Earnings per share (EUR), basic 0.08 (1.56)

Earnings per share (EUR), diluted 0.08 (1.56)

Statement of comprehensive income

1 January – 31 December

mEUR Note 2023 2022

Profit/(loss) for the year

78 (1,572)

Other comprehensive income

Items that may be subsequently reclassified to the income statement:

Exchange rate adjustments relating to foreign entities

(92) (4)

Fair value adjustments of derivative financial instruments 4.2 70 133

Gain/(loss) on derivative financial instruments transferred to the

income statement

4.2 (133) (133)

Share of fair value adjustments of derivatives financial instruments of

joint ventures and associates

3.5 (4) 14

Tax on fair value adjustments that may be subsequently reclassified to

the income statement

24 4

Other comprehensive income after tax (135) 14

Total comprehensive income (57) (1,558)

Total comprehensive income is attributable to:

Owners of Vestas Wind Systems A/S

(56) (1,558)

Non-controlling interests (1) 0

51

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

Balance sheet

31 December

Assets

mEUR Note 2023 2022

Intangible assets

3.1, 3.4 3,203 3,065

Property, plant and equipment 3.2, 3.3 1,911 1,752

Investments in joint ventures and associates 3.5 593 646

Other investments 4.3 99 88

Tax receivables 5.1 522 100

Deferred tax 5.2 795 497

Other receivables 2.5, 4.3 372 219

Financial investments 4.3 98 95

Total non-current assets 7,593 6,462

Inventories 2.2 6,530 6,373

Trade receivables 4.1, 4.3 1,305 1,280

Contract assets 2.3, 4.1, 4.3 1,777 1,399

Contract costs 2.4 505 753

Tax receivables 5.1 209 51

Other receivables 2.5, 4.3 1,274 1,221

Financial investments 4.3 3 -

Cash and cash equivalents 4.1, 4.3 3,318 2,378

Assets held for sale 6.2 - 173

Total current assets 14,921 13,628

Total assets 22,514 20,090

Liabilities

mEUR Note 2023 2022

Share capital

4.4 27 27

Other reserves (102) 15

Retained earnings 3,102 3,002

Equity attributable to Vestas 3,027 3,044

Non-controlling interests 15 16

Total equity 3,042 3,060

Provisions 3.6 1,225 944

Deferred tax 5.2 164 158

Financial debts 4.1, 4.3 3,224 2,179

Tax payables 5.1 635 177

Other liabilities 2.6, 4.1, 4.3 204 59

Total non-current liabilities 5,452 3,517

Financial debts 3.3, 4.1, 4.3 163 248

Contract liabilities 2.3 7,995 6,937

Trade payables 4.1, 4.3 3,738 4,089

Provisions 3.6 783 829

Tax payables 5.1 176 58

Other liabilities 2.6, 4.1, 4.3 1,165 1,349

Liabilities related to assets held for sale 6.2 - 3

Total current liabilities 14,020 13,513

Total liabilities 19,472 17,030

Total equity and liabilities 22,514 20,090

52

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

Shareholder return

Capital structure and

financing items

Equity and solvency ratio

As at 31 December 2023, total equity amounted to EUR

3,042m, which is on the same level as at the end of 2022

(2022: EUR 3,060m). The equity was positively impacted by

profit after tax of EUR 78m but negatively impacted by EUR

90m from translation of net assets in foreign currencies and

development in hedge reserves of EUR 39m.

As at 31 December 2023, the solvency ratio was at 13.5

percent, a decrease of 1.7 percentage-points compared to

31 December 2022. The decrease was mainly a result of

the issuance of two sustainability-linked Eurobonds of EUR

500m each during 2023 to finance the increasing investment

levels and to strengthen the liquidity position. The issuance

supplemented existing Eurobonds issued in 2022. The

Eurobonds with a total notional amount of EUR 2,000m will

mature in the period 2026 to 2034.

Net interest-bearing position and cash position

The ratio of net interest-bearing debt/EBITDA was 0.0 reflect-

ing EBITDA of EUR 1,028m and net interest-bearing position

of EUR 32m as at 31 December 2023. The ratio was not pre-

sented as at 31 December 2022 as the ratio is not meaningful

based on negative EBITDA. EBITDA amounted to negative

EUR 64m in 2022.

As at 31 December 2023, cash and cash equivalents

amounted to EUR 3,318m (2022: EUR 2,378m).

Distribution to shareholders

The general intention of the Board of Directors (Board) is to

recommend a dividend of 25-30 percent of the company’s

annual net result after tax.

The Board recommends no dividends will be distributed to the

shareholders for the financial year 2023 due to the low level

of profit that would result in a mere token dividend.

The financial year 2023

Pursuant to authorisation granted to the Board by the

Annual General Meeting on 12 April 2023, Vestas has been

authorised to acquire treasury shares at a nominal value not

exceeding 10 percent of the share capital at the time of the

authorisation on an ongoing basis until 31 December 2024.

Vestas has acquired 398,924 treasury shares in 2023 for

an average share price of EUR 27.3 per share amounting to

EUR 11m.

Treasury shares

2023 2022 2023 2022

Number of

shares

Number of

shares

% of share

capital

% of share

capital

Treasury shares as at 1 January

3,689,702 4,723,160 0.4 0.5

Purchases 398,924 - 0.0 -

Vested treasury shares (695,021) (1,033,458) (0.1) (0.1)

Treasury shares as at 31 December 3,393,605 3,689,702 0.3 0.4

53

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

Statement of changes in equity

1 January – 31 December

2023 2022

Share

capital

Reserves

Retained

earnings

Non-

controlling

interest Total

Share

capital

Reserves

Retained

earnings

Non-

controlling

interest TotalmEUR

Translation

reserve

Cash flow

hedging

reserve

Other

reserves

Total

reserves

Translation

reserve

Cash flow

hedging

reserve

Other

reserves

Total

reserves

Equity as at 1 January

27 10 (1) 6 15 3,002 16 3,060 27 14 16 (8) 22 4,635 13 4,697

Impact from change in accounting policy - - - - - - - - - - - - - (17) - (17)

Adjusted equity as at 1 January 27 10 (1) 6 15 3,002 16 3,060 27 14 16 (8) 22 4,618 13 4,680

Profit/(loss) for the year - - - - - 77 1 78 - - - - - (1,572) 0 (1,572)

Other comprehensive income for the year - (90) (39) (4) (133) - (2) (135) - (4) 4 14 14 - (0) 14

Total comprehensive income for the year - (90) (39) (4) (133) 77 (1) (57) - (4) 4 14 14 (1,572) 0 (1,558)

Transfer of cash flow hedge reserve to the

initial carrying amount of hedged items, net

- - 16 - 16 - - 16 - - (21) - (21) - - (21)

Transactions with owners:

Transaction with non-controlling interest

- - - - - - - - - - - - - - 3 3

Dividends distributed - - - - - - (0) (0) - - - - - (50) - (50)

Dividends distributed related to treasury

shares

- - - - - - - - - - - - - 0 - 0

Acquisition of treasury shares - - - - - (11) - (11) - - - - - - - 0

Share-based payment - - - - - 34 - 34 - - - - - 7 - 7

Tax on equity transactions - - - - - 0 - 0 - - - - - (1) - (1)

Total transactions with owners - - - - - 23 - 23 - - - - - (44) 3 (41)

Equity as at 31 December 27 (80) (24) 2 (102) 3,102 15 3,042 27 10 (1) 6 15 3,002 16 3,060

Refer to note 4.4 for information on movements in share capital.

54

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

202 320222021*20202019

729

687

773

758

823

94

56

183

(953)

204

Cash flows

Working capital and cash flow

Net working capital

Net working capital amounted to a net liability of EUR 1,507m

as at 31 December 2023, an improvement of EUR 158m

compared to a net liability at the end of 2022 of EUR 1,349m.

The development is mainly driven by increased prepayments

in the Power Solutions segment.

Cash flow from operating activities

Cash flow from operating activities was EUR 1,027m in 2023,

an increase of EUR 1,222m compared to 2022. The increase

was mainly driven by the positive operating profit in 2023.

Cash flow from investing activities before acquisitions

of subsidiaries, joint ventures, associates and financial

investments

Cash flow from investing activities amounted to a net outflow

of EUR 823m compared to a net outflow of EUR 758m in

2022. The higher net investments mainly reflect an increased

level of investment in property, plant and equipment related to

our offshore manufacturing footprint for the V236-15.0 MW™

turbine. In addition to cash investments, Vestas has made

leasing additions of EUR 108m in properties, EUR 134m

in vehicles and vessels and EUR 10m in other lease assets

(2022: EUR 86m in properties, EUR 30m in vehicles and ves-

sels and EUR 13m in other assets).

Free cash flow

Free cash flow before acquisitions of subsidiaries, joint

ventures, associates and financial investments amounted to

EUR 204m (2022: negative EUR 953m), an increase from

2022 primarily driven by the positive cash flow from operating

activities.

Strategic acquisitions

and divestments

In February 2023, Vestas completed an agreement with KK

Wind Solutions to sell the controls and converters business

including Vestas’ three factories in Denmark, India and China

and associated staff functions. The sale impacted EBIT

positively with EUR 154m and free cash flow with EUR 173m.

Net Investment

mEUR

Free cash flow before acquisitions of subsidiaries,

joint ventures, associates and financial investments

mEUR

* Comparative figures for 2021 have been adjusted following the

accounting policy change for configuration and customisation

cost in cloud computing arrangements.

Value-adding investments

Over the last five years, we

have invested in a new modular

platform, taken full ownership

of the offshore business and

invested in V236-15�0 MW™ tech-

nology and ramp-up activity�

EUR

204m

In 2023, Vestas generated free cash

flow before acquisitions of subsidiaries,

joint ventures, associates and financial

investments of EUR 204m.

55

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

Statement of cash flows

1 January – 31 December

mEUR Note 2023 2022

Profit/(loss) for the year

78 (1,572)

Adjustments for non-cash transactions 6.5 1,177 1,713

Interest received 205 37

Interest paid (205) (37)

Income tax paid 5.1 (261) (144)

Cash flow from operating activities before change in net working capital 994 (3)

Change in net working capital 2.1 33 (192)

Cash flow from operating activities 1,027 (195)

Purchase of intangible assets 3.1 (436) (448)

Purchase of property, plant and equipment 3.2 (456) (371)

Proceeds from sale of intangible assets 2 -

Proceeds from sale of property, plant and equipment 55 48

Dividends from investments in joint ventures and associates 3.5 12 13

Cash flow from investing activities before acquisitions of subsidiaries, joint

ventures and associates, and financial investments

(823) (758)

Free cash flow before acquisitions of subsidiaries, joint ventures and

associates, and financial investments

204 (953)

mEUR Note 2023 2022

Purchase of shares in joint ventures and associates

3.5 (21) (40)

Purchase of other financial assets (16) 3

Proceeds from sale of other financial assets 3 -

Net cash flow from deconsolidation of subsidiary (8) -

Proceeds from sale of investments in joint ventures and associates 3.5 86 -

Purchase/disposal of financial investments (3) 116

Cash flow from investing activities (782) (679)

Free cash flow 245 (874)

Acquisition of treasury shares (11) -

Dividends paid - (50)

Payment of lease liabilities 4.1 (162) (147)

Proceeds from borrowings 4.1 1,137 1,756

Payment of financial debt 4.1 (221) (713)

Cash flow from financing activities 743 846

Net increase in cash and cash equivalents 988 (28)

Cash and cash equivalents as at 1 January 2,378 2,420

Exchange rate adjustments on cash and cash equivalents (48) (14)

Cash and cash equivalents as at 31 December 4.1 3,318 2,378

56

Financial statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Statements Additional informationGovernanceIn brief

20222021 2023

27� 8

18.1

30�4

19.1

34�1

26.0

↑6%

1 Result for the year

Revenue

In 2023, Vestas generated

a revenue of EUR 15.4bn.

Order backlog (mEUR)

In 2023, Vestas continued the trend of increasing

the value of its total order backlog to EUR 60.1bn,

an increase year over year of 21 percent.

Power Solutions

Service

In brief Strategy and ambitions Business area progress Governance Statements Additional information

57

Vestas Annual Report 2023

Financial statements

→ 1�1 Segment information

→ 1�2 Revenue

→ 1�3 Sale of technology

→ 1�4 Government grants

→ 1�5 Costs

→ 1�6 Employee costs

→ 1�7 Share based payment

→ 1�8 Special items

→ 1�9 Financial items

202 320222021*20202019

202 3202220212020*2019

10,276

12,664

100

10,766

2,337

10,398

933

10,680

1,134

1,871

25.8

2,055

27.6

2,484

23.2

3,155

21.4

3,568

21.0

(13.3)

(1.2)

1.43.17.2

1.1 Segment information

Power Solutions

– Result for the period

The segment contains sale of onshore and offshore wind

power plants, wind turbines, development sites, etc.

In 2023, revenue from the Power Solutions segment amounted

to EUR 11,814m (2022: EUR 11,331m), an increase of 4.3

percent compared to 2022. Volumes delivered in 2023 were

slightly lower than in 2022 but at a higher average price per

MW across all regions. Revenue reflected a negative impact of

EUR 553m from foreign exchange rates compared to 2022.

EBIT before special items from the Power Solutions segment

amounted to negative EUR 141m (2022: negative EUR

1,512m). Consequently, the EBIT margin before special items

was negative 1.2 percent (2022: negative 13.3 percent). This

positive development in EBIT was primarily attributable to

increased revenue and improved margins from higher pricing

and easing of supply chain disruptions. In addition, the EBIT

margin was positively impacted by the sale of the converters

and controls business in the first quarter of 2023 and 2022

was negatively impacted by impairment losses and warranty

provisions related to V164/V174 offshore technology.

Global development projects impacted EBIT in Power Solutions

with EUR 80m in 2023 (2022: negative EUR 32m), the positive

development was mainly driven by sales in the USA.

A net income amounting to EUR 61m was recognised in spe-

cial items primarily relating to a reversal of a previously recog-

nised write-down of inventories of EUR 45m and a previously

recognised impairment loss on tangible assets of EUR 12m.

For additional information, refer to note 1.8.

Revenue and EBIT margin before special items

mEUR – percent

Onshore Offshore EBIT margin before special items

* Comparative figures for 2021 have been adjusted following the

accounting policy change for configuration and customisation cost in

cloud computing arrangements.

Service

– Result for the period

The segment contains sale of service contracts, spare parts,

and related activities.

In 2023, the Service business generated revenue of EUR

3,568m, a year-on-year growth rate of 13.1 percent. The

higher revenue was driven by higher contract activity as well

as higher pricing from indexation of contracts. The service

business was negatively impacted by decreasing revenue from

transactional sales, primarily driven by lower level of repower-

ing projects. Furthermore, revenue reflected a negative impact

of EUR 207m from foreign exchange rates compared to 2022.

At the end of 2023, Vestas had approx. 50,400 wind turbines

under service equivalent to 152 GW, a 5.5 percent increase

compared to 144 GW end of 2022.

In 2023, the EBIT margin was 21.0 percent (2022: 21.4

percent). The EBIT margin was primarily impacted by higher

employee costs and depreciations related to the fleet of ves-

sels and vehicles.

Revenue and EBIT margin before special items

mEUR – percent

Revenue EBIT margin before special items

* Comparative figures for 2021 have been adjusted following the

accounting policy change for configuration and customisation cost in

cloud computing arrangements.

15%

Revenue from Power Solutions increased

by 15 percent from 2019 to 2023.

21%

The Service EBIT margin in 2023 of 21 percent

constitutes a decrease of 4.8 percentage points

compared to the level in 2019.

58

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.1 Segment information – continued

The measure of revenue is disclosed in accordance with how

the segments are reported to the Vestas’ chief operating

decision maker. The reported revenue is in alignment with

how the segments are internally committed for variable

consideration under sales contracts. This is different to the

external commitment of the segments.

Revenue

mEUR 2023 2022USA3,072 2,969Denmark 473 569Other countries 11,837 10,948Total 15,382 14,486

The revenue split is based on geographical supply point.

Revenue specified by country shows all countries with a

revenue of more than 10 percent of Vestas’ total revenue as

well as revenue in Denmark.

Intangible assets and property,

plant and equipment

mEUR 2023 2022Denmark3,711 3,521Other countries 1,403 1,296Total 5,114 4,817

Intangible assets and property, plant and equipment are based

on the physical location of the assets.

With the exception of Denmark, no country has intangible

assets and property, plant and equipment exceeding 10

percent of the Group's total intangible assets and property,

plant and equipment as at 31 December 2023.

2023 2022mEURPower Solutions Service Not allocated Total Power Solutions Service Not allocated TotalRevenue11,814 3,568 - 15,382 11,331 3,155 - 14,486Sale of technology 147 - - 147 - - - -Income/(loss) from investments in joint ventures and associates 48 - - 48 - - - -Total income 12,009 3,568 - 15,577 11,331 3,155 - 14,486Total costs (12,150) (2,818) (378) (15,346) (12,843) (2,480) (315) (15,638)Operating profit/(loss) (EBIT) before special items (141) 750 (378) 231 (1,512) 675 (315) (1,152)Special items 61 - - 61 (444) - - (444)Operating profit/(loss) (EBIT) (80) 750 (378) 292 (1,956) 675 (315) (1,596)Income/(loss) from investments in joint ventures and associates - - (26) (26) - - 10 10Financial items - - (164) (164) - - (110) (110)Profit/(loss) before tax 102 (1,696)Amortisation and depreciation included in total costs (603) (152) (42) (797) (910) (132) (47) (1,089)Investments in joint ventures and associates, refer to note 3.5 593 646

Accounting policies

The reportable segments are determined based on Vestas’

management structures and the consequent reporting to the

Chief Operating Decision Maker (CODM), which is defined

as the Executive Management. Following the acquisition of

MHI Vestas Offshore Wind A/S on 14 December 2020, a new

offshore operating segment has been established. Vestas’

reportable segment ‘Power Solutions’ includes respectively

onshore and offshore operating segments. The onshore and

offshore activities are combined in one reportable segment,

as the nature of the businesses and the financial impact from

the activities are similar in respect of product categories,

production, distribution and customers. In addition, the

long-term EBIT margins and investment requirements relative

to revenue are expected at the same level.

The total external revenue is derived from the two reportable

segments and comprises sale of wind turbines and associated

service activities, Power Solutions and Service respectively.

Certain income and costs relating to Vestas functions, investing

activities, tax, etc. are managed on Vestas level. These items

are not included in the reportable segments, and therefore,

presented as ‘Not allocated’.

The measure of revenue, costs, and EBIT included in the segment

reporting are the same as those used in the Consolidated

financial statements. No segment information is provided

to CODM on a regular basis for assets and liabilities and the

measures below EBIT.

Income and costs included in profit for the year are allocated

to the extent that they can be directly or indirectly attributed

to the segments on a reliable basis. Costs allocated as either

directly or indirectly attributable comprise production costs,

R&D costs, distribution costs, and administration costs.

The income and costs allocated, including depreciation and

amortisation, as indirectly attributable to the segments, are

allocated by means of allocation keys determined on the basis

of the utilisation of key resources in the segment.

59

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.2 Revenue

From order intake to revenue recognition

Order backlog

The order backlog reflects the value of future

deliveries and services. An order is included as order

intake when firm and unconditional. The value of

future contracts is measured at the end of the period.

The order backlog comprises firm and unconditional

orders from Power Solutions and Service, less

deliveries made in Power Solutions and Service

performance.

Order intake Manufacturing and transport

Deliveries

Deliveries in MW reflect the capacity of wind turbines

delivered during the reporting period. The capacity is

considered delivered, and is deducted from the wind turbine

order backlog, when the related revenue is recognised.

Sales from turnkey projects are deducted from the wind

turbines backlog simultaneously as the customer has

taken delivery of the wind turbines under the term of the

contracts.

Delivery according to contract

Supply-only

2.2

Revenue EURbn

Revenue recognition

Revenue is recognised at a point in

time when control is transferred to

the customer. Control is generally

transferred upon delivery of the

components in accordance with the

agreed delivery plan.

Construction

EPC / Turnkey projects

0.8

Revenue EURbn

Revenue recognition

Revenue is recognised over time as

the wind power plant is constructed

based on the stage of completion

of the individual contracts.

Operational turbine

Supply-and-installation

8.8

Revenue EURbn

Revenue recognition

Revenue is recognised over time for

non-standard solutions with no alter-

native use as the turbine is installed

based on the stage of completion of

the individual contracts.

Revenue is recognised at a point in

time for standard solutions with

alternative use when control of the

turbine is transferred to the customer.

Control is transferred at a point in time

when Vestas has proven a fully

operational turbine.

Service

Sales from Service agreements are

deducted from Service backlog

simultaneously as revenue is recognised

over the term of the agreement.

Operating wind power plants

Service

3.6

Revenue EURbn

Revenue recognition

Service contracts are normally recog-

nised over time as the services are

provided over the term of the agree-

ment. Spare parts sales are recognised

at a point in time when control has

been transferred to the customer.

60

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.2 Revenue – continued

Disaggregation of revenue

In the following section, revenue is disaggregated by sale of

projects and sale of service, by primary geographical market,

major contract types and timing of revenue recognition.

For the financial year 2023, supply-and-installation projects

recognised over time (percentage-of-completion) constituted

31 percent of the total supply-and-installation revenue

compared to 37 percent in 2022.

Transaction price allocated

to the remaining sales contracts

The following table includes revenue expected to be recognised

in the future related to performance obligations that are unful-

filled (or partially unfulfilled) at the end of the financial year.

All considerations from contracts with customers are included

in the amounts presented.

Order backlog

bnEUR 2023 2022Power Solutions, onshore20.7 16.4Power Solutions, offshore5.3 2.7Wind turbines total 26.0 19.1Service, onshore 29.3 26.6Service, offshore 4.8 3.8Service total 34.1 30.4

Power Solutions Service TotalDisaggregation of revenuemEUR2023 2022 2023 2022 2023 2022Timing of revenue recognitionProducts and services transferred at a point in time8,324 7,519 491 653 8,815 8,172Products and services transferred over time 3,490 3,812 3,077 2,502 6,567 6,314Total 11,814 11,331 3,568 3,155 15,382 14,486Revenue from contract typesSupply-only (at a point in time)2,210 2,590 - - 2,210 2,590Supply-and-installation (at a point in time) 6,114 4,929 - - 6,114 4,929Supply-and-installation (over time) 2,718 2,859 - - 2,718 2,859Turnkey (EPC) (over time) 772 953 - - 772 953Service - - 3,568 3,155 3,568 3,155Total 11,814 11,331 3,568 3,155 15,382 14,486Primary geographical marketsEMEA5,711 6,276 1,906 1,550 7,617 7,826Americas 4,356 3,783 1,372 1,328 5,728 5,111Asia Pacific 1,747 1,272 290 277 2,037 1,549Total 11,814 11,331 3,568 3,155 15,382 14,486

At the end of 2023, the average remaining duration in the

service order backlog is approx. 11 years (2022: 11 years),

with a range up to 35 years (2022: 35 years). For the Power

Solutions segment, projects are normally to be delivered

within 1 to 3 years (2022: 1 to 3 years).

Power Solutions – order backlog

At the end of the year, the total wind turbine order backlog

amounted to 25,315 MW corresponding to EUR 26.0bn. Of

this, 21,014 MW corresponding to EUR 20.7bn relates to

onshore wind turbines. Compared to last year, the onshore

order backlog increased by 26 percent. The offshore backlog

amounted to 4,301 MW corresponding to EUR 5.3bn as at

31 December 2023, an increase of 96 percent compared to

2022, driven by the new V236-15.0 MW™.

Service – order backlog

At the end of 2023, Vestas had service agreements in the

order backlog with expected contractual revenue of EUR

34.1bn, which is an increase of EUR 3.7bn compared to 2022.

Accounting policies

Order backlog in EUR reflects the value of future deliveries and

services under firm and unconditional orders and is measured

as the expected revenue to be recognised in the future related

to performance obligations that are unfulfilled or partially

unfulfilled at the end of the period. The order backlog is

forward-looking by nature and is a subset of Vestas' potential

future revenue.

Order backlog in MW reflect the capacity of future turbine

deliveries under firm and unconditional orders and is

measured as the total capacity of turbines to be delivered

under firm and unconditional orders less deliveries at the end

of the period. The capacity of turbines delivered is included as

deliveries when the related revenue is recognised.

61

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.2 Revenue – continued

Key accounting estimates and judgements

Estimate regarding revenue from contracts with multiple

performance obligations

Management performs significant accounting estimates

in connection with determining the appropriate income

recognition of contract elements. In certain situations, Supply-

only projects contain elements that in nature are associated

with a high degree of estimations regarding allocation of

consideration under a contract to elements already delivered

and elements to be delivered in the future. Management has

assessed that the project specific margin is a fair estimate of

a reasonable margin used to allocate consideration under a

contract to the contract elements. Significant judgement is

also involved in assessing whether project or service contracts

contain multiple performance obligations which should be

accounted for separately.

Estimate regarding revenue from contracts accounted for

by percentage-of-completion method

Vestas applies the percentage-of-completion method in

accounting for service contracts and certain wind power plants,

in general projects with a high degree of customisation. The use

of the percentage-of-completion method requires Management

to determine the stage of completion by reference to the

contract costs incurred for work performed to date in proportion

to the estimated total contract costs (cost-to-cost method).

This method is considered to best show the progression of

the projects. Based on the estimated stage of completion, a

respective portion of the consideration is recognised.

Judgement regarding method for recognition of revenue

from Supply-and-installation contracts

Management applies judgement when determining whether

revenue from Supply-and-installations contracts shall be

recognised at a point in time or over time. Management has

determined that Supply-and-installation projects based on

standard solutions have an alternative use. Consequently,

revenue from such contracts are recognised at the point

in time when the turbine is fully operational and control is

transferred to the customer. For certain projects, Vestas

agrees to delivery of wind power plants based on non-

standard solutions to the customer. Management assesses

whether such non-standard solutions have an alternative use.

The judgements made take into consideration technology

used, the degree of customization and remoteness of the wind

power plant. Revenue from sale of non-standard solutions,

which are judged to have no alternative use is recognised over

time (percentage-of-completion method).

Judgement regarding service contract modifications

Management applies judgement when determining whether

a service contract modification should be accounted for as

a separate contract or as if it is part of the original contract.

The judgements made take into consideration whether the

scope is changed, if price changes reflect stand-alone prices,

whether a contract is won in a tender, if the modification is due

to execution of a renewal option and other relevant facts and

circumstances.

Accounting policies

Revenue is measured based on the consideration specified in

a contract with a customer. Vestas recognises revenue when it

transfers control over a product or service to a customer.

Revenue recognition

Revenue comprises sale of wind turbines and wind power

plants, after-sales service, sale of spare parts and wind power

plants under development. The following is a description of the

principal activities from which Vestas generates its revenue.

Supply-only projects

Revenue from the sale of individual wind turbines based on

standard solutions is measured based on the consideration

specified in a contract with a customer and excludes amounts

collected on behalf of third parties. Vestas recognises revenue

at a point in time, when control is transferred to the customer,

and the consideration agreed is expected to be received.

Control is deemed to be transferred upon delivery of the

components in accordance with the agreed delivery plan.

Supply-and-installation projects (point in time)

Revenue from sale of wind power plants based on standard

solutions with alternative use is measured based on the

consideration specified in a contract with a customer and

excludes amounts collected on behalf of third parties. Vestas

recognises revenue when control of the fully operational

turbine is transferred to the customer, and the consideration

agreed is expected to be received. Control is generally deemed

to be transferred at the point in time when the turbine is fully

operational.

Supply-and-installation projects (over time)

Revenue from sale of wind power plants based on non-

standard solutions to the customer, where there is no alter-

native use for the wind power plant to be delivered and

where we have an enforceable right to payment for the work

completed is recognised over time using the percentage-of-

completion method. Revenue excludes amounts collected on

behalf of third parties.

EPC / Turnkey projects

Revenue from contracts to deliver wind power plants with a

high degree of customisation are recognised over time as

the wind power plants are constructed based on the stage

of completion of the individual contracts. Where the profit

from a contract cannot be estimated reliably, revenue is only

recognised equalling the cost incurred to the extent that it is

probable that the costs will be recovered.

Service sales

Revenue from service sales, comprising services and mainte-

nance agreements as well as extended warranties regarding

wind turbines and wind power plants sold, are recognised

over the term of the agreement as the services are provided.

Separate spare parts sales are recognised at a point in time

when control has been transferred to the customer, and pro-

vided that consideration agreed is expected to be received.

Service contract modifications

Contract modifications treated as separate contracts are

typically related to changes in scope, successful tender

bids or renegotiated close to term expiry (signed). Contract

modifications which are treated as part of the original

contract, are typically related to renewals renegotiated far

from term expiry (signed) or price changes agreed upon.

Contract modifications treated as separate contracts are

accounted for on a prospective basis. Contract modifications

treated as part of the original contract and accounted for on a

cumulative catch-up basis.

Wind power plants under development

Revenue from the sale of wind power plants under develop-

ment is measured based on the consideration specified in a

contract with a customer and recognised at a point in time

when the control of the project is transferred to the customer.

Transaction price

The transaction price for sale of wind turbines and wind power

plants normally includes a fixed consideration. The transaction

price for service contracts includes a fixed consideration

and often a variable consideration. The estimated amount

of variable consideration will be included in the transaction

price only to the extent that a significant reversal in revenue

recognised is highly unlikely to occur when the uncertainty

associated with the variable consideration is subsequently

resolved. The transaction price recognised as revenue is

furthermore reduced by penalties and payment of liquidated

damages related to project and service contracts.

All wind turbine and wind power plant contracts include a

standard warranty clause. For further details on warranty, refer

to note 3.6.

62

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.3 Sale of technology

Sale of technology includes consideration received of EUR

147m relating to a perpetual manufacturing license granted

to KK Wind Solutions under the agreement for the sale of the

converters and controls business. For further details on the

transaction, refer to note 6.2.

Accounting policies

Income relating to the perpetual manufacturing license granted

to KK Wind Solutions is measured based on an allocation of

the total consideration specified in the contract. The total

consideration is allocated to the individual performance

obligations in the contract based on stand-alone selling prices

and is presented in the income statement according to the

nature of the performance obligations. The consideration is

recognised at closing as Vestas has no future performance

obligations in respect of the manufacturing license.

1.4 Government grants

Government grants

mEUR 2023 2022Government grants recognised in income statement 56 3Government grants recognised in the balance sheet (receivable) (53) (1)Government grants received in the year 3 2

Vestas receives Advanced Manufacturing Production

Credits (AMPC) under the Inflation Reduction Act (IRA) as

compensation for costs when manufacturing nacelles and

blades in the US. Vestas treats the subsidy as a government

grant, as it is paid by the US Federal Government.

Vestas has recognised AMPC grants of EUR 54m in the

income statement for 2023 (2022: EUR 0m) where it is offset

against productions costs.

In addition to AMPC, Vestas has recognised grants of EUR 2m

in the income statement as compensation for R&D costs in

2023 (2022: EUR 3m).

Accounting policies

Government grants are recognised when there is reasonable

assurance that Vestas complies with the conditions attaching

to them, and the grants will be received. Grants received as

compensation for costs are offset against the cost for which

they compensate. Grants for investments and capitalised

development projects are offset against the cost of the asset

to which the grant relate.

The Avanced Manufacturing Production Credits (AMPC) grant

is conditional on sale of manufactured nacelles and blades.

Therefore, the grants are recognised at transfer of control of

individual wind turbines or wind power plants that comprise

parts eligible for AMPC, corresponding to the point in time of

revenue recognition. The grants are recognised in the income

statement where it is offset against production costs.

63

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.5 Costs

Research and development costs recognised

in the income statement

mEUR 2023 2022R&D costs500 514Capitalised development projects(386) (414)Amortisation and depreciation257 357Total 371 457

Accounting policies

Production costs

Production costs, including warranty costs, comprise the costs

incurred to achieve revenue for the year. Costs consist of raw

materials, consumables, direct labour costs, transportation

costs and indirect costs such as salaries, rental and lease costs

as well as depreciation of production facilities. Furthermore,

provisions for loss-making construction contracts are included

in production costs.

Research and development costs

Research and development costs primarily comprise employee

costs, internal and external costs related to innovation and

new technologies, as well as amortisation, depreciation and

impairment losses on capitalised development costs.

Distribution costs

Distribution costs comprise costs incurred for the sale

and distribution of products, etc. sold during the year. Also

included are costs relating to employees and depreciation.

Administration costs

Administration costs comprise costs incurred during the year

for management and administration of Vestas and includes

costs for administrative staff, management, office premises,

office costs, and depreciation.

1.6 Employee costs

Staff costs

mEUR 2023 2022Staff costs are specified as follows:Wages and salaries, etc.1,904 1,581Share-based payment, refer to note 1.734 7Pension schemes, defined contribution schemes108 94Other social security costs 219 198Total 2,265 1,880

Average number of

employees

29,463 28,779

Number of employees as

at 31 December

30,586 28,438

Board of Directors and Executive Management team

mEUR 2023 2022Staff costs attributable to:Board of DirectorsBoard remuneration1 1Total 1 1Executive Management teamWages and bonus11 7Share-based payment 12 2Total 23 9

The Board of Directors and Executive Management team are

not covered by any pension schemes. In the event of change in

control, members of the Executive Management do not receive

any additional compensation.

In 2023, share-based payment and wages to the registered

members of the Executive Management amounted to EUR 8m

(2022: EUR 3m).

Key management personnel is defined as Executive

Management team.

64

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.7 Share based payment

Restricted performance

share programme

The purpose of the restricted performance shares is to ensure

common goals for management, certain key employees,

and shareholders. The number of shares available for grant

may be adjusted in the event of changes in Vestas’ capital

structure. Further, in the event of a change of control, merger,

winding-up or demerger of Vestas, an accelerated grant may

extraordinarily take place. In the event of certain transfers of

activities or changes in ownership interests within Vestas,

adjustment, replacement of the programme and/or settlement

in cash of the programme entirely may also take place.

In April 2023, the Board of Directors of Vestas Wind Systems

A/S (Board) launched a new restricted performance share

programme. The performance share programme has been

revised for the sake of simplification. The 2023 performance

share programme will fully vest after a three-year performance

period with all shares vesting at once, instead of the previous

split vesting in two portions. The performance measurements

are based on financial key performance indicators as well as

Vestas’ market share as defined by the Board.

The terms and conditions governing the restricted

performance share programmes are as follows:

ż Only participants employed by Vestas at the time of

announcement of the programme or later in the financial

year are eligible for participation in the restricted

performance share programme.

ż The number of restricted performance shares available for

distribution depends on Vestas’ performance as per table

below.

ż Depending on the performance, the total number of shares

to be granted will range between 0 percent and 150

percent of the target level and is determined by Vestas’

performance in the financial year.

ż A cap for value at vesting for CEO and CFO equal to

300 percent of base pay.

In 2023, the total number of shares granted amounts to

1,716,826 shares with a fair value of EUR 41m (out of which

653,00 shares with a fair value of EUR 16m were granted to

the Executive Management team). The fair value calculated

is based on share price at grant date, close of Nasdaq

Copenhagen on 26 April 2023, EUR 24.

Employee elected members of the Board, had 0 restricted

shares outstanding as at 31 December 2023 (2022: 0).

Refer to note 1.6 for the total expense recognised in the

Income statement for restricted performance shares (share-

based payment) granted to Executive Management team and

other executives.

Accounting policies

Vestas operates a number of share-based compensation

schemes (restricted share programmes) under which it awards

Vestas shares to members of the Executive Management

team and certain key employees in Vestas Wind Systems A/S

or its subsidiaries.

The value of the services received in exchange for the

awarding/granting of shares is measured at the fair value of

the shares.

Restricted shares granted to employees are measured at

fair value at the time of granting and are recognised in staff

expenses in the income statement over the vesting period.

The opposite entry is recognised directly in equity.

On initial recognition of the restricted shares, the number

of shares expected to vest is estimated. Subsequently, the

estimate is revised so that the total expense recognised is

based on the actual number of shares vested.

The fair value of restricted shares is determined based on

Vestas quoted share price at grant date.

Management’s incentive programmes 2023 2022 2021 2020 2019Year awarded:April 2023 April 2022 April 2021 May 2020 May 20191 Performance year2023-2025 2022-2024 2021-2023 2020-2022 2019-2021EPS, ROCE, EPS, ROCE, EPS, ROCE, EPS, ROCE, EPS, ROCE, Vesting conditions (KPIs):Market shareMarket shareMarket shareMarket shareMarket shareVesting years: 2026 2025 2024 2023/25 2022/2024

1 Performance years defined as Vestas’ financial year.

Executive OtherManagement teamexecutivesTotalNumber of restricted performance sharespcspcs pcsOutstanding as at 1 January 2023689,289 1,921,808 2,611,097Adjusted386,645 964,829 1,351,474Granted 653,000 1,063,826 1,716,826Vested (100,351) (594,670) (695,021)Cancelled (334,832) (835,242) (1,170,074)Outstanding as at 31 December 2023 1,293,751 2,520,551 3,814,302Outstanding as at 1 January 2022 1,021,888 2,587,229 3,609,117Adjusted(119,077) 436,143 317,066Granted 329,998 581,060 911,058Vested (212,234) (821,224) (1,033,458)Cancelled (331,286) (861,400) (1,192,686)Outstanding as at 31 December 2022 689,289 1,921,808 2,611,097

↑

Adjusted includes adjustments due to final calculation of

entitlement based on performance in prior year and transfers

between categories due to changes in management.

Allocation of performance shares for the 2021, 2022 and 2023

performance programmes will be adjusted based on the level of

target achievement in the measurement period.

65

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

1.8 Special items

Russian invasion of Ukraine

In April 2022, Vestas announced that we would withdraw

from the Russian market. Since the announcement, Vestas

has continued certain activities to wind down operations

and end contractual relationships. Furthermore, Vestas’

activities in Ukraine was put on hold. On 31 January 2023,

Vestas exited Russia by putting a full stop to all remaining

corporate activities in Russia, including terminating remaining

employees and leaving stranded assets idle. From this date,

Vestas deconsolidated its Russian entities.

In 2023, a net expense of EUR 4m was recognised in special

items, including a gain of EUR 2m from the deconsolidation.

Basis for recognition

The entities in Russia were deconsolidated, as Vestas,

following the exit from Russia, no longer controls the

entities. As a result, the assets, liabilities and the share of the

accumulated exchange rate adjustments recognised in other

comprehensive income, are recognised in special items.

Adjusting manufacturing footprint

In 2023, a net income of EUR 65m was recognised in special

items relating to the adjustment of the manufacturing

footprint in China and India. The net income comprise mainly a

reversal of a previously recognised write-down of inventories

of EUR 48m and a previously recognised impairment loss on

tangible assets of EUR 12m, and further a reversal of accruals

for other costs of net EUR 5m.

Basis for recognition

The reversal of write-down of inventories relates to blades

sold that were previously expected to be scrapped. The

reversal of impairment loss on tangible assets relates to

assets sold that were previously expected to be scrapped and

reassessment of expected sales prices. Other costs primarily

related to purchase commitments towards suppliers and costs

of closing the factories.

Key accounting judgements

Judgement regarding classification in the income statement

The use of special items entails management judgement in

the separation from other items in the income statement. In

connection with the use of special items, it is crucial that these

are of a significant unusual and/or infrequently occurring

nature that are not attributable to Vestas’ normal operations,

as such classification highlights to users of financial

statements the items to which the least attention should be

given when understanding current and future performance.

Estimate regarding the valuation of assets and liabilities

in Russia and Ukraine

Measurement of the provisions related to the ceasing of acti-

vities in Russia and Ukraine as well as write-down of inventory

located in Russia and Ukraine is associated with significant

estimation uncertainty due to the current situation in Russia

and Ukraine. The recognised write-downs and provisions

reflect management’s best estimate based on the current

expectations.

Accounting policies

Special items comprise significant unusual and/or infrequently

occurring items that are not attributable to Vestas’ normal

operations. Special items comprise income and costs related to

significant organisational restructuring and significant adjust-

ments to production capacity and the product programme.

Special items

mEUR 2023 2022Write-down of inventory45 (260)Provisions - (87)Impairment loss on intangible and tangible assets 12 (69)Staff costs (1) (5)Other costs 5 (23)Special items 61 (444)

1.9 Financial items

Financial income

mEUR 2023 2022Interest income205 37Hedging instruments 1 2Other financial income 4 13Total 210 52

Financial costs

mEUR 2023 2022Interest costs219 51Interest on lease liabilities 16 12Foreign exchange losses 99 70Other financial costs 40 29Total 374 162

Accounting policies

Financial items comprise interest income and costs, realised

and unrealised foreign exchange gains and losses, gains

and losses related to derivatives used to hedge assets and

liabilities and ineffective part of derivatives used to hedge

future cash flows.

66

Financial statements

Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

(1,349)

(1,507)

(1,049)

2021

0

2022 2023

2 Working capital

Net working capital (mEUR)

Net working capital amounted to a net liability of

EUR 1�5bn as at 31 December 2023�

67Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Governance Statements Additional informationFinancial statements

→ 2�1 Change in net working capital

→ 2�2 Inventories

→ 2�3 Contract balances

→ 2�4 Contract costs

→ 2�5 Other receivables

→ 2�6 Other liabilities

Total

EUR 6,530m

Total

EUR 6,373m

2.1 Change in net working capital

mEUR 2023 2022NWC as at 1 January(1,349) (1,049)Change in inventories and contract costs (91) 763Change in trade receivables 25 (251)Change in other receivables 53 116Change in contract assets / liabilities (680) (585)Change in trade payables 351 197Change in other liabilities 184 (540)NWC as at 31 December (1,507) (1,349)

The change in net working capital (NWC) includes non-cash

adjustments and exchange rate adjustments with a total

amount of EUR negative 125m (2022: EUR negative 492m).

Consequently, the cash flow impact of change in NWC is

EUR 33m (2022: EUR negative 192m).

Vestas is facilitating a supply chain financing program funded

by credit institutions. Use of this programme by suppliers

takes place in the ordinary course of business with the same

payment terms offered to other suppliers and without credit

enhancement. Supplier financing therefore fulfils the criteria

as trade payables and has been presented in the balance

sheet as ordinary trade payables with a total amount of EUR

545m (2022: EUR 696m).

2.2 Inventories

mEUR 2023 2022Inventories consumedInventories consumed for the year, which are included in production costs7,647 7,750Write-downs of inventoriesWrite-downs of inventories in the year5 283Utilised write-downs in the year(3) (4)Reversal of write-downs in 1the year (59 ) (25)

1 The reversal of write-downs in the year are due to goods previously

written down being used or sold at or above original cost.

In 2023, Vestas has reversed EUR 48m relating to adjustments

of manufacturing footprint. In 2022, write-down of inventories

included EUR 159m relating to the Russian invasion of Ukraine

and EUR 101m relating to adjustments to the manufacturing

footprint. For further details, refer to note 1.8.

Key accounting estimates

Estimate of net realisable value

Vestas estimates the net realisable value at the amount at

which inventories are expected to be sold. Inventories are

written down to net realisable value when the cost of inven-

tories is estimated to be non-recoverable due to obsolescence,

damage or declining selling prices. Estimates are used when

accounting for or measuring inventory pro visions, and these

estimates depend upon subjective and complex judgements

about certain circumstances, taking into account fluctuations

in prices, excess quantities, condition of the inventory, nature

of the inventory, and the estimated variable costs necessary to

make the sale.

Accounting policies

Inventories are measured at the lower of cost, using the

weighted average method, and net realisable value (NRV).

The cost of raw materials and service stock comprise purchase

price of materials, consumables, duties, and transportation costs.

The cost of work in progress and finished goods comprises the

cost of raw materials, consumables, direct labour, and indirect

production costs. Indirect production costs comprise materials

and labour costs as well as maintenance and depreciation

of the machinery, factory buildings, and equipment used in

the manufacturing process together with costs of factory

administration and management.

The NRV of inventories is measured at sales price less costs

of completion and selling costs. NRV is determined taking into

account marketability, obsolescence, and development in the

expected selling price.

2023

Service stock EUR 1,052 (16%)

Finished goods EUR 4,490 (69%)

Raw materials and consumables

EUR 646m (10%)

Work in progress EUR 342m (5%),

hereof development projects of

EUR 104m.

2022

Service stock EUR 978m (15%)

Finished goods EUR 4,487m (70%)

Raw materials and consumables

EUR 666m (10%)

Work in progress EUR 242m (5%),

hereof development projects of

EUR 77m.

68Vestas Annual Report 2023

Financial statementsIn brief Strategy and ambitions Business area progress Statements Additional informationGovernance

2.3 Contract balances

2023 2022Contract Contract Contract Contract mEURassetsliabilitiesassetsliabilities1 January1,399 6,937 1,227 6,180Revenue recognised that was included in the contract liability balance at the beginning of the period - (3,848) - (3,283)Increases as a result of changes in the measure of progress and other adjustments 978 - 733 -Payments received, excluding amounts recognised as revenue during the period (prepayments) - 4,993 - 3,986Transfers from contract assets recognised at the beginning of the period to receivables (558) - (559) -Exchange rate adjustments (42) (87) (2) 5431 December 1,777 7,995 1,399 6,937Contract assets and liabilities comprise the following:Construction contracts in progress (turnkey)13 166 58 193Service contracts 1,698 891 1,245 930Supply-only contracts - 1,328 - 744Supply-and-installation contracts point in time - 2,882 - 2,993Supply-and-installation over time 66 2,728 96 2,077Total 1,777 7,995 1,399 6,937

Accounting policies

Contract assets/liabilities comprise agreements to deliver

wind power plants based on non-standard solutions (supply-

and-installation projects over time) and wind power plants

with a high degree of customisation (turnkey projects), as well

as service and maintenances agreements. Contract liabilities

also comprise prepayments from customers for supply-only

and supply-and-installation projects ordered but not yet

delivered.

Vestas receives payments from customers based on billing

schedules established in the contracts. The scheduled

payments from customers typically preceed the satisfaction of

performance obligations under the contracts.

Contract assets relate to Vestas’ conditional right to

consideration for Vestas’ completed performance under the

contract. Accounts receivable are recognised when the right to

consideration becomes unconditional. Contract liability relates

to payments received in advance of performance under the

contract. Contract liabilities are recognised as revenue as (or

when) Vestas performs under the contract.

Contract assets/liabilities are measured at the selling price

of the work performed based on the stage of completion less

progress billing and expected losses.

The stage of completion is measured as the proportion of the

costs related to the contract incurred relative to the estimated

total costs related to the contract. Where it is probable that

total costs will exceed total revenues from a contract, the ex -

pected loss is recognised immediately as a cost and a provision.

The value of self-constructed components is recognised as

contract assets/liabilities upon installation of the components

to the specific wind power plant’s construction site.

If the selling price of the work performed exceeds progress

billings and expected losses it is recognised as an asset. If

interim billings and expected losses exceed the selling price it

is recognised as a liability.

Costs relating to sales work and the pursuing of contracts are

recognised in the income statement as incurred.

←

The table provides information

about development in contract

assets and contract liabilities

from contracts with customers,

as well as a disaggregation

of the contract balances on

contract type.

69

Vestas Annual Report 2023

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2.4 Contract costs

mEUR 2023 2022Asset recognised from costs to fulfill a contract505 753Total 505 753

Capitalised costs as a result of fulfilling sales contracts are

recognised as part of production cost in the income statement

when related revenues are recognised. In 2023, EUR 891m

(2022: EUR 958m) was recognised as cost.

Accounting policies

Costs incurred for supply-only and supply-and-installation

projects in fulfilling the contracts with customers that are

directly associated with the contract, comprising installation

cost and transportation cost, are recognised as an asset

(contract costs), if those costs are expected to be recoverable.

2.5 Other receivables

mEUR 2023 2022Prepayments190 157Supplier claims 84 711VAT 366 582Derivative financial instruments461 366Other receivables545 264Total 1,646 1,440Specified as follows:0–1 year1,274 1,221> 1 year 372 219Total 1,646 1,440

1 Includes loss provisions on VAT receivables of EUR 44m as at

31 December 2023 (2022: EUR 55m).

Key accounting estimates

Estimate of allowance for doubtful VAT receivables

Management makes allowance for doubtful VAT receivables

in anticipation of estimated future receipt of payments. If

certain circumstances result in lack of receipt of payments,

an additional allowance could be required. When evaluating

the adequacy of the allowance for doubtful VAT receivables,

Management analyses the nature of the individual VAT

receivables and takes into account any relevant historical

information that is applicable to the specific circumstance.

Accounting policies

Other receivables are measured at amortised cost or net

realisable value equivalent to nominal value less allowances

for doubtful receivables, whichever is lower. Prepayments

recognised as assets comprise prepaid expenses and are

measured at cost. Derivative financial instruments are

measured at fair value.

2.6 Other liabilities

mEUR 2023 2022Staff costs417 182Taxes and duties 198 365Derivative financial instruments459 364Other liabilities 295 497Total 1,369 1,408Specified as follows:0-1year1,165 1,349> 1 year 204 59Total 1,369 1,408

Accounting policies

Other liabilities are measured at amortised cost.

Derivative financial instruments are measured at fair value.

Obligations relating to defined contribution plans, where Vestas

continuously makes fixed pension contributions to independent

pension funds, are recognised in the income statement in the

period to which they relate. Any contributions outstanding are

recognised in the balance sheet under other liabilities.

70

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20222021 2023

1,066

948

1,144

3 Other operating assets and liabilities

Total investments (mEUR)

In 2023, Vestas made investments

of EUR 1,144m.

71Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Governance Statements Additional informationFinancial statements

→ 3�1 Intangible assets

→ 3�2 Property, plant and equipment

→ 3�3 Leases

→ 3�4 Impairment test

→ 3�5 Investments in joint ventures

and associates

→ 3�6 Provisions

Total

EUR 272m

Total

EUR 325m

Total

EUR 128m

3.1 Intangible assets

2023 2022Completed OtherDevelopment Completed OtherDevelopment development intangibleprojects in development intangibleprojects in mEUR Goodwillprojects Softwareassetsprogress Total Goodwillprojects Softwareassetsprogress TotalCost as at 1 January1,617 2,725 409 562 612 5,925 1,611 2,561 366 560 376 5,474Exchange rate adjustments (7) (6) (2) (2) (1) (18) 7 - 1 1 1 10Additions - - 28 - 408 436 - - 2 1 445 448Disposal - - (29) (2) - (31) - - (6) - - (6)Transfers - 83 41 - (124) - - 164 46 - (210) -Transfer to assets held for sale - - - - - - (1) - - - - (1)Cost as at 31 December 1,610 2,802 447 558 895 6,312 1,617 2,725 409 562 612 5,925Amortisation and impairment losses as at 1 January 103 2,277 294 186 - 2,860 103 1,942 244 123 - 2,412Exchange rate adjustments - (5) (1) (1) - (7) - - - 1 - 1Amortisation for the year - 191 46 35 - 272 - 221 55 49 - 325Impairment losses for the year - - - - - - - 114 1 13 - 128Disposal - - (29) (2) - (31) - - (6) - - (6)Transfers - 15 - - - 15 - - - - - -Amortisation and impairment losses as at 31 December 103 2,478 310 218 - 3,109 103 2,277 294 186 - 2,860Carrying amount as at 31 December 1,507 324 137 340 895 3,203 1,514 448 115 376 612 3,065Internally generated assets included above - 324 49 - 895 1,268 - 394 42 - 611 1,047Amortisation period 2-5 years 3-5 years 3-7 years 2-5 years 3-5 years 3-7 years

Amortisation, intangible assets

2023

Production costs EUR 23m (8%)

Research and development

costs EUR218m (80%)

Distribution costs EUR 2m (1%)

Administration costs EUR29m (11%)

Special items EUR 0m (0%)

2022

Production costs EUR 56m (17%)

Research and development

costs EUR 232m (71%)

Distribution costs EUR 3m (1%)

Administration costs EUR 34m (11%)

Special items EUR 0m (0%)

Impairment loss, intangible assets

2023

No imparment

2022

Production costs EUR 13m (10%)

Research and development

costs EUR 90m (70%)

Distribution costs EUR 0m (0%)

Administration costs EUR 0m (0%)

Special items EUR 25m (20%)

72Vestas Annual Report 2023

Financial statementsIn brief Strategy and ambitions Business area progress Statements Additional informationGovernance

3.1 Intangible assets – continued

Development projects and other

intangible assets

Vestas continually invests in the development of new

technologies and, for this reason, development projects

constitute a significant part of the total intangible assets.

The continuous investments include a wide portfolio of

development projects. Vestas does not have one individually

significant development assets.

Impairment relating to offshore activity

As part of the acquisition of MHI Vestas Offshore Wind

(MVOW) in 2020, Vestas acquired intangible assets and

tangible assets relating to the offshore activity.

As at 31 December 2023, the acquired assets were tested for

impairment. Based on the impairment test, no impairment or

reversal of prior year impairments was recognised.

The impairment test was performed due to revised

assumptions on profitability and increasing cost of capital.

The recoverable amount is based on the discounted value of

future expected cash flows from the V164/V174 offshore

activity. A discount rate before tax of 12.0 percentage was

used in the updated impairment test. The test is performed

based on firm orders. Further order intake on the V164/

V174 technology is not expected but the test remains

sensitive to changes in key assumptions, including project

and service margins. A change of 1 percentage point in the

assumed project margin will result in a EUR 14m change to

the recoverable amount and a change of 1 percentage point

in the service margin will result in a EUR 21m change to the

recoverable amount.

In 2022, Vestas recognised an impairment loss of EUR 177m

relating to the V164/174 offshore activity, impacting the

Power Solutions segment by EUR 165m and the Service

segment by EUR 12m. Intangible assets were written down by

EUR 96m and tangible assets were written down by EUR 81m.

Key accounting estimates

Estimate of recoverable value used for impairment test

of acquired assets relating to MVOW

In performing the impairment test, the carrying amount of

the assets is compared to the recoverable value, which is

the discounted value of expected future cash flows from the

offshore activity (value-in-use). The expected future cash

flows are based on key assumptions including order intake and

project margins and service contract margins, which are by

nature subject to significant uncertainty.

Accounting policies

Goodwill

Goodwill is initially recognised in the balance sheet as the

difference between the fair value of net assets acquired and

consideration transferred. Subsequently, goodwill is measured

at this value less accumulated impairment losses. Goodwill is

not amortised.

The carrying amount of goodwill has been allocated to Vestas’

operating segments. Identification of operating segments is

based on management structure and internal financial reporting.

The carrying amount of goodwill is tested at least annually

for impairment, together with the other non-current assets of

the operating segment to which goodwill has been allocated.

If the recoverable amount is lower than the carrying amount

of the operating segment, goodwill is written down to its lower

recoverable amount in the income statement.

The recoverable amount is usually calculated as the net

present value of expected future net cash flows from the

operating segments to which the goodwill has been allocated.

Alternatively, the recoverable amount is calculated as fair

value less costs to sell. Impairment losses on goodwill are

recognised in the income statement, either in production

costs, research and development costs, distribution costs or

administration costs.

Impairment losses on goodwill are not reversed.

Development projects

Projects for the development and testing of new wind turbines

are recognised as intangible assets when they are clearly

defined, identifiable, and for which technical feasibility, suffi-

cient resources and a potential future market or application

in the enterprise can be demonstrated. In addition, it is the

intention with these projects to manufacture, market or use

the project for future commercial purposes. This applies

if cost can be measured reliably and sufficient certainty

exists that future earnings or the net selling price can cover

production costs, distribution costs, and administration costs

as well as research and development costs. At Vestas, this

is underpinned by a gate process, where these judgements

are made at specific gates. Other development costs not

qualifying for capitalization are recognised in the income

statement as research and development costs.

Capitalised development costs are measured at cost less

accu mulated amortisation and impairment losses. Devel-

opment costs comprise salaries, amortisation and other costs

attributable to Vestas’ development activities.

Following completion of the development work, development

projects are amortised on a straight-line basis over their

estimated useful lives. The amortisation period is two to

five years. The basis of amortisation is calculated net of any

impairment losses.

The carrying amount of development projects in progress is

tested for impairment at least annually, and where the carrying

amount exceeds the net present value of the future net cash

flows expected to be generated by the development project,

the project is written down to its recoverable amount in the

income statement. Finished development projects are tested

for impairment if there is indication of impairment from the

annual review.

Patents and licences included in development projects are

measured at cost less accumulated amortisation and impair-

ment losses. Patents and licences are amortised over the patent

period or term of agreement, the life of the development project

or the estimated useful life, whichever is shorter. The basis of

amortisation is calculated net of any impairment losses.

Software

Acquired software licences and internally developed software

is measured at cost less accumulated amortisation and

impairment losses. Cost includes both direct internal and

external costs. Software is amortised on a straight-line basis

over three to five years. The basis of amortisation is calculated

net of any impairment losses.

Other intangible assets

Customer relationship, order backlog, and trademarks with a

finite useful life acquired from third parties, either separately

or as part of the business combination, are capitalised at

cost and amortised over their remaining useful lives. Other

intangible assets that are not Customer relationship, order

backlog, or trademarks are measured at cost less amortisation

and impairment losses.

73

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Total

EUR 518m

Total

EU R 574m

Total

EUR 186m

3.2 Property, plant and equipment

2023 2022Other fixtures Property, Other fixtures Property, and fittings, plant and and fittings, plant and Land and Plant and tools and equipment in Right-of-use Land and Plant and tools and equipment in Right-of-use mEURbuildingsmachineryequipmentprogressassets Totalbuildingsmachineryequipmentprogressassets TotalCost as at 1 January1,023 989 1,905 150 884 4,951 1,135 1,104 1,778 136 808 4,961Exchange rate adjustments (26) (11) (34) 1 (8) (78) 8 8 14 1 (1) 30Additions 4 9 123 320 252 708 9 11 160 191 129 500Disposals 4 (41) (53) - (50) (140) (69) (150) (129) (3) (45) (396)Transfers 54 46 124 (224) - - 5 69 101 (175) - -Transfer to assets held for sale - - - - - - (65) (53) (19) - (7) (144)Cost as at 31 December 1,059 992 2,065 247 1,078 5,441 1,023 989 1,905 150 884 4,951Depreciation and impairment losses as at 1 January 618 783 1,352 - 446 3,199 625 781 1,179 - 285 2,870Exchange rate adjustments (10) (8) (20) - (4) (42) 3 7 10 - 2 22Depreciation for the year 31 80 246 - 161 518 34 118 270 - 152 574Impairment losses for the year - - - - - - 55 66 29 - 36 186Reversal of impairment (7) (3) (2) - - (12) (39) (8) - - (7) (54)Transfers - (12) 17 - (20) (15) - (1) 1 - - -Transfers to assets held for sale - - - - - - (37) (32) (12) - (4) (85)Reversal of depreciation of disposals in the year - (41) (48) - (29) (118) (23) (148) (125) - (18) (314)Depreciation and impairment losses as at 31 December 632 799 1,545 - 554 3,530 618 783 1,352 - 446 3,199Carrying amount as at 31 December 427 193 520 247 524 1,911 405 206 553 150 438 1,752Depreciation period 10–40 years 3–10 years 3–5 years 2–20 years 10–40 years 3–10 years 3–5 years 2–20 years

Depreciation, property, plant and equipment

2023

Production costs EUR 315m (61%)

Research and development

costs EUR 39m (8%)

Distribution costs EUR 150m (29%)

Administration costs EUR 14m (3%)

Special items EUR 0m (0%)

2022

Production costs EUR 369m (64%)

Research and development costs EUR

34m (6%)

Distribution costs EUR 156m (27%)

Administration costs EUR 15m (3%)

Special items EUR 0m (0%)

Impairment loss, property, plant and equipment

2023

No imparment

2022

Production costs EUR 61m (33%)

Research and development costs EUR

4m (2%)

Distribution costs EUR 19m (10%)

Administration costs EUR 3m (2%)

Special items EUR 99m (53%)

74Vestas Annual Report 2023

Financial statementsIn brief Strategy and ambitions Business area progress Statements Additional informationGovernance

3.2 Property, plant and equipment – continued

Key accounting estimates

Estimates of future cash flows used for impairment test of

acquired assets relating to MVOW

Refer to note 3.1 for further details.

Accounting policies

Land and buildings, plant and machinery as well as other

fixtures and fittings, tools and equipment are measured at

cost less accumulated depreciation and impairment losses.

Cost comprises the cost of acquisition and costs directly

related to the acquisition up until the time when the asset is

ready for use. In the case of construction of own assets, cost

comprises direct and indirect costs for materials, components,

sub-suppliers, and labour. Estimated costs for dismantling

and disposing of the asset and for re-establishment are added

to cost to the extent that they are recognised as a provision.

Where individual components of an item of property, plant and

equipment have different useful lives, the cost of the item is

decomposed into separate components which are depreciated

separately.

Subsequent costs, e.g. in connection with the replacement of

components of an item of property, plant and equipment, are

recognised in the carrying amount of the asset in question

when it is probable that the costs incurred will result in future

economic benefits to Vestas. The carrying amount of the

replaced components is derecognised in the balance sheet

and recognised as costs in the income statement. All other

costs incurred for ordinary repairs and maintenance are rec-

ognised in the income statement as incurred.

Installations capitalised as land and buildings which are

related to leased assets are depreciated over the term of the

related lease contract. Such lease contracts range with a lease

term from 10 to 20 years.

Depreciation is calculated on a straight-line basis over the

expected useful lives of the assets, which are:

Buildings (including installations) 10–40 years

Plant and machinery 3–10 years

Other fixtures and fittings, tools and equipment 3–5 years

Right-of-use assets 2-20 years

Land is not depreciated.

The basis of depreciation is calculated taking into account

the residual value of the asset less any impairment losses.

The residual value is determined at the time of acquisition and

is reassessed annually. Where the residual value exceeds the

carrying amount of the asset, depreciation is discontinued.

The depreciation periods are determined based on estimates

of the expected useful lives and future residual value of the

assets. The estimates are based on historical experience.

A reassessment is made once a year to ascertain that the

depreciation basis reflects the expected life and future

residual values of the assets.

If the depreciation period or the residual value has changed,

the effect on depreciation is recognised prospectively as a

change in accounting estimate.

Depreciation is recognised in the income statement as

either production costs, research and development costs,

distribution costs or administration costs to the extent that

depreciation is not included in the cost of assets of own

construction.

The carrying amounts of non-current assets are reviewed on

an annual basis to determine whether there is any indication

of impairment. If so, the recoverable amount of the asset is

calculated. The recoverable amount is the higher of the fair

value of the asset less estimated costs to sell and value in use.

Value in use is calculated as the net present value of expected

future net cash flows from the asset or a group of assets.

An impairment loss is recognised where the carrying amount

of an asset exceeds its recoverable amount.

Impairment losses are reversed only to the extent of changes

in the assumptions and estimates underlying the impairment

calculation.

Impairment losses are reversed only to the extent that the

new carrying amount of the asset does not exceed the carrying

amount of the asset after depreciation/amortisation had the

asset not been impaired.

75

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3.3 Leases

2023 2022Right-of-use assetsmEURProperty Vehicles Equipment Vessels Total Property Vehicles Equipment Vessels TotalCarrying amount as at 1 January242 51 40 105 438 300 59 45 119 523Exchange rate adjustments (4) - - - (4) (3) - - - (3)Depreciation charge for the year (65) (41) (16) (39) (161) (77) (37) (19) (19) (152)Impairment losses for the year - - - - - (36) - - - (36)Reversal of impairment - - - - - 7 - - - 7Addition of right-of-use assets for the year 108 80 10 54 252 86 25 13 5 129Disposal of right-of-use assets for the year (6) (12) (3) - (21) (27) - - - (27)Transfers 20 - - - 20 (5) 4 1 - -Transfer to assets held for sale - - - - - (3) - - - (3)Carrying amount as at 31 December 295 78 31 120 524 242 51 40 105 438

Vestas leases several assets including properties, vehicles,

vessels, and equipment. Rental contracts are typically made

for fixed periods of one to 10 years but may have extension

options. Lease terms are negotiated on an individual basis

and contain different terms and conditions including payment

terms, terminations rights, index-regulations, maintenance,

deposits, and guarantees etc.

Some property leases contain variable payment terms that

are linked to an index e.g. a consumer price index. Overall, the

variable payments constitute less than 1 percent of Vestas’

entire lease payments.

Total lease expenses recognised in the income statementmEUR 2023 2022Variable lease payments not included in the measurement of lease liabilities0 0Expenses relating to short-term leases and leases of low-value69 51

Total leases recognised in the statement of cash flowsmEUR 2023 2022Short-term leases and leases of low value69 51Payment of lease liability including interest178 159Total cash outflow for leases247 210

Lease liabilities

Lease liabilities are included in financial debts and amount

to EUR 556m as at 31 December 2023 (2022: EUR 493m).

Refer to note 4.1 for disclosure on contractual cash flows.

Accounting policies

Vestas as Lessee

Vestas assesses whether a contract is or contains a lease

at inception of the contract. Vestas recognises right-of-

use assets and corresponding lease liabilities at the lease

commencement date, except for short-term leases and leases

of low value. For these leases, Vestas normally recognises the

lease payments as an operating expense on a straight-line

basis over the term of the lease.

The right-of-use asset is initially measured at cost, which

comprises the initial amount of the lease liabilities adjusted

for any lease payments made at or before the commencement

date, plus any initial costs incurred.

The right-of-use assets are subsequently measured at cost

less accumulated depreciation and impairment losses.

The right-of-use assets are from the commencement date

depreciated over the shorter period of lease term and useful

life of the underlying asset. The estimated useful lives of right-

of-use assets are determined on the same basis as those of

property and equipment. In addition, the right-of-use assets

are periodically reduced by impairment losses, if any, and

adjusted in accordance with lease liabilities.

The lease liabilities are initially measured at the present value

of the lease payments that are not paid at the commencement

date, discounted using the interest rate implicit in the lease or,

if that rate cannot be readily determined, Vestas’ incremental

borrowing rate. Generally, Vestas uses its incremental

borrowing rate taking into account the specific countries.

Lease payments included in the measurement of the lease

liabilities comprise the following:

ż fixed payments;

ż variable lease payments that depend on an index or a

rate, initially measured using the index or rate as at the

commencement date;

ż the exercise price of a purchase option if Vestas is

reasonably certain to exercise the options; and

ż amounts expected to be payable under residual

value guarantees.

The lease liabilities are subsequently measured at amortised

cost using the effective interest method. It is remeasured

when there is a change in future lease payments arising from a

change in an index or rate, if there is a change in the estimate

of the amount expected to be payable under a residual value

guarantee, or if Vestas changes its assessment of whether it

will exercise a purchase, extension or termination option.

When the lease liabilities are remeasured in this way, a corre-

sponding adjustment is made to the carrying amount of the

right-of-use assets, or is recorded in profit or loss if the carrying

amount of the right-of-use assets has been reduced to zero.

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3.4 Impairment test

Goodwill

Vestas has performed the annual impairment tests of goodwill

and it did not result in any impairment loss (2022: No

impairment loss).

In the impairment tests, the carrying amount of the assets

are compared to the discounted value of future expected

cash flows. The annual tests of goodwill were performed for

the three CGUs: Power Solutions Onshore, Power Solutions

Offshore, and Service, these being the lowest level

of cash-generating units as defined by Management.

The main part of the carrying amount of goodwill in Vestas

subject to impairment testing are related to several

acquisitions specified as follows.

ż The acquisition of NEG Micon A/S in 2004, included

acquisition of goodwill of EUR 180m allocated to Vestas

Power Solutions Onshore and EUR 35m allocated to the

Service segment.

ż The acquisition of UpWind Solutions, Inc. in 2015,

included acquisition of goodwill of EUR 40m, which was

allocated to the Service segment.

ż The acquisition of Availon GmbH in 2016 included

acquisition of goodwill of EUR 56m, which was allocated

to the Service segment.

ż The acquisition of Utopus Insights, Inc. in 2018 included

acquisition of goodwill of EUR 70m, which was allocated

to the Service segment.

ż The acquisition of MHI Vestas Offshore Wind A/S in

2020 included acquisition of goodwill of EUR 1,126m.

The goodwill arising from the acquisition was allocated

with EUR 893m to Power Solutions Offshore and EUR

233m to the Service segment.

Assumptions underpinning impairment test of goodwill

Budgets and business plans for the next three years are based

on Vestas’ investments in progress and contracted invest-

ments, and the risks relating to the key parameters have been

assessed and incorporated in the expected future cash flows

underpinning the impairment test of goodwill. In addition, the

budgets and business plans are based on management’s ex-

pectations of the current market conditions and future growth

expectations.

For the Power Solutions Onshore and Service, projections for

2027 and onwards are based on general market expectations

and risks in the impairment test.

The acquisition of MHI Vestas Offshore Wind A/S in 2020

was primarily based on a business case for introduction of the

new offshore turbine V236-15.0 MW. The impairment test

of Power Solutions Offshore include the updated business

case based on firm orders, preferred supplier agreements

and identified opportunities. An extended budget and

forecast period including the years 2024 to 2030 is applied.

Projections for year 2031 and onwards are based on general

market expectations and risks in the impairment test.

The terminal value in the projection period is determined

taking into account general growth expectations for the

segments in question. Long-term growth rate has been

assumed at 2 percent.

Power Solutions Onshore Power Solutions Offshore Service

Order backlog of EUR 20.7bn as at 31

December 2023

Order backlog of EUR 5.3bn as at 31

December 2023

Service order backlog of EUR 34.1bn as

at 31 December 2023

Expectations on changing market

environment, including future market

prices and high cost pressure

Expectations on changing market

environment, including future market

prices and high cost pressure

Expectations on changing market

environment, including future market

prices and future development in cost

reductions

Expectations on future orders received,

among other things based on expected

market share of the global market

outlook

Expectations on future orders received,

among other things based on expected

market share of the global market

outlook including expectation of high

growth in offshore market

Expectations on continued servicing

of the existing installed base of wind

turbines as well as future service

contracts received, among other things

based on expected market share

Expectations on continuing develop-

ments in mature and emerging markets

Expectations on continuing develop-

ments in mature and emerging markets

Capture full potential and accelerate

profitable growth strategy from

historically technology acquisitions and

developments

Expectations on support schemes in both

mature and emerging markets

Expectations on support schemes in both

mature and emerging markets

Growth supported by market develop-

ments and organic growth

2023 2022Discount rate Growth rate in Carrying amount of Discount rate Growth rate in Carrying amount of before tax (%)terminal period (%)goodwill (mEUR)before tax (%)terminal period (%)goodwill (mEUR)Power Solutions Onshore12.1 2 178 10.6 2 178Power Solutions Offshore 11.5 2 885 10.2 2 894Service 12.3 2 444 10.9 2 442

↑

The above main information is used in

determining revenue, EBIT, and capital

expenditure.

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3.5 Investments in joint ventures and associates

Income/(loss) from investments in joint ventures and associates

mEUR 2023 2022Joint ventures48 -Associates - -Income/(loss) from investments in joint ventures and associates above EBIT 48 -Joint ventures - (7)Associates (26) 17Income/(loss) from investments in joint ventures and associates below EBIT (26) 10

Joint ventures AssociatesInvestments in joint ventures and associatesmEUR2023 2022 2023 2022Cost as at 1 January122 91 588 585Additions 15 21 6 4Disposals (60) - - -Effect of exchange rate adjustment (3) 10 (1) (1)Cost as at 31 December 74 122 593 588Value adjustments as at 1 January (80) (66) 16 (1)Dividends received (12) (2) (2) (3)Impairment losses - - (10) (8)Share of profit/(loss) 25 (7) (16) 17Share of other comprehensive income - - (4) 14Disposals 7 - - -Effect of exchange rate adjustment 2 (5) - (3)Value adjustments as at 31 December (58) (80) (16) 16Carrying amount as at 31 December 16 42 577 604

Name of entity

Place of

business

% of

ownership

Measurement

method

Investment

type

Copenhagen Infrastructure Partners Holding P/S Copenhagen, Denmark 25 Equity AssociateBlakilden Fäbodberget Holding AB Solna, Sweden 40 Equity Associate

Material investments

In 2023, Vestas made no material investments in associates

or joint ventures. In February 2021, Vestas acquired a 25

percent stake in Copenhagen Infrastructure Partners P/S’

parent companies. The total consideration of EUR 500m

included a EUR 180m upfront payment and a EUR 320m

contingent consideration related to performance in the period

2023 to 2029. Refer to note 4.3 for further information on the

fair value measurement of the contingent consideration.

The associated companies listed above are material to Vestas

and have share capital consisting solely of ordinary shares,

which are held directly by Vestas.

Accounting policies

Associates are entities over which Vestas has significant

influence, but not control. A joint venture is an arrangement in

which Vestas has joint control. Joint ventures and associates

are accounted for using the equity method. Under the equity

method, interests in joint ventures and associates are initially

recognised at cost and adjusted thereafter to recognise

Vestas’ share of the post-acquisition profits or losses and

movements in other comprehensive income. When Vestas’

share of losses in a joint venture and associate equals or

exceeds its interests in the joint ventures and associates

(which includes any long-term interests that, in substance,

form part of Vestas’ net investment in the joint ventures and

associates), the Group does not recognise further losses,

unless it has incurred obligations or made payments on behalf

of the joint ventures and associates.

Timing in revenue recognition may be different between

Vestas and joint ventures and associates where Vestas

recognises revenue when control of the wind turbines have

been transferred to joint ventures and associates but joint

ventures and associates do not recognise revenue until they

have transferred the risk of the same wind turbines to the end

customer. Such timing difference results in part of Vestas’

profit from wind turbines delivered being eliminated in the net

result from joint ventures and associates, until joint ventures

and associates have recognised their revenue. This timing

difference may vary between quarters and year end but will

even out over time.

Unrealised gains on transactions between Vestas and its

joint ventures and associates are eliminated to the extent

of Vestas’ interest in the joint ventures and associates.

Unrealised losses are also eliminated unless the transaction

provides evidence of an impairment of the asset transferred.

Accounting policies of the joint ventures and associates have

been changed where necessary to ensure consistency with the

policies adopted by Vestas.

Income/(loss) from investments in joint ventures and

associates which are deemed to pertain to our core business

activities is included in EBIT before special items.

The profit/(loss) from investments in joint ventures and

associates will be presented below EBIT before special items

when deemed outside Vestas' core business activities.

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3.5 Investments in joint ventures and associates – continued

Summarised financial information

for joint ventures and associates

Set out below is the summarised financial information for

Copenhagen Infrastructure Partners P/S and Blakliden

Fäbodberget Holding AB as of 31 December 2023, which are

accounted for using the equity method. The profit/(loss) from

the investments is presented below EBIT before special item

as they are deemed outside Vestas' core business activitiy.

The information below reflects the amounts presented in the

financial statements of the entities (and not Vestas’ share of

those amounts) material to Vestas in 2023.

The investment in Copenhagen Infrastructure Partners P/S

includes investment in companies related to and managed by

Copenhagen Infra structure Partners P/S and for this reason

the financial amounts presented below include financial

information from several consolidated and non-consolidated

entities related to Copenhagen Infrastructure Partners P/S.

Other joint ventures and associates that are individually and

aggregated immaterial to Vestas, have not been included in

the summarised financial information.

Associate, 25 percentAssociate, 40 percentCopenhagen Infrastructure Partners P/SBlakliden Fäbodberget Holding ABSummarised balance sheetmEUR2023 2022 2023 2022CurrentCash and cash equivalents52 18 4 19Other current assets (excluding cash) 30 26 6 21Total current assets 82 44 10 40Other current liabilitiesTotal current liabilities(34) (10) (4) (89)Non-currentTotal non-current assets406 555 326 348Total non-current liabilities (15) (16) (284) (289)Net assets 439 573 48 10

Associate, 25 percent Associate, 40 percentSummarised statement of Copenhagen Infrastructure Partners P/SBlakliden Fäbodberget Holding ABcomprehensive incomemEUR2023 2022 2023 2022Revenue200 141 - -Depreciation and amortisation (3) (4) - -Interest cost 1 0 (13) (9)Profit before tax (117) 294 (28) (13)Post-tax profit from continuing operations(117) 294 (28) (13)Other comprehensive income - - (6) 31Total comprehensive income (117) 294 (34) 18

Associate, 25 percentAssociate, 40 percentReconciliation of summarised Copenhagen Infrastructure Partners P/SBlakliden Fäbodberget Holding ABfinancial informationmEUR2023 2022 2023 2022Opening net assets as at 1 January573 324 10 (28)Acquired net assets - - - -Distributions (17) (45) - -Contributions - - 72 20Profit/(loss) for the year (117) 294 (28) (13)Other comprehensive income - - (6) 31Closing net assets 439 573 48 10Interest in joint venture and associate (ownership of net assets)55 60 19 4Goodwill and other intangible assets, and other adjustments479 480 21 47Carrying value 534 540 40 51

79Vestas Annual Report 2023

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3.6 Provisions

2023 2022ProvisionsWarranty Other Total Warranty Other Total mEURprovisionprovisionsprovisionsprovisionprovisionsprovisionsCarrying amount as at 1 January1,490 283 1,773 1,197 135 1,332Impact on change in accounting policy - - - - 22 22Adjusted carrying amount as at 1 January 1,490 283 1,773 1,197 157 1,354Exchange rate adj. - (1) (1) - - -Addition during the year 845 83 928 926 196 1,122Utilised during the year (588) (93) (681) (633) (59) (692)Reversed during the year - (11) (11) - (11) (11)Carrying amount as at 31 December 1,747 261 2,008 1,490 283 1,773Non-current 1,031 194 1,225 765 179 944Current 716 67 783 725 104 829Carrying amount as at 31 December 1,747 261 2,008 1,490 283 1,773

Product risks

Vestas invests significant resources in improving products

and increasing their reliability to mitigate major warranty

provisions. This work comprises design, production, installation,

and continuous maintenance. The goal of these initiatives is to

reduce Vestas’ warranty costs, to secure customer returns, and

increase the competitiveness of the products.

Key accounting estimates

Provisions for warranties

The product warranties, which in the great majority of cases

includes component defects and functional errors, are usually

granted for a two-year period from legal transfer of the

wind turbine. In certain cases, a warranty of up to five years

is provided. For the customer, the specific warranty period

and the specific warranty terms are part of the basis of the

individual contract.

Warranty provisions include only standard warranty, whereas

services purchased in addition to the standard warranty are

included in the service contracts.

In addition to the above, provisions are made for wind

turbines sold in prior years, but where component defects and

functional error are identified later. It should be emphasised

that the complexity of some of the cases identified may

lead to adjustments of previous estimates, upwards as well

as downwards, in light of new factual information about

population size, costs of repair and the timing of such repairs.

During 2023, net warranty provisions charged to the income

statement amounted to EUR 814m (2022: EUR 915m),

equivalent to 5.3 percent of revenue (2022: 6.3 percent).

The net amount consists of a gross warranty provision of

EUR 845m less supplier claims of EUR 31m. The warranty

provisions in 2022 included additional warranty provisions of

EUR 124m due to increased repair costs caused by external

cost inflation, hereof EUR 93m related to offshore projects.

In 2023, warranty consumption amounted to EUR 588m

compared to EUR 633m in 2022.

Management assesses the likely outcome of pending and

future negotiations with sub-suppliers for compensation.

Compensation from sub-suppliers may be recognised only

when it is virtually certain that we will receive compensation

from the sub-suppliers.

Accounting policies

Provisions are recognised as a consequence of a past event

when Vestas has a legal or constructive obligation and it is

probable that there will be an outflow of Vestas’ financial

resources to settle the obligation. Provisions are measured at

management’s best estimate of the costs required to settle

the obligation. Discounting is applied where relevant.

Vestas accrues for the estimated cost of the warranty upon recog-

nition of the sale of the product. The costs are estimated based

on actual historical costs incurred and on estimated future costs

related to current sales, and are updated periodically. Actual

warranty costs are charged against the provision for warranty.

Restructuring costs are recognised as liabilities when a

detailed, formal restructuring plan has been announced to

those affected no later than the balance sheet date.

A provision for loss-making contracts is made where the

expected benefits to Vestas from the contract are lower

than the unavoidable costs of meeting obligations under the

contract. Loss making construction contracts in progress are,

however, recognised in construction contracts in progress.

Provision for legal disputes are recognised where a legal

or constructive obligation has been incurred as a result of

past events and it is possible that there will be an outflow of

resources that can be reliably estimated. In this case, Vestas

arrives at an estimate on the basis of an evaluation of the most

likely outcome. Disputes for which no reliable estimate can be

made are disclosed as contingent liabilities, refer to note 6.4.

Warranty provision charged to the income statementmEUR 2023 2022Gross warranty provision845 926Supplier reclaims (31) (11)Net warranty provision 814 915

←

The table shows movements in warranty

provision and other provisions. Other provisions

mainly relate to provisions for legal claims and

loss making contracts.

80

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4 Risk management and capital structure

The interest bearing position

(net), at the end of 2023.

EUR

32m

81Vestas Annual Report 2023

In brief Strategy and ambitions Business area progress Governance Statements Additional informationFinancial statements

→ 4�1 Financial risk management

→ 4�2 Hedge accounting

→ 4�3 Financial assets and liabilities

→ 4�4 Share capital

→ 4�5 Earnings per share

4.1 Financial risk management

Vestas’ policy for managing

financial risks

Financial risk management is an integrated part of Vestas’

operating activities. Vestas is exposed to a number of financial

risks through its international operations. Financial risks are

monitored and managed centrally. The Treasury Policy outlines

the overall objectives and policies for Vestas’ financial risk

management. The Treasury Policy is approved by the Board,

and revised on a continuous basis to adapt to the changing

financial risks and market situation. The Treasury Policy sets

the limits for the various financial risks as well as Vestas’

hedging policy. It is Vestas’ policy only to use derivatives

to hedge commercial exposures and not to enter into any

speculative transactions.

Capital structure

The Board and Executive Management regularly assess

whether Vestas’ capital structure is in the shareholders’ best

interest. The objective is to create the necessary flexibility

and stability to implement strategic development work, while

in the long-term achieving Vestas’ financial ambitions and

maintain our capital structure target of a net interest-bearing

debt/ EBITDA ratio below 1x. Furthermore, Vestas has an

Investment Grade Baa2 rating with Stable Outlook from

Moody's Investors Services.

Liquidity risks

Vestas manages its liquidity risk in line with the Treasury

Policy to ensure having sufficient and diversified financial

resources to service its financial obligations. Financial

resources are managed through a combination of cash, money

market deposits and highly rated marketable securities

as well as committed and uncommitted credit facilities

with a diversified group of long-standing banking partners

and access to the public bond markets through the EMTN

programme.

Vestas’ main credit facility, a EUR 2,000m committed

revolving multi-currency credit facility with a group of leading

banks is available for general corporate purposes, including

guarantees issuance, with a final maturity in 2028. As at

end of 2023, EUR 771m of this revolving credit facility was

converted into ancillary bank guarantees issuance facilities

leaving EUR 1,229m available for cash drawings. The

revolving credit facility is subject to customary undertakings,

a change of control clause resulting in repayment of

the credit facility in the event of change in control and a

financial covenant that is subject to testing under certain

circumstances. In 2023, the financial covenant has not been

subject to testing and is not expected to be subject to testing

in 2024.

Additionally, Vestas in March 2023 signed a EUR 750m

committed revolving multi-currency credit facility with a group

of leading banks. The facility has a tenor of 1 year and includes

a 6-month extension option at lenders discretion.

Vestas maintains its access to liquidity and long-term funding

through the existing EUR 3,000m EMTN programme. The

programme is a versatile platform available for quick access

to the corporate bond market from short maturities (1-year) to

very long maturities (15+ years).

Liquidity is managed and optimised centrally by using cash

pools, in-house bank solutions, and ongoing diligent cash- and

working capital management practices. As part of managing

short term liquidity, Vestas also has access to and make use of

a number of uncommitted money market facilities (EUR 475m

in total) granted by core relationship banks. The committed

revolving credit facilities combined with the uncommitted

money market lines provide additional financial headroom

for the Group. Further funding can be provided by the EMTN

programme.

On 15 March 2023, Vestas secured further long-term funding

with a new EUR 500m sustainability-linked bond. This bond

will mature in 2026. Furthermore, on 22 November 2023,

Vestas strengthened its liquidity position with a EUR 500m

sustainability-linked bond. This bond will mature in 2031.

In addition, Vestas have two EUR 500m bonds issued in

2022 maturing in 2029 and 2034. The EMTN programme's

remaining capacity is EUR 1,000m.

Accounting policies

Cash and cash equivalents included in Vestas’ cash manage-

ment comprise cash on hand, deposits held at call with financial

institutions, other short-term, highly liquid investments with

original maturities of three months or less that are readily

convertible to known amounts of cash and which are subject to

an insignificant risk of changes in value, and bank overdrafts.

Cash and cash equivalents with disposal restrictions are in-

cluded in day-to-day cash management and fulfils the criteria

as cash and cash equivalents. Cash with disposal restrictions

includes cash pledged to guarantee providers as security for

guarantee obligations to obtain lower commission rates.

Financial risk How Vestas manages the risk

Liquidity risk Cash and cash equivalents, supplemented by availability of committed credit lines and borrowing facilitiesCredit risk Diversification of bank exposure, credit limits and guaranteesMarket risk, foreign exchange Currency forward contracts and currency swapsMarket risk, interest risk Fixed interest loans and interest rate derivativesMarket risk, commodity price risk Fixed price agreements with suppliers and commodity contracts

Available financial resources

mEUR 2023 2022Liquidity positionFinancial investments101 95Cash and cash equivalents without disposal restrictions 3,288 2,352Cash and cash equivalents with disposal restrictions 30 26Cash and cash equivalents as at 31 December 3,318 2,378

Credit facilities

Main credit facility1,229 1,229Other credit facilities 80 80Total available financial resources 4,728 3,782

↓

The table shows Vestas’ liquidity

position and available credit facilities.

82

Financial statements

In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

4.1 Financial risk management – continued

83

Financial statements

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2023 2022Contractual cash flowsCarrying amount Contractual cash flowsCarrying amount Maturity of financial assets and liabilitiesfinancial financial mEURinstrumentsinstruments0-1 year 1-2 years >2 years Total 0-1 year 1-2 years >2 years TotalTotal financial assets, non-current and current7,586 281 13 7,880 7,853 5,990 112 13 6,115 6,083Financial liabilities, non-current and currentLeasing liabilities154 133 442 729 556 142 104 371 617 493Other financial debts138 80 2,795 3,013 2,513 175 26 1,658 1,859 1,613Total financial debts292 213 3,237 3,742 3,069 317 130 2,029 2,476 2,106Foreign currency derivatives353 76 22 451 451 305 37 6 348 348Commodity derivatives8 - - 8 8 14 2 - 16 16Other liabilities200 102 - 302 302 257 6 - 263 263Other liabilities and derivative financial instruments561 178 22 761 761 576 45 6 627 627Trade payables3,738 - - 3,738 3,738 4,089 - - 4,089 4,089Contingent consideration139 146 43 328 318 115 32 181 328 321Financial guarantee contracts33 - - 33 - 46 - - 46 -Total financial liabilities, non-current and current4,763 537 3,302 8,602 7,886 5,143 207 2,216 7,566 7,1432023 2022Changes to financial liabilitiesLease Issued Credit Contingent Lease Issued Credit Contingent mEURliabilitiesbondsfacilitiesconsideration Totalliabilitiesbondsfacilitiesconsideration TotalBalances as at 1 January493 991 622 321 2,427 545 0 571 320 1,436Proceeds from borrowings- 991 146 - - 990 766 -1,1371,756Additional lease liabilities237 - - - 102 - - -237102Payment of lease liabilities(162) - - -(162)(147) - - -(147)Disposal of right-of-use asset(6) - - - (6) (1) - - - (1)Payments of financial debt- - (221) (5) (226) - - (713) - (713)Unwinding of financial liabilities- - - 2 2 - 1 - 1 2Transfer to liabilities held for sale- - - - - (4) - - - (4)Exchange rate adjustments(6) - (16) - (22) (2) - (2) - (4)Balances as at 31 December556 1,982 531 318 3,387 493 991 622 321 2,427

4.1 Financial risk management – continued

Credit risks

Credit risks are managed according to the Treasury Policy.

Vestas is exposed to credit risks arising from cash and cash

equivalents, including money market deposits, investments

in marketable securities, derivative financial instruments,

and trade and other receivables. The Treasury Policy sets

limits for the credit risk exposure. For financial institution

counterparties, this is based on the counterparty’s credit

rating, for other counterparties, this is based on mitigating

actions, such as third-party quaranties.

As at 31 December 2023, Vestas considers the maximum

credit risk related to financial institution counterparties to be

EUR 3,419m (2022: EUR 2,473m), and the total credit risk is

considered to be EUR 7,293m (2022: EUR 5,719m).

Trade receivables and contract assets

Trade receivables are mainly with counterparties within the

energy sector. The credit risk depends, among other things,

on the development within this sector and the country in

which the individual customer operates.

Upon signing a contract for the delivery of wind turbines or

wind power plants with a customer, a prepayment is received.

The remaining consideration is usually invoiced and paid in

instalments at different stages of the project. For service

contracts, customers are usually invoiced in equal instalments

over the duration of the service contract. Payment terms are

typically one month from the invoice date.

Contract assets are by nature not overdue. Vestas does not

expect to have any contracts where the period between the

transfer of the promised goods or services to the customer and

payment by the customer exceeds one year. Therefore, Vestas

does not adjust any of the transaction prices for the time value

of money.

Trade receivables from customers are grouped based on loss

patterns in assessing the expected credit losses. Contract

assets are grouped with trade receivables as these relate

to unbilled work in progress with same credit risk as trade

receivables.

The allowance for expected lifetime credit losses is

determined using a provisional matrix based on past due

dates, historical loss rates and current and forward-looking

information, including geographical risk, the level of security

obtained as well as individual assessment.

The past due date analysis and expected credit loss allowance

for trade receivables and contracts assets is set out in the

following tables.

As at 31 December 2023, Vestas’ trade receivables and

contract assets per geographical areas can be specified as

follows: 57 percent in EMEA, 33 percent in Americas, and 10

percent in Asia Pacific (2022: 59 percent in EMEA, 30 percent

in Americas, and 11 percent in Asia Pacific).

As at 31 December 2023, no single customer accounted

for more than 10 percent of Vestas’ total trade receivables

(2022: 0).

The commercial credit risk relating to the outstanding trade

receivables balance as of 31 December 2023 was mitigated

by EUR 595m (2022: EUR 535m) received as security, such

as third-party guarantees. Historically, Vestas has not incurred

significant losses on trade receivables.

Financial instruments and cash deposits

Group Treasury manages balances with financial institutions and

the associated credit risk in accordance with Vestas’ Treasury

Policy assessing the individual counterparty’s credit rating.

95 percent of Vestas’ exposure towards financial institutions are

with counterparties with a credit rating in the range of A to AAA.

Vestas has entered into ISDA agreements with all financial

institution counterparties used for trading derivative financial

instruments under which Vestas has a right to set-off should

certain credit events occur, which means that Vestas’ actual

credit risk is limited to the net assets per counterparty.

Expected credit losses

on trade receivables and

2023 2022

contract assetsCarrying Expected Loss Carrying Expected Loss mEURamountloss rateallowanceamountloss rateallowanceNot overdue2,679 0.2% (5) 2,404 0.1% (2)Overdue 0-60 days 207 0.3% (1) 115 0.2% 0Overdue 61-120 days 38 2.3% (1) 39 1.8% (1)Overdue 121-180 days 28 3.0% (1) 21 4.8% (1)Overdue 181-365 days 42 9.3% (4) 52 5.9% (3)Overdue more than 365 days88 14.0% (14) 48 33.9% (25)Total 3,082 (26) 2,679 (32)Write-down as at 1 January (32) (36)Reversal of write-downs 10 7Write-downs realised - 2Write-downs in the year (4) (5)Write-down as at 31 December(26) (32)

Netting of financial assets

and liabilities

mEUR

2023 2022

Carrying

amount

balance

sheet

Netting

agree ments

not offset in

the balance

sheet Net amount

Carrying

amount

balance sheet

Netting

agree ments

not offset in

the balance

sheet Net amount

Derivatives461 (236) 225 349 (197) 152Financial assets 461 (236) 225 349 (197) 152Derivatives 459 (236) 223 364 (197) 167Financial liabilities 459 (236) 223 364 (197) 167

↑

The table details financial assets and liabilities which are

subject to netting in case of certain credit events.

84

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In brief Strategy and ambitions Business area progress Statements Additional informationGovernance

4.1 Financial risk management – continued

Market risks

Vestas is exposed to various market risks with the main

risks being foreign currency risks, commodity price risks and

interest rate risk. All market risks are managed in accordance

with the Treasury Policy.

Foreign currency risks

Vestas’ international business activities involves local Vestas

entities making transactions in currencies other than the

entity's functional currency. Consequently, Vestas’s income

statement, balance sheet and cash flows are exposed to

fluctuations in foreign currencies. The foreign currency

exposures arise primarily from purchases of materials and the

sales of wind turbines and service agreements.

Vestas objective is to reduce the impact from short-term

fluctuations in foreign currencies on the income statement and

to increase the predictability of the financial results. Foreign

currency risks are reduced by purchasing and producing in

local markets and by hedging the foreign currency exposures

in according to the Treasury Policy.

Vestas hedges foreign currency exposures related to its firm

wind turbine order backlog. For committed exposures with

durations of 18 months or more, hedging is performed with

shorter maturity (12-18 months). Furthermore, Vestas hedges

foreign currency exposure relating to monetary balances

on the balance sheet, i.e. accounts receivables, accounts

payables, cash at bank, cash in in-house bank accounts and

loan/overdraft items.

Foreign currency risks related to long-term investments and

it’s service business are not hedged based on an overall risk,

liquidity and cost perspective.

Foreign currency exposures are primarily hedged through

foreign currency forward contracts and foreign currency

swaps. Vestas hedge strategy is to centralise foreign currency

exposure in Vestas Wind Systems A/S through internal

contracts and trade the net currency exposures in the market.

The majority of Vestas’ sales are in USD and EUR. The EUR

exchange rate risk is regarded as low in Danish entities due

to Denmark’s fixed exchange rate policy towards EUR. EUR

sales outside Europe are limited. Despite the significant sales

in USD, Vestas’ currency exposure in USD has decreased as a

result of increased sourcing of materials and components in

USD. Due to Vestas being by nature a project business, the risk

exposures towards specific foreign currencies changes from

one year to another, depending on the geographical areas in

which Vestas has its activities.

Commodity price risks

Commodity price risks in Vestas mainly relate to fluctuations

in raw materials which are used directly or indirectly in the

production and delivery of wind turbines. The commodity

price risk can be divided into a direct exposure and an indirect

exposure. The direct exposure is related to purchase of the raw

material. The indirect exposure is related to the purchase of

components as well as transportation costs, primarily by sea,

where the price is linked to the prices of commodities such as

metals and bunker fuel. The risk is managed by a combination

of customer indexation, fixed price agreements with suppliers

and by entering into commodity derivatives.

Interest rate risks

Interest rate risk mainly relates to interest-bearing debt with

floating interest rates, interest rate derivatives used to hedge

and cash and cash equivalents. As at 31 December 2023, 81

percentage (2022: 71percentage) of Vestas' long-term debt

financing in the form of bonds and loans was entered into with

fixed interest rates.

As at 31 December 2023, cash and cash equivalents

amounted to EUR 3,318m and interest-bearing debt with

floating interest rates amounted to EUR 531m. An increase

in relevant interest rates of 1 percentage point would have

increased profit before tax in 2023 by EUR 28m (2022:

increased by EUR 19m).

Sensitivity analysis

mEUR Change

2023 2022

Effect on

profit/ (loss)

before tax

Effect on

equity

before tax

Effect on

profit/ (loss)

before tax

Effect on

equity

before tax

Foreign currency riskUSD10% 36 182 (49) 159AUD 10% (5) (92) 6 (81)BRL 10% 17 (93) 15 (59)GBP 10% (16) (91) (13) (88)TWD 10% 1 (93) (12) (107)PLN 10% 15 20 - -CNY 10% (5) (83) (16) 72Commodity price risksMetals10% - 14 - 16Fuels 10% - 1 - 4

↑

The sensitivity analysis shows the impact on net profit/(loss) before tax and other

comprehensive income of a 10 percent increase in our most significant currencies

towards the Euro as well as our most significant commodities. The analysis

includes the impact from cash flow hedging instruments on equity before tax and

excludes the impact from the hedged exposures such as future purchases or sales

since these are not recognised in the balance sheet. If the hedged exposures were

included the impact from hedge instruments would be offset in their entirety. The

analysis is based on the assumption that all other variables remain constant.

85

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4.2 Hedge accounting

In 2023, Vestas used derivative financial instruments to

hedge foreign currency risk and commodity price risk.

Foreign currency risks

The risks relating to purchases and sales in foreign currencies

as well as monetary balances denominated in foreign curren-

cies are hedged using foreign currency forward contracts

and foreign currency swaps. Currency forward contracts and

currency swaps relating to highly probable forecasted sales

and purchases are designated as cash flow hedges. Currency

forward contracts and currency swaps relating to recognised

monetary balances are designated as fair value hedges.

Some sales agreements contain foreign currency elements.

In sales agreements where the sales currency is not closely

related to the functional currency nor a commonly used

currency in the country in which the sales takes place, the

foreign currency element is treated as an embedded financial

derivative. The embedded financial derivative is designated as

a cash flow hedge of forecasted purchases.

As at 31 December 2023, the average exchange rates for

cash flow hedges in EUR contracts were AUD 0.6 (2022: AUD

0.6), BRL 0.2 (2022: BRL 0.2), CNY 0.1 (2022: CNY 0.1),

GBP 1.1 (2022: GBP 1.1), TWD 0.03 (2022: TWD 0.03) and

USD 0.9 (2022: USD 0.9). The average exchange rates for fair

value hedges in EUR contracts were USD 0.9 (2022: USD 0.9),

CNY 0.1 (2022: CNY 0.1) and GBP 1.2 (2022: GBP 1.2).

Commodity price risk

The commodity price risks relating to fluctuations in the prices

of raw materials used directly or indirectly in the production

is hedged using commodity forward contracts. Commodity

forward contracts related to highly probable forecasted

purchases are designated as cash flow hedges.

As at 31 December 2023, the average forward price in EUR

per metric tonne for cash flow hedges were for copper: 9,536

(2022: 9,604), coking coal: 304 (2022: 332), iron ore: 107

(2022: 127), aluminium: 2,547 (2022: 2,506), bunker fuel:

571 (2022: 697).

In general, the primary sources of ineffectiveness are changes

to planned purchases or planned payments leading to

overhedging. In 2023, no hedge ineffectiveness was identified

(2022: No ineffectiveness).

Accounting policies

Derivative financial instruments are initially measured at

fair value at the trade date and subsequently remeasured at

fair value at the reporting date. The fair value of derivative

financial instruments are presented in other receivables or

other liabilities.

Changes in the effective portion of the fair value of cash flow

hedges are recognised in other comprehensive income. Upon

realisation of the hedged item, gains or losses on the cash

flow hedges are transferred from the equity hedging reserve

into the initial carrying amount of the hedged item. Changes

in any ineffective portion of the fair value of cash flow hedges

are recognised in the income statement as financial items.

Ineffectiveness is mainly resulting from differences in the

timing of the cash flows of the hedged items and the hedging

instruments and resulting from changes to the forecasted

amount of cash flows of hedged items. Changes in the fair

value of fair value hedges are recognised in the income

statement as financial items.

2023 2024 After 2024

2023 2022Contract Expected recognitionContract Expected recognitionMaturity of hedging instrumentsnotional notional mEURamount2024 2025 After 2025 amountCash flow hedges Foreign currency risk(2,398) (745) (1,186) (467) (2,098) (512) (907) (679) AUD (636) (517) (119) - (863) (449) (414) -BRL (823) (520) (303) - (1,100) (467) (633) -CNY 1,105 897 179 29 876 592 283 1 GBP (761) (208) (130) (423) (746) (244) (159) (343) TWD (463) (315) (147) (1) (951) (298) (315) (338)USD 558 636 (147) 69 1,455 731 700 24 Other (1,378) (718) (519) (141) (769) (377) (369) (23)Commodity 210 195 15 - 213 177 36 - Metals 191 176 15 - 171 136 35 -Fuels 19 19 - - 42 41 1 -Fair value hedges 1,883 1,635 248 - 510 510 - - USD 940 940 - - 34 34 - - GBP 101 101 - - 205 205 - - CNY 498 498 - - 367 367 - - Other 344 96 248 - (96) (96) - - Total (305) 1,085 (923) (467) (1,375) 175 (871) (679)

←

The table shows the contract notional amount and expected

timing of recognition of hedging instruments as at

31 December 2023. Positive amounts reflect that Vestas

on a net basis have contracts to purchase the respective

foreign currencies or commodities, and negative amounts

reflect that Vestas on a net basis have contracts to sell the

respective foreign currencies or commodities.

86

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4.2 Hedge accounting – continued

Asset Liabilities

2023 2022Carrying amount of Contract Carrying amountContract Carrying amounthedging instrumentsnotional notional mEURamountAsset Liabilities amountForeign currency riskCash flow hedges(2,398) 403 430 (2,098) 321 311Fair value hedges 1,883 37 21 510 24 30Commodity price riskCash flow hedges210 14 8 213 3 23Interest rate riskCash flow hedges170 7 - 480 17 -Total (135) 461 459 (895) 365 364Recognised in income statement2,053 44 21 990 41 30Recognised in other comprehensive income(2,188) 417 438 (1,885) 324 334Total (135) 461 459 (895) 365 364

Carrying amount of

hedged items

mEUR

2023 2022

Carrying amount of

hedged items

Change in fair

value used

for measuring

ineffectiveness

Carrying amount of

hedged items

Change in fair

value used

for measuring

ineffectivenessAsset Liabilities Asset Liabilities

Currency risk

Forecast sales and

purchases

- - 59 - - 185

Monetary balances 3,394 1,088 15 1,230 1,950 (6)

Commodity risk

Forecast sales and

purchases

- - 11 - - (19)

Total 3,394 1,088 85 1,230 1,950 160

Cash flow hedge reservemEUR 2023 2022Hedge reserve as at 1 January(1) 16Change in fair valueForeign currency hedges59 171Commodity price hedges 11 (5)Amount reclassified to profit and lossForeign currency hedges recognised in revenue(63) (46)Foreign currency hedges recognised in production costs (70) (86)Interest rate hedge recognised in financial items - (2)Amount transferred to non-financial itemsForeign currency hedges recognised as prepayment from customers(45) 4Foreign currency hedges recognised as inventory 59 (49)Commodity hedges recognised as inventory 7 (14)Tax effect 19 10Hedge reserve as at 31 December (24) (1)

↑

In the table the effect from hedging instruments on the balance sheet,

profit and loss and other comprehensive income is shown.

↑

The risk categories recognised in the cash flow hedge

reserve is reconciled in the table below with items

impacting other comprehensive income for the period.

←

The carrying amounts of

hedged items on the balance

sheet are shown in the table.

87

Financial statements

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4.3 Financial assets and liabilities

2023 2022Total carrying Carrying Carrying Categories of financial instrumentsTotal carrying Carrying Carrying Categories of financial instrumentsamount in amount amount amount in amount amount the balance non-financial financial Fair value – hedging Fair value through Amortised the balance non-financial financial Fair value – hedging Fair value through Amortised mEURNotesheetinstrumentsinstrumentsinstrumentsprofit or losscostsheetinstrumentsinstrumentsinstrumentsprofit or losscostFinancial assets, non-current and currentOther investments99 - 99 - 64 35 88 - 88 - 62 26Financial investments 101 - 101 - 101 - 95 - 95 - 95 -Foreign currency derivatives 2.5 440 - 440 440 - - 346 - 346 346 - -Commodity derivatives 2.5 14 - 14 14 - - 3 - 3 3 - -Other derivatives 2.5 7 - 7 7 - - 17 - 17 17 - -Other receivables 2.5 1,187 395 792 - - 792 1,075 598 477 - - 477Trade receivables 1,305 - 1,305 - - 1,305 1,280 - 1,280 - - 1,280Contract assets 2.3 1,777 - 1,777 - - 1,777 1,399 - 1,399 - - 1,399Cash and cash equivalents 3,318 - 3,318 - - 3,318 2,378 - 2,378 - - 2,378Total financial assets, non-current and current 8,248 395 7,853 461 165 7,227 6,681 598 6,083 366 157 5,560Financial liabilities, non-current and currentFinancial debts3,069 - 3,069 - - 3,069 2,106 - 2,106 - - 2,106Foreign currency derivatives 2.6 451 - 451 451 - - 348 - 348 348 - -Commodity derivatives 2.6 8 - 8 8 - - 16 - 16 16 - -Other liabilities 2.6 917 615 302 - - 302 1,044 781 263 - - 263Trade payables 3,738 - 3,738 - - 3,738 4,089 - 4,089 - - 4,089Contingent consideration 318 - 318 - 318 - 321 - 321 - 321 -Total financial liabilities, non-current and current 8,501 615 7,886 459 318 7,109 7,924 781 7,143 364 321 6,458

At 31 December 2023, financial debts comprise green loan

facility EUR 475m (2022: EUR 475m), sustainability-linked

bonds EUR 1,982m (2022: EUR 991m), other credit facilities

EUR 56m (2022: EUR 147m) and lease liability EUR 556m

(2022: EUR 493m). As at 31 December 2023, the fair value

of sustainability-linked bonds amounted to EUR 1,931m

(2022: EUR 859m). The fair value of the long-term interest-

bearing bonds is based on their listed market price (Level 1).

Accounting policies

Other investments include investments in non-listed equity

shares and rental deposits. Equity investments are irrevocably

designated at fair value through profit and loss.

Financial investments comprise short-term deposits and

marketable securities managed on a fair value basis with

a continuously observation of their performance. Financial

investments do not meet the definition of cash and cash

equivalents. On initial recognition financial investments are

recognised in the balance sheet at fair value. Subsequently,

assets held to maturity are measured at amortised cost and

assets held to sell are measured at fair value through profit

or loss. Any changes in the fair value of financial investments

remeasured at fair value is recognised in the income

statement as financial items.

Bond debt and bank debt (financial debts) are recognised

at inception at fair value (typically proceeds received)

net of transaction costs incurred. In subsequent periods,

the liabilities are measured at amortised cost, so that the

difference between the cost (proceeds) and the nominal value

is recognised in profit (loss) for the year as interest expenses

over the term of the loan, using the effective interest rate

method.

Contingent consideration relating to Vestas' acquisition of a

25 percent stake in Copenhagen Infrastructure Partners P/S

(CIP) is classified as financial debt and measured at fair value.

88

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4.3 Financial assets and liabilities – continued

Fair value hierarchy

Financial instruments measured at fair value are categorised

into the following levels of the fair value hierarchy:

Level 1: Observable market prices for identical instruments.

Level 2: Valuation techniques primarily based on

observable prices or traded prices for comparable

instruments.

Level 3: Valuation techniques primarily based on

unobservable prices.

Other investments and Financial Investments

Other investments in non-listed equity shares are measured

at fair value determined using generally accepted valuation

techniques based on unobservable inputs, and are categorised

as Level 3. Financial investments in marketable securities

are measured at fair value based on market prices, and are

categorised as Level 1.

Derivatives

Foreign currency forward contracts, embedded derivatives and

commodity forward contracts are measured at fair value using

generally accepted valuation techniques based on observable

market prices and forward market rates, and are categorised

as Level 2.

Renewable energy certificates

Vestas has a commitment in the US to purchase Renewable

Energy Certificates (RECs) during a 4 year period from

2028 to 2031 based on production of MW in this period at

a fixed price. The contract qualifies as a financial instrument.

The fair value measurement is based on Level 3 input. As

per 31 December 2023, the estimated maximum nominal

commitment under the contract is EUR 18m (2022: EUR 19m

for a 10 year commitment period). Given the uncertainties

underpinning the future market for selling RECs, Management

has determined that the best evidence of fair value for the

RECs is the transaction price. Consequently, the net fair value

of the contract has been measured at EUR 0 (2022: EUR 0).

Contingent consideration

Contingent consideration relating to Vestas’ acquisition of a

25 percent stake in CIP’s parent companies in February 2021

is measured at fair value based on expected total payments

of EUR 326m in the period 2024 to 2026 discounted using

a 1 percent normalised financing interest rate (Level 3 in fair

value hierarchy).

Expected payments depend on expected management fees

earned from funds managed by CIP. As at 31 December 2023,

the fair value amounted to EUR 318m (2022: EUR 321m).

During 2023, instalments paid amounted to EUR 5m (2022:

EUR 0) and interest amounted to EUR 2m (2022: EUR 1m).

Total Level 1 Level 2 Level 3

2023 2022Financial instruments Fair valueFair valuemeasured at fair valueCarrying Carrying mEUR Valuation techniqueamountTotal Level 1 Level 2 Level 3 amountOther investments Market prices/Discounted cash flow64 64 - - 64 62 62 - - 62Financial investments Market prices 101 101 101 - - 95 95 95 - -Foreign currency Forward pricing and derivativesswap models440 440 - 440 - 346 346 - 346 -Commodity derivatives Forward pricing14 14 - 14 - 3 3 - 3 -Interest derivatives Swap model 7 7 - 7 - 17 17 - 17 -Financial assets 626 626 101 461 64 523 523 95 366 62Foreign currency Forward pricng and derivativesswap models451 451 - 451 - 348 348 - 348 -Commodity derivatives Forward pricing 8 8 - 8 - 16 16 - 16 -Contingent consideration Discounted cash flow 318 318 - - 318 321 321 - - 321Financial liabilities 777 777 - 459 318 685 685 - 364 321

89

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4.4 Share capital

Number of shares 2023 2022Number of shares as at 1 January1,009,867,260 1,009,867,260Number of shares as at 31 December1,009,867,260 1,009,867,260Shares outstanding 1,006,473,655 1,006,177,558Treasury shares 3,393,605 3,689,702Number of shares as at 31 December1,009,867,260 1,009,867,260

Vestas Wind Systems A/S has acquired

treasury shares as follows:

2023 2022Average share price, purchases (DKK)203 -Purchase amount (mEUR) 27 -

Treasury shares are acquired to cover issues of shares under

Vestas’ incentive programmes or as part of its capital structure

strategy. The share capital has been fully paid.

Net proposed cash distribution to shareholders

mEUR 2023 2022Dividend- -

Dividend excluding treasury shares.

Movements in share capital

During 2019, there was a reduction of share capital by DKK

6,974,040 nominally by cancelling 6,794,040 shares from

Vestas’ holding of treasury shares. During 2020, there was

a reduction of share capital by DKK 1,977,848 nominally

by cancelling 1,977,848 shares from Vestas’ holding of

treasury shares. Vestas Wind Systems A/S has completed a

capital increase of nominally DKK 5,049,337, representing

5,049,337 shares of nominally DKK 1 each. During 2021, a

share split of Vestas’ shares with a ratio 1:5 was carried out

with effect as of 28 April 2021. Consequently, each share of

nominally DKK 1.00 was split into five new shares of nominally

DKK 0.20. Except for these five transactions, the share capital

has not changed in the period 2018 to 2023. All shares

rank equally.

Accounting policies

Treasury shares

Treasury shares are deducted from the share capital upon

cancellation at their nominal value of DKK 0.20 per share.

Differences between this amount and the amount paid to

acquire treasury shares are deducted directly in equity.

Dividend

A proposed dividend is recognised as a liability at the time

of adoption at the Annual General Meeting (declaration date).

The proposed dividend for the year is included in retained

earnings.

4.5 Earnings per share

2023 2022Profit for the year (mEUR) – owners of Vestas Wind Systems A/S 77 (1,572)Weighted average number of ordinary shares 1,009,867,260 1,009,867,260Weighted average number of treasury shares (3,507,394) (3,689,702)Weighted average number of ordinary shares outstanding 1,006,359,866 1,006,177,558Dilutive effect of restricted performance shares 3,439,847 -Average number of shares outstanding including restricted performance shares 1,009,799,713 1,006,177,558Earnings per share, basic, EPS (EUR) 0.08 (1.56)Earnings per shares, diluted, EPS-D (EUR) 0.08 (1.56)

90

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5 Ta x

24%

The effective tax rate 2023

Our Corporate Tax Policy

can be downloaded from our

corporate website�

91Vestas Annual Report 2023

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→ 5�1 Income tax

→ 5�2 Deferred tax

5.1 Income tax

Income tax for the year

mEUR 2023 2022Current tax on profit for the year(54) 134Deferred tax on profit for the year 97 (317)Tax on profit for the year 43 (183)Change in income tax rate 2 -Adjustments relating to previous years (net) (21) 59Income tax for the year recognised in the income statement, expense/(income) 24 (124)Deferred tax on other comprehensive income for the year (20) (15)Tax recognised in other comprehensive income, expense/(income) (20) (15)Deferred tax on equity transactions 0 1Tax recognised in equity 0 1Total income taxes for the year, expense/(income) 4 (138)

Computation of effective tax rate

Percent 2023 2022Income tax rate in Denmark22 22Adjustment relating to previous years (net) (20) (4)Deviation in foreign subsidiaries’ tax rates compared to the Danish tax rate (net)50 (2)Income and expenses non-taxable 4 (4)Change in write-down of deferred tax assets and tax provisions(32) (5)Income/loss from investments in joint ventures - -Effective tax rate 24 7

Key accounting estimates

Income taxes and uncertain tax position

The Group continuously wants to be a compliant corporate tax

citizen in collaboration with our operations and stakeholders

and to support shareholder interest and our reputation. To

ensure compliance, national and international tax laws as

well as the OECD Guidelines are acknowledged and followed

throughout the world.

The Group is subject to income taxes around the world and

therefore recognise that significant judgement is required in

determining the worldwide accrual for income taxes, deferred

income tax assets and liabilities and provision for uncertain

tax positions.

The global business implies that the Group may be subject

to disputes on allocation of profits between different

jurisdictions. Management judgement is applied to assess

the expected outcome of such tax disputes which is provided

for in provision for uncertain tax positions. Management

believes that provisions made for uncertain tax positions not

yet settled with local tax authorities at year end is adequate.

However, the actual obligation may deviate and is dependent

on the result of litigations and settlements with the relevant

tax authorities.

The provision for uncertain tax positions has been derived by

applying probability weighted outcomes for all uncertainties

with multiple potential outcomes and in scenarios where the

outcome is determined by a single point it is determined by the

most probable outcome.

Accounting policies

Tax for the year consists of current tax and deferred tax

including adjustments to previous years and changes in

provision for uncertain tax positions. The tax attributable to

the profit for the year is recognised in the income statement,

whereas the tax attributable to equity transactions is

recognised directly in equity. The tax expense relating to items

recognised in other comprehensive income is recognised in

other comprehensive income

Following developments in ongoing tax disputes primarily

related to transfer pricing cases, uncertain tax positions are

assessed individually and are generally presented as part of

non-current tax receivables or non-current tax payables. The

uncertain tax positions that materialise and become certain or

virtually certain are classified as current tax.

Current tax liabilities and receivables are recognised in the

balance sheet at the amounts calculated on the taxable

income for the year adjusted for tax on taxable incomes for

prior years and for taxes paid on account.

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5.1 Income tax – continued

Income tax assets and liabilities

mEUR 2023 2022Income tax as at 1 January, net assets/(liabilities)(84) (70)Exchange rate adjustments (4) 6Income tax for the year 54 (134)Adjustments relating to previous years (352) (50)Settlements against VAT receivables 45 20Income tax paid in the year 261 144Income tax as at 31 December, net assets/(liabilities) (80) (84)Receivables specified as follows:0-1 year209 51> 1 year 522 100Income tax receivables 731 151Liabilities specified as follows:0-1 year(176) (58)> 1 year (635) (177)Income tax liabilities (811) (235)

5.2 Deferred tax

No provision is made for deferred tax regarding undistributed

earnings in subsidiaries, as Vestas controls the release of the

obligation.

Deferred tax recognised on tax losses is mainly in jurisdictions

where there are no expiry limits. As at 31 December 2023,

the value of recognised deferred tax assets amounted to EUR

795m (2022: EUR 497m), of which EUR 582m (2022: EUR

399m) relates to tax loss carry-forwards. Out of recognised

tax loss carry forwards of EUR 582m (2022: EUR 399m), EUR

20m (2022: EUR 8m) are subject to expiry if not used within

5-10 years whereas the remaining EUR 562m (2022: EUR

391m) are not subject to any limitations. Following Vestas'

transfer pricing policy, these losses are expected to be utilised.

Of the total deferred tax relating to tax loss carry-forwards

write down, EUR 20m (2022: EUR 60m) relates to Denmark.

The recognised loss carry-forward relating to Denmark

amounts to EUR 2,408m (2022: EUR 1,727m).

As many other multinational businesses, Vestas recognises

the increased focus on the transfer pricing and the con sequent

allocation of profits to the relevant countries. Even though

the Vestas’ subsidiaries pay corporate tax in the countries

in which they operate, Vestas is still part of a number of tax

audits on different locations. Some of these disputes concern

significant amounts and uncertainties. Vestas believes

that the provisions made for uncertain tax positions not yet

settled with the local tax authorities is adequate. However, the

actual obligation may differ and is subject to the result of the

litigations and settlements with the relevant tax authorities.

Key accounting estimates

Valuation of deferred tax assets

The Group recognises deferred tax assets, including the tax

value of tax loss carry-forwards, where Management assesses

that the tax assets may be utilised in the foreseeable future

for set-off against positive taxable income. The assessment

is made on an annual basis and is based on the budgets

and business plans for future years, including planned

business initiatives. Key parameters are expected revenue

and EBIT development considering expected allocation of

future taxable income based on the transfer pricing policy

in place. Due to the uncertainties relating to allocation of

profits, Management has limited the forecast period used to

determine the utilisation to three years.

Of the total tax loss carry-forwards, EUR 147m (2022: EUR

61m) is expected to be realised within 12 months, and EUR

482m (2022: EUR 416m) is expected to be realised later

than 12 months after the balance sheet date.

The assessment in 2023 resulted in a reduction of the write-

down of deferred tax assets of EUR 38m (2022 EUR 21m

additional write-down) with the write down being primarily due

to the fact that certain jurisdictions have more tax assets than

what is expected to be utilised in the foreseeable future.

The value of non-recognised tax assets totals EUR 83m

(2022: EUR 122m), of which EUR 83m (2022: EUR 122m)

relates to write-down of tax assets that are not expected to be

utilised in the foreseeable future.

OECD Pillar Two model rules

Vestas is within the scope of the OECD Pillar Two model

rules also known as the Global Anti-Base Erosion (GloBE)

Rules. Pillar Two legislation has been enacted in Denmark,

the jurisdiction in which Vestas Group is incorporated

and will come into effect from 1 January 2024. The Pillar

Two legislation was not effective at the reporting date

and therefore no related current tax exposure has been

recognised. Vestas applies the exception to recognising

and disclosing information about deferred tax assets and

liabilities related to Pillar Two income taxes, as provided in the

amendments to IAS 12 issued by IASB in May 2023.

Under the legislation, Vestas is liable to pay a top-up tax

for the difference between the GloBE effective tax rate per

jurisdiction and the 15 percentage minimum rate. All Vestas

entities have an effective tax rate that exceeds 15 percentage

in a normalised commercial cycle. However, analysis shows

that individual entities, based on historical data, can drop

below the threshold in individual years. The calculated

theoretical historic top-up tax, adjusted for one-off events,

impact on the Vestas Group effective tax rate is immaterial.

Vestas management is in the process of assessing Vestas'

exposure to the Pillar Two legislation for when it comes

into effect. Vestas is operating in an Industry that is

rapidly changing in terms of growth, markets and products.

Combined with the complexities in applying the legislation

and calculating GloBE income, the quantitative impact of

the enacted or substantively enacted legislation is not yet

reasonably estimable. Therefore, even for those entities with

an accounting effective tax rate above 15 percentage, there

may still be Pillar Two tax implications. Vestas’ tax specialists

are working with colleagues across the value chain to define

with application of the legislation.

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5.2 Deferred tax – continued

mEUR 2023 2022Deferred tax as at 1 January, net assets339 16Exchange rate adjustments (5) 1Deferred tax on profit for the year (97) 317Adjustment relating to previous years 373 (9)Changes in income tax rate 1 -Deferred tax on equity transactions 0 (1)Addition related to acquisitions and equity adjustments - -Tax on other comprehensive income 20 15Deferred tax as at 31 December, net assets 631 339Deferred tax assets specified as follows:Tax value of tax loss carry-forwards (net)629 477Intangible assets (290) (328)Property, plant and equipment (3) (18)Current assets 226 236Provisions 211 131Write-down of tax assets (83) (122)1Other105 121Deferred tax assets 795 497Deferred tax provisions specified as follows:Intangible assets0 1Property, plant and equipment 26 43Current assets 102 89Provisions 44 13Other (8) 12Deferred tax provisions 164 158

1 Other mainly relates to deferred revenue and

share-based payment and hedges.

Accounting policies

Deferred tax is measured using the balance sheet liability

method in respect of all temporary differences between the

carrying amount and the tax base of assets and liabilities.

Deferred tax is, however, not recognised in respect of

temporary differences on initial recognition of goodwill

and other items, apart from business acquisitions, where

temporary differences have arisen at the time of acquisition

without affecting the profit for the year or the taxable income.

In cases where the computation of the tax base may be made

according to different tax rules, deferred tax is measured on

the basis of management’s intended use of the asset and

settlement of the liability, respectively.

Deferred tax assets, including the tax base of tax loss carry-

forwards, are recognised in other non-current assets at the

value at which the asset is expected to be realised, either by

elimination of tax on future earnings or by set-off against

deferred tax liabilities within the same legal tax entity and

jurisdiction.

Deferred tax assets are reviewed on an annual basis and are

only recognised when it is probable that they will be utilised

in future periods.

Adjustments are made to deferred tax to take account of the

elimination of unrealised inter-company profits and losses.

Deferred tax is measured on the basis of the tax rules and tax

rates of the respective countries that will be effective when the

deferred tax is expected to crystallise as current tax based on

the legislation at the balance sheet date. Changes to deferred

tax due to changes to tax rates are recognised in the income

statement except for items recognised directly in equity.

94

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registered in more than

70 different countries�

>1 3 0

entities

6 Other disclosures

95Vestas Annual Report 2023

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→ 6�1 Audit fees

→ 6�2 Assets held for sale

→ 6�3 Related party transactions

→ 6�4 Contingent assets, liabilities,

and contractual obligations

→ 6�5 Non-cash transactions

→ 6�6 Subsequent events

→ 6�7 Legal entities

6.1 Audit fees

mEUR 2023 2022Audit PricewaterhouseCoopers3 3Assurance engagements PricewaterhouseCoopers1 1Tax assistance 1 1Other services 0 1Total 5 6

Vestas’ policy is to follow the 70 percent fee cap restriction

on non-audit services provided by PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab, Denmark, the

auditor of the parent company. PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab is compliant with

the 70 percent fee cap restriction in 2023.

Non-audit services provided by PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab, Denmark,

amounted to EUR 1m, relating to advisory services and

tax compliance advices. Assurance engagements now

include local statutory audit fees for EUR 1m and assurance

engagements for 2022 of EUR 1m are a reclassification from

"Audit".

6.2 Assets held for sale

Vestas has no assets classified as held for sale at 31

December 2023.

On 9 August 2022, Vestas signed an agreement for the sale

of the converters and controls business to KK Wind Solutions

and consequently, the converters and controls business was

classified as held for sale as at 31 December 2022. On 28

February 2023, the transaction closed and a total gain of EUR

154m was recognised, hereof EUR 147m recognised in sale

of technology and EUR 7m recognised in production costs.

6.3 Related party transactions

mEUR 2023 2022

Joint ventures

Revenue for the period29 139Proceeds from investments in joint ventures 10 2Capital contribution 15 21Receivables as at 31 December 2 4Prepayments received balance as at 31 December - 14Other receivables balance as at 31 December - 1

Associates

Revenue for the period2 15Reversal of revenue - (64)Proceeds from investments in associates 2 11Capital contributions 5 9Payable capital contribution as at 31 December - 36Receivables as at 31 December - -Other liabilities as at 31 December 85 85Prepayments paid balance as at 31 December - -Other assets balance at 31 December 3 -

Related parties are considered to be the Board of Directors

(Board) and the Executive Management of Vestas Wind

Systems A/S together with their immediate families. Related

parties also include entities which are controlled or jointly

controlled by the aforementioned individuals.

Transactions with the Board and Executive Management

Transactions with the Executive Management only consist of

normal management remuneration, refer to note 1.6.

With the exception of the board members elected by the

employees, no members of the Board have been employed by

Vestas in 2023.

←

Vestas has had the

following material

transaction with joint

ventures and associates.

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6.4 Contingent assets, liabilities,

and contractual obligations

Guarantees and indemnities

Vestas provides indemnities and guarantees to third parties

on behalf of non-Vestas entities and joint ventures with a

notional amount of EUR 33m (2022: EUR 46m). No guaran-

tees have been utilised during 2023 or in previous years and

none of the indemnities are expected at the balance sheet

date to be utilised.

Contractual obligations

Vestas has entered into binding contracts concerning

purchase of property, plant and equipment to be delivered in

2024 and future periods at a value of EUR 64m (2022: EUR

91m).

Vestas has made commitments to invest in funds managed by

Copenhagen Infrastructure Partners P/S. As at 31 December

2023, undrawn commitments amounted to EUR 272m

(2022: EUR 182m).

Contingent liabilities

In March 2022, a number of lawsuits was filed against Vestas

in relation to a framework agreement which Vestas contends

has expired. Vestas believes the claims to be without merit and

hence has made no provision in relation to the complaints. In

the event that Vestas is not succesful in its defence of these

cases, there potentially could be a financial impact on Vestas.

Vestas is also involved in a number of litigation proceedings

and disputes. It is Management’s assessment that these

proceedings and disputes will not have a material effect on

the financial position of the Group beyond what is already

recognised in assets and liabilities as at 31 December 2023.

Refer to note. 5.2 concerning contingent liabilities on transfer

pricing.

Contingent assets

Vestas has made supplier claims for faulty deliveries. Further,

Vestas is pursuing certain claims against suppliers for faulty

deliveries, as well as claims for supplier implementation and

application of faulty manufacturing processes, in litigation

proceedings. However, it is Management’s opinion that

settlement of these and any settlement amounts are not

virtually certain, and therefore not recognised in the financial

position of Vestas, except for supplier claims accounted for as

other receivables, refer note 2.5.

6.5 Non-cash transactions

mEUR 2023 2022Amortisation, impairment and depreciation for the year of intangible assets and property, plant and equipment789 1,088Profit/(loss) from investments in joint ventures and associates, incl. other relating transactions (22) (11)Write-down of fixed assets (3) -Write-down of inventory (52) 260Warranty provisions in the year (net) 257 293Other provisions in the year (21) 127Interest income (205) (37)Interest expenses 205 37Income tax for the year 24 (146)Cost of share-based payments 34 7Gains/(losses) from property, plant and equipment - (8)Other adjustments for non-cash transactions incl. foreign currency adjustments 171 103

Total 1,177 1,713

6.6 Subsequent events

No events have occurred subsequent to 31 December 2023

which could have a significant impact on the Consolidated

financial statements.

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6.7 Legal entities

1

Name and country Ownership (%)

Parent company

Vestas Wind Systems A/S, Denmark

Production unitsVestas Americas A/S, USA100Vestas Blades America Inc., USA 100Vestas Nacelles America Inc., USA 100Vestas Wind Technology (China) Co. Ltd., China 100Vestas Manufacturing A/S, Denmark 1002Vestas Blades Deutschland GmbH, Germany100WPT Nord GmbH, Germany 1002Vestas Nacelles Deutschland GmbH, Germany100Vestas Blades Italia S.r.l., Italy 100Vestas Control Systems Spain S.L.U., Spain 100Vestas Manufacturing Spain S.L.U., Spain 100Vestas Manufacturing Poland 2 Sp. z o.o., Poland 100Vestas Assembly Poland Sp. z o.o., Poland 100

Name and country Ownership (%)Sales and service unitsVestas Argentina S.A., Argentina100Vestas Mediterranean A/S Sucursal, Bolivia 100UpWind Solutions Canada Ltd., Canada 100Vestas Chile Turbinas Eólica Limitada Santiago, Chile 100Vestas Colombia S.A.S, Colombia 100Vestas Costa Rica S.A., Costa Rica 100Vestas Wind Systems Dominican Republic S.R.L., Dominican Republic100Vestas El Salvador S.A. De C.V., El Salvador 100Vestas Guatemala, Guatemala 100Vestas Honduras S.A. De C.V., Honduras 100Vestas Jamaica Wind Technology Ltd., Jamaica 100Vestas WTG Mexico S.A. de C.V., Mexico 100Vestas Mexicana del Viento S.A. de C.V., Mexico 100Vestas Nicaragua SA, Nicaragua 100Vestas Overseas Panamá S.A., Panama 100Vestas Peru S.A.C., Peru 100Vestas Turbinas Eólicas de Uruguay S.A., Uruguay 100Vestas – American Wind Technology Inc., USA 100

Name and country Ownership (%)Availon Inc., USA100Vestas – Portland HQ LLC, USA 100Vestas Upwind Solutions Inc.. USA 100Vestas – Canadian Wind Technology Inc.. USA 100UpWind Holdings LLC, USA 100Vestas America Holding Inc., USA 100Steelhead Americas LLC, USA 100Steelhead Wind 1 LLC, USA 100Steelhead Wind 2 LLC, USA 100Steelhead Wind 2a LLC, USA 100Steelhead Wind 9 LLC, USA 100Utopus Insights Inc., USA 100Roaring Fork Wind LLC, USA 100Vestas – Australian Wind Technology Pty. Ltd., Australia 100NEG Micon Australia Pty. Ltd., Australia 100Vestas Wind Technology (Beijing) Co. Ltd., China 100Vestas Wind Technology India Pvt Limited, India 100Vestas Japan Co. Ltd., Japan 100Vestas Mongolia LLC, Mongolia 100

Name and country Ownership (%)Vestas New Zealand Wind Technology Ltd., New Zealand100Vestas Wind Technology Pakistan (Private) Limited, Pakistan100Vestas Asia Pacific Wind Technology Pte. Ltd., Singapore 100Vestas Korea Wind Technology Ltd., South Korea 100Vestas Wind Lanka (PVT) Ltd., Sri Lanka 100Vestas Taiwan Ltd., Taiwan 100Vestas Offshore Wind Taiwan Ltd., Taiwan 100Vestas Wind Technology (Thailand) Ltd., Thailand 100Vestas Wind Technology Vietnam LLC, Vietnam 100Vestas Österreich GmbH, Austria 100Vestas Belgium NV, Belgium 100Vestas Offshore Wind Belgium NV, Belgium 100Vestas Bulgaria EOOD, Bulgaria 100Vestas Central Europe – Zagreb d.o.o, Croatia 100Vestas MED (Cyprus) Ltd., Cyprus 100Vestas Czech Republic s.r.o., Czech Republic 100Vestas Asia Pacific A/S , Denmark 100Vestas Central Europe A/S, Denmark 100Vestas Mediterranean A/S, Denmark 100

1 Companies of immaterial significance have been left out of the overview.

2 Vestas Deutschland GmbH, Vestas Blades Deutschland GmbH, Vestas Nacelles Deutschland GmbH, Vestas Services GmbH and Availon GmbH, wholly

owned subsidiaries of Vestas Wind Systems A/S, claiming not to prepare notes and management report to its financial statements pursuant to the

relief provision of section 264 Abs. 3 HGB.

3 The companies are in a liquidation process.

4 Vestas Benelux B.V., wholly owned subsidiary of Vestas Wind Systems A/S, claiming neither to prepare notes and management report to its financial

statements nor conduct a statutory audit on its financial statements pursuant to the relief provision of section 2:403 DCC.

98Vestas Annual Report 2023

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6.7 Legal entities

1

– continued

Name and country Ownership (%)Vestas Northern Europe A/S, Denmark1003Covento A/S, Denmark100Vestas Estonia OÜ, Estonia 100Vestas Finland Oy, Finland 100Vestas France SAS, France 100Vestas Offshore Wind France SAS, France 100Vestas Georgia LLC, Georgia 1002Vestas Deutschland GmbH, Germany1002Vestas Services GmbH, Germany100Availon Holding GmbH, Germany 1002Availon GmbH, Germany100Vestas Hellas Wind Technology S.A., Greece 100Vestas Hungary Kft., Hungary 100Vestas Ireland Ltd., Ireland 100Vestas Italia S.r.l., Italy 100Vestas Kazakhstan LLP, Kazakhstan 100Vestas Eastern Africa Ltd., Kenya 100Vestas Moroc SARLAV, Morocco 100Vestas Norway AS, Norway 100Vestas Poland Sp.z.o.o., Poland 100Vestas Portugal LDA, Portugal 100

Name and country Ownership (%)Portugal Unipessoal Lda. , Portugal100Availon LDA Portugal, Portugal 100Vestas CEU Romania S.R.L, Romania 100Vestas Saudi Arabia Limited Co., Saudi Arabia 100Vestas Senegal S.A.R.L.U, Senegal 100Vestas Central Europe d.o.o. Beograd, Serbia 100Vestas Slovakia spol S.r.o., Slovakia 100Vestas Southern Africa Pty. Ltd., South Africa 74.8Vestas Eólica S.A., Spain 100Availon Iberia S.L., Spain 100Vestas Middle East S.L.U., Spain 100Vestas Northern Europe AB, Sweden 100Vestas Offshore Wind Sweden AB, Sweden 1004Vestas Benelux B.V., The Netherlands100Vestas CV Limitada, The Republic of Cape Verde 100Vestas Rüzgar Enerjisi Sistemleri Sanayi Ve Ticaret Ltd. Sirketi, Turkey100Vestas Kompozit Kanat Sanayi Ve Ticaret Anonim Şirketi Şirketi, Turkey100Vestas Ukraine LLC, Ukraine 100Vestas – Celtic Wind Technology Ltd., United Kingdom 100

Name and country Ownership (%)Vestas Offshore Wind UK Ltd., United Kingdom 100Vestas Offshore WInd Blades UK Ltd., United Kingdom 100NEG Micon UK Ltd., United Kingdom 100Other subsidiariesVestas Wind Systems (China) Co. Ltd., China100Vestas Technology R&D (Beijing) Co. Ltd., China 100Vestas Technology R&D Chennai Pte. Ltd., India 100Vestas Services Philippines Inc., Philippines 100Vestas Development A/S, Denmark 100Vestas India Holding A/S, Denmark 100Wind Power Invest A/S, Denmark 100Vestas Shared Service A/S, Denmark 100Vestas Service Delivery Center – Szczecin sp Z.o.o., Poland100Vestas Shared Service (Spain) S.L.U., Spain 100Vestas Cantabria Prototype SL, Spain 100Vestas Switzerland AG, Switzerland 100Vestas Technology (UK) Limited, United Kingdom 100

Name and country Ownership (%)

Joint ventures

Clearview Solar LLC, USA

50

Emerging Markets Power (Holdings) Limited, Ireland 50

Associates

Blakliden Fäbodberget Holding AB, Sweden

40

Copenhagen Infrastructure Partners P/S, Denmark 25

SoWITec Group GmbH, Germany 25

1 Companies of immaterial significance have been left out of the overview.

2 Vestas Deutschland GmbH, Vestas Blades Deutschland GmbH, Vestas Nacelles Deutschland GmbH, Vestas Services GmbH and Availon GmbH, wholly

owned subsidiaries of Vestas Wind Systems A/S, claiming not to prepare notes and management report to its financial statements pursuant to the

relief provision of section 264 Abs. 3 HGB.

3 The companies are in a liquidation process.

4 Vestas Benelux B.V., wholly owned subsidiary of Vestas Wind Systems A/S, claiming neither to prepare notes and management report to its financial

statements nor conduct a statutory audit on its financial statements pursuant to the relief provision of section 2:403 DCC.

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7 Basis for preparation

100Vestas Annual Report 2023

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→ 7�1 Material accounting policy information

→ 7�2 Change in accounting policies

→ 7�3 Key accounting estimates and judgements

7.1 Material accounting policy information

The Annual Report of Vestas Wind Systems A/S comprises the

Consolidated financial statements of Vestas Wind Systems

A/S and its subsidiaries and separate financial statements of

the parent company, Vestas Wind Systems A/S.

The Consolidated financial statements have been prepared in

accordance with the IFRS Accounting Standards as adopted

by the EU and further requirements in the Danish Financial

Statements Act.

Basis of preparation

The Consolidated financial statements have been prepared

under the historical cost method, except for certain derivative

financial instruments and marketable securities, which are

measured at fair value and assets held for sale, which are

measured at the lower of carrying amount and fair value less

costs to sell.

The Consolidated financial statements are presented in

million Euro.

This note describes the general accounting policies. Other

accounting policies are described in the separate notes to the

Consolidated financial statements.

Materiality in the financial reporting

For the preparation of the Consolidated financial statements,

Vestas discloses the information required according to IFRS,

unless such information is deemed immaterial or irrelevant.

A judgement is made of whether more detailed specifications

are necessary in the presentation of Vestas’ assets, liabilities,

financial position, and results. All judgements are made with

due consideration of legislation and the Consolidated financial

statements as a whole presenting a true and fair view.

Consolidated financial statements

The Consolidated financial statements comprise Vestas Wind

Systems A/S (the parent company) and the subsidiaries over

which Vestas Wind Systems A/S exercises control. Vestas

Wind Systems A/S and its subsidiaries together are referred

to as the Group.

Joint arrangements are classified as either joint operations

or joint ventures depending on the contractual rights and

obligations of each investor. Vestas has assessed the nature

of its joint arrangements and determined them to be joint

ventures.

An overview of Vestas legal entities is provided on pages

98-99.

The Consolidated financial statements are prepared

from the financial statements of the parent company and

subsidiaries by combining accounting items of a uniform

nature, with subsequent elimination of intercompany income

and expenses, shareholdings, intercompany balances

and dividends as well as unrealised profits and losses on

transactions between consolidated entities.

The Consolidated financial statements are based on financial

statements prepared under the accounting policies of Vestas.

Translation policies

Functional currency and presentation currency

Assets, liabilities and transactions of each of the reporting

entities of Vestas are measured in the currency of the primary

economic environment in which the entity operates (the

functional currency). Transactions in currencies other than

the functional currency are transactions in foreign currencies.

The functional currency of the parent company is Danish

kroner (DKK); however, due to Vestas’ international relations,

the Consolidated financial statements are presented in

Euro (EUR).

Translation into presentation currency

The balance sheet is translated into the presentation currency

at the Euro rate at the balance sheet date. In the income

statement the transaction date rates are based on average

rates for the individual months to the extent that this does

not materially distort the presentation of the underlying

transactions.

Translation of transactions and amounts

Transactions in foreign currencies are initially translated into

the functional currency at the exchange rates at the dates of

transaction. Exchange adjustments arising due to differences

between the transaction date rates and the rates at the dates

of payment are recognised as financial income or financial

costs in the income statement. Receivables, payables and

other monetary items in foreign currencies not settled at the

balance sheet date are translated at the exchange rates at

the balance sheet date. Exchange adjustments arising due to

differences between the rates at the balance sheet date and

the transaction date rates are recognised as financial income

or financial costs in the income statement.

Translation of Vestas entities

On recognition in the Consolidated financial statements of

foreign entities with a functional currency that differs from

the presentation currency of Vestas, income statements

are translated at transaction date rates, and balance sheet

items are translated at the exchange rates at the balance

sheet date. The transaction date rates are based on average

rates for the individual months to the extent that this does

not materially distort the presentation of the underlying

transaction. Exchange adjustments arising on the translation

of the opening equity of foreign entities at exchange rates

at the balance sheet date and on the translation of income

statements from transaction date rates to exchange

rates at the balance sheet date are recognised in other

comprehensive income.

Exchange adjustments of balances with foreign entities that

are treated as part of the total net investment in the entity in

question are recognised in other comprehensive income in the

Consolidated financial statements.

On recognition in the Consolidated financial statements of

investments accounted for using the equity method with

functional currencies that differ from the presentation

currency of Vestas, the shares of results for the year are

translated at average exchange rates. The shares of equity

including goodwill are translated at the exchange rates

at the balance sheet date. Exchange adjustments arising

on the translation of the share of the opening equity of

foreign investments accounted for using the equity method

at exchange rates at the balance sheet date and on the

translation of the share of results for the year from average

exchange rates to exchange rates at the balance sheet date

are recognised in other comprehensive income.

On full or partial disposal of foreign entities, resulting in a

loss of control or on repayment of balances treated as part of

the net investment, the share of the accumulated exchange

adjustments recognised in other comprehensive income, is

recognised in the income statement at the same time as any

profit or loss on the disposal.

Equity

Translation reserve

The translation reserve in the Consolidated financial state-

ments comprises exchange rate adjustments arising on the

translation of the financial statements of foreign entities from

their functional currencies into the presentation currency of

Vestas (EUR).

Upon full or part realisation of the net investment in foreign

entities, exchange adjustments are recognised in the income

statement.

Cash flow hedging reserve

The cash flow hedging reserve in the Consolidated financial

statements comprises gains and losses on fair value adjust-

ments of forward exchange contracts concerning future trans-

actions as well as hedging in connection with commodities.

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7.1 Material accounting policy

information – continued

Cash flow statement

The cash flow statement shows Vestas’ cash flows for the year,

broken down by operating, investing and financing activities,

changes for the year in cash and cash equivalents as well

as Vestas’ cash and cash equivalents at the beginning and

end of the year. Cash flows relating to acquired entities are

recognised from the date of acquisition. Cash flows relating to

entities disposed of are recognised until the date of disposal.

Cash flows from operating activities

Cash flows from operating activities are calculated as the net

profit/loss for the year adjusted for non-cash operating items

such as depreciation, amortisation and impairment losses,

provisions, changes in working capital, interest received and

paid and income tax paid. Working capital comprises current

assets less short-term debt, which does not include current

bank loans.

Cash flows from investing activities

Cash flows from investing activities comprise cash flows from

business acquisitions and disposals and from acquisitions and

disposals of intangible assets, property, plant and equipment

as well as other non-current assets. The cash flow effect of

business acquisitions and sales is shown separately. The

establishment of leases is treated as non-cash transactions.

Cash flows from financing activities

Cash flows from financing activities comprise changes to the

amount or composition of Vestas’ share capital and related

expenses as well as the raising of loans, repayment of interest-

bearing debt, repayment of lease liabilities, acquisition and

sale of treasury shares together with distribution of dividends

to shareholders.

iXBRL reporting

Vestas is required to file the annual report in the European Sin-

gle Electronic Format (ESEF) using the XHTML format and tag

the Consolidated financial statements including notes using

inline eXtensible Business Reporting Language (iXBRL). The

iXBRL tags comply with the ESEF taxonomy, which is included

in the ESEF Regulation and developed based on the IFRS tax-

onomy published by the IFRS Foundation.

As part of the tagging process, financial statement line items

and notes are marked up to elements in the ESEF taxonomy.

Where a financial statement line item is not defined in the

ESEF taxonomy, an extension to the taxonomy is created.

The Annual Report submitted to the Danish Financial

Supervisory Authority consists of the XHTML document

together with certain technical files, all included in a ZIP file

named VWS-2023-12-31.zip.

7.2 Change in accounting policies

Implementation of new accounting standards, amendments

and interpretations

The following new and amended accounting standards have

been implemented as of 1 January 2023:

ż Issurance contracts – amended IFRS 17

ż Definition of accounting estimates – amendments to IAS 8

ż Disclosure of accounting policies – amendments to IAS 1

ż Deferred tax related to assets and liabilities arising from a

single transaction – amendments to IAS 12

ż International Tax Reform – Pillar Two Model Rules –

amendments to IAS 12.

The adoption of the new and amended accounting standards

has not had any material impact on the recognition and

measurement in the Consolidated financial statements.

New accounting standards, amendments and interpretations

The IASB has issued new or amended accounting standards

and interpretations that have not yet become effective and

have consequently not been implemented in the Consolidated

financial statements for 2023. Vestas expects to adopt the

accounting standards and interpretations when they become

mandatory.

Based on the current nature of the business and level of

activities, none of the new or amended standards and

interpretations are expected to have a material impact on the

recognition and measurement in the Consolidated financial

statements.

Income/(loss) from investments in joint ventures and

associates presented in and after EBIT

From 1 January 2023, Vestas presents income/(loss) from

investments in joint ventures and associates which are

deemed to pertain to Vestas' core business activities in EBIT

before special items. The profit/(loss) from investments in

joint ventures and associates is not included in EBIT before

special items when deemed outside Vestas' core business

activities. The changed presentation is due to an expected

significant increase in income from investments in joint

ventures and associates related to Development activitites.

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7.3 Key accounting estimates and judgements

When preparing the Consolidated financial statements of

Vestas, Management makes several accounting estimates and

assumptions which impact the recognition and measurement

of Vestas’ financial statements.

The key accounting estimates and judgements which may

have a significant impact on the financial statements are listed

below. The nature of accounting impact of key accounting

estimates and judgements is described in the relevant notes.

The impact of key accounting estimates and judgements is

divided into three categories from low to high. The rating is

based on a combined assessment of materiality, complexity,

subjectivity and estimation uncertainty and indicates the

impact on amounts recognised and carrying values of assets

or liabilities.

Climate-related risks

Vestas continuously monitors risks related to climate change

and has considered them while preparing Consolidated

financial statements, where they may affect reported

amounts materially. The Group performed an extended and

improved risk assessment in 2023 relating to assets in

our manufacturing facilities that significantly contribute to

property, plant and equipment, presented in note 3.2.

Further reference is made to ‘climate risks’ in the Risk

governance section on page 43 for more details on this

process.

Estimate/ Impact of accounting Note Key accounting estimates and judgementsjudgementestimates and judgements1.2 Revenue Estimate regarding revenue from contracts with multiple performance obligations Estimate MediumEstimate regarding revenue from contracts acccounted for by percentage-of-completion method Estimate HighJudgement regarding method for recognition of revenue from Supply-and-installation contracts Judgement MediumJudgement regarding service contract modifications Judgement Low1.8 Special items Judgement regarding classification in the income statement Judgement LowEstimate regarding the valuation of assets and liabilities in Russia and Ukraine Estimate Medium2.2 Inventories Estimate of net realisable value Estimate Low2.5 Other receivables Estimate of allowance for doubtful VAT receivables Estimate Medium3.1 intangible assets Estimate of recoverable value used for impairment test of acquired assets relating to MVOW Estimate Medium3.2 Tangible assets3.6 Provisions Estimates for warranty provisions Estimate High5.1 Income tax Estimates of income taxes and uncertain tax position Estimate High5.2 Deferred tax Estimate of deferred tax assets valuation Estimate Medium

Key accounting estimates

The key accounting estimates made are based on

assumptions, that are supported by experience, historical

trends and other factors that Management assesses to be

reasonable, but that by nature are associated with inherent

uncertainty and unpredictability.

The estimates and underlying assumptions are reviewed

on an ongoing basis. If necessary, changes are recognised

in the period in which the estimate is revised. Management

considers the key accounting estimates to be reasonable and

appropriate based on currently available information.

Key accounting judgements

Key accounting judgements are made when applying certain

accounting policies. Management considers the accounting

judgements made are consistent and reflect the most fair

and true view of Vestas’ financial position and results of the

Group’s operations.

103

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Parent company financial

statements and notes

Income statement �� 105

Balance sheet �� 106

Statement of changes in equity �� 107

1. Result for the year �� 108

1�1 Revenue �� 108

1�2 Costs �� 108

1�3 Other operating income �� 108

2. Working capital �� 108

2�1 Inventories �� 108

3. Other operating assets and liabilities �� 108

3�1 Intangible assets �� 108

3�2 Property, plant and equipment �� 109

3�3 Leases �� 109

3�4 Investments in subsidiaries and associates �� 110

3�5 Prepayments �� 111

3�6 Provisions �� 111

3�7 Contingent assets, liabilities, and contractual obligations �� 111

4. Capital structure and financing items �� 112

4�1 Financial risks �� 112

4�2 Financial liabilities �� 112

4�3 Financial items �� 112

5. Tax �� 112

5�1 Income tax �� 112

5�2 Deferred tax �� 112

6. Other disclosures �� 113

6�1 Audit fees �� 113

6�2 Related party transactions �� 113

6�3 Ownership �� 113

7. Basis for preparation �� 113

7�1 Material accounting policy information �� 113

104Vestas Annual Report 2023

Financial statementsIn brief Strategy and ambitions Business area progress Statements Additional informationGovernance

Income statement

1 January – 31 December

mEUR Note 2023 2022

Revenue

1.1 1,632 835

Production costs 1.2 (1,718) (2,258)

Gross profit/(loss) (86) (1,423)

Administration costs 1.2 (570) (473)

Other operating income 1.3 174 -

Operating profit/(loss) (EBIT) (482) (1,896)

Income/(loss) from investments in subsidiaries 3.4 1 5

Income/(loss) from investments in associates 3.4 (0) (1)

Financial income 4.3 469 118

Financial costs 4.3 (430) (181)

Profit/(loss) before tax (442) (1,955)

Income tax 5.1 430 281

Profit/(loss) for the year (12) (1,674)

Proposed distribution of profit:

Reserve for net revaluation under the equity method

1 5

Retained earnings (13) (1,679)

Profit/(loss) for the year (12) (1,674)

105Vestas Annual Report 2023

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Balance sheet

31 December

Assets

mEUR Note 2023 2022

Intangible assets

3.1 2,639 2,547

Property, plant and equipment 3.2, 3.3 360 352

Investments in subsidiaries 3.4 2,657 2,755

Investments in associates 3.4 3 3

Marketable securities 98 95

Other investments 23 13

Other receivables 223 61

Tax receivables 507 241

Total financial fixed assets 3,511 3,168

Total non-current assets 6,510 6,067

Inventories 2.1 270 234

Receivables from subsidiaries 4,424 5,198

Other receivables 348 357

Prepayments 3.5 24 29

Deferred tax 5.2 309 157

Tax receivables - 17

Total receivables 5,105 5,758

Cash and cash equivalents 2,521 1,731

Total current assets 7,896 7,723

Total assets 14,406 13,790

Equity and liabilities

mEUR Note 2023 2022

Share capital

27 27

Reserve for net revaluation under the equity method 660 783

Reserve for capitalised development costs 951 846

Translation reserve 9 14

Retained earnings 889 980

Total equity 2,536 2,650

Warranty provisions 3.6 1,029 762

Other provisions 3.6 136 136

Total non-current provisions 1,165 898

Other liabilities 28 17

Financial debts 4.2 1,616 594

Total non-current debt 1,644 611

Total non-current liabilities 2,809 1,509

Financial debts 4.2 25 38

Warranty provisions 3.6 715 724

Trade payables 391 390

Payables to subsidiaries 7,691 8,249

Other liabilities 239 230

Total current liabilities 9,061 9,631

Total liabilities 11,870 11,140

Total equity and liabilities 14,406 13,790

106Vestas Annual Report 2023

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Statement of changes in equity

1 January – 31 December 2023

Share capital

Reserves

Dividends

Retained

earnings TotalmEUR

Reserve under

the equity

method

Reserve for

capitalised

development

costs

Translation

reserve

Equity as at 1 January

27 783 846 14 - 980 2,650

Exchange rate adjustments relating to foreign entities - (84) - - - - (84)

Exchange rate adjustments - - - (5) - - (5)

Fair value adjustments of derivative financial instruments - (30) - - - - (30)

Tax on fair value adjustments of derivative financial instruments - (6) - - - - (6)

Capitalised development costs - - 135 - - (135) -

Tax on capitalised development costs - - (30) - - 30 -

Share-based payments - (4) - - - 38 34

Tax on share-based payments - - - - - 0 0

Acquisition of treasury shares - - - - - (11) (11)

Profit for the year - 1 - - - (13) (12)

Equity as at 31 December 27 660 951 9 - 889 2,536

107Vestas Annual Report 2023

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1 Result for

the year

1.1 Revenue

Revenue in the parent company consists of sale of spare

parts and royalty income from other Group companies.

1.2 Costs

For information regarding remuneration to the Board of

Directors and to the Executive Manage ment for the parent

company, refer to note 1.6 to the Consolidated financial

statements. Pension schemes in the parent company consist

solely of defined contribution plans and the company does

therefore not carry the actuarial risk or the investment risk.

For management incentive programmes, refer to note 1.7

to the Consolidated financial statements.

Staff costs

mEUR 2023 2022

Staff costs are specified

as follows:

Wages and salaries, etc.

392 288

Pension schemes 21 19

Other social security costs 3 3

Total 416 310

Average number of

employees in Vestas Wind

Systems A/S

3,025 2,843

1.3 Other operating income

Other operating income primarily includes consideration of

EUR 147m relating to a perpetual manufacturing license

granted to KK Wind Solutions under the agreement for the

sale of the converters and controls business. Refer to note

1.3 to the Consolidated financial statements. The remainder

comprise income for sale of operating fixtures and equipment,

IT licenses and intellectual property rights.

2 Working

capital

2.1 Inventories

Inventories relate to spare part activities.

mEUR 2023 2022

Raw materials and

consumables

264 228

Work in progress 6 6

Total 270 234

3 Other operating assets

and liabilities

3.1 Intangible assets

Included in software are internally completed IT projects

amounting to EUR 49m as at 31 December 2023

(2022: EUR 42m).

For development projects in progress, refer to note 3.1 to

the Consolidated financial statements.

Goodwill

Goodwill is included in the item “Goodwill” or in the item

“Investments accounted for using the equity method” and

is amortised over the estimated useful life determined on

the basis of Management’s experience with the individual

business areas. Goodwill is amortised on a straight-line basis

over the amortisation period, which is a maximum of 20 years.

mEUR Goodwill

Completed

development

projects Software

Other

intangible

assets

Develop ment

projects

in progress Total

Cost as at 1 January

1,145 2,700 543 509 611 5,508

Exchange rate adjustments (3) (5) (1) (1) (1) (11)

Additions - - 28 - 404 432

Disposals - - (29) - - (29)

Transfers - 83 36 - (119) -

Cost as at 31 December 1,142 2,778 577 508 895 5,900

Amortisation as at 1 January 135 2,265 440 121 - 2,961

Exchange rate adjustments - (5) (1) - - (6)

Amortisation for the year 53 191 42 34 - 320

Disposals - - (29) - - (29)

Transfers - 15 - - - 15

Amortisation as at 31 December 188 2,466 452 155 - 3,261

Carrying amount as at 31 December 954 312 125 353 895 2,639

Amortisation period 20 years 2–5 years 3–5 years 3–7 years

108Vestas Annual Report 2023

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3 Other operating assets and liabilities – continued

3.2 Property, plant and equipment

mEUR

Land and

buildings

Plant and

machinery

Other fixtures

and fittings,

tools, and

equipment

Property,

plant and

equipment

in progress

Right-of-

use assets Total

Cost as at 1 January

205 130 302 31 253 921

Additions 1 4 41 5 62 113

Disposals - - (19) - (10) (29)

Exchange rate adjustments - - (1) - (1) (2)

Transfers - 27 9 (36) - -

Cost as at 31 December 206 161 332 - 304 1,003

Depreciation as at 1 January 158 106 197 - 108 569

Exchange rate adjustments (1) (1) - - - (2)

Depreciation for the year 7 13 55 - 37 112

Depreciation on disposals for the year - - (14) - (7) (21)

Transfers - (15) - - - (15)

Depreciation as at 31 December 164 103 238 - 138 643

Carrying amount as at 31 December 42 58 94 - 166 360

Depreciation period 10–40 years 3–10 years 3–5 years 2–20 years

3.3 Leases

Vestas leases several assets including properties, vehicles,

and equipment. Rental contracts are typically made for fixed

periods of 1 to 10 years but may have extension options.

Lease terms are negotiated on an individual basis and contain

different terms and conditions including payment terms,

terminations rights, index-regulations, maintenance, deposits,

and guarantees, etc.

Some property leases contain variable payment terms that

are linked to an index e.g. a consumer price index. Overall, the

variable payments constitute less than 1 percent of Vestas’

entire lease payments. Extension and termination options

may be included in leases. These terms are used to maximise

operational flexibility in terms of managing contracts.

Right-of-use assets

mEUR

2023 2022

Property Vehicles Equipment Total Property Vehicles Equipment Total

Right-of-use assets as

at 1 January

114 5 26 145 139 6 27 172

Exchange rate adjustments - - - - (1) - - (1)

Depreciation charge for the year (25) (4) (8) (37) (24) (4) (10) (38)

Addition of right-of-use assets

for the year

52 8 1 61 - 3 9 12

Disposal - (2) (1) (3) - - - -

Right-of-use assets as at 31

December

141 7 18 166 114 5 26 145

Maturity analysis – contractual

undiscounted cash flow

mEUR 2023 2022

Less than one year

33 38

One to five years 122 81

More than five years 59 48

Total undiscounted lease

liabilities as at 31 December

214 167

Lease liabilities included in

the statement of financial

position as at 31 December

174 157

Current 25 38

Non-current 149 119

Lease liabilities

Lease liabilities are included in financial debts which amounts

to EUR 174m as at 31 December 2023 (2022: EUR 157m).

The lease liabilities included in financial debts can be

specified as described above.

Total lease expenses recognised

in the income statement

mEUR 2023 2022

Interest expense on lease

liabilities

3 2

Expenses relating to short-term

leases and leases of low-value

assets

23 17

109Vestas Annual Report 2023

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3 Other operating assets and liabilities – continued

3.4 Investments in subsidiaries

and associates

Refer to note 6.7 to the Consolidated financial statements for

an overview of the legal entities within the Group.

Investments in subsidiaries and associates

mEUR 2023 2022

Subsidiaries

2,657 2,755

Associates 3 3

Carrying amount as at

31 December

2,660 2,758

Income/(loss) from investments in subsidiaries and

associates

mEUR 2023 2022

Subsidiaries

1 5

Associates (0) (1)

Total 1 4

Income from subsidiaries

mEUR 2023 2022

Share of profit in subsidiaries

after tax

35 39

Amortisation of goodwill (34) (34)

Total 1 5

Investments in subsidiaries

mEUR 2023 2022

Cost as at 1 January

1,972 3,402

Exchange rate adjustments (7) -

Additions - 4

Disposals (0) (1,434)

Cost as at 31 December 1,965 1,972

Value adjustments as at

1 January

783 843

Impact on change in accounting

policy

- (17)

Exchange rate adjustments (84) (13)

Share of profit/loss for the year

after tax

35 39

Changes in equity, share-based

payment

(4) (6)

Changes in equity, derivative

financial instruments

(36) 19

Disposal - (48)

Amortisation of goodwill (34) (34)

Negative net assets in

subsidiaries set off against

receivables from subsidiaries

32 -

Value adjustments as at 31

December

692 783

Carrying amount as at 31

December

2,657 2,755

Remaining positive difference

included in the above carrying

amount as at 31 December

439 506

Accounting policies

Investments in subsidiaries and associates are recognised and

measured in the financial statements of the parent company

under the equity method.

On acquisition of subsidiaries and associates, the difference

between cost of acquisition and net asset value of the entity

acquired is determined at the date of acquisition after the

individual assets and liabilities having been adjusted to fair

value (the acquisition method) and allowing for the recognition

of any restructuring provisions relating to the entity acquired.

Any remaining positive differences in connection with the

acquisition of subsidiaries and associates are included in

the items “Investments in subsidiaries” and “Investments

in associates”. The items “Income/(loss) from investments

in subsidiaries” and “Income/ (loss) from investments in

associates” in the income statement include the proportionate

share of the profit after tax less goodwill amortisation.

The items “Investments in subsidiaries” and “Investments in

associates” in the balance sheet include the proportionate

ownership share of the net asset value of the entities

calculated under the accounting policies of the parent

company with deduction or addition of unrealised

intercompany profits or losses and with addition of any

remaining value of the positive differences (goodwill).

Subsidiaries and associates with a negative net assets

value are measured at EUR 0, and any receivables from

these are written down by the parent company’s share of the

negative net asset value, if impaired. Any legal or constructive

obligation of the parent company to cover the negative

balance of the subsidiaries and associates including is

recognised as provisions.

The total net revaluation of investments in subsidiaries

and associates is transferred upon distribution of profit to

“Reserve for net revaluation under the equity method” under

equity.

Gains and losses on disposals or winding up of subsidiaries

and associates are calculated as the difference between the

sales value or cost of winding up and the carrying amount of

the net assets at the date of acquisition including goodwill and

expected loss of disposal or winding up. The gains or losses

are included in the income statement.

Of the total carrying value, negative net assets in subsidiaries,

EUR 32m have been set off against receivables from

subsidiaries.

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3 Other operating assets and liabilities – continued

3.5 Prepayments

Prepayments comprise of prepaid software license, insurance,

and rent.

3.6 Provisions

In line with accounting policies, potential product warranties

are recognised as warranty provisions when revenue from sale

of wind turbines is recognised.

Product risks

Vestas invests significant resources in improving products

and increasing their reliability to mitigate major warranty

provisions. This work comprises design, production, installation,

and continuous maintenance. The goal of these initiatives is

to reduce Vestas’ warranty costs, to secure customer returns,

to increase the competitiveness of the products, and to

improve customer earnings.

The other provisions relate to risks stemming from Vestas’

cessation of activities in Russia, including claims brought

against Vestas outside Russia.

mEUR

2023 2022

Warranty

provision

Other

provisions

Total

provisions

Warranty

provision

Other

provisions

Total

provisions

Carrying amount as at 1 January

1,486 136 1,622 1,190 - 1,190

Addition during the year 843 - 843 929 136 1,065

Utilised during the year (585) - (585) (633) - (633)

Carrying amount as at 31 December 1,744 136 1,880 1,486 136 1,622

Non-current 1,029 136 1,165 762 136 898

Current 715 - 715 724 - 724

Carrying amount as at 31 December 1,744 136 1,880 1,486 136 1,622

3.7 Contingent assets and liabilities,

and contractual obligations

Vestas provides indemnities and guarantees to third parties

on behalf of non-Vestas entities with a notional amount of

EUR 33m (2022: EUR 46m). No guarantees have been utilised

during 2023 or in previous years and none of the indemnities

are expected at the balance sheet date to be utilised.

Vestas provides indemnities and guarantees for bank and

bonding facilities to third parties on behalf of subsidiaries.

In addition, the company provides indemnities and guarantees

to third parties in connection with project supplies in subsid-

iaries, and their warranty obligations to customers. To secure

guaran tees issued by banks, the company has given securities

in cash and cash equivalents with disposal restrictions, refer to

note 4.1 to the Consolidated financial statements.

Vestas has entered into binding contracts concerning

purchase of property, plant and equipment to be delivered

in 2023 and future periods at a value of EUR 8m (2022:

EUR 23m). Vestas has made commitments to invest in funds

managed by Copenhagen Infrastructure Partners P/S. As at

31 December 2023, undrawn commitments amounted to EUR

272m (2022: EUR 182m).

Vestas is involved in a number of litigation proceedings. It is

Management’s assessment that these proceedings will not

have a material effect on the financial position of the Group

beyond what is already recognised in assets and liabilities as

at 31 December 2023.

The company is jointly taxed with its Danish subsidiaries.

As the administrative company for the subsidiaries included in

the joint taxation, the company is liable for the tax obligations

of the included subsidiaries.

Vestas has made supplier claims for faulty deliveries. However,

it is Management’s opinion that settlement of these are not

virtually certain, and therefore not recognised in the financial

position of Vestas, except for supplier claims accounted for as

other receivables.

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4 Capital structure and

financing items

4.1 Financial risks

For the use of derivative financial instruments and risks and

capital management refer to note 4.1 to the Consolidated

financial statements.

4.2 Financial liabilities

mEUR 2023 2022

Credit facilities

1,467 475

Lease liabilities 174 157

Total 1,641 632

Financial debts break down as

follows:

< 1 year

25 38

1–2 years 23 22

> 2 years 1,593 572

Total 1,641 632

4.3 Financial items

mEUR 2023 2022

Financial income

Interest income

173 21

Interest income from

subsidiaries

228 93

Exchange rate adjustments 48 -

Financial instruments 17 -

Other financial income 3 4

Total 469 118

Financial costs

Interest costs

65 16

Interest costs to subsidiaries 245 96

Interest on lease liabilities 3 2

Exchange rate adjustments - 17

Financial instruments 103 33

Other financial costs 14 17

Total 430 181

5 Tax

5.1 Income tax

mEUR 2023 2022

Current tax on profit for the year

(224) 134

Deferred tax on profit for the

year

(101) (449)

Foreign taxes 6 8

Write down of deferred tax

(assets)

(40) 60

Adjustment related to previous

years

(71) (34)

Income tax for the year

recognised in the income

statement, (income)

(430) (281)

Deferred tax on equity (0) 0

Tax recognised in equity,

expense/(income)

(0) 0

Total income taxes for the

year, (income)

(430) (281)

5.2 Deferred tax

mEUR 2023 2022

Deferred tax as at 1 January, net

assets/(liabilities)

157 (225)

Deferred tax on profit for

the year

101 449

Tax on entries in equity - (1)

Revaluation of tax assets 60 -

Reclassification to tax

receivables, non-current

- (17)

Adjustment relating to previous

years

11 11

Write down to assessed value (20) (60)

Deferred tax as at 31

December, net assets

309 157

112Vestas Annual Report 2023

Financial statementsIn brief Strategy and ambitions Business area progress Statements Additional informationGovernance

6 Other disclosures

6.1 Audit fees

mEUR 2023 2022

Audit PricewaterhouseCoopers

2 2

Assurance engagements

PricewaterhouseCoopers

- -

Tax assistance 1 0

Other services 0 1

Total 3 3

6.2 Related party transactions

All transactions with related parties have been carried out

at arm’s length principle. Definition of related parties and

concerning other transactions with related parties, refer to

note 6.3 to the Consolidated financial statements.

6.3 Ownership

The company has registered the following shareholders with

more than 5 percent of the share capital or nominal value:

BlackRock Inc, Wilmington, Delaware, United States.

7 Basis for preparation

7.1 Material accounting policy

information

The parent company financial statements have been prepared

in accordance with the Danish Financial Statements Act (DK

GAAP) applying to entities of reporting class D.

With the exception of the items described below, the

accounting policies of the parent company are identical to

the accounting policies of the group, see the notes to the

Consolidated financial statements. The denomination of the

items in the parent company’s financial statements complies

with the requirements under DK GAAP.

Development costs

An amount equivalent to the capitalised development costs in

the balance sheet incurred after 1 January 2016 is recognised

in the category “Reserve for capitalised development costs” in

the equity. The value of the reserve is reduced by the value of

the depreciations.

Cash flow statement

Vestas Wind Systems A/S applies an exemption under

DK GAAP whereby the parent company is not required to

prepare a separate cash flow statement as it is included in

the Consolidated cash flow statement, refer to page 56 in the

consolidated financial statements.

113

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Financial statementsIn brief Strategy and ambitions Business area progress Statements Additional informationGovernance

Diversity

and inclusion

At Vestas, we believe that a diverse and

inclusive workforce is vital for accelerating

the green energy transition globally. We know

that our differences make us stronger, more

innovative, and better equipped to address

the challenges of the future.

Strategy and ambitions Business area progress Financial statementsGovernance Additional information

114

Vestas Annual Report 2023

In brief Statements

→ Management’s statement

→ Independent Auditor’s Reports

→ Independent limited assurance report

on the Sustainability key figures

Statements

Management’s statement

The Executive Management and Board of Directors have today

considered and adopted the Annual Report of Vestas Wind

Systems A/S for the financial year 1 January – 31 December

2023.

The Consolidated financial statements have been prepared

in accordance with IFRS Accounting Standards as adopted

by the EU and further requirements in the Danish Financial

Statements Act, and the parent company financial statements

of Vestas Wind Systems A/S have been prepared in

accordance with the Danish Financial Statements Act. The

Management’s Review has been prepared in accordance

with the Danish Financial Statements Act and the disclosure

requirements of Article 8 of Regulation (EU) 2020/852 (EU

Taxonomy Regulation).

In our opinion, the Consolidated financial statements and

the parent company financial statements give a true and fair

view of the financial position of the Group and the parent

company and of the results of the Group and parent company

operations and consolidated cash flows for the financial year

1 January – 31 December 2023.

In our opinion, the Management’s Review includes a true and

fair review of the development in the operations and financial

circumstances of the Group and parent company as well as

a description of the most significant risks and elements of

uncertainty facing the Group and the parent company.

In our opinion, the social and environmental statements have

been prepared in accordance with the accounting policies

applied. They give a fair review of the Group’s social and

environmental performance.

In our opinion, the Annual Report of Vestas Wind Systems A/S

for the financial year 1 January to 31 December 2023 with the

file name VWS-2023-12-31-en.zip is prepared, in all material

respects, in compliance with the ESEF Regulation.

We recommend that the Annual Report be adobted at the

General Meeting.

Aarhus, 7 February 2024

Executive Management

Henrik Andersen

Group President & CEO

Hans Martin Smith

Executive Vice President & CFO

Board of Directors

Anders Runevad

Chair

Bruce Grant

Eva Merete Søfelde Berneke

Helle Thorning-Schmidt

Lena Olving

Karl-Henrik Sundström

Deputy Chair

Kentaro Hosomi

Michael Abildgaard Lisbjerg

Sussie Dvinge

Claus Christensen

Pia Kirk Jensen

115

Statements

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Strategy and ambitions Business area progress Financial statements Additional informationGovernanceIn brief

Independent Auditor’s Reports

To the shareholders of Vestas Wind Systems A/S

Report on the audit of

the Financial Statements

Our opinion

In our opinion, the Consolidated financial statements

give a true and fair view of the Group’s financial position

at 31 December 2023 and of the results of the Group’s

operations and cash flows for the financial year 1 January

to 31 December 2023 in accordance with IFRS Accounting

Standards as adopted by the EU and further requirements in

the Danish Financial Statements Act.

Moreover, in our opinion, the Parent Company financial

statements give a true and fair view of the Parent Company’s

financial position at 31 December 2023 and of the results

of the Parent Company’s operations for the financial year 1

January to 31 December 2023 in accordance with the Danish

Financial Statements Act.

Our opinion is consistent with our Auditor’s Long-form Report

to the Audit Committee and the Board of Directors.

What we have audited

The Consolidated financial statements (pages 48-103) and

the Parent Company financial statements (pages 104-113)

of Vestas Wind Systems A/S for the financial year 1 January

to 31 December 2023 comprise income statement, balance

sheet, statement of changes in equity and notes, including

material accounting policy information for the Group as well

as for the Parent Company and statement of comprehensive

income and statement of cash flows for the Group. Collectively

referred to as the “Financial Statements”.

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (ISAs) and the additional requirements

applicable in Denmark. Our responsibilities under those

standards and requirements are further described in the

Auditor’s responsibilities for the audit of the Financial

Statements section of our report.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the

International Ethics Standards Board for Accountants’

International Code of Ethics for Professional Accountants

(IESBA Code) and the additional ethical requirements

applicable in Denmark. We have also fulfilled our other ethical

responsibilities in accordance with these requirements and

the IESBA Code.

To the best of our knowledge and belief, prohibited non-audit

services referred to in Article 5(1) of Regulation (EU) No

537/2014 were not provided.

Appointment

We were first appointed auditors of Vestas Wind Systems A/S

on 5 May 1999 for the financial year 1999. We have been

reappointed annually by shareholder resolution for a total

period of uninterrupted engagement of 25 years including the

financial year 2023.

Key audit matters

Key audit matters are those matters that, in our professional

judgement, were of most significance in our audit of the

Financial Statements for 2023. These matters were

addressed in the context of our audit of the Financial

Statements as a whole, and in forming our opinion thereon,

and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Revenue recognition

Recognition of the Group’s revenue is complex

due to several types of customer contracts

utilised, including sale of wind turbines and

wind power plants (supply-only, supply-and-

installation and turnkey), service sales and sale

of spare parts.

We focused on this area as recognition of

revenue involves significant judgement and

estimates made by Management including,

whether contracts contain multiple performance

obligations which should be accounted for

separately and the most appropriate method

for recognition of revenue for the identified

performance obligations in the contracts.

This includes assessing whether performance

obligations in supply-and-installation contracts

are satisfied at a point in time or over time.

Further, it comprises the point in time when

transfer of control has occurred regarding sale

of wind turbines and sale of spare parts, and

assessing the degree of completion of project

and service contracts, which are accounted for

over time.

Significant estimates are involved in allocation

of the consideration to the individual

performance obligations in a contract. Further,

significant estimates are also involved in

estimating the variable elements of the

consideration for service contracts, and the

degree of completion for project and service

contracts regarding the remaining cost to

complete the contracts. Furthermore, the

reduction in revenue related to damages or

penalties regarding project and service contracts

is subject to significant estimates.

Refer to Note 1.2, Note 2.3 and Note 2.4 in the

Consolidated financial statements.

We carried out risk assessment procedures in order to obtain an

understanding of IT systems, business processes and relevant controls

regarding recognition of revenue. For the controls, we assessed whether they

were designed and implemented to effectively address the risk of material

misstatement. For selected controls that we planned to rely on, we tested

whether they were performed on a consistent basis.

We reviewed samples of both project and service contracts to assess whether

the method for recognition of revenue was relevant and consistent with the

Group’s accounting policy. We focused on contract classification, allocation

of fixed and variable consideration and cost to the individual performance

obligations and timing of transfer of control. For supply-and-installation

projects with revenue recognition over time we reviewed a sample of

projects and challenged the judgement made by Management in terms of no

alternative use of the project. Where a contract contained multiple elements,

we considered Management’s judgements as to whether they comprised

performance obligations that should be accounted for separately, and, in such

cases, challenged the significant assumptions used in the allocation of the

consideration to each performance obligation.

We evaluated and challenged the significant judgements and estimates

made by Management in applying the Group’s accounting policy to a sample

of specific contracts and separable performance obligations of contracts.

We tested the point in time when transfer of control occurred by obtaining

evidence, including inspecting signed contracts, delivery records, cash receipts

and project plans and reconciled the revenue recognised to the underlying

accounting records. We obtained a sample of Management’s calculations of

the degree of completion of project and service contracts, which are accounted

for over time, and matched a sample of source data used in Management’s

calculation to evidence, and evaluated the judgements and assumptions

applied. We further challenged the estimated cost to complete and reductions

in revenue related to damages or penalties for the sampled contracts. We

also considered the historical outcome of accounting estimates made in prior

periods.

We reviewed the disclosures included in the notes and sample tested

disclosures to accounting records.

116

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Additional informationGovernanceIn brief

Key audit matter How our audit addressed the key audit matter

Warranty provisions

The Group’s product warranties primarily cover

expected costs to repair or replace components

with defects or functional errors. Warranties are

usually granted for a two-year period from legal

transfer of the turbine, however, in certain cases,

a warranty of up to five years is granted.

We focused on this area as the amounts

involved are significant and the completeness

and valuation of the expected outcome of

warranty cases require significant Management

judgement and estimates. This includes the use

of significant assumptions concerning expected

failure rates and expected repair or replacement

costs.

Refer to Note 3.6 in the Consolidated financial

statements.

We carried out risk assessment procedures in order to obtain an understanding

of IT systems, business processes and relevant controls regarding provision

for warranty. For the controls, we assessed whether they were designed and

implemented to effectively address the risk of material misstatement. For

selected controls that we planned to rely on, we tested whether they were

performed on a consistent basis.

We performed substantive audit procedures on the methodology, data,

assumptions and model used by Management to calculate the provisions and

reviewed a sample of specific warranty cases.

We challenged the significant assumptions applied in the valuation of provisions

by checking and corroborating the inputs used to calculate the provisions,

including interviewing project managers, cost controllers and Management

regarding individual cases. We assessed specific warranty provisions held for

individual cases to evaluate whether the warranty provisions were sufficient to

cover future expected costs and whether the disclosures included in the notes

appropriately reflected the estimation uncertainty.

Further, we assessed the level of historical warranty claims to assess whether

the total warranty provisions held at year-end were sufficient to cover

expected costs in light of known and expected cases.

Tax risks

The Group operates in a complex multinational

tax environment and the Group is part in tax

cases with domestic and foreign tax authorities.

The Group has recognised provisions in respect

of uncertain tax positions. Furthermore, the

Group has recognised write-downs on deferred

tax assets related to the uncertainty about

potential future utilisation of these tax assets.

We focused on this area as the amounts

involved are material and as the valuation of the

provision and deferred tax assets is associated

with significant accounting estimates and

judgements.

Refer to Note 5.1 and Note 5.2 in the

Consolidated financial statements.

We carried out risk assessment procedures in order to obtain an

understanding of IT systems, business processes and relevant controls

regarding recognition for uncertain tax positions and valuation of deferred

tax assets. For the controls, we assessed whether they were designed and

implemented to effectively address the risk of material misstatement. For

selected controls that we planned to rely on, we tested whether they were

performed on a consistent basis.

In understanding and evaluating Management’s accounting estimates and

judgements, we considered the status of recent tax authority audits and

enquiries, the outcome of previous claims, judgmental positions taken in tax

returns and estimates and developments in the tax environment.

We used PwC tax specialists to evaluate and challenge the adequacy of

Management’s significant assumptions and read correspondence with tax

authorities to assess Management’s significant accounting estimates.

We evaluated the Group’s model for valuation of deferred tax assets, including

the data used to estimate the expected future taxable income. We also

considered the historical outcome of accounting estimates made in prior

periods.

We reviewed the disclosures included in the notes and sample tested

disclosures to accounting records.

Statement on Management’s Review

Management is responsible for Management’s Review, pages

2-46 and pages 120-130.

Our opinion on the financial statements does not cover

Management’s Review, and we do not express any form of

assurance conclusion thereon.

In connection with our audit of the financial statements, our

responsibility is to read Management’s Review and, in doing

so, consider whether Management’s Review is materially

inconsistent with the financial statements or our knowledge

obtained in the audit, or otherwise appears to be materially

misstated.

Moreover, we considered whether Management’s Review

includes the disclosures required by the Danish Financial

Statements Act and Article 8 of Regulation (EU) 2020/852

(EU Taxonomy Regulation).

Based on the work we have performed, in our view,

Management’s Review is in accordance with the Consolidated

financial statements and the Parent Company financial

statements and has been prepared in accordance with the

requirements of the Danish Financial Statements Act and

the disclosure requirements of Article 8 of Regulation (EU)

2020/852 (EU Taxonomy Regulation). We did not identify

any material misstatement in Management’s Review.

Management’s responsibilities for the Financial Statements

Management is responsible for the preparation of consoli-

dated financial statements that give a true and fair view in

accordance with IFRS Accounting Standards as adopted

by the EU and further requirements in the Danish Financial

Statements Act and for the preparation of parent company

financial statements that give a true and fair view in accor-

dance with the Danish Financial Statements Act, and for such

internal control as Management determines is necessary to

enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

In preparing the financial statements, Management is

responsible for assessing the Group’s and the Parent

Company’s ability to continue as a going concern, disclosing,

as applicable, matters related to going concern and using the

going concern basis of accounting unless Management either

intends to liquidate the Group or the Parent Company or to

cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the

financial statements

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to

issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with ISAs and the

additional requirements applicable in Denmark will always

detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be

expected to influence the economic decisions of users taken

on the basis of these financial statements.

As part of an audit in accordance with ISAs and the additional

requirements applicable in Denmark, we exercise professional

judgement and maintain professional scepticism throughout

the audit. We also:

ż Identify and assess the risks of material misstatement

of the financial statements, whether due to fraud or error,

design and perform audit procedures responsive to those

risks, and obtain audit evidence that is sufficient and

appropriate to provide a basis for our opinion. The risk

of not detecting a material misstatement resulting from

fraud is higher than for one resulting from error, as fraud

may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

ż Obtain an understanding of internal control relevant to

the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the Group’s

and the Parent Company’s internal control.

ż Evaluate the appropriateness of accounting policies used

and the reasonableness of accounting estimates and

related disclosures made by Management.

ż Conclude on the appropriateness of Management’s use of

the going concern basis of accounting and based on the

audit evidence obtained, whether a material uncertainty

exists related to events or conditions that may cast

significant doubt on the Group’s and the Parent Company’s

ability to continue as a going concern. If we conclude that

a material uncertainty exists, we are required to draw

attention in our auditor’s report to the related disclosures

in the financial statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are

based on the audit evidence obtained up to the date of

our auditor’s report. However, future events or conditions

117

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Additional informationGovernanceIn brief

Independent Auditor’s Reports

may cause the Group or the Parent Company to cease to

continue as a going concern.

ż Evaluate the overall presentation, structure and content

of the financial statements, including the disclosures, and

whether the financial statements represent the underlying

transactions and events in a manner that gives a true and

fair view.

ż Obtain sufficient appropriate audit evidence regarding the

financial information of the entities or business activities

within the Group to express an opinion on the Consolidated

financial statements. We are responsible for the direction,

supervision and performance of the group audit. We remain

solely responsible for our audit opinion.

We communicate with those charged with governance

regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including

any significant deficiencies in internal control that we identify

during our audit.

We also provide those charged with governance with a

statement that we have complied with relevant ethical

requirements regarding independence, and to communicate

with them all relationships and other matters that may

reasonably be thought to bear on our independence and,

where applicable, actions taken to eliminate threats or

safeguards applied.

From the matters communicated with those charged with

governance, we determine those matters that were of most

significance in the audit of the Financial Statements of the

current period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or

regulation precludes public disclosure about the matter.

Report on compliance with the

ESEF Regulation

As part of our audit of the financial statements we performed

procedures to express an opinion on whether the Annual

Report of Vestas Wind Systems A/S for the financial year

1 January to 31 December 2023 with the filename VWS-

2023-12-31-en.zip is prepared, in all material respects,

in compliance with the Commission Delegated Regulation

(EU) 2019/815 on the European Single Electronic Format

(ESEF Regulation) which includes requirements related to the

preparation of the Annual Report in XHTML format and iXBRL

tagging of the Consolidated financial statements including

notes.

Management is responsible for preparing an annual report

that complies with the ESEF Regulation. This responsibility

includes:

ż The preparing of the Annual Report in XHTML format;

ż The selection and application of appropriate iXBRL

tags, including extensions to the ESEF taxonomy and

the anchoring thereof to elements in the taxonomy, for

all financial information required to be tagged using

judgement where necessary;

ż Ensuring consistency between iXBRL tagged data and

the Consolidated financial statements presented in

human-readable format; and

ż For such internal control as Management determines

necessary to enable the preparation of an annual report

that is compliant with the ESEF Regulation.

Our responsibility is to obtain reasonable assurance on

whether the Annual Report is prepared, in all material respects,

in compliance with the ESEF Regulation based on the evidence

we have obtained, and to issue a report that includes our

opinion. The nature, timing and extent of procedures selected

depend on the auditor’s judgement, including the assessment

of the risks of material departures from the requirements set

out in the ESEF Regulation, whether due to fraud or error. The

procedures include:

ż Testing whether the Annual Report is prepared in

XHTML format;

ż Obtaining an understanding of the company’s iXBRL

tagging process and of internal control over the tagging

process;

ż Evaluating the completeness of the iXBRL tagging of

the Consolidated financial statements including notes;

ż Evaluating the appropriateness of the company’s use of

iXBRL elements selected from the ESEF taxonomy and

the creation of extension elements where no suitable

element in the ESEF taxonomy has been identified;

ż Evaluating the use of anchoring of extension elements

to elements in the ESEF taxonomy; and

ż Reconciling the iXBRL tagged data with the audited

Consolidated financial statements.

In our opinion, the Annual Report of Vestas Wind Systems A/S

for the financial year 1 January to 31 December 2023 with the

file name VWS-2023-12-31-en.zip is prepared, in all material

respects, in compliance with the ESEF Regulation.

Hellerup, 7 February 2024

PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab

CVR No 3377 1231

Claus Lindholm Jacobsen

State Authorised Public Accountant

mne23328

Rune Kjeldsen

State Authorised Public Accountant

mne34160

118

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Additional informationGovernanceIn brief

Independent Auditor’s Reports

Independent limited assurance report on the Sustainability key figures

To the stakeholders of Vestas Wind Systems A/S

Vestas Wind Systems A/S (“Vestas”) engaged us to provide

limited assurance on the Sustainability key figures for the

period 1 January – 31 December 2023 described in the

section “What are we assuring” and set out in the Annual

Report of Vestas on page 11.

Our conclusion

Based on the procedures we performed and the evidence we

obtained, nothing came to our attention that causes us not

to believe that the Sustainability key figures for the period 1

January – 31 December 2023 of Vestas stated on page 11

are prepared, in all material respects, in accordance with the

accounting policies developed by Vestas as stated on pages

128–130, Notes to Sustainability key figures (“accounting

policies”).

This conclusion is to be read in the context of what we state in

the remainder of our report.

What we are assuring

The scope of our work was limited to assurance on the

Sustainability key figures for the period 1 January – 31

December 2023 on page 11 (the “Sustainability key figures”).

We express limited assurance in our conclusion.

Professional standards applied and level of assurance

We performed a limited assurance engagement in accordance

with International Standard on Assurance Engagements

3000 (Revised) 'Assurance Engagements other than Audits

and Reviews of Historical Financial Information' and, in

respect of the greenhouse gas emissions, in accordance with

International Standard on Assurance Engagements 3410

'Assurance Engagements on Greenhouse Gas Statements'.

The quantification of greenhouse gas emissions is subject

to inherent uncertainty because of incomplete scientific

knowledge used to determine the emissions factors and the

values needed to combine emissions of different gases.

A limited assurance engagement is substantially less in scope

than a reasonable assurance engagement in relation to both

the risk assessment procedures, including an understanding

of internal control, and the procedures performed in response

to the assessed risks; consequently, the level of assurance

obtained in a limited assurance engagement is substantially

lower than the assurance that would have been obtained had a

reasonable assurance engagement been performed.

Our independence and quality control

We have complied with the independence requirements

and other ethical requirements in the International Ethics

Standards Board for Accountants’ International Code of Ethics

for Professional Accountants (IESBA Code), which is founded

on fundamental principles of integrity, objectivity, professional

competence and due care, confidentiality and professional

behaviour, and ethical requirements applicable in Denmark.

PricewaterhouseCoopers applies International Standard

on Quality Management 1, ISQM 1, which requires the

firm to design, implement and operate a system of quality

management including policies or procedures regarding

compliance with ethical requirements, professional standards

and applicable legal and regulatory requirements.

Our work was carried out by an independent multidisciplinary

team with experience in sustainability

reporting and assurance.

Understanding reporting and measurement methodologies

The Sustainability key figures need to be read and understood

together with the accounting policies. The accounting policies

used for preparation of the Sustainability key figures are

the applied accounting policies developed by Vestas, which

Management is solely responsible for selecting and applying.

The absence of a significant body of established practice on

which to draw to evaluate and measure the Sustainability

key figures allows for different, but acceptable, measurement

techniques and can affect comparability between entities and

over time.

Work performed

We are required to plan and perform our work to consider the

risk of material misstatements of the Sustainability key figures.

In doing so and based on our professional judgement, we:

ż Evaluated the appropriateness of the accounting policies

used, their consistent application and related disclosures in

the Sustainability key figures;

ż Made inquiries and conducted interviews with Vestas’

Management with responsibility for management and

reporting of the Sustainability key figures to assess

reporting and consolidation process, use of company-wide

systems and controls performed;

ż Performed limited substantive testing on a sample

basis to underlying documentation and evaluated the

appropriateness of quantification methods and compliance

with the accounting policies for preparing the Sustainability

key figures at corporate head office and in relation to

selected Vestas reporting sites;

ż Performed analytical review and trend explanation of the

Sustainability key figures; and

ż Evaluated the evidence obtained.

Management’s responsibilities

Management of Vestas is responsible for:

ż Designing, implementing and maintaining internal

control over information relevant to the preparation of

the Sustainability key figures that are free from material

misstatement, whether due to fraud or error;

ż Establishing objective accounting policies for preparing

the Sustainability key figures;

ż Measuring and reporting the information in the Sustainability

key figures based on the accounting policies; and

ż The content of the Sustainability key figures for the period

1 January – 31 December 2023.

Our responsibility

We are responsible for:

ż Planning and performing the engagement to obtain limited

assurance about whether the Sustainability key figures

for period 1 January – 31 December 2023 are prepared,

in all material respects, in accordance with the accounting

policies;

ż Forming an independent conclusion, based on the

procedures performed and the evidence obtained; and

ż Reporting our conclusion to the stakeholders of Vestas.

Hellerup, 7 February 2024

PricewaterhouseCoopers

Statsautoriseret Revisionspartnerselskab

CVR no. 3377 1231

Claus Lindholm Jacobsen

State Authorised Public Accountant

mne23328

Rune Kjeldsen

State Authorsed Public Accountant

mne34160

119

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statements Additional informationGovernanceIn brief

In 2023, we installed turbines in

Estonia for the first time, bringing the

number of countries in which we have

installed wind power to a total of 88.

88 countries

Strategy and ambitions Business area progress Financial statementsGovernance Statements

120

Vestas Annual Report 2023

In brief

→ Quarterly financial and operational key figures

→ Overview of deliveries

→ Definition of terms

→ Selected tax data

→ TCFD reporting overview

→ Notes to Sustainability key figures

→ Disclaimer and cautionary statement

Additional information

Quarterly financial and operational key figures 2023

Financial highlights

mEUR Q1 2023 Q2 2023 Q3 2023 Q4 2023

Income statement

Revenue

2,829 3,429 4,353 4,771

– of which onshore wind turbines 1,785 2,107 3,116 3,672

– of which offshore wind turbines 238 418 299 179

– of which Service 806 904 938 920

Gross profit 188 221 351 523

Operating profit before financial income and costs,

depreciation and amortisation (EBITDA) before

special items

236 132 264 396

Operating profit (EBIT) before special items 40 (70) 70 191

Operating profit (EBIT) after special items 66 (68) 69 225

Profit before tax 31 (130) 28 173

Profit for the period 16 (115) 28 149

Balance sheet

Net working capital

(167) (171) 291 (1,507)

Cash flow statement

Cash flow from operating activities

(974) 48 (31) 1,984

Cash flow from investing activities before

acquisitions of subsidiaries, joint ventures,

associates and financial investments

(107) (188) (220) (308)

Free cash flow before acquisitions of subsidiaries

and financial investments

(1,081) (140) (251) 1,676

Free cash flow (1,085) (110) (239) 1,679

Financial ratios

1

mEUR Q1 2023 Q2 2023 Q3 2023 Q4 2023

Gross margin (%)

6.6 6.4 8.1 11.0

EBITDA margin (%) before special items 8.3 3.8 6.1 8.3

EBIT margin (%) before special items 1.4 (2.0) 1.6 4.0

EBIT margin (%) 2.3 (2.0) 1.6 4.7

Net interest-bearing debt / EBITDA before special items 5.8 3.9 6.0 0.0

Operational key figures

Order intake (bnEUR)

2.9 2.5 4.9 8.2

Order intake (MW) 3,303 2,333 4,502 8,248

– of which onshore 3,303 2,095 2,402 7,468

– of which offshore - 238 2,100 780

Order backlog – wind turbines (bnEUR) 19.7 20.0 21.6 26.0

– of which onshore 17.2 17.6 17.0 20.7

– of which offshore 2.5 2.4 4.6 5.3

Order backlog – service (bnEUR) 31.0 31.6 32.4 34.1

– of which onshore 27.5 27.7 28.1 29.3

– of which offshore 3.5 3.9 4.3 4.8

Produced and shipped wind turbines (MW) 2,983 3,656 2,719 2,308

Deliveries (MW) 2,317 2,831 3,641 3,896

– of which onshore 2,103 2,436 3,387 3,744

– of which offshore 214 395 254 152

1 The ratios have been calculated in accordance with the

guidelines from “Finansforeningen” (The Danish Finance Society)

(Recommendations and Financial ratios).

121

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Quarterly financial and operational key figures 2022

Financial highlights

mEUR Q1 2022 Q2 2022 Q3 2022 Q4 2022

Income statement

Revenue

2,485 3,305 3,913 4,783

– of which onshore wind turbines 1,705 2,527 2,723 3,443

– of which offshore wind turbines 157 78 373 325

– of which Service 623 700 817 1,015

Gross profit 22 97 161 (162)

Operating profit before financial income and costs,

depreciation and amortisation (EBITDA) before

special items

(20) 41 101 (185)

Operating profit (EBIT) before special items (329) (182) (127) (514)

Operating profit (EBIT) after special items (894) (147) (114) (441)

Profit before tax (889) (139) (171) (480)

Profit for the period (765) (119) (147) (541)

Balance sheet

Net working capital

(609) (448) 93 (1,349)

Cash flow statement

Cash flow from operating activities

(928) (188) (614) 1,535

Cash flow from investing activities before

acquisitions of subsidiaries, joint ventures,

associates and financial investments

(193) (174) (138) (253)

Free cash flow before acquisitions of subsidiaries

and financial investments

(1,121) (362) (752) 1,282

Free cash flow (1,123) (381) (644) 1,274

Financial ratios

1

mEUR Q1 2022 Q2 2022 Q3 2022 Q4 2022

Gross margin (%)

0.9 2.9 4.1 (3.4)

EBITDA margin (%) before special items (0.8) 1.2 2.6 (3.9)

EBIT margin (%) before special items (13.2) (5.5) (3.2) (10.7)

EBIT margin (%) (36.0) (4.4) (2.9) (9.2)

Net interest-bearing debt / EBITDA before special items NA

2

(0.2) 2.6 NA

2

Operational key figures

Order intake (bnEUR)

3.0 2.1 2.0 4.8

Order intake (MW) 2,948 2,153 1,895 4,193

– of which onshore 2,329 2,123 1,895 4,193

– of which offshore 619 30 - -

Order backlog – wind turbines (bnEUR) 18.9 18.9 18.1 19.1

– of which onshore 15.4 15,4 15.1 16.4

– of which offshore 3.5 3.5 3.0 2.7

Order backlog – service (bnEUR) 30.0 31.3 32.8 30.4

– of which onshore 26.0 27.3 28.9 26.6

– of which offshore 4.0 4.0 3.9 3.8

Produced and shipped wind turbines (MW) 3,969 3,758 2,441 2,938

Deliveries (MW) 2,236 3,140 3,569 4,383

– of which onshore 2,123 3,053 3,187 4,077

– of which offshore 113 87 382 306

1 The ratios have been calculated in accordance with the

guidelines from “Finansforeningen” (The Danish Finance Society)

(Recommendations and Financial ratios).

2 The ratio of net interest-bearing debt/EBITDA cannot be calculated

as at 31 December 2022 as the EBITDA is negative..

122

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Overview of deliveries

MW 2023 2022

Germany

1,486 818

United Kingdom 896 790

France 735 1,002

Finland 723 1,185

Poland 292 957

Netherlands 287 578

Italy 265 256

Austria 197 213

Spain 177 156

Sweden 165 480

Greece 161 215

Egypt 145 82

Portugal 107 46

Estonia 101 -

Romania 72 -

Lithuania 68 -

Belgium 65 123

Denmark 53 95

United Arab Emirates 42 -

South Africa 37 4

Ireland 36 178

Turkey 32 89

Czech Republic 9 -

Faroe Islands - 14

Latvia - 59

Norway - -

Russian Fed. - 13

Ukraine - 114

EMEA 6,151 7,467

– hereof offshore 563 700

MW 2023 2022

USA

2,079 2,275

Brazil 1,635 1,528

Argentina 420 80

Colombia 332 142

Canada 275 325

Chile 41 128

Dominican Rep. 18 29

Puerto Rico 11 6

Mexico 1 7

Americas 4,812 4,520

– hereof offshore - -

Australia 822 376

Taiwan 458 126

India 193 162

Japan 95 399

New Zealand 84 22

China 21 54

South Korea 21 23

Philippines 13 -

Vietnam 9 179

Sri Lanka 6 -

Asia Pacific 1,722 1,341

– hereof offshore 452 188

Total 12,685 13,328

– hereof offshore 1,015 888

↑

The Parkwind Arcadis Ost I offshore wind power plant in the

Baltic Sea. The V174-9.5 MW™ turbines were installed

using a new floating installation method, an industry-first,

instead of the typical method using a jack-up vessel.

123

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Definition of terms

Average Selling Price (ASP)

The value of the order intake (order intake in mEUR) divided by

the capacity (order intake in MW).

Capital Employed

Capital Employed is the carrying value/sum of total equity and

interest-bearing debt.

Corporate income taxes

Taxes paid in relation to the profit generation of Vestas (also

referred to as profit tax). This includes corporate income taxes

and withholding taxes paid during the year.

Deliveries

The capacity of wind turbines delivered during the reporting

period. The capacity is considered delivered and is deducted

from the wind turbine order backlog when the related revenue

is recognised. Deliveries on EPC/turnkey and non-standard

Supply-and-installation projects are included and deducted

from the order backlog over time, based on the percentage of

completion.

Dividend per share

Dividend multiplied by the nominal value of the share.

EBIT margin

Operating profit as a percentage of revenue.

EBITDA margin

Operating profit before amortisation, depreciation and

impairment as a percentage of revenue.

Earnings per share (EPS)

Profit/loss for the year divided by the average number of

shares outstanding.

Employee taxes

Taxes paid (borne) or withheld (collected) in relation to

Vestas’ people (also referred to as people taxes). These taxes

primarily include compulsory social security contributions ,

unemployment, and healthcare benefits.

Engineering, Procurement and Construction (EPC) projects

Within the Power Solutions segment, Vestas differentiates

between three main types of wind power projects: Supply-

only, Supply-and-installation, and Engineering, Procurement

and Construction (EPC). EPC or turnkey projects, are projects

where Vestas supplies the wind turbines, takes care of the

installation, and finally also handles commissioning.

Free cash flow

Cash flow from operating activities less cash flow from

investing activities.

Free cash flow before acquisitions of subsidiaries, joint

ventures, and associates, and financial investments

Cash flow from operating activities less cash flow from investing

activities before acquisition of subsidiaries, joint ventures, as-

sociates any investments in marketable securities and short-

term financial investments.

Gross margin

Gross profit/loss as a percentage of revenue.

IFRS

International Financial Reporting Standards.

IAS

International Accounting Standards.

IASB

International Accounting Standards Board.

Indirect taxes

Taxes generated through transactions across the supply chain

and either recognised as operating cost (borne) or received

(collected) from customers and settled towards the treasury

(also referred to as product taxes). This includes VAT non-

refundable, net VAT collection, customs duties, stamp duties,

and property taxes.

Investments

Same as ‘Cash flow from investing activities’.

iXBRL

iXBRL tags (or inline XBRL tags) are hidden meta-information

embedded in the source code of an XHTML document in accor-

dance with the inline XBRL 1.1 specification, which enables

the conversion of XHTML-formatted information into a

machine-readable XBRL data record by appropriate software.

Management’s Review

Management’s Review comprises:

ż In brief

ż Strategy and ambitions

ż Business area progress

ż Governance

ż Additional information

Net interest-bearing debt

Net interest-bearing debt is the sum of cash and cash

equivalents and financial investments less financial debts.

Net interest-bearing debt/EBITDA before special items

Net interest-bearing debt divided by operating profit before

amortization, depreciation, impairment and special items.

Net working capital (NWC)

Inventories, trade and other receivables, contract assets,

contract cost, less trade and other payables and contract

liabilities.

Order backlog (EUR)

The value of future deliveries and services under firm and

unconditional orders. The value of the order backlog is

measured as the expected revenue to be recognised in the

future, related to performance obligations that are unfulfilled

or partially unfulfilled at the end of the period.

Order backlog (MW)

The capacity of future turbine deliveries measured as the

total capacity of turbines to be delivered under firm and

unconditional orders less deliveries made at the end of the

period.

Order intake

Orders that have become firm and unconditional during the

period and adjustments to existing contracts measured as

either value (EUR) or capacity (MW) .

Pay-out ratio

Total dividend distribution divided by profit/loss for the year.

Reporting segments

In a reporting context, we distinguish between the Power

Solutions and Service segments. In this context, Power

Solutions covers revenue derived from the three business

areas Onshore wind, Offshore wind, and Development.

Return on Capital Employed (ROCE) before special items

Operating profit/loss (EBIT) before special items adjusted

for tax (effective tax rate) as a percentage of average capital

employed calculated as a 12-month average.

Return on equity

Profit/loss after tax for the year divided by average equity.

Solvency ratio

Equity at year-end divided by total assets.

Supply-and-installation project

In Supply-and-installation projects, Vestas supplies the wind

turbines and takes care of the construction of the wind park.

Supply-only project

When selling a Supply-only project, Vestas delivers the wind

turbines at site.

Taxes borne

Taxes paid to governments at any level (federal, state, or local)

that will or has been recognized as a cost in Vestas’ financial

statement.

Taxes collected

Taxes collected on behalf of governments at any level (federal,

state, or local) that will not be recognized as a cost in Vestas’

financial statement.

124

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Selected tax data

Taxes by category

EURm EMEA Americas Asia Pacific Global

Corporate income taxes

97 178 12 287

Indirect taxes 1,145 102 84 1,331

Employee taxes 527 124 56 707

Total 1,769 404 152 2,325

Taxes borne by category

EURm EMEA Americas Asia Pacific Global

Corporate income taxes

84 170 8 262

Indirect taxes 43 68 24 135

Employee taxes 200 33 13 246

Total 327 271 45 643

Taxes collected by

category

% of EURm revenue EMEA Americas Asia Pacific Global

Corporate income taxes

0.2 0.2 0.2 0.2

Indirect taxes 13.5 0.6 3.0 7.8

Employee taxes 4.0 1.7 2.2 3.0

Total 17.7 2.5 5.4 11.0

* Excluding employees from Utopus Insights Inc.

and SoWiTec Group GmbH.

125

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

VAT receivables (gross)

EURm EMEA Americas Asia Pacific Global

Total

144 184 82 410

VAT receivables (gross)

EUR/FTE

1

EMEA Americas Asia Pacific Global

Total

7,895 29,356 13,567 13,419

VAT receivables (gross)

% of EURm revenue EMEA Americas Asia Pacific Global

Total

1.8 3.5 4.2 2.7

Top five countries by total, borne, and collected

EURm Total Borne Collected

Denmark

328 United States 212 Denmark 213

France 323 Germany 38 France 303

United States 289 Denmark 115 Finland 162

Germany 197 Brazil 35 Germany 159

Poland 188 United Kingdom 32 Poland 180

Other 1,000 Other 211 Other 665

Total 2,325 Total 643 Total 1,682

Top five countries by tax category

EURm

Corporate

income taxes

Indirect

taxes

Employee

taxes

United States

159 Finland 163 Denmark 279

Denmark 38 United Kingdom 73 United States 88

Germany 11 Poland 179 Germany 47

Turkey 7 France 299 Spain 39

United Kingdom 14 Germany 139 United Kingdom 27

Other 58 Other 478 Other 227

Total 287 Total 1,331 Total 707

Top five countries total taxes by region

EURm EMEA Americas Asia Pacific

Denmark

192 United States 289 China 20

Germany 183 Brazil 52 India 15

Finland 181 Canada 28 Australia 81

France 143 Colombia 8 New Zealand 5

Poland 130 Mexico 9 Taiwan 19

Other 940 Other 18 Other 12

Total 1,769 Total 404 Total 152

Selected tax data – continued

126

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

TCFD reporting overview

Below is an overview of the 11 TCFD recommendations and where to find our

2023 disclosures regarding the topic in question. The Vestas Sustainability Report

2023, the CDP (Carbon Disclosure Project) Climate questionnaire 2023 and the

Vestas Climate Risk Report 2023 can all be found on our corporate website, go to:

vestas.com/en/investor/reporting/2023

Governance

Disclose the organisation’s governance around

climate-related risks and opportunities.

TCFD Recommended Disclosures Our reporting

Describe the board’s oversight of climate-related risks and

opportunities.

ż CDP, Climate questionnaire 2023, section C1

Describe management’s role in assessing and managing climate

related risks and opportunities

ż Annual Report 2023, Risk governance and main risks,

pages 43-44

ż CDP, Climate Change Questionnaire 2023, section C1

Strategy

Disclose the actual and potential impacts of climate-related risks

and opportunities on the organisation’s businesses, strategy, and

financial planning where such information is material.

TCFD Recommended Disclosures Our reporting

Describe the climate related risks and opportunities the

organisation has identified over the short, medium, and long term.

ż Annual Report 2023, Strategy and ambitions,

pages 16-21

ż CDP, Climate questionnaire 2023, section C2

ż Vestas Climate Risk Report 2023, pages 6 -7

Describe the impact of climate-related risks and opportunities on

the organisation’s businesses, strategy, and financial planning.

ż Annual Report 2023, Strategy and ambitions,

pages 16-21

ż CDP, Climate questionnaire 2023, section C3

ż Vestas Climate Risk Report 2023, pages 6-9

Describe the resilience of the organisation’s strategy, taking into

consideration different climate-related scenarios, including a 2°C

or lower scenario.

ż CDP, Climate questionnaire 2023, section C3

Risk management

Disclose how the organisation identifies, assesses,

and manages climate-related risks.

TCFD Recommended Disclosures Our reporting

Describe the organisation’s processes for identifying and

assessing climate related risks.

ż Annual Report 2023, Risk governance and main risks,

pages 43-44

ż CDP, Climate questionnaire 2023, section C2

ż Vestas Climate Risk Report 2023, pages 3-5

Describe the organisation’s processes for managing climate-

related risks.

ż Annual Report 2023, Risk governance and main risks,

pages 43-44

ż CDP, Climate questionnaire 2023, sections C1 and C2

ż Vestas Climate Risk Report 2023, page 2, 8 and 9

Describe how processes for identifying, assessing, and managing

climate-related risks are integrated into the organisation’s overall

risk management.

ż Annual Report 2023, Risk governance and main risks,

pages 43-44

ż Vestas Climate Risk Report 2023, page 2 and 9

ż CDP, Climate questionnaire 2023, section C1 and C2

Metrics and targets

Disclose the metrics and targets used to assess and

manage relevant climate-related risks and opportunities where

such information is material.

TCFD Recommended Disclosures Our reporting

Disclose the metrics used by the organisation to assess climate-

related risks and opportunities in line with its strategy and risk

management process.

ż Annual Report 2023, Sustainability highlights, page 8

ż Sustainability Report 2023, page 7 and 17-21

Disclose Scope 1, Scope 2, and, if appropriate, Scope 3

greenhouse gas (GHG) emissions, and the related risks.

ż Annual Report 2023, Sustainability highlights, page 8

ż Sustainability Report 2023, pages 17-21 and 57

ż CDP, Climate questionnaire 2023, sections C2, C4, and C6

Describe the targets used by the organisation to manage climate

related risks and opportunities and performance against targets.

ż Annual Report 2023, Sustainability highlights, page 8

ż Sustainability Report 2023, page 7, 17-21 and 57

127

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Notes to Sustainability key figures

Basis for preparation

of the statement

General reporting approach

The below description of accounting policies refers to the

environmental, social, and governance indicators presented

on page 11.

All Vestas’ wholly owned companies are covered by the

report. Newly established companies are included from the

time of production start, and companies are excluded from

the reporting from the specific time when they leave Vestas’

control. Acquired companies are included from the specific

time when coming under Vestas’ control.

Defining materiality

Vestas performs its materiality assessment based on an

analysis of significant economic, environmental and social

impacts of the company’s activities. The analysis is based

on internal priorities as well as experience from dialogue

with and direct involvement of customers, investors, policy

makers, employees, and media. The result of the analysis is

incorporated in the Vestas Sustainability Report, which is

published on an annual basis. In 2023 Vestas has continued

to drive and report on progress in line with the materiality

assessment conducted in 2020, see the Sustainability Report

2023, pages 10-11.

Environmental

Vestas' environmental key figures encompass the Vestas

Group in an operational control perspective (including owned

and leased entities) ensuring a comprehensive and accurate

statement of these figures. This approach applies to all

environmental indicators that are reported for the accounting

period, based on data registered locally in the Vestas reporting

system, consolidated on Group level.

Utilisation of resources

Consumption of energy (GWh)

This indicator includes electricity, gas, oil, biomass, LPG,

diesel, gasoline, marine gas oil and district heating. Energy

is reported based on quantities consumed, including cars

owned and leased by Vestas, employee benefit cars, and fuel

for transportation on project sites, production equipment,

and machinery. Consumption of electricity comprises

electricity purchased externally. Oil for heating is based on

external purchases and meter readings at the end of the

reporting period.

'Of which renewable energy (GWh)': Electricity and heating

from renewable energy sources are calculated on the basis

of renewable energy certificates for electricity (RECs) and

supplier statements. Renewable share of fuel for transport

is based on local renewable energy mix in line with fuel

specific legal requirements and where legal requirements are

exceeded the added renewable energy is based on supplier

statements.

'Of which renewable electricity (GWh)': Electricity from

renewable energy sources is calculated on the basis of

renewable energy certificates (RECs) and supplier statements.

Only 100 percent renewable electricity is counted as

renewable electricity.

Renewable energy (%)

Percentage of renewable energy is based on total

consumption of energy.

Renewable electricity for own activities (%)

Percentage of renewable electricity for own activities is based

on total consumption of electricity.

Withdrawal of fresh water (1,000 m

3

)

The withdrawal of water is measured by withdrawal of fresh

water based on supplier statements and metre readings.

Waste

Volume of waste from own operations (1,000 tonnes) and -

of which collected for recycling (1,000 tonnes)

Volume of waste is based on weight which is calculated on the

basis of supplier statements, internal weighing, destination

certificates, etc. Waste disposal method is based on supplier

statements.

Recyclability rate of hub and blade (%)

Recyclability rate of hub and blade is calculated as the

recyclable share of the total rotor (i.e. hub and blade)

mass. The measure is based on the material composition

of all turbine types that were produced and shipped in the

reporting year. Recyclability rates of different materials and

component types are quantified and estimated based on

information from life cycle assessment (LCA) reports. During

2023 the recyclability rate of blades has been adjusted to

reflect the latest development in technology related to our

CETEC project. This means that all epoxy-infused blades are

100 percent recyclable, which increases the overall rotor

recyclability.

Material efficiency (tonnes of waste excl. recycled per MW

produced and shipped)

Material efficiency is defined as the total tonnes of non-

recycled waste materials from Vestas’ own manufacturing

per MW capacity produced and shipped during the reporting

period. Non-recycled waste materials include those that are

incinerated or landfilled.

CO

2

e emissions

Carbon emissions are measured using the carbon dioxide

equivalent (CO

2

e) to include all relevant greenhouse gasses

according to the Greenhouse Gas Protocol. A distinction is

made between scope 1, 2, and 3 emissions, as also defined by

the Greenhouse Gas Protocol.

Direct emissions of CO

2

e (scope 1) (1,000 t)

Scope 1: Direct emissions of CO

2

e are calculated based on

determined amounts of fuel for own transport and the direct

consumption of fossil-based fuels (e.g., oil and gas), with the

usage of standard factors published by the UK Department for

Business, Energy & Industrial Strategy (BEIS) (2023).

Indirect emissions of CO

2

e (scope 2) (1,000 t)

Scope 2: Covers emissions released in connection with the

consumption of purchased electricity and heat. Indirect

market-based emissions of CO

2

e from consumption of

electricity are calculated using national grid emission factors

published by the International Energy Agency (2023). Indirect

CO

2

e emissions from district heating are calculated using BEIS

(2023) emission factors.

Indirect emissions of CO

2

e from the supply chain (scope 3)

(million t)

Scope 3: Indirect emissions of CO

2

e from the value chain are

reported based on the Greenhouse Gas Protocol. Scope 3

categories 8, 9, 10, 11, 13 and 15 are immaterial for Vestas

and category 14 is not applicable.

Wind plant: The largest part of the emissions is in category

1 ‘Purchased goods and services’, emissions from materials

going into products are calculated based on LCAs following

ISO 14040 & 14044, publicly available at vestas.com.

The CO

2

e emissions of different materials and component

types are based on the total quantity of annual produced

and shipped turbines and the material composition of the

individual turbine types as stated in the LCA reports. Based

on this, the global material mass balance is calculated for

all materials consumed during the production and CO

2

e

emissions are calculated using GaBi (2023) emission factors

per material group for raw materials used in production

and manufacturing processes. The actual steel mass for all

produced and shipped turbines is used to calculate global

CO

2

e emissions for the raw material production of steel and for

foundation materials. The CO

2

e emissions from concrete and

steel used in foundations is based on the same LCA reports as

the remaining material groups.

128

Additional information

Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Construction: The CO

2

e emissions emitted during the

construction of a wind farm is estimated based on the quantity

of diesel-fuel consumed per wind turbine produced and

shipped in markets in which Vestas is responsible for installing

the wind turbine. LCA studies for the diesel combustion per

turbine installation and respective BEIS emission factors

(2023) are applied.

Service: CO

2

e emissions from service operations are estimated

using the quantity of spare parts that are replaced and

repaired in the reporting year, as well as expected repair and

replacement levels. GaBi (2023) emission factors for the raw

materials are applied to estimate global CO

2

e emissions.

Capital goods: (category 1) Other purchased goods and

services and capital goods (category 2) and waste generated

in operations (category 5) are estimated based on spend

data using BEIS factors (2023) for Indirect emissions from

the supply chain (2011). Fuel- and energy-related activities

are calculated using BEIS factors for emissions related to the

production of fuel and NREL factors (2019) for renewable

electricity and IEA factors (2023) for grid electricity.

Transportation: Emissions from upstream transportation

(category 4) are based on supplier information and estimated

based on the LCA reports for weight and distance of

components transported and BEIS (2023) carbon emissions

factors. Business travel (category 6) emissions for air flights,

hotels and rental cars are activity-based data provided by

the travel agency used for all bookings. Employee commuting

(category 7) is reported on daily commute by car, which

is estimated based on the average number of FTEs and a

selected sample of commuting distance. It applies standard

factors published by the BEIS (2023).

End-of-life treatment: Of sold products (category 12) is

estimated based on material composition of all produced and

shipped wind turbines in the reporting year. For materials that

are not recyclable, an average GaBi (2023) emission factor for

inert landfill is applied.

Indirect emissions of CO

2

e from the supply chain (scope 3)

(kg per MWh generated)

The amount of MWh generated is based on the number and

type of wind turbines produced and shipped in the financial

year along with values for wind turbine capacity factor and

site-specific lifetime. Vestas applies an expected lifetime

based on site- specific agreed lifetimes where this differs

from the standard design lifetime. In relation to the target to

reduce carbon emissions in the value chain, indirect emissions

of CO

2

e from the value chain per MWh generated include 70

percent of the scope 3 emissions.

Products

Expected CO

2

e avoided over the lifetime of the capacity

produced and shipped during the period (million tonnes)

This is based on total wind turbines (MW) produced and

shipped during the reporting period. A weighted average

capacity factor was applied in 2023, based on actual hourly

performance data from the wind turbine types produced and

shipped in the reporting year. Vestas applies an expected

lifetime based on site-specific agreed lifetimes where this

differs from the standard design lifetime. The expected CO

2

e

avoided over the lifetime of the wind turbines is calculated

using the latest updated standard factor of global average

carbon emissions for electricity from the International Energy

Agency (2023).

Expected annual CO

2

e avoided by the total aggregated

installed fleet (million tonnes)

Expected annual CO

2

e avoided by the total aggregated

installed fleet is calculated on one year operation of total

annual installed capacity and global average CO

2

e emissions.

Vestas applies a fleet average capacity factor from 2023. The

expected annual CO

2

e avoided is based on the latest updated

standard factor of global average carbon emissions for

electricity from the International Energy Agency (2023).

Social

Safety

Total Recordable Injuries (number)

The total recordable injuries (TRI) include fatalities, lost time in-

cidents, restricted work injuries and medical treatment injuries.

TRI includes injuries for employees and externally employed

workers under Vestas' supervision. Supervision of an external

worker is day-to-day working directions.

‘Of which Lost Time injuries (number)’: The lost time injuries are

based on incidents reported in Vestas' reporting system, with

more than one day of absence from work, including externally

employed workers under Vestas' supervision.

‘Of which fatal injuries (number)’: The fatal injuries are based

on incidents reported in Vestas’ reporting system, including

externally employed workers under Vestas’ supervision.

Total Recordable Injuries per million working hours (TRIR)

Total Recordable Injury Rate (TRIR) represents all injuries

reported in the Vestas reporting system per one million

working hours, including externally employed workers under

Vestas' supervision.

Lost Time Injuries per million working hours (LTIR)

Lost Time Injuries are injuries that have caused at least one

workday of absence after the day of the injury per one million

working hours. The Lost Time Injury Rate (LTIR) represents

all Lost Time injuries reported per one million working hours.

The number of working hours and external supervised workers

are registered and measured on the same basis as the Total

Recordable Injuries. The LTIR includes fatalities.

The number of working hours is measured on the basis of

hours registered in the system for hourly-paid employees, and

prescribed working hours for salaried employees excluding e.g.

holidays, absence due to illness and maternity leave.

Employees

Average number of employees (FTEs)

The average number of employees is calculated as the twelve-

month average number of full-time equivalents (FTEs). The

employees included are under Vestas’ financial control (i.e.

have standard and temporary contracts directly with Vestas).

Employees at the end of the period (FTEs)

Employees at the end of the period are calculated based on

total full-time equivalents (FTE). The employees included

are under Vestas’ financial control (i.e. have standard and

temporary contracts directly with Vestas).

Diversity and inclusion

The share of women in the Board, the Executive management

team and leadership positions are calculated based on

headcounts at the end of the reporting period. Headcount

is based on number of individuals employed , irrespective of

contract (full-time/part-time).

Women in the Board and Executive Management team at the

end of the period (%)

Women in the Board and Executive Management team

is the share of women among the members of the Board

who are elected by the Annual General Meeting and the share

of women among the members of the Executive

Management team combined.

Women in leadership positions at the end of the period (%)

The share of women in leadership positions is calculated

based on headcounts at the end of the reporting period. The

parameter is calculated based on the number of women in

leadership positions divided by the total number of leadership

positions. Employee information is from the company’s

ordinary registration systems with specification of gender and

management level. Leadership positions comprise managers,

specialists, project managers, and above.

129

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Statements

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Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Notes to Sustainability key figures

Human rights

Community grievances (number)

The number of community grievances is calculated based

on incidents registered in the reporting system. The

measure “Community grievances” covers the total number of

community complaints registered in the reporting system in

the reporting year. Vestas registers and handles community

incidents caused by Vestas or its contractors on communities

that turn into a grievance, where a “community” is a person or

group that is either directly or indirectly affected by Vestas or

Vestas' activities. The cases occur in connection with a wind

farm project and its associated facilities (e.g. accommodation

facilities), a Vestas factory or a Vestas Research and

Development Centre.

Community beneficiaries (number)

Community beneficiaries are defined as individuals that have

benefitted by participating in Vestas’ community development

initiatives intended to upgrade skills or by receiving financial

or equivalent aid.

These initiatives are implemented during the reporting period

in connection to a wind farm project and associated facilities, a

Vestas factory, or Vestas Research and Development Centre.

Community development initiatives are identified in

collaboration with local stakeholders, such as local authorities

and members of the local community to ensure that the

initiatives meet local needs.

This indicator only includes defined community members

that benefit directly. It does not include Vestas employees

or community members in cases where the number of

beneficiaries is undefined e.g. installation of solar cells on

a village health clinic. Where the beneficiary is a household,

Vestas calculates the total beneficiaries based on the average

number of individuals per household defined by the UN

Department of Economic and Social Affairs (UN 2017).

Social Due Diligence on projects in scope (%)

This measures the share of wind power projects, materialised

as firm orders, that have been subject to social due diligence

(SDD) processes in the reporting period. Wind farm projects

in scope for SDD are: 1) Engineering, Procurement and

Construction (EPC) projects in emerging markets; 2) all

Supply-and-installation projects of 100 MW or above in

emerging markets; and 3) projects in OECD countries with

a risk rating of ‘Extreme’ or ‘High’ according to the Verisk

Maplecroft’s “Indigenous People” risk index on risks related

to indigenous people’s lands, territories or livelihoods under

threat. In this context, ‘Emerging markets’ are defined as

non-OECD, high-income countries, as defined by the World

Bank classifications. SDD procedures include: 1) a high-level

country assessment; 2) ‘Know Your Customer’ assessment; and

3) an in-depth project assessment on social matters.

Governance

Whistle-blower system

EthicsLine cases (number)

All whistleblower cases reported to the EthicsLine

whistleblower hotline are investigated by the EthicsLine

function supported by the relevant Ethics Committee, with

the purpose of identifying whether a violation of the Code

of Conduct has taken place.

Of which substantiated (number) or unsubstantiated (number):

Upon the completion of the investigation, cases are classified

as either substantiated or unsubstantiated. At the end of

the reporting year, the variance between the total number of

reported cases and the combined total of substantiated and

unsubstantiated cases are calculated to identify the number

of open cases still under investigation. These are expected to

be assessed during the following reporting year, and included

in the number of substantiated or unsubstantiated cases in

the reporting year when the case is closed.

Disclaimer and cautionary statement

This document contains forward-looking statements

concerning Vestas’ financial condition, results of operations

and business. All statements other than statements of

historical fact are, or may be deemed to be, forward-looking

statements. Forward-looking statements are statements

of future expectations that are based on management’s

current expectations and assumptions and involve known

and unknown risks and uncertainties that could cause actual

results, performance, or events to differ materially from those

expressed or implied in these statements.

Forward-looking statements include, among other things,

statements concerning Vestas’ potential exposure to market

risks and statements expressing management’s expectations,

beliefs, estimates, forecasts, projections and assumptions. A

number of factors that affect Vestas’ future operations and

could cause Vestas’ results to differ materially from those

expressed in the forward-looking statements included in

this document, include (without limitation): (a) changes in

demand for Vestas’ products; (b) currency and interest rate

fluctuations; (c) loss of market share and industry competition;

(d) environmental and physical risks, including adverse

weather conditions; (e) legislative, fiscal, and regulatory

developments, including changes in tax or accounting policies;

(f) economic and financial market conditions in various

countries and regions; (g) political risks, including the risks of

expropriation and renegotiation of the terms of contracts with

governmental entities, and delays or advancements in the

approval of projects; (h) ability to enforce patents; (i) product

development risks; (j) cost of commodities; (k) customer credit

risks; (l) supply of components; and (m) customer created

delays affecting product installation, grid connections and

other revenue-recognition factors.

All forward-looking statements contained in this document are

expressly qualified by the cautionary statements contained

or referenced to in this statement. Undue reliance should

not be placed on forward-looking statements. Additional

factors that may affect future results are contained in Vestas’

Annual Report for the year ended 31 December (available at

www.vestas.com/en/investor) and these factors also should

be considered. Each forward-looking statement speaks only

as of the date of this document. Vestas does not undertake

any obligation to publicly update or revise any forward-looking

statement as a result of new information or future events

other than as required by Danish law. In light of these risks,

results could differ materially from those stated, implied or

inferred from the forward-looking statements contained in this

document.

130

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Statements

Vestas Annual Report 2023

Strategy and ambitions Business area progress Financial statementsGovernanceIn brief

Corporate

Governance 2023

This report is prepared according to section 107b (1) and (3) of the Danish Financial Statements Act

- the report covers the period 1 January 2023 - 31 December 2023

RReemmuunneerraattiioonn

RReeppoorrtt 22002233

This report is prepared according to section 139b of the Danish Companies Act

- the accounting period 1 January 2023 - 31 December 2023

Vestas Wind Systems A/S – Company reg. no.: 10403782

Hedeager 42, 8200 Aarhus N, Denmark

Sustainability

Report

2023

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