Treasury at Nordex: See Which Way the Wind Blows
“Because our business is project-driven, we generally have fewer but therefore larger payments come in. This is a challenge for liquidity planning – everything depends on the progress of the project. This determines when we invoice customers and in turn also when we receive the money. This is why those responsible for a project need to provide us with information for our liquidity planning. It is a little bit ironic really: our business is all about wind – but wind at a too early stage means projects and installations take longer – and that’s not good for cash. (laughs)”
Michael Mattig | Group Lead Treasury, Transaction & Inhouse Banking, Nordex
Nordex Treasury Profil

NORDEX is one of the leading manufacturers of onshore wind power farms worldwide and focuses on producing, erecting and maintaining wind turbines. The business was founded in 1985 and has since become a true global player active in 80 countries on 6 continents – from Uruguay to China. NORDEX is listed on the German TecDax and has been growing rapidly: in April 2016, they took over the wind power division of the Spanish Acciona Group and now boast 4,800 employees. In 2015, they had a pro-forma turnover of EUR 3.4 billion.

Hamburg, Germany: cloudy sky, light showers, windy. Some would consider this great weather conditions – at least NORDEX would! For them, the weather, and wind in particular, plays a very special role. Many people are familiar with their colossal rotor blades and wind turbine pulpits up in the clouds; either from the media, because they live nearby or because they have seen these “giants” transported on the autobahn. NORDEX designs wind farms and manufactures the turbines for them. It is easier to cast and weld wind turbine towers in the region or country where they will be erected. That way you don’t have to transport them hundreds and thousands of miles or even across continents.

NORDEX focuses on the engineering of wind turbines as well as corresponding services and consulting. After all, you don’t just order a wind farm from a catalog. This is complex, project-based business. Energy providers and financial investors alike are interested in entire wind farms and enlist NORDEX to design, offer and build them – ready to use! In Germany, a wind farm typically contains 5 or 10 wind turbines; in more remote locations where noise and lighting conditions can be ignored, you can find up to 100 wind turbines. Both the diversity of the regions in which these wind farms are built, and their very project-driven business operations define NORDEX and have a great influence on the way the treasury department works.


Wind up with NORDEX – business worldwide

Unlike the background noise of wind turbines, payments at NORDEX are anything but constant. The company operates on a project basis, and regular incoming cash flows are the exception. It is not unusual for NORDEX to receive relatively few payments for two or three whole weeks. When money does come in again, it can easily be large million euro sums, mostly installments from projects all over the world.

Europe remains a core market for NORDEX, but it operates worldwide. With the acquisition of Acciona Windpower, NORDEX has grown by 30% and has boosted its country portfolio. Some of the new countries they now operate in, for example Chile, Mexico or Brazil, are not that easily integrated in a treasury setup and pose challenges to treasurer Michael Mattig and his team. Fortunately, the NORDEX treasury team is very experienced on an international stage, including important and complex projects in South Africa or Pakistan that represented real milestones for the company.

With the latest acquisition, Acciona Windpower, funding and cash management in emerging markets have become key issues. While many other businesses set up cash pools in various currencies, NORDEX largely sticks to EUR and Europe. Too many foreign exchange controls and payment restrictions in countless portfolio countries make cross-border cash pooling impossible. If the law stipulates a paper document and a stamp for every international transaction, then even the best technology will not get you very far.


Efficiency with the 80-20 Rule

The NORDEX treasury team is a great advocate of the 80-20 Rule: 80% of results can be achieved with predictable overall effort – the remaining 20% require the most effort and will only be tackled afterwards. You first need to deal with the easy issues before you can concentrate on complex topics, for example payments in South America. This maxim has led NORDEX to adapt their banking strategy accordingly, bearing in mind that without banks and without a functioning financial market you jeopardize the funding of wind farms and thus one of the main business “motors.” Irregular but then high-volume incoming payments are a key issue for NORDEX, one that impacts cash management, and a number of other areas of the treasury. For example, while intraday account statements (so-called MT942s, i.e. statements listing the transactions posted by a bank throughout the day) are of minor importance for most companies, they are essential for NORDEX. They show the large-value payments which in turn trigger a number of processes. For many engineers, waiting for these payments to come in is like waiting for the starting signal in a 100-m race: production is triggered, parts can be purchased, and the project can be outlined and kicked off – they can fly out of their starting blocks!

Liquidity and FX management – planning the “unplannable”

18 months are an average project span for NORDEX, and incoming payments need to be planned proactively. In addition to short-term cash management, liquidity planning is of great importance. With projects always containing some basic expenses, outgoing payments remain foreseeable and can be planned relatively well. Incoming payments on the other hand depend on the progress of a construction project or its completion. However, it is impossible to predict this progress with absolute certainty. While wind is greatly appreciated when running a wind farm, it can be a real obstacle when erecting the turbines and lead to delays, which also means incoming payments are pushed back. This represents a challenge when it comes to liquidity planning as treasurers require real in-depth knowledge of the individual projects. The Commercial Project Management team at NORDEX is therefore encouraged to directly contribute their data for liquidity planning purposes and to update expected time lines accordingly. The weekly planning horizon for group liquidity that comes with this setup helps the treasury team to decide on the lifetime of investment for excess funds. With the advent of negative interest, this has become an even more crucial topic for the NORDEX treasury team.

NORDEX cannot use historical data to deduce general projections for the future. This also means they’re unable to make valid predictions for FX exposure and thus the potential trade volume in USD or other currencies. NORDEX is an export business with manufacturing plants in Germany and Spain. FX hedging with large sums and fixed deadlines is only possible if the order in foreign currency – usually USD – has been placed. If the order is to be processed in EUR after all, no FX hedging is necessary. In the long term, the hedging volume is hard to predict. Moreover, transactions are processed in a currency risk neutral way in line with project sourcing in key markets, including not just Europe but also Pakistan, India, South Africa, Brazil, Uruguay, Chile, Mexico and North America. The US is an exception here, with deals in EUR hard to enforce. Most orders are USD-denominated. NORDEX aims to invoice everything in local currency which has also been purchased locally, for example building an access road to a wind farm, the foundation of a wind turbine, a tower, the costs for erecting a wind turbine or for connecting a turbine to the grid. This means that while FX management does play a fairly important role for the NORDEX treasury team, it actually only forms a smaller part of their day-to-day business.


Treasury in the context of globalization and standardization

Another important factor for the work of the treasury team is the group’s decentralized structure with centralized management. 60 entities in around 30 countries keep the treasury busy when it comes to allocating liquidity, and providing support for the establishment of new subsidiaries and the compliance with local legislation. For their financial status, NORDEX classifies countries and their available liquidity as “highly trapped,” “moderately trapped” and “available,” depending on how easily funds can be transferred. Having excess liquidity in a country does not necessarily mean it can also be transferred and used for the repayment of group liabilities, not least in connection with the acquisition of Acciona Windpower. Management has also needed to get used to another effect the large country portfolio has: in light of the continued expansion, the group-wide financial status for the previous day is no longer available at 10 am but at 3 pm when the last account statements from Mexico and Uruguay come in.

Despite all these local requirements and country specifics, NORDEX centralizes wherever it can. Great effort was put into replacing the previously needed, multiple electronic banking systems. By using EBICS and SWIFT to exchange account statements for over 95% of all accounts and to standardize most of the payments processing, the treasury has succeeded in integrating countries such as China or Pakistan via the group-wide treasury platform.

NORDEX has also focused their operations on five main banks. Michael Mattig describes his own journey as the evolution from “bank token juggler” to efficient payments manager. Local payments are either automatically captured by processing payment files or, in some exceptions, uploaded manually. Central treasury may not be able to read documents from China, but they are still responsible for the final authorization of payments and the electronic transfer to the respective bank. This is even true in cases where the MT101-based payment order was created and entered in Pakistan, signed in Germany and transferred to a bank server in Germany, transferred back bank-internally to Karachi and printed there on a check that a NORDEX employee collects from their local bank and mails. The combination of IT and globalization can yield some strange effects, but the process is still more secure and more efficient as it would be if subsidiaries were to be in charge without the necessary transparency.

System-driven collaboration of all local entities

The NORDEX treasury team has great experience and expertise and has dealt with many different aspects of financial management while working for NORDEX. Seeing the effects of the global financial crisis and the excessively rapid growth of some companies in the industry has had a great impact on them. Using technology to facilitate financial management and the continuous reduction of spreadsheets were a natural development. As early as 2008, creating group-wide visibility and ensuring systemic support for centralization efforts were singled out as cornerstones of the treasury setup, following much deliberation and based on past experiences. While SAP continues to be an important element of the NORDEX IT landscape, the treasury management system has created a whole new, overarching level encompassing all group entities, enabling the flexible and quick collection of local data that can then be used both locally and centrally. A fair distribution of the workload between central treasury and decentralized units supported by the system is the key to successful cooperation at NORDEX. “Centralized and coordinated” is the catchphrase of the self-proclaimed “cash custodian” – the treasurer. This setup guarantees that NORDEX can breeze through any market conditions and brave any treasury storm.

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