Vestas' 128 MW Chilean Wind Project: A Strategic Bet on Latin America's Renewable Energy Surge and High-Margin Service Agreements

In the race to decarbonize the global energy grid, Vestas Wind Systems has positioned itself as a masterclass in strategic foresight. The Danish turbine giant's recent 128 MW Chilean wind project, announced in Q3 2025, isn't just another order—it's a calculated move to capitalize on Latin America's renewable energy boom and a masterstroke in leveraging long-term service agreements to secure sustainable investor returns. Let's break down why this deal matters for Vestas, its shareholders, and the broader energy transition.

Latin America: The Next Frontier for Renewable Energy

Latin America is no longer a side note in the global energy transition—it's a front-row player. Clean energy investment in the region hit $70 billion in 2025, with countries like Chile, Colombia, and Brazil leading the charge. Solar and wind now account for 17% of the region's electricity mix, while hydro remains dominant at 41%. Fossil fuel dependency has dropped from 47% in 2015 to 35% in 2024, and coal's share is a mere 4%.

Chile, in particular, is a poster child for this shift. The Atacama Desert—home to the world's highest solar irradiation—has attracted megaprojects like Sonnedix Atacama and Grenergy's Oasis Atacama. Meanwhile, wind energy is surging in Brazil, which added 36 TWh of wind and solar capacity in 2024 alone. By 2030, Latin America's wind and solar capacity could surpass 100 GW, driven by policy tailwinds and natural advantages.

Vestas' 128 MW project in Chile aligns perfectly with these trends. The project will deploy 20 of its V162-6.4 MW turbines, a high-capacity model optimized for low-wind sites, and include a 10-year AOM5000 service agreement—a blueprint for the company's long-term value creation.

Vestas: Market Leader with a Decarbonization Playbook

Vestas has dominated Latin America's wind market for years, but this project cements its leadership. The region accounts for a significant portion of Vestas' global order intake, and the 128 MW Chilean deal adds to a growing pipeline that includes offshore wind projects in Colombia and onshore expansions in Brazil.

What sets Vestas apart? Its ability to bundle high-margin service contracts with turbine sales. The AOM5000 agreement for this project isn't just maintenance—it's a performance guarantee. By ensuring 99% turbine availability, Vestas shifts operational risk to itself, locking in recurring revenue while customers enjoy predictable costs and energy output.

This model is a win-win. For investors, it transforms Vestas from a project-based contractor into a recurring revenue engine, a structural shift that stabilizes cash flows and margins. For customers, it reduces the levelized cost of energy (LCOE), making renewables more competitive in subsidy-free markets.

Service Agreements: The Unsung Hero of Vestas' Profitability

Long-term service contracts are the backbone of Vestas' financial strategy. In Q1 2025, the service segment generated an 18% EBIT margin, outpacing the company's overall EBIT of 0.4%. By 2025, Vestas expects the service segment to deliver €700 million in EBIT before special items, with a long-term ambition of hitting 25% EBIT margins.

Why? These agreements are sticky. A 10-year AOM5000 contract like the one in Chile ensures Vestas remains tied to the asset's performance for a decade, creating a “landed revenue” model. This contrasts with the volatile Power Solutions segment, where margins are squeezed by supply chain costs and project execution risks.

Moreover, service agreements provide predictable cash flows, a critical advantage in a market plagued by geopolitical and macroeconomic uncertainty. For investors, this means Vestas can fund R&D, reduce debt, and potentially boost dividends—all while maintaining a strong balance sheet.

Strategic Risks and the Road Ahead

No investment is without risks. Latin America's renewable energy boom faces headwinds: high interest rates, limited long-term financing, and political shifts could delay projects. Competitors like GE Vernova and Siemens Gamesa are also eyeing the region, though Vestas' service-first approach gives it an edge.

However, Vestas' recovery plan—focused on operational efficiency, commercial discipline, and service margin expansion—positions it to outpace rivals. The CEO, Henrik Andersen, has emphasized turning the service segment into a “really good source of income,” a goal that's already showing traction.

Investor Takeaway: A High-Conviction Play on Renewables and Recurring Revenue

The 128 MW Chilean project is more than a single deal—it's a microcosm of Vestas' broader strategy. By targeting high-growth markets like Latin America and leveraging high-margin service agreements, Vestas is building a business that thrives on the energy transition's momentum.

For investors, the key metrics to watch are:
1. Service segment EBIT margins (targeting 25% by 2026).
2. Order backlog execution in Latin America and other emerging markets.
3. Free cash flow generation, which underpins Vestas' ambition for a 10% EBIT margin and 20% ROCE over the cycle.

If Vestas continues to execute, its stock could outperform peers in the renewable sector. The 128 MW Chilean project is a reminder: in the energy transition, it's not just about selling turbines—it's about selling the future. And Vestas is positioning itself to own that future.

Final Note: This analysis assumes continued policy support for renewables in Latin America and Vestas' ability to maintain service margins. Investors should also consider macroeconomic risks and supply chain dynamics in their decision-making.