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NKT A/S: Connecting a Greener World Through High-Voltage Cable Dominance
Introduction: The Hidden Infrastructure of the Energy Transition
Picture this: a 200-meter tower rising above the Swedish coastline at Karlskrona, taller than any structure in Scandinavia except for a handful of radio masts. This concrete monolith isn't a monument to vanity—it's an extrusion tower for manufacturing high-voltage submarine power cables, the arteries of our renewable energy future. The company building it, NKT A/S, has quietly become one of the most strategically positioned industrial players in Europe's energy transition, and almost nobody outside the energy sector knows their name.
NKT A/S is a Danish power cable producer and accessory manufacturer based in Copenhagen. The company is listed on the Nasdaq Copenhagen and has approximately 6,000 employees with production facilities in 10 European countries. It is best known for its offshore high-voltage DC cables that are used to connect offshore wind farms to onshore grids.
As of late November 2025, NKT trades at approximately DKK 777 per share with a market cap of around DKK 41.5 billion, a trailing P/E ratio of approximately 25, and generated revenue of about EUR 3.6 billion over the trailing twelve months. The stock has significantly outperformed its benchmark over the past year, though volatility has increased as the company executes on massive capacity expansion programs.
The central question driving this analysis: How did a 134-year-old Danish cable company—one that once made everything from glass to nails to vacuum cleaners—transform itself into an indispensable player in Europe's renewable energy infrastructure? The answer lies in a series of disciplined strategic moves, a game-changing acquisition, and the tailwinds of a generational energy transition that shows no signs of slowing.
Founding & Early History: The Second Industrial Revolution in Copenhagen (1891-1989)
The story begins in 1891, in the midst of what historians call the Second Industrial Revolution. Ship-owner H.P. Prior saw the potential in making high quality wire for power distribution and for the new-fangled telephone. He founded NKT during the second industrial revolution where coal and gas were giving way to electricity as the source of domestic and industrial power. H.P. Prior was part of the band of 19th Century entrepreneurs and industrialists who paved the way towards the degree of comfort and convenience demanded by modern life in a world running on electrical power.
Hans Peter Prior, who would later become chairman of the Danish industry council, founded the company under the unwieldy name Nordisk Elektrisk Ledningstraad og Kabel-Fabrik—Nordic Electric Wire and Cable Factory. The company was founded in 1891 by Hans Peter Prior. It quickly expanded, buying up other companies. A new factory on Ryesgade was inaugurated. In 1898, it was named Nordiske Kabel og Traadfabrik, from which is derived its current name: NKT.
NKT was founded by Dane Hans Peter Prior in 1891 and became a listed company in the Copenhagen Stock Exchange in 1898. That's 127 years of continuous public listing—a remarkable continuity for any industrial company, let alone one that has reinvented itself multiple times.
The company's early decades tell a story common to industrial conglomerates of that era: aggressive diversification. Over the next decades the company was active in a number of sectors outside the cable industry, including glass, aluminium, steel, nails, fasteners etc., primarily for the Danish market. In the 1960s, NKT started recycling scrap from cable production in its facility in Stenlille, Denmark.
But beneath the conglomerate sprawl, NKT was quietly building expertise in something that would prove far more valuable than nails: high-voltage power transmission. The company's manufacturing facility in Karlskrona, Sweden—dating back to the start of cable production in 1883 by Liljeholmens Fuse factory—has an extensive experience in high voltage cables. It is a center of excellence for production, installation and service of high voltage cables in both AC and DC for submarine and underground applications. This Karlskrona facility would eventually become the crown jewel of NKT's operations.
The significance of this early history for investors is simple: NKT didn't stumble into the HVDC cable business. The company has been accumulating specialized knowledge in power transmission for over 140 years—the kind of institutional expertise that cannot be replicated by throwing money at the problem.
The Conglomerate Era & Restructuring: Shedding the Past (1989-2012)
By the late 1980s, NKT had become a sprawling Danish industrial conglomerate. In 1990 the current company structure was established. But this structural reorganization marked the beginning of a two-decade strategic pivot that would fundamentally reshape the company.
In 1989 NKT Holding, listed on the Copenhagen Stock Exchange, bought Fisker & Nielsen. In 1994 Nilfisk A/S acquired Advance Machine Company and in 1998 Nilfisk A/S was renamed Nilfisk-Advance. In 1998 Nilfisk-Advance merged with Euroclean/Kent and between 2000 and 2011, Nilfisk-Advance acquired CFM, Gerni, ALTO, Ecologica, United States Products, Viper, Hydramaster, Egholm, Plataforma and Jungo, making Nilfisk-Advance one of the largest suppliers of professional cleaning equipment worldwide.
For much of the 1990s and 2000s, NKT operated under what management described as a "best owner" philosophy. In 1990 the current company structure is established and over the next 10 years, begins merging and selling of several companies in the portfolio with the aim to concentrate on a smaller number of core businesses with major international potential. The past decade, the company has continued that path, founded by the "best owner" philosophy, where NKT Holding provides a kind of industrial home for each entity until such time as the may be ready for further development and growth under "better" ownership. This way, NKT Holding sold the electricity distribution manufacturer Lauritz Knudsen to Schneider in 1999, the semi-conductor manufacturer GIGA to Intel in 2000 and the underwater pipe manufacturer NKT Flexibles in November 2012.
The 1999 acquisition of German cable manufacturer Felten & Guilleaume proved pivotal. In 1999 NKT acquired German cable manufacturer Felten & Guilleaume, doubling the production capacity and adding businesses in the Czech Republic, China, and Austria. NKT headquarters subsequently moved to Cologne.
Environmental consciousness also began reshaping NKT's product development. The company introduced lead-free cables and halogen and PVC-free cables as part of a renewed environmental focus in the 1990s. Introduction of a completely new range of PVC and halogen-free cables and cords. The new products were developed and introduced for environmental and safety reasons. First in the world to introduce lead free installation cables. These weren't just marketing gestures—they positioned NKT as a company that understood where regulations and customer preferences were heading.
By 2012, after the sale of NKT Flexibles, the company had pruned its portfolio significantly. But it still faced a fundamental strategic question: should it remain a holding company with disparate assets in cables and cleaning equipment, or should it place a bigger bet on where management saw the greatest opportunity?
The 2013-2017 Transformation: Betting the Company on High-Voltage (Critical Inflection Point #1)
The period from 2013 to 2017 represented NKT's most consequential strategic transformation. What emerged from this period was a radically focused company positioned at the heart of the global energy transition.
In 2013 NKT acquired Swedish cable manufacturer Ericsson Cables in Falun, Sweden. Founded in 1888 as Sieverts Kabelverk, later on part of L. M. Ericsson and ABB, and now since 2017 a part of NKT. This acquisition expanded NKT's Applications portfolio and deepened its Nordic manufacturing presence.
But the truly transformative move came in September 2016. NKT Cables is acquiring ABB's global high-voltage cable system business with a total enterprise value of 836 million euros (US$934 million). High voltage cables are key components in sustainable energy networks, used for transmitting large amounts of electricity over long distances. The business is part of ABB's Power Grids division, which is currently undergoing a strategic review.
This acquisition was not merely additive—it was transformative. ABB's CEO at the time explained the strategic logic: "We are combining two strong cable portfolios rooted in a shared Nordic heritage that will be more competitive on a larger scale under NKT Cables' ownership, while maintaining access to supply through a long-term strategic partnership."
ABB's cable system and the cable accessories business offers turnkey solutions including design, engineering, supply, installation, commissioning and service. It employs around 1,000 people, and has manufacturing and R&D capabilities for high-voltage submarine and underground cables in Karlskrona, Sweden. The cable accessories business is located in Alingsås, Sweden. The transfer of assets also includes a new cable-laying vessel, currently under construction.
The European Commission approved that NKT Cables' acquisition of the ABB high-voltage cables business can be completed as planned. Today, closing of the transaction is completed. The deal closed on March 1, 2017.
With the ABB acquisition came something equally valuable: the cable-laying vessel that would become NKT Victoria. The cable-laying vessel will be at the NKT Cables plant in Karlskrona, Sweden, for a naming ceremony, including a customer seminar, on 4 May 2017. Hereafter, it will head out for its first cable-laying project.
The acquisition's strategic logic demanded a corporate restructuring. In 2016, the NKT Board of Directors announced the intent to split NKT Holding A/S into two separately listed companies, NKT (incl. NKT Photonics) and Nilfisk, as a consequence of the acquisition of ABB HV Cables business. The split took place in October 2017.
On 12 October 2017, Nilfisk was Spun-off from NKT Holding. The spin-off resulted in the listing of Nilfisk on the Nasdaq Nordic. Due to the spin-off, Nilfisk started to trade as a standalone, separately, publicly traded company under ISIN DK0060907293 and ticker NLFSK.
NKT A/S agreed to spin-off Nilfisk A/S on September 11, 2017. Under the terms of the consideration, the shareholders of NKT will receive 1 share in Nilfisk for each 1 share in NKT. The record date for the transaction is October 13, 2017.
The strategic logic was compelling: in an era of increasing specialization and accelerating energy transition, a company couldn't be world-class at both industrial cleaning equipment and high-voltage submarine cables. Focus allows for deeper R&D investment, stronger customer relationships, and alignment with macro tailwinds. NKT chose cables.
The Offshore Wind & Interconnector Boom: Riding the Energy Transition Wave (2017-Present) (Critical Inflection Point #2)
The timing of NKT's transformation proved prescient. Europe's offshore wind buildout accelerated dramatically from 2017 onward, driven by ambitious decarbonization commitments. The deployment of offshore wind energy is at the core of delivering the European Green Deal and ensuring Europe's competitiveness and security of energy supply. The installed offshore wind capacity in the EU was 19.38 GW in 2023.
In line with EU countries' regional cumulative offshore goals of 86-89 GW by 2030 and 355-366 GW by 2050, offshore renewables are poised to become a main pillar of Europe's future electricity mix.
The scale of required grid investment is staggering. The EU Action Plan for Grids foresees an investment need of €584bn of investment in electricity grids by 2030. Huge funding is required for transmission infrastructure associated with offshore renewable energy. It is estimated that an annual average investment of EUR50.5 billion is needed in the transmission and distribution network to meet 2030 EU targets.
For NKT, this macro tailwind translated into record-breaking order intake. "2023 was a successful year for NKT with organic revenue growth of 36% and the highest annual operational EBITDA in company history," said NKT CEO Claes Westerlind. "Demand for high-voltage power cable systems was unprecedented during the year. This led to a record order intake bringing our high-voltage order backlog to EUR 10.8bn and the launch of an approximately EUR 1bn investment program. We enter 2024 with a robust financial position that forms the foundation for further improvement of financial performance."
NKT achieved a record-high annual order intake of EUR 7bn in 2023 driven by project awards across Europe, primarily based on DC technology. In May 2023, NKT launched the largest investment program in company history.
The customer concentration tells an important story about NKT's market position. Interconnector projects make up for around 50 per cent of NKT's year-end order backlog, offshore wind projects around 45 per cent, and the remaining 5 per cent is in power-from-shore projects, with 75 per cent of all orders placed by large European transmission system operators (TSOs).
Major contract wins in 2023 included: Among the company's 2023 contracts are the three NKT secured with TenneT for delivering turnkey high-voltage power cable projects for Ijmuiden Ver Beta, Gamma and Nederwiek 2 offshore wind zones in the Netherlands.
The Danish company also saw a massive boost in its order book following a contract for five power cable projects signed with the German TSO 50Hertz, worth a total of €3.5 billion.
NKT inked a multi-year framework agreement with Tennet for further three offshore wind projects in the Netherlands with a total generation capacity of 6 GW: Nederwiek 3, Doordewind 1, and Doordewind 2. "The contracts are expected to be called off in 2025 and will have a combined value of approx. EUR 1.5 bn, which covers the majority of the project scope. The framework agreement runs until 2028, with possible extension until 2031."
In August 2023, Southwire Company, LLC partnered with NKT to supply underground power cables for the Champlain Hudson Power Express (CHPE) project. NKT will provide the cables through Southwire Company to transmit 1,250 megawatts of clean and renewable hydropower from the US–Canada border to Queens, N.Y. This is enough to power millions of homes in New York. The CHPE project will use a 339-mile totally buried HVDC transmission system to provide clean and renewable hydroelectricity using submerged and underwater cables.
The 2024 results continued this momentum. In 2024, NKT achieved revenue (in std. metal prices) of EUR 2,489m, equalling organic revenue growth of 26% compared to 2023. The higher revenue was driven by all three business lines. Operational EBITDA of EUR 344m in 2024 was the highest annual level in company history and was EUR 89m above 2023. Net result from continuing operations for 2024 amounted to EUR 236m, an increase of EUR 117m compared to 2023.
At the end of 2024, the high-voltage order backlog was at a high level of EUR 10.6bn (EUR 9.3bn in std. metal prices). Driven by continued order intake, the backlog was maintained largely in line with the level of EUR 10.8bn by end-2023.
Strategic Capacity Expansion & Vertical Integration: Building for the Future (2023-2025) (Critical Inflection Point #3)
With an order backlog stretching years into the future and visibility into sustained demand, NKT made a decisive choice: invest aggressively to capture market share during this generational infrastructure buildout.
The investment program will expectedly amount to approx. EUR 1bn between 2023 and 2026 and will strengthen NKT's market leading position significantly. The new assets will be operational from 2027. In addition, NKT will still have ongoing maintenance and less sizable investments in the business.
The centerpiece of this investment is the massive expansion of the Karlskrona facility. NKT started the slipforming casting of concrete for a third extrusion tower at the Swedish factory in Karlskrona. The firm underlines this expansion is driven by a record-high order backlog and increased demand for power cables to support the transition to renewable energy.
While providing an update on its progress, the company highlights a new construction milestone, as its third extrusion tower has reached 100 meters and can be viewed from the city center. As the slipform casting of concrete continues, NKT anticipates the tower will reach its final height of 200 meters during Q4 2024.
The third extrusion tower is part of NKT's ongoing investments of €1.3 billion in expanding production and installation capabilities at this factory. The Danish firm believes this will make the site the world's largest manufacturing facility.
The new test centre is part of the ongoing EUR 1.3bn expansion of NKT's high-voltage cable factory in Karlskrona, including the new cable-laying vessel NKT Eleonora. Testing is a key component in material development, power cable innovations, and manufacturing. The centre will be approximately 4,000 square meters and is expected to be operational during 2027.
The workforce expansion is equally significant. More than 300 new employees have joined the Karlskrona site since 2020 and NKT expects more than 500 new employees to join the site in Karlskrona towards 2027.
Beyond manufacturing, NKT invested in a second cable-laying vessel—a critical asset for project execution. Building upon the strong operational experience and cutting-edge technology featured on NKT Victoria, our new cable-laying vessel NKT Eleonora will represent the next generation of cable-laying vessels in in terms of both design and capabilities. Notably, it will be one of the world's first cable-laying vessels designed to be able to run on methanol. Equipped with three turntables, NKT Eleonora will offer a power cable-laying capacity in excess of 23,000 tonnes, and host a large range of subsea tooling for precise installation and service of offshore cables. The vessel will be capable of laying three power cables, so it can fulfil evolving customer requirements, especially on large-scale 525 kV projects where metallic return cables are required.
On November 5th 2024, we begun the steel-cutting for our new, market-leading cable-laying vessel, NKT Eleonora. This major step was celebrated at the shipyard in Romania during a ceremony marking this landmark moment for NKT Eleonora, where actual construction begins and the detailed planning and extensive engineering design come to life.
Once in operation in 2027, NKT Eleonora will join NKT's existing vessel, NKT Victoria, as a next-generation cable layer. Equipped with three turntables, she will have a cable-laying capacity of 23,000 tonnes and will host a wide range of subsea tools.
In 2024, NKT completed its transformation into a pure-play cable company. In 2024, NKT sold NKT Photonics to focus 100% on electricity cables. In the same year, NKT acquired SolidAl, a Portugal-based power cable manufacturer, adding medium- and high-voltage capacity to meet the growing demand from grid upgrades.
The final required regulatory approval was obtained for the divestment of NKT Photonics to proceed. Today, the closing of the transaction between NKT A/S (NKT) and Hamamatsu Photonics K.K, Japan (the Purchaser) has been completed.
Jens Due Olsen, Chairman, commented: "We are pleased that the approval has been obtained and that NKT Photonics can now be divested to Hamamatsu. This will maximize the value creation and position NKT Photonics for long-term growth. For NKT, the divestment marks the final step in the process to fully focus the company on our core business within power cable solutions, where we have announced several investments in the past year to support the green transition of societies."
The SolidAl acquisition added important capacity. Cable manufacturer NKT has acquired SolidAl, a Portugal-based wire company, from Njord Partners for €192m. The deal will add medium- and high-voltage capacity to meet the growing demand from grid upgrades and renewable energy projects across Europe, said the Danish outfit. As part of the acquisition, NKT will invest in additional capacity at the existing site 50km north of Porto, Portugal.
In 2023, SolidAl had revenue (in market prices) of approximately EUR 150m and generated an EBITDA of approximately EUR 20m. NKT has acquired SolidAl for a total enterprise value of EUR 192m, corresponding to an EV/EBITDA multiple of 9.4x.
NKT is investing €50m in expanding the site's production capacity to meet Europe's rising demand for grid infrastructure.
Technology Deep Dive: Why HVDC Cables Matter
To understand NKT's competitive position, investors must understand why high-voltage direct current (HVDC) technology is critical for the energy transition.
HVDC lines are commonly used for long-distance power transmission, since they require fewer conductors and incur less power loss than equivalent AC lines. HVDC also allows power transmission between AC transmission systems that are not synchronized.
HVDC lines are commonly used for long-distance power transmission, since they require fewer conductors and incur less power loss than equivalent AC lines. HVDC also allows power transmission between AC transmission systems that are not synchronized. Since the power flow through an HVDC link can be controlled independently of the phase angle between source and load, it can stabilize a network against disturbances due to rapid changes in power. HVDC also allows the transfer of power between grid systems running at different frequencies, such as 50 and 60 Hz. This improves the stability and economy of each grid, by allowing the exchange of power between previously incompatible networks.
The efficiency advantages are substantial. HVDC is more environmentally friendly than AC, providing more energy per square metre over greater distances more efficiently than AC systems, as well as lower losses and less space requirements. This increased efficiency reduces the carbon footprint of HVDC compared to AC, with losses being reduced from around 5-10% in AC transmission to around 2-3% for the same application in HVDC.
The break-even distance for HVDC versus HVAC varies by application. According to the scientific journal, PNAS, the conventionally cited break-even distance for new DC over AC overhead lines is ∼600 km to 800 km. The reason why high-voltage DC has less energy losses over transmission lines is because high-voltage AC has much more "capacitive" losses than DC power, especially when conductors are closer to the ground. Therefore, DC power is inherently more efficient to transmit, especially underground or underwater, than AC electricity. In fact, the break-even distance is much shorter for cables travelling underground or underwater; for underground cables the break-even distance is 50-95km, and underwater it's about 24-50km.
For offshore wind farms, this physics makes HVDC essentially mandatory. As the demand for renewable energy grows, offshore wind farms have become prominent contributors to the power supply. HVDC transmission is instrumental in integrating power generated from offshore wind farms into onshore grids. Its ability to transmit electricity over long distances with minimal losses makes HVDC an ideal choice for harnessing energy from remote offshore locations.
NKT has pushed the technology frontier. The company's expanded Karlskrona site will produce cables for up to 640 kV DC—among the highest voltage ratings in commercial submarine cable production. The 525 kV cable system has become a key element in developing DC grid infrastructure.
Business Model & Segment Breakdown
NKT A/S is a Denmark-based provider of cable technology. The company, along with its subsidiaries, operates in the following segments; Solutions, Applications, and Service & Accessories. Maximum revenue is generated from the Solutions segment which caters to the high-voltage power cable market and is involved in the manufacturing and installation of high-voltage cables and products for onshore power transmission and distribution, power-from-shore, cable projects, offshore wind connections, and other projects. This segment also owns and operates a cable-laying vessel, NKT Victoria. Geographically, the company generates maximum revenue from Germany followed by the United States of America, the United Kingdom, Poland, Norway, Denmark, and other regions.
Net sales (including intragroup) break down by activity as follows: - sale of high voltage power cables (54.9%): for onshore and offshore installations; - sale of medium and low voltage power cables and building wires (37.3%); - sale of services and accessories (7.8%).
The segment breakdown reveals NKT's strategic focus:
Solutions (High-Voltage): This is the growth engine and primary source of competitive differentiation. Solutions focuses on HVDC and HVAC power cable solutions for interconnectors, offshore wind, and power-from-shore applications. The segment benefits from NKT's Karlskrona manufacturing facility, cable-laying vessels, and decades of accumulated project execution expertise.
Applications (Medium/Low-Voltage): Applications focuses on building wires, low- and medium-voltage power cables as well as renewable projects. This segment provides steady cash flow and serves the broader electrification trend, including EV charging infrastructure and grid reinforcement.
Service & Accessories: Accessories focuses on cable joints, cable connectors, and cable terminations between 12–550 kV. This segment provides recurring revenue and maintains customer relationships throughout project lifecycles.
The turnkey solutions approach is strategically important. By offering design, engineering, supply, installation, commissioning, and service all under one roof, NKT reduces execution risk for customers and captures more value per project.
NKT is headquartered in Denmark and employs 6,000 people. NKT is listed on Nasdaq Copenhagen and realised a revenue of EUR 3.3 billion in 2024.
Leadership & Management
Understanding NKT's leadership transitions provides insight into the company's strategic evolution.
Alexander Kara (58, German and Swiss citizen) joins NKT from ABB and a position as Senior Vice President, HUB Business Unit Manager CSE, High Voltage Products with responsibility for all ABB high-voltage product plants and markets in Central and Southern Europe. Prior to that and since 1987, He has held several key positions at ABB, some with global functional responsibilities. From 2012 to 2014, Alexander Kara was head of ABB's global power cables business in Karlskrona, Sweden, now owned by NKT.
NKT has appointed Alexander Kara as president and CEO of NKT and NKT A/S. Alexander Kara, an internationally experienced executive in the power distribution industry, joins NKT on August 01, 2019.
Kara's departure in May 2023 came at a pivotal moment, just as NKT was announcing its €1 billion investment program. The NKT Board of Directors informs that Alexander Kara, CEO of NKT A/S and NKT, as of today will be replaced by Claes Westerlind, who will be the new CEO. Claes Westerlind has more than 15 years of experience with power cables and high-voltage DC converters and joined NKT in 2017.
"That said, we have outperformed our competitors, and Alex has contributed greatly in that. Alex is a cable man and a person who fixes things and sees things through." Chairman Jens Due Olsen added: "In a lot of ways, we stand as a much stronger company today, not just measured by results as these are shared by our competitors – but also measured by what is underneath the hood – which is all thanks to Alex."
"We have strong team, ready to take over, and a strong CEO in the form of Claes Westerlind, whom is already in deep with the fastest growing part of our business – namely, the project business," Due Olsen replied. Westerlind has more than 15 years of experience in the industry of high-voltage cable systems and transformer. He joined NKT in 2017. Since 2019, Westerlind has held the position of executive vice president of NKT's Solutions Karlskrona as well as being a member of the global management team of NKT. "Claes Westerlind is a great leader and highly regarded among employees. He is incredibly competent in making people collaborate, and he is surrounded by a very strong team."
Previous employment (amongst others): Management Consultant at McKinsey and various leadership positions in the ABB Group · Education: M.Sc Engineering Physics from the Royal Institute of Technology.
The management bench draws heavily from ABB, reflecting the transformative impact of the 2017 acquisition. Executive Vice President, Head of HV Solutions Karlskrona, Darren Fennell: Born 1975, joined NKT in 2012, through ABB HV Cables acquisition. Previous employment: Management roles in Installation, Commercial & Tendering, and Project Execution within ABB and later NKT.
Competitive Landscape: Porter's Five Forces Analysis
Threat of New Entrants: LOW
The submarine HVDC cable market presents formidable barriers to entry. Significant capital investment is required for the installation and maintenance of submarine cable systems, posing a barrier to entry for smaller companies. Geopolitical instability and potential disruptions to undersea cable routes also represent risks. Furthermore, the competition among established industry giants is intense, forcing companies to continually improve efficiency, reduce costs and differentiate their offerings.
NKT's Karlskrona facility exemplifies this barrier. Dating back to the start of cable production in 1883 by Liljeholmens Fuse factory, our manufacturing facility in Karlskrona has an extensive experience in high voltage cables. A new entrant cannot replicate 140+ years of institutional knowledge, supplier relationships, and project execution experience simply by building a factory.
The cable-laying vessel fleet represents another barrier. These specialized ships cost hundreds of millions of euros and take years to build. NKT operates NKT Victoria and will add NKT Eleonora in 2027—an investment that would be difficult for new entrants to match while also building manufacturing capacity.
Bargaining Power of Suppliers: MODERATE
NKT in Poland also has its own PVC compounds production facility located in Knurów. NKT has its own PVC compounds production facility located in Knurów, Poland. This vertical integration provides some protection against supplier power.
However, dependence on high-grade conductors (copper and aluminum) and advanced insulation materials like XLPE creates exposure to commodity price volatility. NKT manages this through standard metal price mechanisms in contracts, but fluctuations affect reported revenue and can compress margins if not properly hedged.
Bargaining Power of Buyers: MODERATE-LOW
The composition of the order backlog divided by customer type was more than 75% with large European TSOs. This concentration could theoretically give buyers leverage, but in practice the supply-constrained market dynamics favor cable manufacturers.
The multi-year backlogs, growing offshore wind buildout targets, and limited competitor capacity have shifted pricing power toward cable suppliers. TSOs face regulatory pressure to deliver projects on schedule, giving them limited ability to negotiate aggressively or delay purchases.
Threat of Substitutes: VERY LOW
For offshore wind farms and long-distance interconnectors, there is no viable substitute for submarine power cables. Overhead transmission lines cannot cross bodies of water, and no technology exists to wirelessly transmit gigawatts of power over hundreds of kilometers.
The only partial substitute would be hydrogen production at offshore wind farms, which would eliminate the need for power cables by converting electricity to hydrogen offshore. However, this approach faces economic and technological hurdles and would require entirely new infrastructure. For the foreseeable planning horizon, submarine cables remain indispensable.
Industry Rivalry: MODERATE (Oligopolistic)
Prysmian S.p.A (Italy), Sumitomo electric industries (Japan), LS Cable & System Ltd. (South Korea), NKT A/S (Denmark), and Nexans (France) are the market leaders in the global Submarine Power Cable market.
Three main players: NKT, Nexans and Prysmian have shared more than 75% of that awarded length since 2016. The array cable market has also grown significantly with the yearly awarded length doubling in the last six years.
Prysmian, Nexans, and Sumitomo Electric consistently rank among the top three, collectively holding an estimated 40-45% market share, valued at approximately $3-4 billion annually.
The market structure is oligopolistic with meaningful differentiation based on technology, capacity, and project execution capabilities. Price competition exists but is tempered by capacity constraints, long project lead times, and the high cost of switching suppliers mid-project.
Europe is imposing duties on non-EU suppliers to protect Nexans, NKT, and Prysmian, leading to stronger EU cable industry dominance. This regulatory protection further entrenches the European oligopoly.
Hamilton's 7 Powers Framework Analysis
1. Scale Economies: MODERATE-TO-STRONG
NKT's €1.3 billion investment in Karlskrona creates significant scale advantages. The expanded facility will be the world's largest high-voltage offshore cable factory. Fixed costs spread across larger production volumes reduce per-unit costs, and the massive capital requirements prevent competitors from easily matching this scale.
2. Network Effects: WEAK
Unlike software platforms, cable manufacturing does not benefit from network effects. However, track record and relationships with TSOs create a form of "learning network"—each successfully executed project builds credibility for winning the next.
3. Counter-Positioning: MODERATE
NKT's pure-play focus on cables represents a form of counter-positioning. Diversified industrial conglomerates like ABB chose to exit the cable business, suggesting that the capital intensity and project execution complexity don't fit well within broader portfolios. NKT's willingness to concentrate entirely on cables allows for deeper specialization.
4. Switching Costs: MODERATE
Once a customer selects a cable supplier for a major project, switching mid-project is extremely costly and risky. However, switching between projects is more feasible, limiting the power of this moat.
5. Cornered Resource: STRONG
NKT possesses several cornered resources: - The Karlskrona facility with its 140+ years of accumulated expertise - The cable-laying vessel fleet (NKT Victoria, NKT Eleonora in 2027) - A trained workforce with specialized skills that take years to develop - Long-term customer relationships with major European TSOs
6. Process Power: MODERATE-TO-STRONG
Cable manufacturing involves highly complex processes—extrusion, insulation, armoring, testing—that require years to optimize. NKT's decades of continuous improvement create process advantages that new entrants cannot easily replicate.
7. Branding: WEAK
In B2B infrastructure markets, branding provides limited power. Technical capabilities, track record, and price/value matter more than brand recognition.
Bull Case: The Green Infrastructure Backbone
The investment thesis for NKT centers on its position as essential infrastructure for Europe's energy transition.
Massive Secular Tailwinds: Europe's offshore wind targets require tens of billions of euros in cable infrastructure. EU countries' regional cumulative offshore goals of 86-89 GW by 2030 and 355-366 GW by 2050 will drive sustained demand for decades.
Supply-Constrained Market: Industry capacity cannot meet projected demand, giving pricing power to established manufacturers. NKT's €1.3 billion expansion positions it to capture market share.
High Barriers to Entry: New competitors face insurmountable barriers: decades of know-how, massive capital requirements, and regulatory certifications that take years to obtain.
Visible Revenue: With a €10+ billion order backlog extending years into the future, NKT has exceptional revenue visibility compared to most industrial companies.
Pure-Play Focus: The sale of NKT Photonics and acquisition of SolidAl demonstrate management's commitment to concentrated investment in the core business.
Bear Case: Execution and Cycle Risks
Execution Risk: The €1.3 billion expansion is ambitious. Construction delays, cost overruns, or operational challenges during ramp-up could disappoint investors.
Customer Concentration: Dependence on a handful of large European TSOs creates concentration risk. Regulatory or political changes affecting these customers could impact NKT.
Commodity Exposure: Despite standard metal price mechanisms, copper and aluminum price volatility affects margins and creates forecasting uncertainty.
Competitive Response: Prysmian and Nexans are also expanding capacity. Overcapacity in the late 2020s could pressure pricing.
Political/Regulatory Risk: The offshore wind buildout depends on supportive policy. Changes in government priorities, permitting delays, or reduced subsidies could slow demand growth.
Technology Risk: While unlikely in the near term, alternative approaches to offshore energy transmission (e.g., offshore hydrogen production) could eventually reduce cable demand.
Key Metrics for Investors to Track
Based on this analysis, investors should focus on three primary KPIs:
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High-Voltage Order Backlog (EUR billions): This is the single most important leading indicator of future revenue and provides visibility into NKT's market position. Watch for changes in backlog composition (offshore wind vs. interconnectors), customer mix (TSO concentration), and execution timeline.
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Operational EBITDA Margin (%): As NKT scales production with its new capacity, margins should expand due to operating leverage. Margin expansion validates the investment thesis; margin compression could signal execution problems or competitive pressure.
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Order Intake (EUR billions annually): Even with a massive backlog, continued strong order intake signals sustained market demand and competitive positioning. Watch for framework agreement conversions and new customer wins.
Conclusion: The Hidden Champion of the Energy Transition
NKT A/S represents a rare combination: a 134-year-old industrial company that has successfully reinvented itself for one of the century's defining megatrends. Through disciplined portfolio management—divesting cleaning equipment, photonics, and other non-core assets—and strategic acquisitions like ABB HV Cables and SolidAl, management has created a pure-play cable company positioned at the heart of Europe's renewable energy infrastructure.
The company's competitive moats are formidable: specialized manufacturing assets accumulated over decades, an oligopolistic market structure, massive capital requirements that deter new entrants, and a multi-year order backlog providing exceptional visibility. The €1.3 billion capacity expansion, while carrying execution risk, demonstrates management's willingness to invest aggressively during a once-in-a-generation infrastructure buildout.
For long-term investors, the central question is whether the current valuation adequately compensates for execution risk and cyclical exposure, or whether NKT's strategic positioning and growth potential make it an attractive way to participate in the energy transition. What's undeniable is that without companies like NKT building the cables that connect offshore wind farms to onshore grids, Europe's decarbonization ambitions would be impossible to achieve.
In the race to connect a greener world, NKT has built itself into an indispensable player. The towering extrusion column rising above Karlskrona isn't just a manufacturing facility—it's a monument to strategic focus and industrial expertise that positions NKT for decades of growth in the infrastructure that powers the future.
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