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$1.5 billion Texas project in trouble as Chinese split with Cielo

UNITED STATES: Experienced US developer Cielo Wind Power is no longer in a relationship with A-Power Energy Generating Systems, the Chinese wind turbine manufacturer and shareholder.

This raises questions about the viability of the $1.5 billion-plus 615MW Spinning Star project in Texas using A-Power turbines. It was originally to be operating in 2011 but is not yet in construction.

"A-Power and Cielo are no longer associated. The relationship was dissolved at the end of the year," said Jan Paulin, Cielo's CEO. "Presumably, A-Power is trying to develop (the project) on its own." A-Power was unable to comment immediately, when contacted by Windpower Monthly.

Experts agree that non-US turbine manufacturers or investors entering the US market on a sizeable scale need a developer with US experience. Cielo, along with private equity investor US Renewable Energy Group (USREG), had a 51% interest in a joint venture with Shenyang Power Group to build the project. A-Power is a major SPG shareholder. USREG could not be reached for comment. Headed by Democratic fundraisers with close links to party leaders, USREG entered the agreement with A-Power in 2007.

Spinning Star had become the subject of a nationwide furore in 2009 over protectionism after it emerged that it might seek public stimulus funds despite using China-made turbines. The controversy had, in part, pushed Nasdaq-traded A-Power into a deal with America's United Steelworkers union, which agreed that the Chinese turbines would use steel towers made in mills employing union members in the US.

A-Power and USREG subsequently announced a turbine assembly plant in Nevada that they said would produce 1.1GW yearly. Asked about the prospects for the plant, a spokeswoman for their Nevada-based real estate partner, American Nevada, would only say: "They are still proceeding."

The break with Cielo comes at a bad time for A-Power. The company has had "practically no success" penetrating even the Chinese wind market, says Pavel Molchanov, an analyst at Raymond James. "It does not appear they will be able to sell significant numbers of turbines in China in the foreseeable future" because of oversupply. The success of Goldwind and Sinovel, he says, gives A-Power little chance to get into the game.

A-Power has only shipped a dozen wind turbines in its entire history, according to Molchanov. The company's market capitalisation, or stock value, of just over $200 million means it will need help raising capital for a 600MW wind farm, he adds.

Another well-placed source in the New York financial community says: "It's very unlikely they'll move forward (on the Texas wind farm) without a US partner."

He notes that state-owned Chinese banks may be reluctant to invest in a US project if the turbines are made in the US, and therefore create only US jobs.

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