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Algonquin deal lends credibility to Goldwind

UNITED STATES: Goldwind turbines are closer to being proven in the US following the sale of its Shady Oaks project, but there is still some way to go, according to industry analysts.

Debut: The 109.5MW Shady Oaks project is the first utility-scale poject in the US to use Chinese turbines
Debut: The 109.5MW Shady Oaks project is the first utility-scale poject in the US to use Chinese turbines

The 109.5MW Shady Oaks project in Illinois, the first US utility-scale project to use Chinese turbines, has been bought for $148.9 million by Canada's Algonquin Power and Utilities, the two companies announced last month.

"These are basically unproven turbines, so (this sale) is a huge win for Goldwind," said Amy Grace, lead US wind analyst for Bloomberg New Energy Finance. "Here's a legitimate company coming in and buying (the turbines) as a long-term producing asset."

Even so, Goldwind is not currently bankable in America. "They still don't have the operating track record," cautioned Matt DaPrato, a wind analyst at IHS Emerging Energy Research. "But they are definitely trying to be considered a major US player."

A turbine must have at least 100 operating years in US conditions before financiers and engineering certifiers consider it proven for American application. Goldwind, which also has turbines in several smaller projects in the US, expects to cross that threshold in the third quarter of 2013, said a spokesman.

Shady Oaks consists of 68 Goldwind GW82 1.5MW direct-drive turbines and three GW100 2.5MW turbines. The project was commissioned in 2012. Power is being sold under a power purchase agreement with utility Commonwealth Edison.

Both analysts described the $148.9-million price tag as relatively low. DaPrato stressed that Goldwind has assumed all operations, maintenance and capital repair responsibilities for the project under a 20-year fixed price agreement, which must be factored in when judging the sale price. "It's on the cheap side, but a lot of the risk is now gone," he said.

Quick sale

"This is a faster sale than most people were expecting, basically because the turbines are unproven," said Grace.

All newcomers to the US market have to prove their turbines, she noted. She also pointed out that Goldwind took a 30% cash grant - instead of the production tax credit - meaning that Algonquin was clearly confident enough to buy a "stream of future payments" under the negotiated power purchase agreement. The grant in question was for $56 million, said Goldwind.

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