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Analysis: Portuguese market stability proving attractive to investors

PORTUGAL: A series of recent asset deals is demonstrating the attractiveness of Portugal's wind sector to investors -- foreign and domestic alike.

The 96MW Terra Fria project, part of EDPR's Portugese portfolio
The 96MW Terra Fria project, part of EDPR's Portugese portfolio

At the end of September, Italian developer Enel Green Power (EGP) sold its Portuguese subsidiary Finerge and its net 642MW capacity to First State Wind Energy Investments for €900 million. 

Then in early October, EDP Renovaveis (EDPR), Portugal's biggest wind operator, announced a deal with the Ventinveste consortium to acquire the latter’s licences and interconnection rights to a total of 216.4 MW of wind capacity for around €17 million.

Ventinveste won 400MW capacity development rights in 2007 in the second phase of a tender launched by the Portuguese government.

The consortium, a joint venture between Portuguese firms Galp and Martifer, has 176.1MW of this total already under construction. The 216.4MW sold to EDPR is all undeveloped.

Under 2012 reforms to renewables support, government and operators agreed a 20-year limit to the feed-in tariff for these assets.

Elsewhere, Iberwind, Portugal's second largest wind project operator with 684MW in production and 42MW under construction, was sold by Portuguese equity fund Magnum Capital for €1 billion to Cheung Kong Holdings Infrastructure Limited (CKI) and Power Assets Holdings Limited (HAP).

HAP is the energy subsidiary of CKI, the largest construction firm traded on the Hong Kong stock market.

In a further development, the UK's Lancashire county pension fund announced it will "acquire a significant minority equity stake" in EDF Energies Nouvelles' Portuguese wind assets, amounting to approximately 500MW.

According to market observers, each deal has its own logic but regulatory stability and the positive future prospects for Portuguese wind power are common factors explaining the interest of investors.

"Wind is a non-core asset for Galp (the Ventinveste consortium's biggest partner)," Helena Barbosa, analyst with Caixa BI told Windpower Monthly. For Portugal's biggest wind operator EDPR, the Ventinveste licences "will be an asset with a good yield because the company is good at creating value from scratch", she added.

Two year search

"Portugal's current relative political stability after the turbulence of recent years has helped equity fund Magnum Capital find a buyer for Iberwind after a two-year search," according to Antonio Sa da Costa, president of the renewable energy industry association APREN.

In the case of EGP, the company is struggling with businesses elsewhere so they needed to raise cash, said Sa da Costa. It was easy to find a buyer for Finerge, he noted, as it is "a transparent and stable business".

The sale was also facilitated by the unwinding this summer of the ENEOP windpower consortium, in which Finerge had a 35.9% stake.

Both commentators agreed the Portuguese market's regulatory and tariff stability, especially when compared to Spain, is attractive for investors.

A further incentive is that the Portuguese government's commitment to achieving a 40% renewable quota for total energy consumption by 2030 enjoys the consensus support of all the major political parties, according to APREN.

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