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Not as good a year as expected -- Gamesa profit warning

Gamesa is warning that its preliminary year-end results indicate a EUR 35 million shortfall on its forecast profit for 2005 of EUR 225 million. Instead of a projected 22% increase in profit for the year, the result is more likely to be a 9% increase, or EUR 190 million, says the Spanish company, which both manufactures wind turbines and develops wind station projects.

Gamesa blames EUR 20 million of its profit shortfall on this year's slow down of the Spanish wind market. It will be well short of the 2000 MW installed in 2004, due to administrative delays in authorising wind plant construction. Gamesa also cites shortages and price hikes in raw materials, especially sheet steel and carbon fibre, for its less spectacular performance in 2005. Extra material costs alone were EUR 6 million, extra start up costs related to series production of its latest 2 MW turbine range are put at EUR 4 million, while the remnants of its aeronautics business, to be sold off this year, dipped into the red. Nevertheless, Gamesa says swollen backlogs in sales of wind turbines and wind plant put it in a strong position for 2006: it is provisionally targeting profit growth of 10%.

Although the company put just 1316 MW of its turbines in the ground in 2005, down from 1474 MW in 2004, "work in progress" figures reveal turbine orders for 1783 MW, compared with 1594 MW in 2004. The same pattern is repeated for project development division Gamesa Energía. It sold 240 MW of completed wind plant in 2005, well down on the 372 MW registered in 2004. But if "work in progress" figures are compared, Gamesa Energía sales amount to 675 MW in 2005, well up on 441 MW the previous year.

Overseas, Gamesa is focused on China and the US, where it is setting up wind turbine assembly. The company's Juan Antonio Berreteaga says that a patent agreement with GE Energy gives Gamesa technology untrammelled access to the booming North American market. GE holds a controversial American patent on variable speed wind turbine technology, acquired through its purchase of Enron Wind. The patent has historically kept some European companies out of the American market, while others have had to adapt their technology to avoid contravening the patent.

Berreteaga says Gamesa's wind project development division, Gamesa Energía, has a 20 GW pipeline of projects across 16 countries with 4000 MW ready to go ahead.

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