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Flexibility on rules opens the door -- Big Vestas projects in Brazil

Two wind projects with a combined capacity of 150 MW are heading towards construction in Brazil using Vestas 1.65 MW turbines. The machines are being imported by New Energy Options for its Alegria I and II wind farms in the north-eastern state of Rio Grande do Norte. Alegria I, at about 50 MW, is expected online by mid-2009 and Alegria II by December 2009.

Vestas is the third wind turbine supplier to have penetrated the Brazilian market, but only the second, after Suzlon, to find a way around the government's requirement that 60% of spending on wind projects must be undertaken in Brazil for them to qualify for premium power purchase contracts under the Programa de Incentivo às Fontes Alternativas de Energia Elétrica support system, known as Proinfa. Only a Brazilian offshoot of Germany's Enercon, Wobben Windpower, has wind turbine manufacturing facilities in Brazil, giving it a virtual monopoly on the market to date.

It now appears, however, that the Brazilian government and energy regulators are prepared to be more flexible on the Proinfa requirements, allowing a broad interpretation of the local content requirement and unofficially extending the end-2008 deadline for project completion.

The Vestas projects are 80% owned by Rio de Janeiro-based energy company Multiner SA, the controlling owner of New Energy Options, and 20% owned by local wind energy company, Eolica Tecnologia Ltda, founded by long-time member of the wind energy industry, Everaldo Feitosa. Financing of 20% equity and 80% debt was arranged by the regional social and development bank, Banco do Nordeste do Brasil. The projects are located at Guarmaré on the coast where average annual wind speeds are a healthy 8.5 m/s, says Multiner's José Marcos Treiger.

Although Feitosa believes the wind farms will qualify for 20-year Proinfa contracts, neither state power company Eletrobrás nor the government will confirm that the program's deadline has been extended. Feitosa says: "Nobody would risk such a large project, if they didn't already have the green light." He and Treiger say the 60% local cost mandate is applicable to the entire project costs. "They will meet the requirement by building 80 kilometres of the transmission lines, roads, towers and components locally, with just the turbines being imported," says Feitosa. The threshold is a worry no more, adds Thaísa Alcoforado of Centro Brasileiro de Energia Eólica. "Big projects can reach this requirement easily by including all investments," he says.

Early move

For Vestas, the first Brazilian projects mark an "early stage" move into Latin America by the company, says Peter Kruse, vice president of communications. "Time will tell," he says, with regard to manufacturing in Latin America. He notes Vestas is ramping up its operations in China, the US and Europe, and cannot be everywhere. "We need to be choosy," he says.

A potential way of complying with the 60% requirement, voiced by some market observers, is for wind turbine manufacturers to take an equity position in any projects (Windpower Monthly, November 2007). The bottom line, says Feitosa, is government and regulatory flexibility. "Although it's difficult to know how many megawatts Brazil will have by the Proinfa deadline in December, the situation looks good," he says.

Eolica Tecnologia has also agreed to buy 15, 1.65 MW wind turbines from Vestas for its 24.75 MW Gravatá project in the north-eastern Pernambuco state. Feitosa expects the first turbines to be delivered in November or December, with the plant delivering energy in the first half of 2009, also with a Proinfa contract. In addition, Eolica Tecnologia has early stage plans for a 4.5 MW project in neighbouring Paraíba state.

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