Surprise winners in Galicia auction

SPAIN: International gas and power firm Gas Natural Fenosa has been the big winner in a 2.3GW wind power auction awarded by northern Spain's Galicia region, with rivals Iberdrola and Electricidade de Portugal securing just 2MW each.

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Fenosa won 339MW, more than first expected and significantly more than the 15MW it won in a similar auction two years ago. Little-known power firm Novento, owned by Spanish bank Caixa Galicia, was a surprise winner with a 303MW allotment. Other big utility winners were Enel Green Power Spain, which received 138MW, and construction firm Copasa, which received 177MW through its Airosa Viento unit.

Major employer

The auction, which will generate EUR6 billion in investments, gives rise to Galicia's largest industrial project. The wind farms will employ 13,200 people directly and 8,000 indirectly, with the first facilities expected to begin operating in 2014.

The contract will boost Gas Natural's plans to expand its wind power capacity beyond the 1GW currently installed, although a spokesman would not reveal specific targets.

"We are pleased with the process, which recognises the Galician government's commitment to choosing the best developers," the spokesman says. "Our project had the best technology and industrial component, and will provide the greatest economic growth for the region." Gas Natural Fenosa has enough financing muscle to build the wind farms individually, the spokesman adds.

A spokesman for Spanish energy firm Iberdrola says that the company regrets the decision but does not expect it to negatively affect the firm's ambitious plans to grow wind power in Spain.

"These were good projects and we were interested in them," he says, but adds that the 200MW for which Iberdrola had originally bid was insignificant in light of the company's 62GW of installed global capacity, 24% of which is in Spain.

"We are the biggest wind firm in Spain and we will continue to participate in upcoming auctions," the spokesman says. Iberdrola is on track to install 250MW of wind-generation capacity per year in Spain and is targeting the windy Castille Leon and Castille La Mancha regions as the next spots to develop its wind farms.

One industry observer believes Galicia's decision was tainted by political issues. "Gas Natural Fenosa is a Galician company and has contacts with the government. It seems an unfair award for Iberdrola, given the company has created 3,000 jobs in Galicia," he says. According to the observer, another leading wind firm, Gamesa, will be forced to downscale some operations in the region following its insignificant, but undisclosed, win in the auction.

Future subsidies

An industry analyst says it is too early to assess the contract's impact on Gas Natural Fenosa's business, as it is unclear whether the new megawatts will be eligible for state subsidies after 2013, when Spain is expected to approve a new wind energy regulatory framework. Council of ministers' approval of the new regulatory framework, which runs until 2011-2012, is imminent. It calls for tariff subsidies to fall by 35%.

"These are not a lot of megawatts and what sort of remuneration they will obtain is very much up in the air," the analyst says. He adds that Gas Natural Fenosa may decide to scrap some projects if the new regulations do not provide attractive enough returns. Nevertheless, the auction will be a boon to a string of smaller developers and savings banks keen to take a slice of Spain's growing wind power industry.

Galenova and Torre de Hercules, a consortium owned by several Galician savings banks, obtained 131MW, while Victor Verde, owned by financial institutions Cupa and Coren and transport group Ceferino Nogueira, was awarded 117MW.

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