Portuguese wind hit by funding crisis

PORTUGAL: Portugal's wind industry is alarmed at the Eneop consortium's announcement last month that it may lay off staff if European Investment Bank (EIB) funding is not immediately approved.

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The consortium, which includes Portugal's EDP and German turbine maker Enercon, won a 2006 government tender to develop 1.2GW and an associated manufacturing cluster in Viana do Castelo, employing a workforce of 2,100. Portuguese and international banks put up the initial EUR560 million investment for the ENEOP project but the economic crisis made the bankers back out of funding a second tranche in 2010, triggering a move to bring in the EIB.

However, the EIB's approval of the EUR300 million loan has been delayed by the perceived risk of wind-power tariffs being cut under the terms of an agreement Portugal's government signed in return for international financial assistance.

Eneop president Anibal Fernandes said any reduction in tariffs would not apply to the ENEOP wind farms, but as we went to press the government had yet to provide the written assurances required by the EIB to approve the loan by its 31 December deadline.

According to Fernandes, "right now, the Portuguese banks have zero liquidity" and so the partners were obliged to put up over EUR500 million from their own resources to keep the project - Portugal's only current wind-power development - on track.

This has allowed ENEOP to complete the installation of 816MW but, Fernandes said, the construction of new wind farms has been practically halted until work on the transmission grid is completed. In the meantime, current production from Enercon's Viana plant is being exported to other EU countries.

Even if ENEOP solves its funding crisis, the outlook for Portugal's wind sector is increasingly bleak. The government has not given details on its commitment to revise renewables tariffs, but the environment minister recently said the government favours promoting energy efficiency over expansion of renewable capacity.

Fernandes is concerned that Portugal should not follow the example of Spain, where repeated rejigging of premium tariffs "destroyed investor confidence in the sector and landed the Spanish state in the courts".

"In Spain the big generators, who have enormous excess gas-fired capacity, have been pressuring governments for a freeze on renewables, alleging the excessive cost of premium tariffs, but the situation in Portugal is radically different," he said. "Here there is no over-capacity; we have a well-balanced system and wind-power tariffs that are 40% lower than in Germany."

Fernandes, who has also worked in the development of gas infrastructure, is adamant that wind-power production in Portugal at EUR67/MWh is currently cheaper than gas-fired production which, with oil at EUR100/barrel, costs EUR74-76/MWh.

Wind energy has also generated a 30% CO2 emissions reduction for Portugal since 2007, he added. As a result the country is now set to meet its Kyoto protocol targets without having to resort to carbon markets.

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