Turbine makers focus on local content rules

BRAZIL: The debate over local content requirements dominated Brazil Windpower 2012 in late August, as global turbine manufacturers met local suppliers in efforts to increase their use of domestic components and regain access to cheap local finance.

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In June, Spain's Acciona, Denmark's Vestas, India's Suzlon, Germany's Fuhrländer and US firm Clipper were delisted by the national development bank (BNDES) from its Finame financing programme after failing to abide by the bank's local content regulations.

Developers say access to Finame is essential as it offers the only local currency-based long-term finance that will reduce the risks in local contracts and competitive auctions, in which prices can be as low as BRL 99 per megawatt-hour.

Indian turbine maker Suzlon met with 40 local suppliers at the conference in an effort to be relisted. "We even invited BNDES to the meeting, although they didn't send anyone. The result is that at least ten [suppliers] are now in advanced talks," said the company's Brazil CEO Arthur Lavieri.

According to Lavieri, the delisting from Finame cost BRL 1.2 billion ($592 million). "This is how much I expected to have signed in contracts," he said. "One-third were cancelled and two-thirds are suspended awaiting a decision from BNDES."

With investments of BRL 3 million, Suzlon has added another line in its hub plant in the north-eastern state of Ceará and is looking for more suppliers. It already contracted local manufacturer Aeris for the moulding of its blades. The company has asked BNDES to carry out a new audit.

Vestas and Acciona also said they were adapting to the BNDES rules since growth in Brazil's booming market is part of their strategy. "We always work with an ecosystem of suppliers and investment is needed in local content," said Acciona's Brazil general director Christiano Forman.

Acciona has signed contracts to supply 40 turbines for energy firm CPFL's 120MW Palmares project, in Rio Grande do Sul. The company is building a factory in the north-eastern state of Bahia for towers, blades and hubs. Nacelles will later be built locally too but will initially be imported from Spain and the US, Forman added.

Sergio Guimarães, manager of the Rio Bravo Energia I fund, which has equity in 22 wind projects in southern Brazil totalling 504MW, is worried about how the delisting will affect supply. "When you remove large suppliers from the market, the remaining companies can take on new orders and this can affect their delivery capacity," he said.

Brazil's only local turbine maker WEG is one of the companies that has benefited most from the delisting issue. Early last month, the firm announced its first supply contract since signing a technology transfer agreement with Spanish manufacturer M Torres Ólvega Industrial in March to develop and manufacture turbines adapted to Brazilian conditions.

Of the 11 manufacturers operating in the country, Argentina's Impsa and Enercon's local subsidiary Wobben Windpower have made strong statements in support of BNDES policies.

Global Wind Energy Council (GWEC)general secretary Steve Sawyer, however, has raised concerns about local content rules. "They make the equipment more expensive, they slow down the market and can result in inferior quality," he said, citing quality problems in some of China's wind farms that were developed with a now-abandoned local content policy.

GWEC favours open trade and free access policies, Sawyer added. "Brazil is building a 5GW-a-year wind-turbine market for a 2GW yearly demand," he warned. "If you want local manufacturing, create the conditions and the way to do that is to develop research and development centres."

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