EGP is now eyeing opportunities in Uruguay, Ecuador, Egypt, Kenya, Russia and Saudi Arabia — together seen contributing around 400MW towards the end of the plan's 2014-2018 timeframe — as it continues to seek investments in countries with strong resources, growing power demand and a solid economic backdrop and scales back investments in mature markets in Europe and North America.
The company plans EUR 5.4 billion in growth capital expenditures in 2014-2018 to allow total capacity to rise by 4.6GW to 13.4GW. The company has earmarked 73% of growth investments for emerging markets, up from 69% in its previous plan. It also has 43% in the one before that. In 2014-2018, a further 17% of growth investments are expected to go towards European projects and the remaining 10% to North America. Around 70% of new capacity through 2018 is seen coming from wind farms.
With the exception of Saudi Arabia, which is more of a magnet for solar power, wind is an investment focus in all of EGP's new additions. However, as well as in wind, EGP is active in solar, hydroelectric, geothermal and biomass power and targets only new markets with the potential for at least two of these sources. The company argues its geographical and technological diversification strategy allows it to better capitalise on opportunities and mitigate risks.
Latin America has featured heavily in the company's emerging market strategy and will continue to do so. Among the new entries in its business plan, EGP chief executive Francesco Starace highlights the "stratospheric" wind resources in Uruguay and stresses the importance of moving quickly given the relatively small size of the country. Generally speaking, he points out, early movers are better placed to secure high-yielding projects.
Antonio Cammisecra, EGP's business development head, said the company should be able to finalise its first wind energy investments later this year in Uruguay, where it is also considering solar projects. Ecuador also boasts strong wind and solar resources, although development there is at an earlier stage. Ecuador and Uruguay had installed wind capacity of just 2MW and 43MW, respectively, at end-2013.
The company is also awaiting Russian solar and wind tenders this year, to evaluate if the conditions are right to participate. Russia's wind capacity now stands at around 14MW. Currently, a local content requirement appears to represent a major deterrent given the lack of a local manufacturing industry of note. "We can't build projects completely on our own," said Cammisecra, "and when we come to a new country we must also know that plants can be serviced and our investment will be sustainable over time."
Kenya, with around 5MW of wind capacity, boasts both wind and solar resources that EGP is evaluating along with geothermal power. One problem here is the grid, and another is that the market for developing projects is immature, explains Cammisecra. Although its market framework could be improved, Egypt, with installed wind capacity of 550MW, has both significant wind and solar power potential.
Currently present in 16 countries, EGP has also been making progress in other emerging markets that officially entered its radar in the last few years. Following a pre-qualification phase, a consortium made up of EGP, Nareva, Taqa and Siemens was one of five groups recently invited to bid in an 850MW Moroccan wind tender divided into five separate sites. It is also pursuing wind projects in Peru, Colombia and Turkey.
The company has made substantial progress in South Africa, where a total 199MW in wind capacity is at the ready-to-build stage. EGP is also looking to participate in a fourth bidding round of up to 1.34GW in wind capacity set to close in August. South Africa is an example of one in which the local supply chain was initially lacking, a problem Cammisecra said was overcome when EGP was able to convince fellow Italian suppliers to enter the market.
Indeed, difficulties EGP initially identifies in new markets do not necessarily mean these countries are off-limits. "When we enter a new country, there's a very structured analysis of the critical issues and also of the way they can be resolved," Cammisecra said.