Utility leapfrogs into German market -- Essent buys Winkra

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Deutsche Essent, the German subsidiary of Dutch utility Essent, has leapfrogged into a leading position in the German onshore wind energy market following its 100% acquisition of wind developer Winkra. The deal, for an undisclosed sum, doubles Essent's wind portfolio from 140 MW to 282 MW. It also includes ownership of plans for two 1000 MW offshore projects -- one in the Baltic Sea, the other near Helgoland island in the North Sea.

Essent beat out nine other companies invited to bid for Winkra. "It's concept for Winkra's future conformed with the company's own ideas," says Winkra's Uwe Thomas Carstensen. "It also offered the best price." Under the agreement -- which is one of just a few utility-developer deals to date -- Winkra will be an independent wind station developer and operator within Essent Deutschland.

"Access to a sizeable volume of wind generated electricity makes Essent well placed for potential future green electricity trading in Germany," says the utility's Jörg Brettschneider. At present its German power trader, Essent Energie, markets conventional power only to industry and commercial customers.

Hamburgische Landesbank analyst, Marc Ziegner, suggests the Winkra acquisition is in fact likely to have more impact in strengthening Essent's position in the Dutch, rather than German, electricity market. In the Dutch market, consumers can only switch supplier if they buy green electricity. The purchase of Winkra means Essent can import the power generated from its newly acquired 142 MW of German wind farms into the Netherlands, enabling it to secure more private customers, says Ziegner. Electricity from Winkra's planned offshore projects could be used in the same way, he adds.

For Winkra, ownership by Essent enables it to pursue larger development projects which can be retained rather than sold on, suggests Carstensen. By the end of 2002, Winkra had developed 500 MW of wind in Germany, retaining 142 MW, mostly in northern and eastern Germany. The company "now has the financial strength to co-operate with or takeover other project development companies," Carstensen says.

Similar merger and acquisition deals between other utilities and developers are, he adds, also likely. The window of opportunity for small independent wind companies like Winkra is gradually closing unless they can latch onto larger players, he says. Indeed, over the last 18 months several developers, including Plambeck Neuer Energie and Umweltkontor, have revealed they are negotiating with potential partners. Plambeck is expected to make an announcement shortly.

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