The French industrial and technological services group Cegelec has been active in wind energy from the early days. Since 1993 it has developed, built or been in some way involved in the installation of 337.5 MW of wind power capacity in Europe and Morocco. Of this, 215.1 MW is located in mainland France, including the country's two biggest developments to date: the 39 MW Ally-Mercoeur plant in the Haute-Loire département and a 37.5 MW installation at Haute-Lys in the Pas-de-Calais. Cegelec now ranks as France's leading project manager in the wind sector, claiming a 27% share of a French market totalling 780 MW installed capacity. Despite an increasingly competitive environment, it is a share the company intends to keep.
Cegelec started life as the electrical contracting division of Alstom, France's troubled power and transport group. It became an independent company in 2001 following a leverage management buyout. The EUR 796.4 million deal was supported by France's CDC Equity Capital, a state-owned institutional investor, and Britain's Charterhouse Development Capital, which specialises in large European buyouts. Each holds 45% of the capital, with the remaining 10% owned by management and staff.
In 2004, Cegelec bought itself greater flexibility by refinancing its acquisition debt and convertible bonds by a combination of EUR 275 million securitisation of trade receivables and EUR 320 million of senior debt. The refinancing also enabled it to return to shareholders 84% of their original investment and to halve its interest charges.
Cegelec's bread and butter is electrical contracting. The company now ranks among Europe's top three electrical engineering giants, alongside Suez and Vinci. Recent high-profile contracts include general contracting work on new football stadiums in Leipzig, Cologne and Frankfurt in Germany for the forthcoming soccer World Cup. While its main focus is Europe, notably France and its neighbours, Cegelec is present in more than 30 countries worldwide. It employs a workforce of over 26,000 and turned over just under EUR 3 billion last year.
As for wind energy, Cegelec has seen its business grow markedly in the last two years, particularly in France. The company declines to say exactly what proportion of its business is wind, but in 2004 it developed, co-developed or carried out general contracting work for 61.3 MW in France, over 40% of the additional capacity installed in the country during the year. It added another 94.5 MW in 2005, accounting for 24% of the year's total.
Looking ahead, Cegelec has already signed contracts for 160 MW in France in 2006 and has pre-orders for another 90 MW. Its French wind energy business is handled by Cegelec's Toulouse office, while its international activity is managed out of Nanterre. In all, the company now employs 22 people in France working solely in the wind sector.
Jean-Marc Perraud, director of Cegelec's energy division, explains the company's strength is its global approach. Cegelec "puts together an ensemble for the client. It carries the client from start to finish and brings the project alive," he says. In France, the company's main clients in the past year have been Sinerg and Boralex. The near future will see a more diverse mix. It has signed contracts, mainly to provide the electrical works, with five different clients for five different projects (54 MW), the largest of which is a 20 MW facility for JMA/EOLE Energies, where it is also the project developer.
Over the years Cegelec has built up experience in all aspects of a wind power project, from site identification and development to construction, commissioning and maintenance. It builds access roads and takes care of the electrical engineering. It also handles operation and maintenance if required. The only thing Cegelec does not do is make wind turbines. Nor, apart from a couple dating from the early days, does it own any plant.
Given that its core business is construction, Cegelec's goal is to be engaged as the general contractor overseeing the entire project wherever possible. Investors want to outsource project management to "one company which can reduce costs and has proved it can meet deadlines and provide quality," says Perraud, adding that Cegelec sources the best professionals and skills for the job.
When not retained as project manager, Cegelec will undertake the construction work alone. To win this business it often co-develops projects with other companies, notably the French research consultancy Espace Eolien Développement (EED). In this role it also applies for siting permits and seeks out investors, recouping the development costs from the construction contract. Indeed, of the 19 wind projects Cegelec has been involved in completing in France since 1993, it had a development role in all but six of them. Of those projects, only four were larger than 12 MW and most were smaller. Internationally, however, Cegelec's role has almost entirely been focused on providing electrical works and it has not developed a wind project abroad.
On the spot
A key element in Cegelec's growth in the wind sector is local presence. It maintains 120 agencies throughout France which, says Alain Viard, head of Cegelec's wind energy department, means the company has good local contacts. Cegelec is "embedded in France," he asserts. As a result, it knows the key local decision makers, including the all-important mayors. It is a point borne out by Christian Blanchard of French power producer Séchilienne-Sidec, which contracted Cegelec to deliver its 37.5 MW Haute-Lys plant key in hand. "Cegelec's staff have pulled off the difficult feat of maintaining excellent relations with farmers, residents and locally elected officials, who have little experience with projects of this size," he says.
Thanks to its local presence coupled with broad national coverage, Cegelec can react quickly on a project. The company has never been penalised for being late, says Viard, and on occasion has delivered two months early. He is particularly proud of a 9 MW turnkey project at Peyrelevade in the Corrèze département in central France. It was built in a record six months in particularly unfavourable weather in 2004.
Equally important is the company's relationship with state utility Eléctricité de France (EDF) and grid operator RTE. Because of its electrical engineering expertise, Cegelec understands the constraints and speaks the same language as EDF, though getting a grid connection is still a long and complicated process in France, says Viard. And, because it has no affiliation with a turbine manufacturer, Cegelec can give independent advice as to the most appropriate machine for the site. "Because of the company's expertise and experience," contends Viard, "Cegelec can minimise the risk."
Outside France, Cegelec answers tender calls for construction contracts, but does not develop projects. Its focus is countries where it already has a strong presence and has built up local knowledge, notably Morocco, Tunisia Brazil and Mexico. Information as to whether it is actively working on any contracts outside France, or has anything in the pipeline was not forthcoming.
Up until now the size of wind power developments in France has generally been governed by the 12 MW upper limit on which projects were eligible for fixed premium purchase prices. Large plant, such as those at Haut-Lys and Ally-Mercoeur, are sub-divided into smaller units to get round the limit. In future, however, the new energy law (Windpower Monthly, July 2005) stipulates the size of projects will be decided by local district authorities; the law allows a two year transition period during which the two systems run in parallel.
For Cegelec, the change is a positive step. The bigger the better, says Perraud, although the company is well-placed to cover any size of project. Overall, he views the situation in France as favourable over the next four to five years.
Cegelec faces growing competition from new French players in the construction market. It feels confident, however, that it can maintain a 25-30% share of the market thanks to its strong local engagement. Most of Cegelec's foreign competitors on the construction side are turbine manufacturers which up to now have generally limited their involvement to maintenance. According to Cegelec, they are not making money -- for the moment at least. If, or when, these manufacturers move into construction, or when other European construction companies move into France, Cegelec may have more to worry about.