Nuclear utility with a wind portfolio

EDF Energies Nouvelles, the dedicated renewables arm of state-run utility Electricité de France (EDF), is not only the largest developer, owner and operator of wind generation in France, but also the only French player in the wind business to figure on an international scale. EDF Energies Nouvelles says it is "rapidly looking to establish positions in the green energy market and to rank among the leaders in its priority markets."

Google Translate

The wind division of French nuclear utility EDF might be no more than a blip within the giant organisation, but in the wind power business it is already a significant owner and operator, particularly in the United States

EDF Energies Nouvelles, the dedicated renewables arm of state-run utility Electricité de France (EDF), is not only the largest developer, owner and operator of wind generation in France, but also the only French player in the wind business to figure on an international scale. EDF is ranked twelfth in terms of net ownership of wind plant by market consultants Emerging Energy Research. The company is placed seventh, however, when measured by growth in ownership. And it is geared up for continued expansion. EDF Energies Nouvelles says it is "rapidly looking to establish positions in the green energy market and to rank among the leaders in its priority markets."

But how green can a company 50% owned by EDF, nearly three quarters of whose global production comes from nuclear power and just 0.14% from renewables (excluding hydro), really be? Does EDF Energies Nouvelles represent a genuine move towards diversification for EDF, or is it merely a public relations exercise providing a green gloss to the utility's image?

Hélène Gassin of environmental campaigner Greenpeace France says EDF only took a stake to give the impression it was "engaged" in green power. EDF is not ambitious for its subsidiary, she argues, pointing to the relatively minor sums the group invests in renewables despite the difficulties France faces in meeting its EU targets. "Even if they put some tens of millions into the development of renewables, it is still nothing compared to their turnover and their serious investments," she says.

EDF, however, constantly reaffirms its belief in renewables and describes itself as a European leader in the field. It views its renewables affiliate as an important player and is keen to see it develop further. To underline that message, in 2004 EDF gave its name to what was formerly known as SIIF Energies, giving the affiliate greater visibility as EDF Energies Nouvelles. At the same time the parent endorsed the decision by Energies Nouvelles to increase its 2010 renewables target to 3000 MW net equity share from 2500 MW. Reaching the target will require development of at least 6000 MW in the next five years -- double that installed in Denmark in the past 25 years.

EDF has also been diverting more of its research budget to renewable energies in recent years. While the total budget has remained fairly steady at around EUR 400 million, the amount spent on renewables has risen from roughly EUR 12 million in 2002 to EUR 19 million in 2004. This is still only 5% of the total, but ranks renewables third after radioactive waste and energy efficiency.

Recent business decisions indicate moves towards a real economic involvement in renewables, both in France and abroad. If EDF was in the sector merely for its image, the argument goes, it would simply build a couple of installations and leave it at that. Instead it has become the country's leading wind project developer through EDF Energies Nouvelles.

Executive vice president of the renewables division, André Antolini, defends his company robustly. "It has hundreds of megawatts running in wind and spends millions in the wind industry, so the investment is not negligible." Furthermore, EDF Energies Nouvelles' founder, Pâris Mouratoglou, still owns 50% of the firm. He has no interest in nuclear power and would not have sold to EDF, or still be involved, if he believed the utility was just polishing its image, according to Antolini. "It is Mouratoglou's private money," adds fellow executive vice president David Corchia. "He is in the business to develop wind, not an image."

EDF Energies Nouvelles is active in wind, small hydro, solar and biomass and operated 1200 MW of renewables plant as of May. Of that, it has an ownership interest in 800 MW, with over 500 MW as net ownership. Wind makes up 76% of installed capacity, followed by hydro at 18% and 6% cogeneration. Electricity sales break down into 53% wind, 30% cogeneration and 17% hydro. Key markets are the US and Europe, notably France, Portugal, Italy and the UK, and the company is also establishing a presence in Greece. Three quarters of its asset base now lies outside France. In 2004 EDF Energies Nouvelles achieved consolidated revenues of EUR 200 million and made a net profit for the second year running, despite high investment in Latin America to establishing a foothold there.

In the beginning

The company began life in 1991 as SIIF, later SIIF Energies, developing fossil fuel and hydroelectric facilities in France and the rest of Europe. It also installed over 40,000 solar water heaters in the French overseas departments. In the 1990s Mouratoglou refocused his company to specialise in renewables and particularly wind power.

The next major development came in 2000, when EDF bought a 35% stake in the company, which enabled SIIF Energies to shift its sights beyond Europe -- partly out of necessity, since its home market was so small. Two years later it acquired Enxco, a leading player in the operation and maintenance of wind plant in the US. At the same time EDF increased its holding to 50% and SIIF Energies embarked on a period of rapid global expansion.

Some might say too fast. After a period of heavy investment, in 2004 the company, now rebranded EDF Energies Nouvelles, pulled out of several underperforming markets, most notably Sweden, where it sold its 65% stake in local wind power developer Airicole, in order to "concentrate on its core markets." Corchia, however, says the initial wide geographic spread was a deliberate strategy. Because the company entered the wind market "a little late," it was necessary to explore a number of markets to identify those offering the best potential.

The result today, says Corchia, is a "balanced and rich portfolio." The aim is to maintain a balance of roughly 60:40 between its American and European portfolios.

Describing itself as an integrated operator, EDF Energies Nouvelles is present in the entire chain of wind plant development and operation, from initial project planning to electricity generation. In America, its subsidiary Enxco not only operates and maintains wind plant owned by EDF, but also for third parties and is now the US leader in the field, with over 4000 turbines and 1000 MW on its books; the company says it won over 50% of all new O&M contracts in the American market in 2004, including for 310 MW of GE turbines and 120 MW of Mitsubishi. On the basis of Enxco's success, EDF Energies Nouvelles is "considering very seriously" setting up a similar O&M franchise in Europe.

Develop and own

Nevertheless, its core strategy remains to develop and own, with revenue coming from electricity sales. This, says Antolini, allows it to leverage off the full value of the development business, unlike the German model of develop and sell, where developers waive the added value.

Even so, EDF Energies Nouvelles does sell projects, particularly in America. "The main thing is to be pragmatic," says Corchia. The overall aim is to balance the portfolio, to extract value from projects in the most effective fashion and to fund new development. It is a flexible strategy in which "everything is possible," he says. Each project is assessed on its own merits. The company has the option of retaining full ownership, keeping a stake or selling it outright, depending where the value lies. As a result, there is a lot of financial engineering behind each project, Corchia says, and no corporate debt (box).

American connection

America represents the company's most important market. Through Enxco, EDF Energies Nouvelles says it is one of the major investors and operators in US wind power, ranking fourth in net megawatts owned at the end of 2004. Over a third of the EUR 30-35 million the company has invested in wind development has been spent in the US. The company operates 390 MW installed capacity in the US, of which 256 MW is net ownership. Enxco's principle areas of activity are California, the Midwest (particularly Minnesota and Iowa) and Washington and Oregon in the Northwest.

Enxco managed to get one project under the wire in late 2004 after the renewal of wind's federal production tax credit -- the 60 MW Oasis development in southern California, which it owns 25% of. Expectations for 2005 are much higher. It is about to complete 150 MW at Wall Lake in Iowa, developed and built on a turnkey basis for local utility MidAmerican Energy, and has 10.6 MW under construction in Hawaii. The company has not yet decided whether it will sell these projects or not, but Corchia says it will still be a very good year for profits: Enxco will earn a royalty share on two projects equivalent to 80 MW net equity ownership. Earlier this year Enxco sold the fully permitted 150 MW Shiloh project in Northern California to PPM Energy, a subsidiary of ScottishPower. PPM Energy will take care of the construction. Enxco is also waiting to hear about siting permission for 30 MW in Massachusetts and over 100 MW in Washington state.

Meantime, the company has been buying wind capacity to strengthen its position in the market. It acquired 19 MW in April 2004 and another 42 MW in January this year; in each case Enxco was already responsible for operating the plant, located in California. Corchia says they are looking for further opportunities. Some of this will be funded by a recently secured EUR 40 million loan (box).

Growth in Europe

While three quarters of its assets lie outside France, EDF Energies Nouvelles still views its home base as an important market. Wind power generation has been painfully slow to take off, but Antolini says things are on the move. From just 70 MW installed capacity in mainland France and its overseas territories at the end of 2004 (out of a national total of 400 MW), the company already has siting permits for 100 MW in 2005 and hopes to build around 120 MW by the end of the year. This would give it almost a quarter of the market, if national energy agency ADEME's estimate of 800 MW total installed capacity by 2006 turns out to be correct.

In the longer term, EDF Energies Nouvelles expects to benefit from new regulations in France which favour larger wind power installations and should bring increased economies of scale for operators. It is also waiting to hear the outcome of three bids submitted in response to the government's 2004 call for proposals to build 500 MW of offshore wind power. Announcement of the bid winners was originally expected in April, but has been postponed.

EDF Energies Nouvelles' offshore ambitions are closer to fruition in Britain, where work should start next year on the 90 MW Burbo Offshore plant in Liverpool Bay. The project is being developed by Seascape Energy Ltd, owned jointly by EDF Energies Nouvelles and Danish electricity company Elsam, which bought a 50% stake of the project in 2004. Investment offshore is important to EDF Energies Nouvelles, says Antolini. The company recognises the risks but also the huge potential and believes it will be a profitable game in the end. "We are very cautious but we intend to be there," he asserts. The company has high expectations for its onshore investments in Britain. These are managed by its wholly-owned subsidiaries Fenland Windfarms, Westbury Windfarms and Cumbria Wind Farms and by project developer Wind Prospect Development, which it owns 70% of. In addition to the 35 MW already operating in Britain, the company recently started building 44 MW for completion in 2006 (box) and has a further 50 MW in the pipeline.

Portugal, Italy and Greece

Further south there is plenty of action on the horizon, particularly in Portugal. Here, SIIF Energies Portugal Ltd, a 95% holding, owns 58 MW, which puts it in among the top three wind plant owners in the country. A further 106 MW is under construction, including the first 52 MW of Portugal's biggest development so far, the 250 MW Vale do Minho project. Equally owned by Siif Energies Portugal and Eolverde (a subsidiary of Spanish utility Endesa) and 15% by the local municipalities, the second tranche of 204 MW should be operational in 2007. The company also owns grid connection rights for 300 MW, out of 2000 MW awarded nationally, and is expecting to bid in the call for tenders for up to 1700 MW of new capacity recently announced by the government (Windpower Monthly, August 2004). The bid will be submitted as part of a consortium including Endesa and German turbine manufacturer Enercon.

To fund all this activity, in May EDF Energies Nouvelles signed a finance deal with a consortium of European banks for EUR 243 million for a portfolio of 200 MW. The facility includes the refinancing of two existing wind plant and secures financing for three more to be built in northern Portugal.

Last year saw EDF Energies Nouvelles bring its first wind project to completion in Italy -- 22 MW at Nurri in Sardinia. This was followed last month by the 70 MW Andretta Biasaccia plant, while work started in July on a further 72 MW at Sant'Agata di Puglia. All the projects were developed in association with local partners.

Greece is also seen as a major future market, with a total potential of 4000 MW according to the government. EDF Energies Nouvelles bought the wind power arm of a Greek construction company with 45 MW of wind plant building and a further 400 MW at various stages of development, some almost ready to proceed with.

Back across the Atlantic Ocean, EDF Energies Nouvelles is establishing positions in the emerging markets of Latin America. In Brazil last year it won connection rights for 342 MW under the government's Proinfa program and is now looking for local partners to co-operate on three projects totalling 185 MW. Negotiations with potential partners are also under way in Mexico where the company is developing a project of 80-100 MW in the south of the country. It hopes to conclude a deal by the end of the year.

With activity spread over so many sectors and markets, some critics argue EDF Energies Nouvelles is in danger of spreading itself too thinly and would be unable to respond if all its markets took off at the same time. On the contrary, says Corchia, they would welcome such an event. Even if all their projects come off, there is still enough cash in the bank from the purchase money received when EDF increased its holding from 35% to 50% in 2002 to cover all development to 2007, he says. Beyond that, the company is seriously considering a partial flotation on the stock market in late 2006 or early 2007 to raise further capital. While wind power will remain the company's strategic business, it is also looking five to 15 years ahead at next generation technologies. In particular, the company is working on more efficient photovoltaic cells and, in partnership with EDF, on harnessing the power of marine currents by means of undersea turbines. Measurements are being taken at two sites along the Channel coast before the experimental phase begins in 2008.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in