Spanish utility buys fourth developer -- Iberdrola adds to US pipeline

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Spanish utility Iberdrola -- which has already stitched up thousands of megawatt of wind project development rights in the US market with its cross-country acquisitions of PPM Energy, Midwest Renewable Energy Corp and Community Energy -- surprised some market watchers last month when it bought a fourth American developer, CPV Wind Ventures. In total, CPV Wind boasts more than 3500 MW of wind projects in various stages of its development pipeline.

Based in Massachusetts, CPV is a subsidiary of Maryland's Competitive Power Ventures Inc, a developer and owner of natural gas plants. CPV Wind is a joint venture of CPV and ArcLight Capital Partners and is focused solely on wind project development. It was formed in 2005 and has yet to complete a wind project, making it relatively unknown in the wind business compared to Iberdrola's earlier acquisitions.

CPV's Sean Finnerty says the company has stayed mostly below the radar as it pursued a range of developments. These include two large projects in New York, one in Nevada, a few in Texas, Kansas, Colorado, and two in Illinois. The Illinois projects total 300 MW.

Finnerty expects the company to be particularly strong in the PJM electricity region in the east. But the only near term development he will speak specifically about is the company's soon to be constructed 85 MW Trew Ranch project in Gray and Donley counties in Texas.

How real all the projects are remains to be seen. Josh Magee of Emerging Energy Research does not question the company's ability to develop, but cautions that there has been "a ton of pipeline inflating" in the industry. "They have sites in several states and have had their hands in several projects but I would not call them one of the more aggressive developers. They're not an Invenergy or a Horizon," says Magee.

"We were surprised because we're not sure what the Iberdrola appetite is in terms of how much more pipeline of US projects they need." PPM Energy alone -- the largest of the four US developer acquisitions by Iberdrola -- boasts more than 4500 MW of potential projects. Through Community Energy on the east coast and Midwest Renewable Energy Corp in the American heartland, Iberdrola gained combined rights to a further 3800 MW, with over 400 MW near to construction (Windpower Monthly, January 2007).

Magee suspects the deal has less to do with the project pipeline and more to do with Iberdrola having negotiated a good deal for CPV Wind. "The cost must have been right," he says. "Some portion must have had the various development benchmarks that put some projects close to construction."

Hyperactive market

Finnerty will not comment on the financial details. Reuters news service reported CPV was bought for EUR 55 million ($73.8 million). But that figure understates the value of the deal, according to Gregg Elesh of Marathon Capitol, the investment banking firm that represented CPV. "There was additional consideration at closing," he says.

Inflated pipeline or not, Elesh adds that Iberdrola knows what it is getting into. "They know exactly what they are buying. It's a gigantic deal. You can fantasize about all these pipelines but if they get it all built, wind will be having a big impact. Firms like Iberdrola all take a view of which will get built...and on this acquisition will probably pick up 1500 MW to 2000 MW they would not have had."

One industry consultant cautions the deal is emblematic of a hyperactive wind market. "The market is overheated and that's not a market where rational decisions are made. Maybe power prices will go through the roof and [Iberdrola] will look pretty smart, but right now it just seems like a lot of people are trying to play in this market."

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