Following its corporate reshuffle last year, Corporación Energía Hidroeléctrica de Navarra (EHN) is in fighting form. In the first eight months of 2004, the company installed 500 MW of wind generation, with a further 240 MW building. The grand total of renewables plant operated (and partly owned) by EHN is currently running at 2531 MW, with a further 240 MW building. Of this by far the greatest proportion is in its home country of Spain, with 280 MW abroad, 250 MW of which was added to the EHN portfolio over the past 12 months in France, Germany, the United States, Canada and Ireland.
"Keeping track of what we are bringing online is a job in itself," says the company's PR man, Jose Arrieta. He is interrupted by a phone call. "See what I mean? That was confirmation on a further 2.5 MW in France." That is not to say that EHN is roller coasting abroad. At least not by EHN's own standards at home (table). So far this year it has put up 461 MW of its 500 MW world total in Spain, despite the efforts of no less than 26 wind development companies on foreign territory.
At home, EHN has a track record for timely strikes. In 1998, the company started measuring wind beyond its home region of Navarra, where it was busy developing a 600 MW wind power concession. Then, in 1999, EHN landed a 450 MW wind development concession for the central region of Castile La Mancha through a joint venture, Energía Eólica Europea (EEE) owned together with utility Iberdrola. Within 18 months, EEE clinched a EUR 913.5 million project-finance agreement -- still a world record for wind -- for 1173 MW of the Castile La Mancha concession. All but 25 MW of that is now turning. The Mediterranean region of Valencia was next, where EHN has recently clinched a 793 MW concession, now shared in a 50-50 local joint venture and ripe for development
The other renewables
Wind power is the mainstay of EHN's business, bringing in the vast bulk of its EUR 156.6 million turnover in 2003 -- 19.4% up on 2002. Project investment last year was EUR 700 million, EUR 543 million for wind development. But to see EHN just in terms of wind is to miss a large part of the point.
"Our objective is to demonstrate the technical and economic viability of a sustainable energy model," says EHN's phlegmatic boss, Esteban Morrás, looking up from a miniature photocell producing hydrogen on his desktop. Last year, 11% of profits were pumped back into research and development (R&D) for other renewables. "EHN's strategy is to be present in all renewables, and only renewables, and to develop them profitably in accordance with their technological maturity and market conditions," says Arrieta.
EHN's actions in other renewables -- all in Navarra -- demonstrate the seriousness with which the words are backed. The company developed and operates the 25 MW Sanguesa straw-fired biomass plant, producing 30% of Spain's primary biomass generation. EHN owns 75% of Alternativas Energéticas Solares SA (AESOL), Spain's largest manufacturer of PV solar cells, with 45% of the market. AESOL runs a 1.2 MW PV solar plant in Tudela, the biggest in Spain. PV power contributed EUR 13.4 million to EHN's earnings in 2003. Close to Tudela stands EHN's gleaming biodiesel facility, about to kick into action in the next few weeks with an estimated annual production capacity of 300,000 tons to meet Spain's rapidly growing biofuel demand. The latest R&D investment has gone to a hydrogen laboratory as a first step to producing hydrogen in the field from an EHN wind turbine (box).
Indeed, EHN's greatest R&D feat is the design and production of a 1.5 MW wind turbine. EHN opened a turbine manufacturing facility in 2003 in Barasoain, Navarra, under the trade name Ingetur. By the end of the year, Ingetur expects to complete orders for 143 machines, all for EHN developments. The turbine recently gained type approval from Germanischer Lloyd.
Until now, EHN has bought wind turbines from no less than seven suppliers, installing more than 2000 machines. "We know the strengths and limitations of each one," says Arrieta, information put to good use in producing its own model. "It's a fairly standard machine though with a wide series of small adjustments," says Ingetur's Miguel Núñez. In-house manufacturing aims to slash turbine costs. Sales of the turbine to other developers and technology transfer agreements abroad also offer new business opportunities. "Around 50% of future EHN developments will use in-house turbines," says business development chief Alberto de Miguel Ichaso.
Divorce and marriage
EHN's vigorous growth has not been trouble free. In 2002, a 4000 MW international expansion program through a joint venture with Iberdrola came to nought. Quarrels over executive control brought about the split with Iberdrola, its long-time favoured business partner. At the time, Iberdrola owned 37% of EHN. In the same year as the split, Iberdrola made wind generation its core business; clearly it was no longer prepared to remain the sleeping partner in its numerous wind concerns.
The divorce agreement with EHN gave Iberdrola full control of EEE. Together with Iberdrola's subsequent developments and wind plant purchases, the major utility is today recognised as the world's second largest wind plant operator after America's FPL Energy. EHN follows in third place: the split does not alter the fact that EHN, as active partner, developed and built all EEE wind plants in Castile La Mancha.
EHN also walked out of the divorce with the huge Valencia concession, as well as projects under development in Canada, US and Australia. "We are one of the top two wind developers in the world, looked at from the viewpoint of project development, construction, exploitation and plant operation and management (O&M)," claims Arrieta. To arrive at that conclusion, he includes EHN's on-going turnkey contract with EEE.
Following the dissolution of its marriage with Iberdrola, EHN's wedding with industrial giant Acciona followed. With EUR 727 million to spend after selling its share in Vodafone, Acciona took a 50% share in EHN. The new set up is registered under the name of Corporación Energía Hidroeléctrica de Navarra. Confusingly, the company wants to retain its old acronym of EHN. The other half of EHN is owned by the Navarra regional government's development agency, Sodena, which has a 39.58% stake, and semi-public regional bank, Caja Navarra, with 10.42%.
"Acciona brings tremendous business volume and the group is fully committed to EHN's renewables strategy and vision," says Arrieta. Acciona also adds international reach, with a presence in over 30 countries. It is mainly involved in infrastructure construction, logistics and telecommunications. Furthermore, EHN has absorbed 190 MW of wind capacity in Galicia from Acciona's wind project development business, Alabe.
With its new backer, EHN aims to boost its presence abroad, "preferably with local partners and mainly with a view to remaining as operators," says Arrieta. EHN's focus is on six countries in the developed world: France, Germany, US, Canada, Australia and UK. "But we will be present wherever market opportunities arise," says De Miguel. It already has 14 wind plants turning or building in five of these target countries, plus one in Ireland.
France marked EHN's first foray abroad, prior to the split with Iberdrola. EHN owns 50% of French developer Compagnie du Vent. "But there is a lack of clear political backing in the country," says De Miguel. Compagnie du Vent has developed just 33 MW in France so far.
Further abroad, more projects are swelling the EHN wind portfolio. This month, the 30 MW Magrath wind plant in Alberta, Canada, using GE 1.5 MW turbines comes fully online. It was part developed by EHN in a three-way joint venture with Canadian oil company Suncor and Enbridge, a Canadian gas firm. Construction has also started on the 66 MW Cathedral Rocks wind plant in Australia, a joint venture between EHN and utility Hydro Tasmania. Vestas is supplying the 33, 2 MW turbines from Denmark.
Other foreign projects have involved piecemeal acquisitions. Earlier in the year, EHN announced its purchase of a 25% stake in the 74.25 MW Blue Canyon wind plant in Oklahoma, where 25 NEG Micon 1.65 turbines have been turning since December. The other partners are Babcock & Brown, an international investment company, which owns 50%, and US wind project developer Zilkha Renewable Energy, with the remaining 25%. Also in the past year EHN has acquired 41 MW outright in Germany in a series of purchases. The latest, in May, is the 12 MW Rehfeld wind plant in the east German state of Brandenburg, now building.
While EHN's expansion abroad is becoming significant, it is still far off anything like the 4000 MW it had originally planned with Iberdrola. The push abroad, however, has come when most of its target countries are suffering market uncertainties, most significantly in Germany and the US. EHN has high hopes for considerable growth in the US once the federal wind incentives are renewed.
One of EHN's most valuable possessions came through its 50% purchase of offshore developer ZeusFord, affiliated to Irish developer Airtricity. The deal, announced in April, makes EHN Spain's first offshore operator, with an immediate stake in Airtricity's 25 MW Arklow Bank offshore wind plant in the Irish Sea. An extension of the facility up to 520 MW is planned.
One of EHN's main future hopes lies in its plans for a 1000 MW wind plant at Trafalgar, off the south coast of Spain near Gibraltar. The Arklow agreement gives Airtricity the option to acquire 50% of Trafalgar when completed. Just when that might be is anybody's guess. After four years in development, EHN's most advanced step has been to present its environmental impact assessment to the coastal authorities. "It's now up to the authorities to decide on procedure," says De Miguel. As the first of only three large-scale offshore developments in Spain, there are no administrative precedents and local opposition is inflamed (Windpower Monthly, May 2003).
Onshore at home
Back on the Spanish mainland, starting orders for fulfilling EHN's concession for development of 793 MW in Valencia are imminent. At the same time, it has found a foothold in two regional markets which have been stagnant for some while, Catalonia on the Spanish eastern seaboard and Andalucia in the south, with building underway on 50 MW in the first and 45 MW in the second.
The main doubt overhanging EHN is not whether it will have enough to do in the future, but whether there will be too much to do if target markets suddenly open up. "We have to be careful not to spread ourselves too thinly," says De Miguel. But having successfully managed a twelve-fold growth in installed capacity since 1998 -- and now having a powerful and rich partner in Acciona -- De Miguel is confident that EHN can meet the challenge.