High price for Spanish assets

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Portugal's national utility, Energía de Portugal (EDP), has bought Spanish wind project developer Desarrollos Eólicos SA (DESA) from Dutch power company Nuon for a whopping EUR 478 million plus EUR 222 million in assumed debt. Business analysts in both Portugal and Spain are surprised at the price.

Nuon acquired DESA in 2001 for EUR 169.1 million, a package that included 136 MW of operating wind capacity, mostly from old 330 kW machines, and a supposed project portfolio of 600 MW. DESA has installed no more than 138 MW since then, with 36 MW of that developed by NEG Micon (now Vestas). The package sold to EDP largely consists of 274 MW of online wind capacity in Spain and a project portfolio of 1200 MW, says Nuon.

A Portuguese equity analyst, Espirito Santo Rearch, bluntly says the price paid is "too high." According to a Spanish commentator, EDP's bid was 30% higher than the next best offer, from Australia's Babcock & Brown. Others known to have been scrambling for the Nuon assets include Acciona Energía. Spanish utilities Iberdrola and Unión Fenosa pulled out of the process before binding bids were required. Iberdrola says the starting price was too high.

EDP clearly believes big money can be made on Spain's lucrative wind market. It recently lost out in a bid for control of Portugal's largest gas and oil company, Galp, and is now selling its 14.2% share of Galp in expectation of raising over EUR 700 million.

The purchase of DESA from Nuon makes EDP Spain's fourth largest wind operator, with 500 MW on its books. The total includes 226 MW of wind operated by Genesa, the renewables arm of Spain's fourth utility Hidrocantábrico, which EDP took over last year. Coupled with the 124 MW operated by EDP's Portuguese renewables arm, Enernova, the utility's wind owns 624 MW of wind capacity in the Iberian peninsula. All of it is controlled by the utility's renewables arm, Novas Energías do Ocidente (NEO) formed in July 2005.

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