Spanish utility places largest order ever

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Spanish utility Energ’a Hidroeléctrica de Navarra (EHN) has ordered 1800 wind turbines - 1400 MW of rated capacity - from Gamesa E—lica SA, the maker of Vestas turbines in Spain. It is by far the largest single order for wind turbines ever made and was announced to the Danish stock exchange by Vestas late last month. Fourteen hundred megawatt is equal to half the entire global wind power capacity installed in 1999, or all of the wind capacity installed in 1998. The order is worth some $750 million, about half the entire Danish wind industry's turnover for 1999.

Gamesa, which is 40% owned by Vestas Wind Systems A/S of Denmark, will deliver the turbines over the next three years, at roughly 600 turbines a year between 2000 and 2002. Vestas' Spanish joint venture company was established in 1995 to comply with regulations requiring a percentage of local content of wind turbines participating in subsidised development in Spain. Gamesa is 50% owned by Iberdrola, one of Spain's major electric utility companies.

EHN is Spain's largest wind power station operator and operates 418 MW of the current national total of 1500 MW, including the recently completed 112 MW first phase of the sprawling Higueruela project in the Castilian province of Albacete (Windpower Monthly, September 1999). The hydro utility's involvement in wind power development has been fast and furious with construction running at 100 MW a year since the end of 1998, when it was operating 207 MW of wind plant. Last year its investment in wind development amounted to EUR 220 million. It expects to double that this year. EHN's wind developments meet 22% of the electricity demand of both Castilla la Mancha (New Castille) and Navarra.

This year EHN is aiming to install more capacity than in the previous five years put together. The regions earmarked for development are Castilla La Mancha to the south of Madrid and the southeastern coastal regions of Valencia and Murcia. These are new areas of wind development far from Navarra, where both EHN and Gamesa are based. Navarra, too, will see more wind development by EHN.

EHN is owned 38% by the Sociedad de Desarrollo de Navarra, a company wholly owned by the regional government of Navarra, 37% by major utility Iberdrola, 15% by Spain's top cement company, Cementos Portland, and 10% by the Caja de Ahoros de Navarra, the regional savings bank.

Share price surge

In Denmark, Vestas shares rocketed within hours of the announcement of the deal, adding 23.5% to their selling price and earning shareholders DKK 3.5 billion by close of business on January 21. The share value of the company, a veritable star on the Danish bourse, has now passed DKK 18 billion, which is greater than several of Denmark's traditional stock market heavyweights, such as the Carlsberg brewing business, according to national newspaper Jyllands Posten. The share price of Vestas Wind Systems, the world's largest wind turbine supplier, has increased by a factor of five over the past year.

According to Vestas, the Spanish order represents a 60% increase in turnover for Gamesa. Vestas' managing director, Johannes Poulsen, admits, however, that it puts Gamesa's prices "under pressure." He continues: "But the large volume and long time horizon at the same time provide potential for optimisation of purchasing and production."

Reflecting a degree of caution, Poulsen adds: "We expect, therefore, that Gamesa's gross profit ratio, also in 2000, will remain at about the same level as that of previous years." On this basis, profit expectations for the Danish Vestas group will "rise significantly" in 2000.

Since the turbines for EHN will be made in Spain, their production will not add to the Danish company's turnover for 2000. Nonetheless, Vestas has adjusted is growth rate projection for the year up to 25-30% from 20-23%.

Spanish dynamism

The dynamic Spanish market was kicked into being in its present form by the country's wind law, passed at the end of 1998, which fixed a national wind tariff (next story) high enough to make wind plant development an attractive business proposition, particularly in a country with large open areas swept by strong winds and a spiralling demand for electricity. Utilities pass on the cost of their wind power purchases to consumers in their electricity bills. The country's 1500 MW of wind power is double what it was in 1998.

It is the regional governments which often provide the driving force for wind development in Spain. Unemployment is high in Spain's more outlying regions and wind turbine manufacture and wind plant development are regarded as prize industries which can significantly improve a region's economic well being.

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