Growth overseas and rising profits -- Gamesa results

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Year end financial results for Spanish Gamesa present a glowing bill of health for the rapidly internationalising wind company. Its turbine manufacturing division, Gamesa Eólica, supplied 2250 MW of capacity, up 26% up on the volume in 2005. Gamesa Energía, the project development division, sprang back on its feet after a weak start to the year, selling 477 MW of completed projects, a 112% improvement on a year earlier. Gamesa reports total sales of EUR 2.4 billion in 2006, 36% up on 2005, with consolidated net profits up 135% to EUR 313 million. Earnings before interest, tax, depreciation and amortization (EBITDA) were up 25%, to EUR 411 million and group debt was down 39%. Gamesa retains its 2006-2008 objective of 15% annual growth.

Now a renewables pure player after shedding its aeronautics division last year, 95% of group turnover came from its wind business, 76% from turbine sales and 19% from wind plant sales. The remaining 5% comes from its PV division, Gamesa Solar. Sales outside Spain made up 60% of the group total.

A better rate of project completion lies behind the improved figures. Gamesa Eólica installed 2402 MW last year, an 83% improvement on 2005. Europe absorbed 65% of that capacity, confirms CEO Guillermo Ulacia. Nearly 970 MW was for Spain, with Italy, Greece, France and Germany making up most of the rest. Outside Europe, the booming US and Chinese markets absorbed 12% and 10% of new installed capacity, respectively. Those markets were also behind 20% and 11% of turbine sales last year. Gamesa notes it is now the leading supplier in the emerging markets of Egypt and Morocco, claims 10-20% of the US and Chinese markets, and over 20% of the cumulative wind megawatts installed in Italy, Portugal and Mexico. Ulacia estimates Gamesa's global market share last year to be about 15%, two points up on 2005.

Gamesa Eólica's 2 MW machines made up 64% of 2006 sales, with its 850 kW turbine making up the rest. After launching new turbine factories last year in China, US and Spain, Gamesa has stepped up global annual nacelle and blade production capacity by 1500 MW and 900 MW, respectively. Actual production of nacelles and blades was up 28% last year, to 2200 MW in both cases. Gamesa forecasts a 30% increase in turbine production capacity by end-2007 to 3500 MW. Ulacia says the company will put up its first 4.5 MW prototypes this year, already earmarked for an offshore development in Italy and an onshore project in Wales.

Future growth is mainly pinned on six long term strategic clients, which, combined, have signed framework deals for 4500 MW of turbines for delivery by end-2009. Strategic clients accounted for 64% of turbine sales over 2006, compared to 45% in 2005. Landmark agreements last year include a deal with Spanish utility Iberdrola, which owns 30% of Gamesa, for 2700 MW of turbines for both sides of the Atlantic. Gamesa also landed a 511 MW turbine supply contract in China with the Longyuan power group.

Although demand for major wind turbine components is outstripping supply, Ulacia says Gamesa's ongoing vertical integration secures its deliveries. In-house component production was up 65% on 2005, with Gamesa making generators for 1400 MW of its supplied turbines, gearboxes for 1200 MW and towers for 800 MW. Gamesa says it has secured carbon fibre to cover blade production for its 2 MW unit to 2008, previously its main supply bottleneck.

On the project development front, Gamesa Energía expects to double the 438 MW it sold this year. Iberdrola has committed to buy 1000 MW of completed wind plant in the US, 762 MW of that now pinned to firm contracts. Global wind investment company Babcock & Brown signed up for a further 230 MW, bringing total orders for finished projects, all in US, to 992 MW. In total Gamesa Energía's global orders stand at 2355 MW. Furthermore, the company claims a 20 GW development portfolio, 25% of which has been validated by wind measurements. Wind measuring is currently underway in the Chinese province of Shangdong, where, last year, the company clinched prospecting rights to develop 250 MW.

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