The regional government, EHN's largest shareholder, says that as far as it is concerned, the deal was all but signed and sealed and that Iberdrola's back-pedalling came as a complete surprise. Iberdrola refuses to comment apart from confirming that negotiations with EHN have started again and that it hopes the joint venture will come off by March. If the talks fail, a big question hangs over the continuation of the long-standing relationship between the two companies which has them embroiled in a growing tangle of hugely ambitious wind projects, especially in Spain and the Americas.
Pride and joy
It is this close interconnection that has tripped up negotiations. EHN is Navarra's pride and joy -- the regional government effectively owns 48% of the company. The proposed fusion will up Iberdrola's stake in EHN from 37% to around 60%, a fundamental shift of control which the government is not happy with. EHN has not only put up 491 MW of wind in Navarra, it is also leading the way in Spain with large-scale biomass and PV plant.
The company also owns half of Energías Eólicas Europeas (EEE), which has installed 445 MW of wind plant in Castile La Mancha as well as developing projects in 21 other countries. And although Iberdrola owns the other half of EEE, its role, until recently, has been largely a dormant one, leaving the executive reigns to EHN. Hell-bent on keeping EHN's business and achievements strongly associated with Navarra, the government wants a say in all major executive decisions. It was this condition which apparently became the main stumbling block for Iberdrola.
At the end of last year the giant utility was already showing signs that it is reluctant to remain as sleeping partner in profitable and prestigious renewables ventures. First it announced it was intending to directly invest EUR 3.6 billion in 3550 MW of new wind capacity by 2006. Then came the news that Iberdrola was bidding together with EHN for a share of the1700 MW opened to public competition by the Valencia government. Next came announcements of Iberdrola and EHN together considering massive foreign joint wind ventures, including 693 MW authorised for Brazil and large-scale developments for Canada and New York state.
A bust up would be complicated and painful for both Navarra and Iberdrola. If Navarra loses vital decision making powers, the value of the new renewables venture to the region will dwindle significantly, even if its headquarters are set up, as planned, in the regional capital, Pamplona. On the other hand, if Iberdrola agrees to hand over more power to Navarra it will still be able to polish up its image as Spain's renewables utility.