Not many of the world's utilities can claim renewables as part of their core business. Spanish utility Iberdrola, the largest renewables player in Spain -- and arguably in the world -- is one of the few. The company says its operating wind capacity in Spain at the start of the year was 1128 MW. The bulk of this comes from operations entirely controlled by the utility. Most of the rest is via joint ventures in which Iberdrola owns majority shares. Its online wind generation would be even greater if it were not for delays in the handing over of 666 MW of wind plant capacity that Iberdrola bought from Spanish wind giant Gamesa last year in a deal that includes the purchase of a further 316 MW to 2004.
The Gamesa deal slotted nicely into Iberdrola's strategic plan for 2002-2006, which aims to develop 3834 MW of generating capacity -- a colossal 3534 MW of that from wind. Indeed the company is confident it will achieve 70% of its 2006 target before next year. Aside from the Gamesa plant acquisition its plans should bring its total capacity up to 2600 MW by the end of 2003, it says.
"Generating clean kilowatt hours is our business," says IberRenova CEO Pedro Barriuso. "It is also core business for the Iberdrola group as a whole. The utility's generation growth is based on renewables -- mostly wind -- and combined cycle gas; nothing else." Iberdrola claims to be one of the lowest producers of CO2 emissions/kWh of all the world's utilities.
Despite the scale and scope of its renewables activities, Iberdrola's renewables wing, IberRenova, has only recently taken hands-on interest in non-hydro clean energy generation (Iberdrola is Spain's leader in hydro electric power). Over the past year or so, the utility has striven to consolidate control over a range of large sleeping interests held in renewables generation ventures across Spain. These purely financial stakes go right back to before the onset of Spain's wind boom and were largely placed in the hands of a joint-venture partner, wind plant developer/operator Energía Hidroeléctrica de Navarra (EHN), in 1992. Recently Iberdrola and EHN split up in a much publicised divorce (Windpower Monthly, December 2002), as Iberdrola sheds its financial role in the wind sector to become an active developer and operator.
Who not what
What stirred the sleeping giant and goaded it into grasping its renewables business by the horns? Barriuso immediately cites Iberdrola's vice president and CEO, Ignacio Sanchez Galán, as the catalyst. He took over the running of Iberdrola in 2001. Shortly after Galán's investiture, Iberdrola's renewables strategic plan was announced, underlining wind as a core business for the utility. Simultaneously, IberRenova, formerly an obscure department of Iberdrola's diversification wing, took on a whole new life.
At its Madrid headquarters, Barriuso is visibly proud of the team that he is fast forging together at IberRenova. "This is a mix of old and new. I came from outside Iberdrola. Others come from within -- from both Iberdrola's generation and diversification departments. Some come from EEE. In all there is a pooling of some of the best knowledge and experience in the industry," he says. "We are making up for lost time. If we'd started all this five or six years ago we would have made even greater advances." EEE is Energías Eólicas Europeas, the wind developing joint venture Iberdrola shared until recently with EHN, which was in charge of management. It now belongs entirely to IberRenova.
Last year it was widely reported that IberRenova was keying up for a stock market flotation, but Barriuso will not be drawn. "We are consolidating mass, increasing size, rationalising our affiliated interests and simplifying management and at the end of 2003 the market and IberRenova might offer good conditions for a flotation. Then again, other options might prove favourable." Following in the footsteps of fellow utilities Unión Fenosa and Endesa by putting the renewables division up for sale is dimissed by Barriuso though. "This is different. Renewables is core business at Iberdrola and we aim to retain control over it."
The giant's awakening in 2001 shook-up the entire Spanish wind industry; it was mainly responsible for the painful and drawn-out split with EHN, owned 37% by Iberdrola. For a while, Galán's new renewables vision included EHN and the two euphorically proposed a massive joint venture to put up 5000 MW world-wide. But then came the power struggle between the "born-again" renewables utility and the regional government of Navarra, which held the majority stake in EHN. The resulting divorce, only recently finalised, handed 820 MW of wind plant in Castile La Mancha, either online or building, to Iberdrola. Most of a joint project portfolio went to EHN.
One of the most surprising results of the divorce is that IberRenova narrowed its sights to concentrate on the Spanish market. "We are Spanish and there is still a lot to be done in the market we know best," says Barriuso, referring not only to Spain's enormous wind potential, but also a largely untapped biomass market. Nevertheless, IberRenova has received initial approval in Brazil to develop up to 640 MW. The company also claims to have advanced developments in Britain and France in conjunction with Gamesa.
But the main synergies are at home, stresses Barriuso. One key synergy is Iberdrola's own electrical engineering firm, Iberinco, which Barriuso classes "among the best in the world." Iberinco is now responsible for wind plant installation and all electrical work. "Iberinco is fast, thus cutting costs. It is also expert in electrical grids," says Barrios.
A vice-like grip
Indeed, another major synergy is Iberdrola's vast distribution network. All the operating wind plant developed by Iberdrola is in regions where it controls distribution: in Castile La Mancha (770 MW), Rioja (92 MW) and the Basque Country (13 MW). Furthermore, Iberdrola controls networks in IberRenova's main new area of development, Castile and León. Last year the company announced the creation of a special regional division called Biovent Energía with the aim of putting up at least 1000 MW in wind as well as leading the way in biomass production.
The influence of Iberdrola's vice-like grip on grid ownership cannot be understated. In Castile La Mancha, a long list of competing wind project developers have failed to get one wind turbine turning. Yet IberRenova has put up nearly 800 MW. Barriuso dismisses any idea of unfair practice. He says EEE simply got a head start in the region with a 450 MW special development concession from the regional government in 1999. After that a moratorium was slapped on further wind development to allow for regulation of the sector to be drawn up. Since then, EEE has put up a further 300 MW.
In other regions where Iberdrola controls the grid, the company points to its specialist local knowledge and its existing offices as the reason for its lead. In the Basque Country -- an Iberdrola stronghold as well as its birthplace -- it owns 50% of Eólicas de Euskadi, developer of the region's 26 MW of wind power. Eólicas de Euskadi also owns the only other projects to have been given initial approval in the Basque Country. In La Rioja, Iberdrola not only controls distribution but it has a hand in all of the operating wind plant. Through its 36.25% share in the DerRioja developing group and 25% stake in developer Molinos de Cidacos, it has its fingers in 150 MW of the region's 204 MW online total. The remaining 54 MW is a development by Eólicas de la Rioja, which Iberdrola owns 68.75% of. IberRenova's only operating wind capacity outside its field of grid influence is in Galicia, where it bought 259 MW of wind plant from Gamesa.
The Gamesa link
Perhaps Iberdrola's main synergy in the Spanish market, albeit a prickly one, is fellow Basque corporation Gamesa, by far Spain's largest turbine manufacturer as well as a booming developer. Not so long ago, Gamesa and Iberdrola were often dismissed by rival wind developers as "the same thing," not without reason. Iberdrola owns 50% of IBV, a special investment joint venture which controlled 91% of Gamesa until shortly before Gamesa's stock market flotation in 2000. The other half of IBV is owned by Banco Bilbao Vizcaya Argentaria (BBVA), a major bank.
After Gamesa went public, however, IBV's share in Gamesa was whittled down to its current 36.78%, making insiders wonder whether Iberdrola still exerts any executive influence in Gamesa. While there are no longer any Iberdrola members on Gamesa's board, some insiders and analysts are confused by the signals. Iberdrola's share in IBV is not under IberRenova's control and last year Iberdrola formally opposed Gamesa's decision to auction off its wind plant -- to no avail as it turned out. Barriuso says this underlines Gamesa's independence and that it "makes its own decisions to the benefit of its shareholders." On the other hand, Gamesa and Iberdrola managed to settle their differences after the disagreement on Gamesa's wind plant sales, with Iberdrola landing 982 MW from the Gamesa auction (Windpower Monthly, November 2002). As part of the same deal, Iberdrola agreed to buy turbines totalling 1100 MW from Gamesa Eólica by 2006. Both companies also agreed to create joint ventures for developing more wind plant at home and abroad. The two companies' fortunes now seem closely linked, at least in the medium term.
Meanwhile, the Gamesa auction continues. Belgian utility Electrabel has recently agreed to buy 456 MW of Gamesa wind developments in Portugal and Italy. More recently, Japanese firms Marubeni and J-Power have bought 64 MW in Spain's Galicia region (story page 49). "All power to Gamesa," says Barriuso without a hint of jealousy. "Gamesa performed marvellously last year and its new clients stand it in good stead internationally, which is good for all its shareholders." To all appearances, IberRenova is now tied to using Gamesa turbines. "Not so," insists Barriuso. He says that while the turbine deal with Gamesa is solid, "Iberdrola has a lot more wind power to develop beyond that and we don't necessarily have to use Gamesa Eólica." He points to former contracts with Enron Wind totalling nearly 200 MW. That may be, but the first Enron Wind contract was in 2000 with EEE, then managed by EHN. And it is EHN which decided to diversify supplies to minimise risks of possible series failures as well as to gain experience in different types of technology, including Lagerwey machines and EHN's own turbine design. The rest of the Enron machines went to a development by DerRioja, in which Iberdrola holds minority shares.
Currently, Iberdrola's plant purchase from Gamesa is on hold in lieu of a verdict from Spain's restrictive practices tribunal, Tribunal de Defensa de la Competencia. However, both Gamesa and IberRenova view this as a procedural formality and are confident the deal will not be hindered. If, IberRenova has gained enough mass to take such a blow and remain standing.