Developing giants separate -- EHN and Iberdrola

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The breakdown in the relationship between Spain's two largest wind operators, utility Iberdrola and Energia Hidroeléctrica de Navarra (EHN), appears to be complete with speculation growing that they have started divorce proceedings. Joint assets are expected be split, including 950 MW in operating wind plant, but Iberdrola's 37% share in EHN is set to complicate matters.

Neither company is commenting, but reports in Spain's financial press suggest Morgan Stanley and Salomon Brothers have already been contracted to take stock of assets for Iberdrola and EHN, respectively. Separation between the companies has been on the cards since negotiations to merge their respective renewables interests collapsed earlier this year.

A merger would have created one of the world's largest wind power companies, with a combined capacity of 1400 MW of operating capacity and plans for 5000 MW of development by 2005, mostly from wind (Windpower Monthly, February 2002). Iberdrola was to have a 60% share in the venture and a stock market flotation by 2003 was planned in order to raise capital to proceed with development. Iberdrola pulled out of the talks after refusing to accept a clause which would have given the right to veto executive decisions to Sodena, the business division of Navarra's government, itself a 37% shareholder of EHN.

Last straw

More recent plans for a flotation of EHN are also in disarray after Iberdrola flexed its shareholder muscle to block proceedings (Windpower Monthly, May 2002). This, it seems, was the straw which broke the Navarra camel's back. The Navarran government sees renewables as a major strategic industry with great potential for exporting regional know-how and prestige. Any deal would have to keep this potential intact.

In addition to its stake in EHN, Iberdrola also owns 18.86% of Gamesa, Spain's largest turbine manufacturer and second largest developer, and has made no secret of its desire to build a renewables empire. It is widely expected to go it alone as a competing developer to EHN, taking on the challenge of developing around 4000 MW in new capacity by 2005. The utility has sold off a huge chain of assets totalling EUR 1700 million in ten months in order to concentrate on its strategic businesses, mainly combined cycle gas generation, wind power and distribution.

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