Wind Wire: Tax blow

Plans to remove the tax-exempt status of imported wind power equipment in Brazil threatens to undermine the market, industry players are warning.

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With a government-sponsored auction for around 1 GW of wind power contracts due to take place on November 25 (see page 69), the country's trade ministry says it is going to introduce a 14% tax on imports, effective from December. Technology imported from countries within the South American trade bloc Mercosur will be exempt. The decision means the price calculations used by some developers hoping to bid for projects in November's auction must be revised, says Lauro Fiuza Junior, president of Brazilian developer Servtec. Those planning to use turbines from suppliers such as Denmark's Vestas, Spain's Gamesa or India's Suzlon, now face a bigger chance of failing to secure contracts at all, or simply have to accept significantly lower profit margins. Some projects could be deemed economically unviable, with some developers pulling out of the auction. The tax will also stifle foreign manufacturers hoping to set up operations in the country, adds Sebastian Fienner, a technical specialist at German turbine supplier Fuhrlander. The company is due to start building a factory in Brazil this month, slated to start production in 2010. But the new rules mean the firm will now be hampered from importing essential European-made components, such as those used in gearboxes, he says. The tax will, however, be viewed as good news by the two companies already with local manufacturing facilities in Brazil: Wobben, a local offshoot of Germany's Enercon, and Argentine construction company Impsa, which manufactures turbines under a license agreement with Vensys (now owned by China's Goldwind). But Brazil needs international manufacturers who can supply a variety of turbines for varying conditions, stresses Fiuza.

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