MONEY COMES BACK TO WIND

Ill winds abate for battered sector
Fiona Harvey, August 17, 2009 (UK Financial Times)

"Wind energy has suffered a battering in the financial storm of the past year but, as one of the most mature renewables, it looks set for a period of calm…The industry…offers steady returns over the lifespan of a turbine – two to three decades – but requires intensive capital spending, and projects are often at the mercy of government subsidies…In 2008 it showed strong growth. Global wind power capacity increased 29 per cent to 121 gigawatts, more than double the 48GW that existed in 2004…The market for installing turbines was worth $47.5bn…But…in the second half confidence evaporated…The first six months of 2009 were also difficult…

"Last year the US, with 25GW of installed capacity, overtook Germany (24GW) as the world’s biggest producer of power from wind, but its looks set to be overtaken within a few years by China (12GW). Other big markets are Spain (17GW) and India (10GW)…Growth has been more sluggish in the US this year…[awaiting] greater clarity on government subsidies."

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"The turbine market is dominated by a handful of big [European] players…[but increasingly] wind companies come from the developing world…Parts of the market may be ripe for consolidation…Turbines are only half the story. Operating wind farms is also big business. The biggest operators tend to be electrical utilities…There are also hundreds of smaller independent developers…Chilly market conditions have encouraged many wind companies to seek partners and others to drop out…

"Flotations have become as rare in wind as any other part of the market but analysts are excited by the prospect of a possible initial public offering for Enel Green Power…[a] unit of Italy’s Enel group…A flotation could value the company at $10bn-$15bn…Indian Energy…which builds and operates wind farms in India, hopes to raise £25m ($41m), which would value it at about £40m."

Global Cumulative New Wind Capacity keeps growing thru 2030. (click to enlarge)

"Project finance has been the biggest problem for wind developers…Wind farms require large amounts of capital for their installation, and banks that once demanded 18 basis points on debt financing now want 300bp…The vast majority of wind farms are located on land, while the offshore wind industry is small but growing…[because offshore installations] can be three times as expensive to build and maintain…

"Overall, medium-term prospects for the wind sector look promising. The Global Wind Energy Council predicts that the market will grow at an average of 22 per cent a year for the next five years, although this will vary dramatically according to region."