Wind flip-flops

It could be a tough year for wind as countries waver over support mechanisms and some firms battle stretched balance sheets. Meanwhile, there's some better news with Europe's ETS.

This year may see less wind power capacity added worldwide, as countries flip-flop over support mechanisms and stretched balance sheets catch up with companies.

But deals are still making the headlines: on Thursday, Swedish developer Arise Windpower announced it had won 280 million krona ($A45m) in loans for three wind farms from Swedbank and the Norwegian bank, DNB. The plants will be commissioned later this year.

The same day, the European Investment Bank said that RWE may secure a €500 million ($A660m) loan to develop an offshore wind farm, subject to approval by the bank's board. The €1.1bn Innogy Nordsee 1 facility will have 332MW of capacity and is the first of three RWE projects totalling 1GW in the area. Germany plans to boost its offshore wind capacity to 10GW by 2020 from some 280MW.

European companies are also looking outside the region for opportunities: Spain's largest wind-turbine maker, Gamesa, has won its first order in Kenya, to supply a project near Nairobi. The Kenya Electricity Generating Company is developing the 13.6MW Ngong II wind plant, which is due to go online in the second quarter of 2014.

Also in Kenya, Electrawinds – a Belgian renewable energy project developer – announced plans on May 31 to work with the World Bank to build a €180 million wind farm in the southeast of the African country. The companies expect to win planning consent for the 90MW project this year and to begin construction in 2014.

In Latin America, Vestas has received a 90MW turbine order from Compania Forestal Uruguaya for the Pintado power plant. The company aims to deliver and install the 30 turbines from the third quarter of 2013 and the wind farm is scheduled to be operational by the second quarter of 2014. Vestas tied with General Electric as the largest supplier of turbines in 2012, according to a Bloomberg New Energy Finance report published on April 18.

In Brazil, Enel Green Power started construction on Friday of three wind energy projects totalling 193MW. The three plants have an aggregate price tag of €330 million.

In North America, on Thursday, Allete and Minnesota Power dedicated the 292MW Bison wind farm in North Dakota. Bison has already produced some 750GWh of electricity – enough to power 85,000 homes for a year. This $US500 million project effectively doubles the utility's share of renewable energy and puts it well on the way to achieving the state mandate that power generators produce 25 per cent of their energy from renewables by 2025. Minnesota Power said it is considering further wind energy investments in North Dakota thanks to the Production Tax Credit extension.

Nebraska may also see wind energy production increase, after state senators approved on May 29 a bill that allows a refund of sales taxes on all equipment and materials used in wind projects. The legislation now goes to Governor Dave Heineman for final assent. Heineman had pledged to veto the bill because it is primarily aimed at persuading Kansas-based TradeWind Energy to build a $US300 million wind farm. However, the bill now includes a clause on Omaha's authority to impose a local sales tax – as advocated by Heineman. He therefore will have to choose between fulfilling his veto promise or letting the bill become law as he likes the Omaha clause. In any case, state lawmakers could override a veto with 30 votes and the margin for the bill ballot was 38-2.

Nebraska is keen to catch up with neighbouring states: it ranks 26th in terms of wind-power generation, though it has the fourth best wind resources. In comparison, Iowa has the seventh-best resources and is third for wind-power generation. 

Also in North America, Ontario is amending domestic content requirements for renewable energy projects, energy minister Bob Chiarelli said on Thursday. The announcement came after the World Trade Organization ruled that these requirements unfairly discriminate against foreign producers. Currently, Ontario's feed-in tariff requires wind and solar project developers to source up to 60 per cent of project costs within the province.

The province is also scrapping its feed-in tariff for projects over 500kW and introducing a competitive procurement process. Under the new set-up, developers will have to work with municipalities to identify sites in order to give communities more power in the process.

This announcement exemplifies the policy uncertainty that is likely hindering wind project development at present. Overall, onshore wind installations worldwide will decline by nearly a fifth this year, according to Bloomberg New Energy Finance forecasts. The slowdown will be driven by limited project financing, continued policy uncertainty and grid congestion. 

In the meantime, some wind-turbine makers face considerable financial pressure: on May 29, India's Suzlon Energy reported a record quarterly loss of 19.1 billion rupees ($A350 million) for the first quarter of 2013. This brings the loss for 2012-13 to 47 billion rupees compared with a loss of 4.8 billion in the preceding financial year. The company attributed the loss to a cash shortfall, which held up orders as management negotiated with creditors.

Suzlon is planning its second bond sale this year but is reportedly under pressure to add guarantees. The company is struggling to pay down debt from overseas acquisitions that were made before the worldwide supply glut cut turbine prices by 25 per cent from their peak in 2009. In April, it concluded a debt reorganisation plan which will allow a two-year moratorium on repayments.

And in China, Sinovel, the country's third-biggest maker of wind turbines, said on May 29 that it was being investigated for suspected violations of securities laws and regulations. Shares in the company fell 3.1 per cent the day after the announcement compared with a 0.3 per cent decline for the benchmark Shanghai Composite Index. In March, Sinovel revised down its 2011 profit figure by 22 per cent, citing an accounting error, and it has seen two consecutive chairmen resign in less than three months. It had a net loss of 583 million yuan in 2012, exceeding its forecast of 490 million yuan. On Friday, the China Lianhe Credit Rating Company said that it lowered the credit rating for Sinovel to AA from AA because it saw a "large decline" in the company's revenue and earnings.

This is not the only legal challenge involving the company: American Superconductor Corporation is seeking over $US1.2 billion in damages from Sinovel, alleging that the Chinese company stole its technology and violated sales contracts.

EU carbon

European carbon climbed last week as Spain announced it would – within a fortnight – decide on a plan to fix an oversupply in the market and the EU indicated that sales from a special reserve of permits may be delayed. European Union allowances (EUAs) for December 2013 gained nearly 11 per cent over the week, ending last Friday’s session at €3.95/tonne compared with €3.56/t at the close of the previous week. EUAs closed at €3.75/t on Wednesday after Spain’s State Secretary for Environment Federico Ramos said his government is discussing whether to back a draft emergency measure to strengthen Europe’s carbon market and will decide about its position in two weeks.

Prices jumped above €4.00/t several times on Friday and market activity increased as participants may have returned to their offices after an annual industry fair in Barcelona. Jos Delbeke, director general for climate at the European Commission, said the EU’s regulatory arm does not have to start selling 100Mt of EUAs from the NER300 reserve soon, as proceeds from the sales need to be awarded to clean-energy projects only by mid-2014.

UN Certified Emission Reduction credits (CERs) for December 2013 surged 20.6 per cent – or €0.07/t – to finish the week at €0.41/t.

This article was originally published by Bloomberg New Energy Finance.

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