MendoCoastCurrent, June 13, 2008
Iberdrola Renewables and Gamesa Energia have signed the largest turbine supply contract ever in the wind power industry representing a total capacity of 4,500 megawatts (MW), for delivery between 2010 and 2012. The investment for wind power projects to which the turbines will be assigned is approximately €6.3 billion, a figure that includes the turbines and other costs such as transport, civil works and interconnections, both those at the wind farms themselves and to the grid.
Under the terms of the agreement, Iberdola will assign the turbines to its wind power projects in Spain, the rest of Europe, the United States and Mexico. The contract covers installation and startup of the turbines, as well as operational services and maintenance during the life of the guarantee.
As a result of this important agreement, Iberdola will be able to meet its turbine supply needs during the coming years for its wind power project portfolio, which currently stands at 43,280 MW, not including projects to be incorporated from Gamesa, and thereby avoid one of the major uncertainties in this business by assuring the installation of a significant portion of its projects for the medium term. More than 70% of its requirements will thus be met up to 2012.
The dimensión of this contract, the largest turbine supply agreement ever signed, has enabled the Company to achieve optimum pricing and conditions. It follows another signed with the same company in 2006 for 2,700 MW in capacity, and those signed recently by Iberdrola with General Electric (300 MW), Mitsubishi (300 MW), Suzlon Wind Energy Corporation (700 MW) and Ecotècnia (310 MW).
Strategic Agreement to Develop Wind Farms
Iberdrola Renewables and Gamesa Energía have also signed a strategic agreement to pool their businesses in promotion, development and exploitation of wind farms in Spain and continental Europe, which will increase its potential for future development and growth. For this purpose, they are creating two joint companies, one in Spain and the other abroad, to which they will assign the businesses of promotion, development and exploitation in those territories from the closing of the agreement.
In Spain, Iberdrola will hold 77% of the new company operating there and Gamesa 23%, while in the other international company the shareholdings will be 76% and 24%, respectively.
The strategic agreement, subject to the corresponding approvals from the competition authorities, establishes that Gamesa can increase its shareholding in the Spanish company up to 32% in relation to the number of additional megawatts that correspond to new wind farms adjudicated to it after the agreement takes effect.
Iberdrola and Gamesa have agreed to not sell their stakes before 31 December 2010, and from 1 January 2011, through a mechanism of matching options, Iberdrola will have the option to buy from Gamesa Energía its shareholding in the joint companies envisaged under the agreement and Gamesa Energía can sell its stake in these companies Iberdrola.
In the event that Iberdrola decides to sell its total shareholding in any of the companies from 1 January 2011, the Company has granted Gamesa Energía a joint transmission right to third parties (tag along) and a first option right, subject to certain conditions.
At the same time, the Company will within one month buy Gamesa’s wind power projects in the United Kingdom, Mexico and the Dominican Republic, with a total capacity of 900 MW, for approximately €65 million.
This agreement reflects the two companies’ interest in jointly developing wind power projects, given their experience and know-how in the sector and the advantages of pooling their respective businesses. The complementary nature of their businesses will favour greater creation of value for shareholders of the two companies.
The goal of this agreement is to bring together the two world leaders in wind farm development and consolidate their positioning in existing markets and in those identified in the strategic alliance. Iberdrola will be able to enter new markets where established businesses exist, minimizing the risks relating to geographical diversification, maximizing value creation and achieving economies of scale.