March 27 (Bloomberg) -- EDP-Energias de Portugal SA, the country's biggest electricity utility, agreed to buy Horizon Wind Energy LLC of Texas from Goldman Sachs Group Inc. for $2.15 billion, more than doubling its wind-power production.

Buying the Houston-based developer's assets in 15 U.S. states raises EDP's ranking to fourth from sixth among the world's largest wind-power producers, the Lisbon-based utility said on its Web site today. The company will borrow $2.5 billion to fund the purchase.

EDP, Portugal's former power monopoly, has branched into Spain and the U.S. because it faces growing competition at home from Spanish rivals such as Endesa SA. The U.S. government's incentives for wind energy helped to make the American market attractive.

``The U.S. market has great potential, as it's tending more and more toward producing power from wind,'' said Olmo Olivares, who helps manage the equivalent of $7.6 billion in stocks and bonds at Gesfinmed in Alicante, Spain, including shares of EDP.

Goldman agreed in March 2005 to buy Zilkha Renewable Energy, a developer of wind-power projects that held minority interests in two operating wind farms. In August 2005, Goldman renamed the company Horizon Wind Energy.

Michael DuVally, a spokesman for New York-based Goldman, declined to disclose the purchase price and how much money the bank would make selling Horizon to EDP. The sale transaction values the U.S. company's equity at $2.15 billion.

Horizon's Capacity

Horizon owns projects with 559 megawatts of gross production capacity and has 997 megawatts under construction, Lisbon-based EDP said today. One megawatt can supply about 1,000 U.S. homes. Adding its capacity means EDP will be producing more than 3,800 megawatts using wind by the end of this year, up from 1,600 in 2006.

Shares of EDP rose 1.5 percent to close at 4.16 euros in Lisbon. The stock has climbed 8.3 percent this year, giving the company a market value of 15.2 billion euros ($20.3 billion).

Credit-default swaps based on 10 million euros of EDP debt rose 1,500 euros, to 12,000 euros, according to Deutsche Bank AG. The swaps are based on corporate bonds and are used to speculate on a company's ability to repay debt. An increase shows a worsening in credit quality.

Standard & Poor's today placed EDP's ratings under review for downgrade following the announcement of the acquisition. The Portuguese utility has an A long-term rating from S&P.

Higher Price

The final purchase price will be increased to adjust for capital spending, which is estimated at $600 million, EDP said. The Portuguese utility plans to complete the acquisition by the end of the second quarter.

``The final price does not seem to be excessively high, taking into account the number of projects to which EDP could have access in the future,'' Banco BPI SA analysts Enrique Soldevila and Laura Alonso said in a note. They have a ``hold'' rating on EDP shares.

EDP expects more countries will add subsidies for wind energy as Portugal has. The U.S. gives tax credits for renewable energy, and its installed wind-power capacity should almost triple to 28.1 gigawatts in 2010, EDP said.

The Portuguese government aims to increase electricity generated from renewable sources to 45 percent by 2010. EDP will spend 2.63 billion euros to help reach that goal. Buying Horizon adds 3.5 billion euros of spending, and means North America is now expected to represent 45 percent of EDP's wind energy by 2010.

``The U.S. market will be the fastest-growing in the world,'' EDP Chief Executive Officer Antonio Mexia said in an interview. ``If you want to be a top player, you need to be in the U.S.''

The Portuguese government holds 20 percent of EDP and the state-owned bank Caixa Geral de Depositos SA owns 5 percent. The purchase won't affect EDP's forecasts that earnings per share will rise more than 14 percent a year to 2010 from 2005. Earnings before interest, taxes, depreciation, and amortization will increase more than 13 percent, the company predicts.

Citigroup Inc. advised EDP on the Horizon acquisition. The legal advisers were Skadden, Arps, Slate, Meagher & Flom; Chadbourne and Parke LLP; and Morais Leitao, Galvao Teles, Soares da Silva & Associados.

To contact the reporter on this story: Joao Lima in Madrid at jlima1@bloomberg.net; Kristian Rix in Madrid at 9617 or krix@bloomberg.net.

Last Updated: March 27, 2007 13:07 EDT