European Green Energy Chases U.S. Stimulus Cash

As the White House hammers out how to spend some $80 billion in stimulus money aimed at kick-starting investment in renewable energy, the race for a piece of the action is on. And while plenty of Americans are on the starting line, many winners are likely to come from across the Atlantic. "The stimulus package is a big incentive to invest," says Francesco Starace, president of Enel Green Power, a new subsidiary of Italian utility Enel.

The Europeans have a substantial head start. Iberdrola Renovables, a unit of Spanish energy company Iberdrola, is the world leader in renewable power and already No. 2 in U.S. wind generation (behind Florida's FPL Group). Portugal's EDP Renováveis is third in U.S. wind and a growing force globally. In manufacturing, Denmark's Vestas is the world's biggest wind-turbine maker, and Spain's Gamesa is No. 3, behind General Electric.

Although the details of the stimulus plan aren't yet finalized, developers will get tax credits or grants worth 30% of the cost of renewable-energy projects started by the end of 2010. That has the Europeans planning big investments for years to come. Iberdrola expects to spend $2 billion-plus annually in the U.S. through 2012, up from $400 million in 2007. EDP Renováveis says it will invest $5 billion in the U.S. over the same period, while Enel Green Power plans U.S. spending of $1.5 billion by 2013—a figure that could jump to $7.5 billion if financing costs fall. As much as $33 billion could be invested over the next two years, at least a third of it from Europe, estimates consultancy Emerging Energy Research.

Some spending already under way may benefit from the incentives, too. Enel Green Power on Apr. 15 unveiled two geothermal plants in Nevada, built at a cost of some $200 million, which use the earth's heat to generate electricity for 40,000 homes. And on Apr. 17, Iberdrola opened a $400 million wind farm in Texas that will power 70,000 households. Both plan to file for stimulus money.

While there's sure to be opposition to funding Europeans, they will put plenty of Americans to work. Vestas, for instance, in November opened a $100 million turbine-blade factory in Windsor, Colo., creating 650 jobs in the town 60 miles north of Denver. The company plans to invest a further $1 billion by 2010 at three more plants across the state and on sales offices nationwide, employing an additional 4,000 people.

funding edgeThe Europeans are helping put some wind back into a sector that has been slowed by the credit crunch. Spending on clean energy projects in the U.S. fell 91% in the first quarter vs. the same period in 2008. Much of the investment had been funded by sales of tax credits for green energy, but as corporate profits have plunged, fewer companies need to buy them. Falling energy prices have also cut the incentive to invest in green technology.

One big advantage for the Europeans is their financial health. They tend to be subsidiaries of well-funded utilities, while American rivals are typically smaller. And the Europeans are sitting on a ton of cash. Iberdrola Renovables raised $5.9 billion in Spain's largest-ever initial public offering in 2007. Last year, EDP Renováveis pocketed $2.1 billion by selling a minority stake. Now, Enel plans to sell 40% of its shares in an offering analysts expect will fetch $4.5 billion. Says Rui Teixeira, chief financial officer at EDP Renováveis, "Our funding provides us with a competitive advantage."

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