Breezing in from Europe
Less than two years after Houston-based Horizon Wind Energy was purchased by Goldman Sachs, the wind power developer will be sold to Portugal's largest utility for $2.2 billion.
Energias de Portugal, a utility with nearly 7 million customers in Portugal and Spain, announced its successful bid for the firm on Tuesday.
EDP said it will invest an additional $600 million in existing wind power projects as part of the deal and assume about $180 million in debt, bringing the total deal value to nearly $3 billion.
The move is another example of European companies' taking a greater interest in the U.S. wind energy business. BP and Shell have been growing their American portfolios in recent years while Spanish utility Iberdrola has entered the U.S. wind business through its acquisition of Scottish Power.
Goldman Sachs' ownership of Horizon over the past two years helped it move forward on a number of projects, Chief Development Officer Michael Skelly said. In the past, the company maintained small stakes in the projects it built, but since Goldman's involvement it has remained the primary owner.
Today, Horizon has 559 megawatts of wind power on line and 997 megawatts under construction.
"Under EDP's ownership we should be able to continue to expand, particularly since renewable energy is at the heart of its business," Skelly said.
One megawatt of wind power can power about 300 homes, according to wind industry data.
EDP has said previously it plans to triple its wind-energy capacity by 2010 by investing in Europe and the U.S.
"We believe the U.S. wind energy market has a significant growth potential," EDP's chief executive, Antonio Mexia, said in a prepared statement.
Financier once owned it
In March 2005, Goldman Sachs announced it would purchase the company. Terms were not disclosed at the time, but several news reports, including those from online energy news site SparkSpread, cited unnamed sources who said the price was less than $1 billion.
Goldman began shopping Horizon late last year. A large number of companies reviewed Horizon's books for a possible purchase, according to sources familiar with the process, including Exxon Mobil. Its officials declined to comment.
Prominent role of U.S.
In the 1990s, however, countries like Denmark, Germany and Spain created a broad range of incentives for wind projects. Today, Europe has 70 percent of worldwide wind energy production and seven of the 10 largest wind equipment manufacturers. Firms like BP, Shell and Spain's Iberdrola are among some of the biggest wind power developers.
A lot has changed in the U.S. renewable energy business in recent years, however, particularly in the two years since Goldman purchased Horizon.
A continuation of a federal production tax credit for wind projects, the broadening of renewable power goals in states like Texas and utility companies' increased familiarity with wind projects helped fuel an investment in wind power, Swisher said.
The European market is far from saturated when it comes to wind projects, but the U.S. has much greater capacity for new projects.
"You've got some pretty strong capabilities in Europe around the wind business, so they are now turning their attention to markets like Asia and the U.S.," Swisher said.
The U.S. had the greatest increase in new wind capacity last year, with 2.5 gigawatts of equipment worth about $4 billion installed, according to the Global Wind Energy Council. Texas accounted for about one-third of all new wind generation installed in 2006 and overtook California as the top wind-energy-producing state in the U.S., with 2,768 megawatts of capacity.
Houston will likely continue to be a hub for wind energy in the U.S., Swisher said.
In addition to Horizon, which Swisher called "one of the crown jewels of the U.S. wind industry," Shell and BP have their American wind businesses based here. Australian developer Babcock & Brown has a sizable Houston office, and PPM, a wind power subsidiary of Scottish Power, also has an office here.
Houston will play host to the American Wind Energy Association's annual meeting in May 2008, which could attract as many as 7,000 participants.