Gamesa, Iberdrola Sign EUR6.3 Billion Wind Power Deal

By Bernd Radowitz

DOW JONES NEWSWIRES

MADRID -(Dow Jones)- Spanish wind-turbine maker Gamesa SA (GAM.MC) Friday said it reached a deal to provide wind turbines, construction and services worth EUR6.3 billion to Iberdrola Renovables SA (IBR.MC), the renewables unit of Spanish power utility Iberdrola SA (IBE.MC).

The deal is the largest wind power deal in the world to date and a "historic milestone for Iberdrola and the whole renewables industry due to its volume, timing and strategic value," Iberdrola Renovables Chief Executive Xabier Viteri Solaun said at a conference call Friday afternoon.

The wind turbines to be delivered from 2010 to 2012 will have the joint potential to generate 4,500 megawatts in electricity in wind parks in Europe, Mexico and the U.S., Gamesa said in a note to the Spanish stock market regulator.

Gamesa, based in Bilbao, northern Spain, is one of the world's largest wind- turbine makers. Iberdrola Renovables is the world's biggest wind power generator.

"Securing such a large deal is positive for Gamesa, and good for Iberdrola as it guarantees it supply in a tight market," said David Garcia, an analyst with Bankinter in Madrid.

The contract guarantees Iberdrola Renovables 70% of its wind turbine needs until 2012, the company said.

Gamesa surged 4.12% to EUR33.65 at 1504 GMT in Madrid, while Iberdrola Renovables added 2.98% to EUR4.49. The parent company Iberdrola rose 1.22% to EUR9.14.

Under the contract, Gamesa commits to building and installing the wind turbines, and connecting them to the electricity grid, as well as starting their operation and providing maintenance services during the turbine's warranty period from 2010 to 2012.

Separately, Iberdrola Renovables will also acquire wind projects currently run by Gamesa in three countries for EUR65 million, which have a joint generating potential of 940 MW, Iberdrola said.

Of those, 600 MW are located in the U.K., 300 MW in Mexico and 40 MW in the Dominican Republic.

The two companies also reached a deal for a strategic alliance for the development and the joint operation of wind farms.

In the agreement, "both companies' competencies in the promotion, development and operation of wind energy projects in Spain and continental Europe will be merged," Gamesa said in a release.

For those new developments, the two companies will set up a joint venture in Spain, in which Iberdrola Renovables will hold 77% and Gamesa 23%. Gamesa under the deal has an option to raise its stake in the JV to 32%.

The two companies will also set up a second joint venture for an international company, in which Iberdrola Renovables will have a 76% stake, and Gamesa a 24% stake.

"Merging their businesses will contribute to greater creation of value for both companies' shareholders, as their activities are complementary."

The setup of the new company still has to be approved by anti-trust regulators.

"The operation aims at uniting two world leaders in the sector of the development of wind parks," Iberdrola said.

The JV deal includes a structure that allows Gamesa to sell its stakes under market conditions on January 1, 2011. The deal doesn't include operations the U.S. and Chinese markets.

As a result of the JV agreement, Iberdrola will add another 800 MW in renewable energy generating capacity in the 2009 to 2012 period, CEO Viteri Solaun said. That is on top of 2,000 MW in capacity the company had already been planning to add in the period.

Iberdrola Renovables at the end of the first quarter had an installed capacity of 8,164 MW. Of that, 7,822 MW comes from wind power and the rest from small hydroelectric power plants.

Gamesa is market leader in Spain, and said it is one of the world's three largest wind turbine generator manufacturers with a market share of 15% in 2007.

The deal comes after Iberdrola Renovables in 2006 had signed a contract with Gamesa to supply it with wind turbines generating 2,700 MW. Recently, the company also signed a 300 MW wind turbine contract with General Electric Co. ( GE), another with Mitsubishi (MSBHY) over 300 MW, one with Suzlon Energy Corp. ( 532667.BY) over 700 MW, and one with Alstom SA (1022047.FR) unit Ecotecnia over 310 MW, Iberdrola Renovables said.

Iberdrola Friday afternoon also said that the wind power deal was part of EUR10 billion in deals the company had signed with a total of ten providers of for power generation. Among them is a deal with French company Alstom SA ( 1022047.FR) to supply pipes for Iberdrola's new hydroelectric power plant in La Muela in the eastern Spanish province of Valencia.

Company Web site: http://www.gamesa.es

-By Bernd Radowitz, Dow Jones Newswires, 34 913958125, bernd.radowitz@ dowjones.com