March 28, 2024

Green Column: Clean Energy Learns to Compete

LONDON — Europe used to be nirvana for companies in the clean-energy business, but in the past couple of years it has become a much tougher place. With economies anemic, electricity demand is down; and, not surprisingly, once-generous subsidies that encouraged installing swaths of solar collectors in sun-poor Germany or wind farms in relatively calm areas of France are either being reduced or look as if they could be.

But for some people and companies, the harsher environment is fostering a tough-minded approach that may be healthy for the effort in the years ahead to curb the greenhouse gases that are blamed for global warming.

Europe’s struggles, for instance, pushed Enel Green Power, one of the world’s largest electricity generators from renewable sources like wind and solar, to explore markets like Brazil, Chile and Mexico, that may turn out to be a lot more promising than Europe.

The bulk of Enel Green Power’s investments used to be in Europe, especially in Italy, its home, and Portugal and Spain. Now the company is mostly putting its new capital into emerging markets.

It’s a no-brainer. In many emerging economies, demand for power is surging. These countries want to harness power sources like wind or solar — if only so that they can conserve their oil and gas for exports.

Contrary to the practice in much of Europe, where subsidies are used as a lure for renewables projects, developing countries like Brazil often award contracts to build new power capacity through competitions that sometimes pit clean energy against fossil fuels like natural gas and diesel. For instance, Enel Green Power recently won wind power deals in Brazil in bake-offs that included proposals for natural gas-fired stations.

“There was a competitive approach to renewables that we liked a lot,” said Francesco Starace, the company’s chief executive.

Mr. Starace especially likes long-term deals like the ones he has worked out in Mexico with Nissan and Nestlé to build wind farms to supply factories with power. He hopes to replicate this sort of arrangement across emerging markets, including east Africa. These private, one-on-one arrangements are more sustainable, he figures.

“You don’t run the risk of a regulator or a state coming back at you and saying, ‘Guys, the good days are over, now we have to talk about reducing this and that,”’ he said.

Tom Murley, who runs two funds with more than $1 billion in renewable energy investments at HgCapital, a private equity firm based in London, takes a similar approach but closer to his home base.

His great enthusiasm at the moment is building wind farms in Sweden anchored by a large €180 million, or $235 million, array north of Stockholm called Havsnäs that opened in 2010. Mr. Murley likes Sweden because it has very windy sites that mean his wind turbines spin faster and more often than those elsewhere, producing more electricity to help pay off their construction costs.

He also likes Sweden’s low-subsidy regime, which is less tempting for a regulator to cut.

“The closer you are to the wholesale price of power, the less you are at risk,” he said. He is also investing in onshore wind projects in Ireland, where the operating environment resembles that of Sweden.

Mr. Murley avoids offshore wind, which requires huge subsidies to make economic sense. He is also veering away from solar projects at the moment for similar reasons. Spain, where he made a large earlier commitment to solar, has cut its subsidies, sharply reducing returns and leading to lawsuits from operators, including HgCapital.

The goal of the renewables business, Mr. Murley said, should be to be competitive eventually on costs with other energy sources and not to rely on subsidies. He also believes in building businesses like his clusters of Swedish wind farms that have the scale to engage a team of managers and the clout to cut better deals with suppliers. His organization tries to buy turbines and other equipment that are reliable rather than cheap and does not skimp on spending money on maintenance.

Renewable energy, he said, “should be run like any other manufacturing business; it is best to be a low-cost producer.”

Both approaches seem to be working. Enel Green Power, which is 68 percent owned by Enel, the big Italian utility, has seen returns through stock appreciation and dividend of about 26 percent over the past year. The stock price had plummeted earlier, along with that of many other renewables companies.

As a private organization, Mr. Murley’s company has returns that are harder to divine, but he says he has sold projects, including a British wind farm business, representing about one-third of the investments by his first €300 million fund for about €225 million.

And both organizations are still investing. Enel Green Power in particular plans to spend €6.1 billion over the next four years. That is good news at a time when carbon dioxide in the atmosphere has reached the highest levels in millions of years.

Sounding the alarm about greenhouse gases and global warming is fine, but money is required to do something about the problem. And it is not likely to be forthcoming without competitive returns.

Article source: http://www.nytimes.com/2013/05/16/business/energy-environment/16iht-green16.html?partner=rss&emc=rss

Sean Quinn and Ireland’s Boom and Bust

IN the green borderlands of County Fermanagh, there was nothing like the Mighty Quinn.

That is what they called Sean Quinn — canny conglomerateur to his friends, wily rogue to his enemies and, until recently, the richest man in Ireland.

Even now, with times so hard in this country, his up-by-the-bootstraps story is the stuff of legend, a Celtic fairy tale for strivers and climbers. This, after all, is the farmer’s son who became a quarry man and then, with gravel and grit and yes, a bit of old-fashioned greed, became a billionaire.

Until, that is, it all came crashing down.

Mr. Quinn, 65, contends he lost nearly everything when the bottom fell out of the Irish economy. His business empire, his concrete factories, his wind farms and hotels, the helicopter and the Falcon jet — all gone. Last November, after apparently gambling away his fortune on disastrous investments, he was declared bankrupt by a court in Belfast. During the proceedings, he said he was down to his last 11,000 euros, and an aging Mercedes and 166 acres of land.

That, anyway, is what Mr. Quinn says. Here in Dublin, at the financial institution formerly known as the Anglo Irish Bank, Mr. Quinn’s skeptical bankers say his assertions are, well, blarney. They suspect that he and his family still secretly control valuable assets as varied as a shopping tower in Ukraine and real estate in Hyderabad, India’s Silicon Valley.

And so the bankers have begun a global treasure hunt. Anglo Irish, which got into so much trouble that it had to be nationalized, says that the Quinns owe it more than 2.8 billion euros, and that it will fight to recover that money for Irish taxpayers.

It is yet another remarkable turn of events in the long, painful saga of the Irish economic collapse. In many ways, Mr. Quinn personified Ireland’s boom. Now, he has come to personify its bust. Banks like Anglo Irish lent lavishly to builders and investors like Mr. Quinn. But when the real estate market finally came unglued, the banks were left with more than 70 billion euros in loans that could not, or would not, be repaid.

The Irish government was forced to rescue the financial industry, and the whole debacle eventually led to a bailout by the European Union and the International Monetary Fund. Today, Ireland’s economy is still struggling. Unemployment is over 14 percent, and home prices are down 60 percent from their peak. Resentment lingers toward reckless lenders and borrowers.

One thing is sure: the Quinn story is full of surprises. Every effort to claim and manage the assets that he used as collateral for his loans from Anglo Irish has run into mysterious — and sometimes violent — difficulties. Last April, shortly after the bank tried to seize the Quinn Group, his holding company, an earthmover smashed through posts outside the company’s headquarters in Derrylin, Northern Ireland, where the Quinn family has kept a farm for five generations. A few months later, a firebomb destroyed a BMW that belonged to the new chief executive of the Quinn Group appointed by the bank. In December, a truck rammed through the company’s canteen.

No one knows who was behind most of the vandalism, and Mr. Quinn and his family have condemned the violence. In court filings, he said he passed his former headquarters nearly every day and still feels pangs of loss. “I no longer own or control the businesses which I have spent my life building up,” he said.

Such assurances aside, his former bankers suspect that Mr. Quinn has masterminded various maneuvers to hang on to at least part of his fortune. They say he has used offshore companies to thwart their efforts to gain control of his empire’s foreign holdings — a contention that the Quinns have denied.

“It is very much a three-dimensional chess game,” said Richard Woodhouse, a British accountant who is leading the quest by the Irish Bank Resolution Corporation, formerly Anglo Irish, to find and seize the Quinn Group’s international properties.

While Mr. Quinn is pleading poverty, his wife, Patricia, and his five adult children are battling the bank in court. They say they don’t owe the Irish Bank Resolution Corporation anything, since they didn’t know what they were doing when they signed the paperwork for Mr. Quinn’s loans.

Neither side agrees on much — not even who said what to whom. When his bankers told Mr. Quinn last April that they were seizing control of his conglomerate, Mr. Quinn said he would fight like a cornered rat, according to the bankers.

One of Mr. Quinn’s daughters, Aoife Quinn, remembers a more poetic declaration: “Put a dog into a corner, and it will come out barking.”

Mr. Quinn, who rarely grants interviews, declined to comment.

Article source: http://feeds.nytimes.com/click.phdo?i=b590e7e4049b57f71d4401f7e325b62d

Money Blows in to a Patch of Oregon Known for Its Unrelenting Winds

In this sparsely populated landscape south of the Columbia River Gorge, annual checks for that amount are local residents’ share of a windfall brought by the growing wind energy industry. In an area otherwise dominated by wheat farms, hundreds of 300-foot wind turbines now generate electricity and cash.

“Wind is the only thing that is going to save rural Oregon,” said Judge Gary Thompson of Sherman County Court, “especially since all the timber is gone and the sawmills and all that are closing down. I think what it is is a breath of fresh air.”

The Columbia Gorge has been like an expressway for hard-blowing wind since long before the turbines arrived. Trees here lean to the east from the gusts that rip across the plateau.

Sherman County, which earned $315,000 in property taxes from the first wind farm in 2002, raked in $3 million from wind farms in 2010. The bounty, while mostly flowing to the farmers who lease their land for the turbines, also benefits the public. Taxes, fees and assessments on more than 1,000 megawatts of wind turbine capacity have brought $17.5 million in nine years to a county with just 1,735 residents.

The county’s four towns — Wasco, Moro, Rufus and Grass Valley — are prospering. At Sherman Junior/Senior High School in Moro, wind money paid for new computers, musical instruments, robotics equipment, portions of a greenhouse and a new teacher to instruct the most gifted of its 124 students last year.

“Right now, when many districts around the state are gutting everything, we don’t have to,” said Ivan Ritchie, superintendent of the Sherman County School District and principal of Sherman Elementary School in Grass Valley.

Judge Thompson said the payments were intended to reward residents who have made no financial gains from wind energy development, but whose views of Mount Adams and the county’s stunning landscape now include a panorama of turbines.

“It’s modeled after a lot of Alaska compensation,” Judge Thompson said. “There are a lot of people who live in the county who are not necessarily going to benefit from the renewable energy, and we felt we needed to share it with all the county residents.”

Such dividends were once unique to Alaska, where residents receive annual payments as a share of the revenue from oil flowing through the 800-mile Trans-Alaska Pipeline.

Every Sherman County head of household who has owned property for more than a year qualifies to receive money. Though the county can afford more, Judge Thompson said it decided to keep the checks lower than $600 to spare two clerks from having to file hundreds of related tax forms.

Kathy McCullough, a former commercial airline pilot, said she found the wind intolerable when she first settled here 23 years ago. Her husband, Kevin, farms wheat on 8,000 acres. Mr. McCullough, whose family has been on the land for generations, said his parents had once tethered a rope between the house and the barn so they could find their way when dust was blowing.

“We absolutely hated waking up some days because the wind blows all the time,” Mrs. McCullough said. “It’s like living in a wind tunnel. You can see how the pioneer women went crazy out here. Now you wake up and the wind is blowing and it’s like, yes!”

The McCulloughs’ earn 4.1 percent of the gross revenue from 15 wind turbines on their property, or about $5,500 a year for each turbine. The payments increase over time, as land values inflated by the turbines decline with their age.

Gorge communities benefit from their nearness to power transmission lines that connect to California. Until 2010, Oregon also offered attractive incentives for wind companies, allowing tax credits of up to $11 million toward wind farms costing $20 million or more, credits that could be sold before construction for cash. Counties like Sherman also have the authority to waive millions in local property taxes, negotiating lower taxes in exchange for special fees and payments.

Critics say that the incentives are overly generous and that they take money from hard-pressed state budgets. In Sherman County, however, the arrangement has helped build a library and two new city halls, sewers and a bridge.

Residents say the biggest challenge brought by the wind industry is simple jealousy. Because the northern part of the county is windier, some farmers in the south feel shorted.

A corporation, Praise the Wind, served as the vehicle for northern farmers looking to attract wind developers. After securing the rights to blocks of land, Praise the Wind negotiated leases, building in provisions like weed control, fencing and penalties for crop damage. The corporation now manages payments and acts as a liaison with the wind companies.

“The opportunity for wind development is going to be what helps agriculture continue in these agricultural areas,” said Cheryl Woods, Praise the Wind’s chief financial officer, “because it’s getting more and more expensive to farm and the margin is getting narrower and narrower.” Ms. Woods said annual royalty payments of between $5,500 and $7,800 per turbine have saved some farms.

The turbines have also meant more jobs, officials say. The Columbia Gorge Community College has retooled its electrical engineering department into a renewable energy technician program that has trained 135 students from Sherman and surrounding counties. Judge Thompson said the industry was now Sherman County’s largest employer.

At Kathy Neihart’s Lean-To Cafe and Goose Pit Saloon in Wasco, construction workers and wind technicians have kept her business alive, she said. Two years ago, the restaurant and bar appeared headed for closing. Now, it is out of debt and Ms. Neihart has bought a car.

“It’s been wonderful,” she said. “It’s just a fabulous, happy pile of money.”

Article source: http://feeds.nytimes.com/click.phdo?i=968bfa465291c4ea0af771a7e6154a27