Saturday, September 29, 2007

Energias de Portugal to monetize more wind tax credits; plans IPO

New York (Platts)--28Sep2007 Energias de Portugal plans to monetize about 650 MW of tax equity credits by the end of 2007 that it gained through its acquisition of Horizon Wind Energy from Goldman Sachs in July, Antonio Mexia, EDP CEO, told Platts Friday.

On the eve of its $3-billion acquisition of Horizon Wind, EDP monetized the 722 MW of Horizon's operational wind farms by selling them for $700 million in deal facilitated by a Citigroup-led group of banks.

Under federal law, wind farms generate tax credits, known as production tax credits, but since EDP is not headquartered in the US it has little use for the credits, except to sell them.

'Unlike other companies, we are not here for the tax credits,' said Mexia. Instead EDP has chosen to monetize the credits and use the proceeds reduce the debt associated with the Horizon acquisition.

The second monetization would strip out credits from Horizon wind farms that were under construction at the time of the acquisition and are expected to be online by year end.

Mexia declined to name the bank that would handle the monetization, but said it would be a different bank for this transaction, although it would still be an American bank.

The Horizon acquisition doubled the size of EDP's worldwide wind power portfolio by adding Horizon's 1,700 MW of US wind farms -- 722 MW in operation and nearly 1,000 MW under construction -- to its portfolio.

Mexia said EDP is also studying an initial public offering for its worldwide wind assets in 2008. There is strong demand for green energy and wind power is a proven technology, said Mexia.

The result, he said, is that investors are valuing wind assets at higher price/earnings multiples than those assets would fetch than in portfolios that included conventional thermal generation. 'We have already been approached by top investors who want to be involved,' he said.

Overall, Mexia said that by 2010 EDP would have 3,400 MW of wind power in operation in the US and 4,200 MW online in Europe. --Peter Maloney, peter_maloney@platts.com For more news, request a free trial to Platts Renewable

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