Portugal’s Energy

By Jennifer Gill <div class="articleImg rightImg" style="width: 124px"><img src="/statics/WebExclusiveButton_V4.gif" alt="" /></div>In 1997 the European Commission proposed that by 2010 the European Union should generate 21 percent of its electricity from renewable energy sources. That deadline has arrived, and the commission now reports that Europe is unlikely to meet its target. Portugal, however, is bucking the trend. The country produces 43 percent of its electricity from renewable sources, a proportion that is expected to reach 60 percent by 2020, according to the Portuguese government. Driving Portugal’s growth in renewable energy is “a convergence between industry interests and government determination,” says Miguel Marques, executive vice president and head of Portuguese markets for <a href="http://www.nyse.com/about/listed/nyx.html" target="_blank">NYSE Euronext</a> (NYX). First, he says, government support is strong for renewable energy in terms of tax incentives, subsidies and feed-in tariffs that require utilities to pay a premium price for renewable electricity. Without oil and gas reserves of its own, Portugal recognizes that it needs to find alternative ways to power the country. Also crucial, he adds, is the technical expertise that Portuguese energy companies have honed with hydropower over the years. Portugal, with its many rivers and miles of coastline, has long tapped its rich water resources to generate hydropower, Marques explains. Hydropower is the country’s largest renewable source, accounting for 34 percent of its current electrical output, and the Portuguese government says 10 new dams will boost capacity by 50 percent by 2012. Now energy companies are using their engineering know-how to pursue other eco-friendly sources, such as solar and wind, Marques says. “They’re looking at market opportunities worldwide and not concentrating their production base in Portugal alone,” he adds. Portugal is also home to the largest wind farm in Europe, and today more than one-third of the country’s renewable energy comes from wind, says Jorge Martins, CEO of diversified holding group <a href="http://www.euronext.com/trader/companyprofile/companyprofilev2-18661-EN.html?isinCode=PTMFR0AM0003" target="_blank">Martifer</a> (NYSE Euronext: MAR). Martifer, which had 2008 revenues of 783 million euros ($1.1 billion on 12/31/08), says it has two subsidiaries in the sector. Martifer Renewables generates power at wind and solar parks around the world, while Martifer Energy Systems manufactures equipment for energy production from renewable sources. The company says it plans to invest $451 million between 2010 and 2012 on renewable energy projects, including the construction of wind parks in Eastern and Central Europe, Portugal, the U.S. and Brazil that together will produce 2.4 gigawatts of electricity, enough to power 600,000 homes. Lack of financing for new projects because of the global economic downturn “has been the No. 1 problem in the renewable energy sector,” notes Martins, adding that Martifer has embarked on strategic partnerships and divestitures to move its international expansion strategy forward. <h2>New Businesses</h2> Portugal’s commitment to green energy has sparked a surge in new energy businesses there, according to a 2009 European Commission report. The number of energy enterprises in Portugal more than tripled from 2000 to 2006, the report says, the second-strongest growth after Spain. It includes startups as well as businesses created from mergers, breakups or spin-offs from existing companies. One recent example is <a href="http://www.euronext.com/trader/summarizedmarket/stocks-2593-EN-ES0127797019.html?selectedMep=5" target="_blank">EDP Renováveis</a> (NYSE Euronext: EDPR), which was spun off from the <a href="http://www.euronext.com/trader/companyprofile/companyprofilev2-18661-EN-PTEDP0AM0009.html?selectedMep=5" target="_blank">EDP Group</a> (NYSE Euronext: EDP), Portugal’s largest industrial group, with 2008 revenues of 13.9 billion euros ($19.6 billion on 12/31/08), in 2008 and was Europe’s largest initial public offering that year, says NYSE Euronext’s Marques. Today the company reports that it is the fourth largest player in wind energy in the world, with wind parks capable of generating 5.6 gigawatts of electricity in the U.S., Europe and Brazil. According to the company, net profits rose 19 percent for the first nine months of 2009 amid expansions in the U.S. and Eastern Europe, and by 2012, it aims to have 10.4 gigawatts in installed capacity. EDP Renováveis can meet that target because it has a pipeline of quality projects that are geographically diverse, says CEO Ana Maria Fernandes adding that 2009 was a great year for gaining visibility in the U.S because the government’s economic stimulus package provided cash grants for future renewable energy projects. In September EDP Renováveis says it received its first cash grant, worth $48 million, for a new wind farm in Oregon. Roughly 60 percent of the company’s planned wind projects, Fernandes says, are in the U.S. where further climate change legislation would present additional opportunities. For example, an energy bill that the U.S. House of Representatives passed last summer mandates that 15 percent of the nation’s electricity come from renewable sources by 2020. A version of the bill currently before the Senate could come up for a vote later this year. In November EDP Renováveis announced that it will invest $4 billion to build new wind farms throughout the U.S. The European Union has also set new renewable energy targets for its 27 member countries for 2020. Whether those targets will be met largely depends on government support, says Martifer CEO Martins. “Countries that adopt feed-in tariffs will be able to meet them,” he adds. EDP Renováveis’s Fernandes agrees that ongoing government backing is needed. “Governments can’t afford the consequences of global warming,” she says. “Changing the energy paradigm costs money, but you have to compare it to the cost of taking no action at all.” As with the U.S., she adds, Europe needs to upgrade and enlarge its antiquated electrical grid so it can handle renewable energy. <h2>A Portuguese Index</h2> EDP Renováveis is one of four energy companies in the <a href="http://www.euronext.com/trader/summarizedmarket/stocks-2634-EN-PTING0200002.html?selectedMep=5" target="_blank">PSI-20</a>, the benchmark index that tracks the prices of the 20 listings with the largest market capitalization on Euronext Lisbon, notes Marques. The others are EDP Group, <a href="http://www.euronext.com/trader/companyprofile/companyprofilev2-18661-EN-PTGAL0AM0009.html?selectedMep=5" target="_blank">Galp Energia-Nom</a> (NYSE Euronext: GALP) and <a href="http://www.euronext.com/trader/companyprofile/companyprofilev2-18661-EN-PTREL0AM0008.html?selectedMep=5" target="_blank">Redes Energéticas Nacionais</a> (NYSE Euronext: RENE), and together they represent 31 percent of the index’s total market capitalization. The index is up 35 percent from 2008, making it one of the strongest indexes in Europe, Marques says. NYSE Euronext also recently launched the <a href="http://www.euronext.com/editorial/wide/editorial-2667-EN.html?isinCode=QS0011181250&selectedMep=5" target="_blank">NYSE Euronext Iberian Index</a>, made up of the 20 most liquid stocks on Bolsa de Madrid, along with the 10 most liquid Portuguese stocks on NYSE Euronext. The energy sector isn’t the only thing going green in the PSI-20. <a href="http://www.euronext.com/trader/companyprofile/companyprofilev2-18661-EN-PTCPR0AM0003.html?selectedMep=5" target="_blank">CIMPOR SGPS</a> (NYSE Euronext: CPR), reporting that it is the largest cementmaker in Portugal, says that alternative fossil fuels account for 5 percent of its fuel usage worldwide. Its main alternative fuels include biomass, shredded tires, rubber waste and industrial waste. Meanwhile, the food retail division of <a href="http://www.euronext.com/trader/companyprofile/companyprofilev2-18661-EN-PTSON0AM0001.html?selectedMep=5" target="_blank">Sonae SGPS</a> (NYSE Euronext: SON), says it has opened a supermarket in Portugal featuring 15 photo-voltaic solar panels that generate power for the building. Efforts like these point to how serious Portugal is about renewable energy and how its companies can capitalize on it by exporting their knowledge to other markets, Marques notes. “Portugal has a strong cluster of competencies around renewable energy,” he says. “It’s been the basis for companies to become global. That’s a reflection of how concentrated we are as a nation on this issue.”

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The expanding renewable energy market has helped companies from Portugal — which has long been a leader in the field — become global players.

Portugal’s Energy

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Portugal’s Energy

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Portugal’s renewable energy market is expanding.

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2010-01-25

Portugal’s renewable energy market is expanding.

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