By Ben Backwell | Editor-in-chief
Thursday, April 03 2014
Updated: Thursday, April 03 2014
Brazil has become one of the biggest markets for Gamesa in the past couple of years. Where are things going there in the future? About 70% of Brazil’s energy mix is hydro, and wind started off as a complementary energy source three to four years ago. But with the lack of rain in the past few years, levels in hydro reservoirs have gone down. And big hydro projects have slowed down because of environmental challenges. The auction system has given wind much more visibility than before, and I would say that wind is no longer complementary but strategic for Brazil. The consensus is that we will see 2.5-3GW per year built going forward.
How are you placed in this very competitive market? We are in an optimum position because of our industrial plans, and [were] one of the preferential suppliers in the last auctions. We were the first in getting the Finame codes [on local content for turbines] and complying with [development bank] BNDES conditions, and our technology is good for Brazilian wind conditions. Our new nacelle plant will be ready by mid-2015, and with that we will be very competitive. At the moment, only GE has a higher market share than us, and they have been in the market a long time. Some of our most important competitors have had to get out. So our plan is to maintain a big market share.
Are you worried about the effect that the new BNDES regulations will have on costs for turbines and on margins? With Finame 2 it will be more expensive, but only during a period of ramp-up while our Brazilian component suppliers go through a learning process and scale up. Steel prices, for example, are high, and there are also high import duties, but in the medium term there are good suppliers with industrial expertise. We don’t see much danger of bottlenecks, especially if we have an industry of 2.5GW per year.
Gamesa has also made a big impact in India, although things have slowed down... In India we have had two bad years because of a lack of clarity about fiscal incentives, but in early 2013 the GBI [Generation Based Incentive] was reinstated. This is giving stability to the market. Overall, the energy market is growing by 6-8% per year, India is short of fossil fuels and there is a lot of space for wind, so we think there should be a wind market of 3-3.5GW per year and we are going to be one of the market leaders.
What do you think gives you an edge there? We have a very experienced team [led by former Vestas India managing director Ramesh Kymal]. Projects in India don’t mature in six months but in six years, even though they are then built in six months. Our technology is the right fit for low-wind conditions, and the introduction of the G114 turbine will make us even more competitive. One of the key things is that we have developed our supply chain in India with a mix of local and global suppliers, which allows us to be extremely efficient on costs.
So do you think Gamesa can win global market share? I think we can win some market share through our deployment in emerging markets, and also win some contracts in the US. In the past six months we have won 250MW, and framework agreements with EDP Renováveis for another 450MW.
How much do you depend on [historical client and largest shareholder] Iberdrola? In the US only 200MW out of the 700MW contracts we won were from Iberdrola, so we are no longer dependent on a strategic client, as people used to say in the past.
In offshore, how are negotiations going with your proposed joint venture partner, Areva? We are in the phase of due diligence and we expect an agreement in three to four months from now.
The plan is basically to work together on an upgraded 5MW machine in the first instance? We have two turbines and we have technologies that are complementary, and we will work hard to make one machine that is the best of class. It’s the same for the 8MW turbine. Areva already has a design, but we also have a good design. It is too early to say whether the new turbine will be based on the Areva design.
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