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Enel plans €500m wind farm off the Italian coast

July 11, 2008

By Guy Dinmore in Rome and Fiona Harvey in London

Published on the Financial Times on July 11 2008

Enel, Italy’s power utility, has committed to a €500m ($789m) joint venture to build Italy’s first offshore wind farm, involving the construction of 115 turbines off the southern coast of Sicily. The project, whose design was submitted to the Italian government yesterday, aims to become operational by 2012 and is competing to become the Mediterranean’s first wind farm.

There are two other projects planned in the Mediterranean but they have not yet entered the construction phase.

If approved, the Sicilian wind farm could meet the electricity needs of 390,000 households and avoid carbon dioxide emissions of 815,000 tonnes a year, according to Enel. The project should have capacity of 345 to 575 megawatts.

The offshore wind sector suffered a high-profile setback in May when Royal Dutch Shell pulled out of the London Array, the world’s biggest proposed offshore project, citing cost reasons.

Enel’s move was the second vote of confidence this week in offshore wind power in Europe. Blackstone, the US buy-out group, on Tuesday announced plans to invest €1bn in a network of about 80 wind turbines off the north German coast.

Mortimer Menzel, partner at Augusta & Co merchant bank, called the Blackstone deal “a very good sign” for Europe’s offshore wind business. “It’s good [for the industry] that a serious professional investor is giving this sort of importance to offshore,” he said.

Shell is in talks to sell its stake in the London Array to its partners in the project, Dong Energy of Denmark and Eon, the German utility.

Offshore wind farms are more costly and difficult to build than onshore turbines, as they require more robust equipment and more frequent maintenance. There is also a shortage of the vessels needed to install them.

Enel has a 57 per cent stake in the Sicilian venture and Moncada Costruzioni, a Sicilian company, 43 per cent. The turbines, anchored to the seabed at a depth of 30m, will be more than 100m tall and have rotors with a diameter of more than 110m. They will be sited in the Gulf of Gela, about three nautical miles off Sicily.

Enel has come under criticism from environmentalists for its plans to increase construction of coal-fired power stations in Italy, increasing CO 2 emissions. Local opposition has also prevented the construction of onshore wind farms in Italy.

Fulvio Conti, chief executive of Enel, said the project would double Enel’s installed capacity in the wind sector. He said Enel’s emissions-free generation already represented about 30 per cent of its total domestic electricity production. Coal also accounts for 30 per cent.

Enel’s target is to have about 1,500MW generated by wind power by 2012. By the end of last year wind accounted for 325MW.

Enel said it planned investments of €7.4bn by 2012 in renewables. Last month it bought wind farms in France expected to produce 120MW.

Wind farms have been achieving high valuations in the past year, prompting some analysts to suggest the market is peaking. Earlier this year Scottish and Southern Energy bought Airtricity, the Irish wind farm developer, for €1.45bn.

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