COPENHAGEN - Major industrial groups are likely to diversify into the wind power industry, prompting a consolidation in the fledgling sector, analysts said.
The arrival of the industrial giants will add lobbying power and political support for the wind market, forecast by the European Wind Energy Association to be worth 80 billion euros ($71 billion) by 2020, up from seven billion today. While wind energy accounts for less than one percent of global energy production, it is becoming increasingly popular, as governments aim to curb greenhouse gas emissions to comply with targets in the Kyoto climate protocol.
Demand for larger turbines and large-scale wind farms which are more efficient and comparable in cost to larger-size power generation alternatives, are leading to consolidation of the turbine manufacturing industry as the new demands require strong balance sheets.
In February, GE Power Systems said it would buy U.S. wind turbine business of Enron Wind, a unit of bankrupt energy trader Enron, for reportedly $250 million.
"There remains a high likelihood of other industrial conglomerates entering the market for wind turbine makers, following GE," said Analyst Axel Funhoff at Bear Stearns & Co. "They don't want to miss the bus."
The only profitable way to enter the wind turbine manufacturing market was through acquisitions, Funhoff said.
Also, energy companies and utilities interest in wind energy adds to increased political awareness.
Several large utilities and oil groups, including BP, ChevronTexaco, FPL Energy, Shell, American Electric Power, Entergy and Powergen, have bought wind farms or announced plans for them this year.
"The string of announcements by major energy corporations is rapidly changing the face of wind energy business," the American Wind Energy Association (AWEA) said in a statement.
"Coming on the heels of of the industry's most succesful year, in the U.S. and worldwide, it signals that wind energy is moving into the big leagues," AWEA executive director Randall Swisher said.
The wind power industry, most visible in Germany, Spain, Denmark and the United States, saw wind turbine installations of 6,500 megawatts last year, 45 percent more than in 2000, bringing total global capacity to 24,000 megawatts.
CONSOLIDATION LOOMS
"The smaller wind turbine makers will disappear from the market," said Dieter Kestner, CEO of turbine maker Nordex, who sees only three or four major players left in five years.
With a global market share of 24 percent, Vestas is the biggest turbine maker in the world, followed by Spain's Gamesa Eolica, German privately-owned Enercon, Danish NEG Micon, Denmark's Bonus, and Germany's Nordex.
Vestas has so far said it sees no need to grow by acquisition in a market expanding 25-30 percent a year.
Bonus CEO Palle Noergaard says GE's entry will make waves.
"GE has been strolling through the industry for a long time looking for a partner, and I believe they'll buy more companies," he said.
Energy companies and utility groups are likely to go for wind power development while manufacturers like Swiss-Swedish ABB and German Siemens are likely to join the lucrative business of making wind turbines.
Analysts say privately owned Bonus and Enercon are the most obvious acquisition targets, as either a takeover or a listing could be the way to obtain additional capital for expansion.
Spain's Gamesa announced plans to spin off its aerospace interests to focus on wind power activities, which includes wind farm development and wind turbine manufacturing.:
