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Wind-Energy Firm Sells Out to One in Spain

Posted on: Wednesday, 3 May 2006, 15:00 CDT

By Jeff Gelles, The Philadelphia Inquirer

May 3--With soaring fuel prices making wind energy seem economical as well as green, a local wind-power company agreed yesterday to be bought for $30 million by Iberdrola, a big Spanish rival.

Community Energy Inc., of Wayne, said it was selling out because wind's sudden emergence as a competitive alternative has made it difficult for a small company to obtain equipment increasingly in short supply.

The privately held company, which had revenue last year of about $10 million, markets about 500 megawatts of wind power to 75,000 residences, businesses and institutions all across the country, said Brent Alderfer, its cofounder and president.

Community Energy recently opened wind farms in the Poconos and Atlantic City and is developing projects in the Northeast and Midwest that would add 2,000 megawatts of power to its portfolio, which the company markets directly or through utility partners in eight states and Washington.

The company's outlook changed because of shifts in world energy markets. For much of the last year, rising natural-gas and oil prices have made wind farms -- at least temporarily -- the cheapest source of new electrical capacity.

That brought greater demand for wind-power equipment, which was already in short supply. It also prompted Alderfer and his cofounder, Eric Blank of Boulder, Colo., to decide they were too small to pursue their dream of staying independent and eventually going public.

"The capital required in this industry and the competition for equipment -- mostly for turbines -- really changed in the last year," Alderfer said in an interview. "You have to be a big player to get equipment and good terms -- the turbines we rely on are back-ordered into 2008."

Iberdrola definitely qualifies as a big player. Currently the world's largest wind-power producer, it operates turbines that can generate up to 3,600 megawatts of electricity for its 17.8 million customers, more than half in Spain.

Iberdrola's access to turbines also benefits from its status as the largest shareholder in another Spanish company, Gamesa S.A., which recently established U.S. headquarters in Philadelphia and opened a turbine-blade-manufacturing plant in Johnstown, Pa.

Alderfer said he and Blank founded Community Energy in 1999 and began marketing wind power two years later. Under the deal with Iberdrola, they agreed to stay on as managers through 2009. The 35-employee company will keep its headquarters in Wayne, he said.

No layoffs are expected. "We have a budget plan that will add positions," Alderfer said. "This is a growth industry."

Alderfer said Community Energy had been backed by private venture investors as well as the Allentown-based nonprofit Sustainable Energy Fund, and has received grants and low-interest loans from Philadelphia's Sustainable Development Fund, part of the Reinvestment Fund.

The Atlantic City wind farm, which went online in December, includes five $2 million turbines that each produce up to 1.5 megawatts of electricity. With average winds, each turbine can generate enough electricity to power about 500 homes for a year.

Its customers do not necessarily get wind power delivered to their homes. Instead, they agree to pay standard electricity rates plus something extra each month for "blocks" of wind power that the company commits to deliver to the regional power grid. A typical household agrees to pay $5 to $10 a month for 200 to 400 kilowatt-hours of wind power.

Wind power's appeal has so far been based on such customers' willingness to vote with their money to boost production of a form of energy that does not pollute or contribute to global warming, as fossil fuels do, or pose the security and waste-disposal risks of nuclear energy.

Without any subsidy, wind power can currently be produced in the eastern United States for a wholesale price of about 8 cents per kilowatt-hour, Alderfer said. That is about the same as electricity produced from natural gas when it costs $8 per million BTUs -- its current level after it spiked last fall at nearly twice that price.

Federal tax credits for investors sweeten the equation, enabling wind power to wholesale for about 6.5 cents per kilowatt-hour, Alderfer said.

Community Energy Inc.

Headquarters:Wayne.

Founded:1999.

Business: Developing wind-generated electricity.

Sales: 2 billion kilowatt- hours of wind energy for 75,000 residential and business customers and 18 utilities.

Customers: Include Pennsylvania Turnpike Commission; the University of Pennsylvania; Peco Energy Co.; Wesleyan University in Middletown, Conn.; City of Ithaca, N.Y.; Aspen Skiing Co. in Colorado; and the Whole Earth Center, a Princeton organic grocery.

SOURCE: Community Energy Inc.

Contact staff writer Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

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SpanishCats:IBE, NYSE:EXC,

Source: The Philadelphia Inquirer

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