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Proposed Northwest Wind-Turbine Plant Uncertain for Timing, Location Ben Tansey & Mark Ohrenschall Con.Web, September 26, 2002

A major wind-turbine manufacturing facility planned for the Northwest is spinning with uncertainties.

Vestas Wind Systems A/S is still considering building such a plant in the region, a company official told Con.WEB Sept. 24. It would employ more than 800 people at full production.

But timing and an exact location are now in question--less than six months after the Denmark-based company announced its intentions to develop a manufacturing plant in Portland to begin operating in summer 2003.

Federal energy legislation--specifically a proposed extension of the 1.7 cents per kilowatt-hour wind energy production tax credit, and also a proposed renewable portfolio standard--is reportedly the biggest variable.

"We're anxiously awaiting in Congress action on the production tax credit," said human resources vice president Jo Anne Firestone of Vestas-American Wind Technology, a Vestas subsidiary. "Once that comes through we'll look at the feasibility of where we need to locate."

She confirmed Vestas is examining potential turbine manufacturing sites in Portland as well as Vancouver and Longview in Washington. In April, a Vestas news release described the Portland plans as entering "final negotiations," and the firm's managing director called those "more like a formality," according to The Oregonian newspaper.

The U.S. wind turbine market, however, is in the midst of a downturn. Vestas' first half 2002 financial statement acknowledged as much, and revealed a companywide after-tax loss of 400,000 Euros for the period. The Aug. 22 statement also reported "on-going" preparations for a "Portland area" production facility.

Meanwhile, Vestas-American has moved its corporate offices from Palm Springs, CA to Portland, Firestone said. More than 100 employees now work in the Rose City.

Changing Circumstances
Vestas' April announcement was hailed by Portland and Oregon officials as well as renewable energy advocates (see Con.WEB, April 30, 2002). Oregon at the time had the nation's highest unemployment rate, 7.9 percent in March.

This newsletter characterized the plans for a Northwest wind-turbine facility as "an economic development coup for the strategically located Rose City, and a potential harbinger of other clean-energy businesses to follow. It expresses confidence in Northwest and U.S. wind-power markets by the world's leading turbine manufacturer."

The Vestas news came less than a month after President George W. Bush signed legislation that included a two-year extension of the PTC, through 2003. Vestas' decision to build a Portland plant was based "on the extension of the Production Tax Credit ... as well as general positive expectations to the future," according to a Vestas news release.

Six months later, circumstances have changed.

"Contrary to first half-year 2001, when the American market was characterised by a high level of activity, the deliveries in first half-year 2002 for the American market have been limited," reads Vestas Jan. 1-June 30 2002 financial statement. Vestas turbine deliveries to the U.S. and Canada fell from 452 megawatts in the first half of 2001 to 41 MW the first six months of this year. Overall, the company reported after-tax profits of almost $40 million for first-half 2001 and a loss of close to $400,000 for first-half 2002.

"The financial scandals and the drop in share prices have caused uncertainty in the market for project financing in the USA," the statement commented. "Combined with the declining dollar rate, the feasibility in a number of projects has been affected negatively."

Installed U.S. wind capacity grew by 1,696 MW in 2001, a record year, according to the American Wind Energy Association. AWEA now projects 400 MW to 450 MW of new capacity this year, jumping to more than 2,000 MW in 2003. AWEA executive director Randy Swisher described 2002 as a "breather" year largely attributable to uncertainties over the PTC's future.

"We're trying to get a long-term extension so we don't have to deal with stops and starts," AWEA spokeswoman Christine Real de Azua told Con.WEB.

House and Senate versions of a proposed comprehensive federal energy bill would extend the PTC through 2006, a scheduled also supported by the Bush administration. A renewables portfolio standard also is under discussion, although Real de Azua said that has generated more controversy than the PTC extension. "Some people just don't like the idea of imposing something on the market."

European wind manufacturers are reluctant to make multimillion dollar investments in the U.S. market without more certainty of sustained policy support, Swisher said.

Wind industry sources suggested Vestas' Northwest plans may also be influenced by FPL Energy's June decision to sign an option to purchase up to 600 MW of turbines from NEG Micon--two months after signing a similar option with Vestas. "The fact that FPL entered into an agreement with another manufacturer casts doubt on the relationship with the first," said one industry insider.

Vestas' Firestone did not mention that when asked about other factors. Earlier in an interview, she said, "We're looking for a commitment from the marketplace," which "is certainly very much associated with the commitment we would get from Congress ... Certainly our commitment has been made to the Columbia River region."

Three Prospective Sites
An expanded list of potential Northwest sites represents another twist in the Vestas saga.

The April announcement said the 227,000-square foot plant--designed to assemble nacelles, produce blades and make towers--was headed to Portland, at an estimated investment of $35 million in production equipment. Vestas managing director Johannes Poulsen praised the local transportation infrastructure and skilled labor pool, as well as local and state political support for the PTC extension.

Since then, however, neighboring Vancouver and Longview to the north have joined the list of contending locations along the lower Columbia. "We're looking currently at three sites in the hopper," Firestone told Con.WEB. "We haven't made a final site selection yet." Cost, transportation infrastructure and employment base are among Vestas' considerations for a specific location, she said.

"Any company would do likely the same type of due diligence we're trying to do, and come up with the best type of decision," she said. "It's a long-term commitment."

Vestas has no definitive timetable, she said--a contrast to Vestas' April news release, which anticipated a summer 2003 opening of the plant and full capacity (with about 1,000 employees) by early 2004.

"It's just a waiting game at this point," said Martha Richmond of the Portland Development Commission, reporting her agency's last contact with Vestas officials in midsummer. "We're still hopeful to bring those jobs here," she added, although wherever the company chose would produce employment for the region.

"We've had ongoing conversations with Vestas," Chastell Ely of the Port of Vancouver told Con.WEB, declining to elaborate.

And at the Port of Longview, planning and development director George Cress said, "We'd love to have them here. We feel they'd be a good fit for the state as well as the community."

Asked if he was surprised Vestas looked at Longview after initially tapping Portland, he indicated the company took a broader look at its transportation needs for wind-energy markets in the Northwest and Midwest. "The best way to move things is by barge or ship, as well as rail, too," he said; Longview offers all those options, as well as cheaper land, a large industrial work force, and proximity to metropolitan Portland.--Mark Ohrenschall and Ben Tansey