WIND IN THE HEDGES

The way the market has been going lately, a good hedge with a strong upside seems like a really great idea. And things aren't looking up in very many industries like they are in wind energy.

Fortis buying wind power from Enel
Steve Gelsi, August 13, 2007 (MarketWatch from Dow Jones)

WHO
Fortis Merchant & Private Banking, Enel North America Inc.

One investment where things are looking up.

WHAT
As a hedge against the rising price of electricity from natural gas, Fortis has contracted for 1.1 million megawatt-hours of wind-generated electricity from Enel’s Snyder Wind Farm.

WHEN
Contract signed August 6. The contract term is 10 years.

WHERE
- Enel is based in Italy. Fortis is based in Brussels.
- Snyder Wind Farm is in West Texas.

WHY
- Snyder Wind Farm:, 63 megawatts, 21 Vestas V90 turbines. It is Enel’s biggest wind facility until the renewables company opens (later this year) a 101 megawatt Kansas farm. Enel North America now has 400+ megawatts of renewable energy in wind, hydropower, geothermal and biomass projects.
- Using the wind energy industry standard of $50-$80/megawatt-hour, this is an estimated $80 million deal, though the companies did not disclose their numbers.

A somewhat definitive trend to this market. (click to enlarge)

- Fortis will market the wind energy as a hedge. Potential customers: financial players (especially energy market players), hedge funds, power companies.
- Electric Reliability Council of Texas handled the transaction for Fortis.
- The American Wind Energy Association (AWEA) expects new wind energy capacity to top 3000 megawatts this year and generate 31 billion kilowatt-hours of electricity, enough for 3 million homes.

QUOTES
David Duran, managing director, Fortis: "Wind energy is a rapidly growing generation resource for the U.S. and we'll continue to pursue hedging transactions not only in renewable power, but in conventional power as well…"