US grants to EDP Renováveis US$525 million tax credit

The United States Administration this year granted Portuguese renewable energy company EDP Renováveis US$525 million in tax credits for setting up wind farms in the US, the company said in a filing with Portuguese sock market regulator, CMVM.

The credit was distributed as follows: US$216 million via a cash grant for 398 megawatts, US$192 million and a further US$117 million via institutional agreement structures, related to 202 megawatts and 99 megawatts, respectively.

EDP Renováveis, via its subsidiary Horizon Wind Energy LLC (Horizon) signed an agreement with JPM Capital Corporation for tax equity funding of US$90 million. This amount is related to the Lost Lakes wind farm in Iowa, which went into operation at the beginning of December and the installed capacity of which is 101 megawatts.

In 2009 EDP Renováveis concluded the installation of 700 megawatts of wind power generation capacity in the US.

EDP Renovaveis SA, through its fully owned subsidiary Horizon Wind Energy LLC, has signed an agreement to secure $90 million of institutional equity financing from JPM Capital Corp. in exchange for a partial interest in its 101 MW Lost Lakes Wind Farm, which was installed this month in Dickinson County, Iowa.

The institutional equity investment will provide the investor with access to the accelerated asset tax depreciation benefits and to the cash grant for which the Lost Lakes wind energy project will apply, pursuant to the American Recovery and Reinvestment Act of 2009.

The Lost Lakes transaction will represent EDP Renovaveis’ second institutional equity transaction with JPM Capital Corp. that incorporates the cash grant in lieu of production tax credits.

Officials from EDP and EDP Renewables, the world’s second largest generator of wind energy in terms of market capitalization and also the third largest wind energy producer in the United States, announced that they have targeted to devote approximately $4 billion to building new wind farms in the United States through 2012.

Such investment will help create thousands of jobs to develop, build and operate the new projects, as well as to manufacture the equipment that will be installed in such projects. The target will build on the record amount of new capacity the company has already installed and has under construction in 2009, totaling 800 megawatts (MW) worth more than $1.5 billion of investment.

In the United States, EDP Renewables has a presence in 21 states and operates more than 2,500 MW of wind energy capacity. EDP Renewables’ United States domestic operations have grown from 60 employees to nearly 300 in just three years. The company’s rapid growth in 2009 is in large part due to the successful implementation by the Department of Treasury and the Department of Energy’s 1603 Program that provided a regulatory framework to accelerate construction of new renewable energy capacity.

The 1603 Program gives wind and other renewable energy producers the chance to offset the costs of new projects with a 30 percent grant. Companies that take advantage of the program agree to give up certain tax credits that they would have been eligible for in the future. The direct payment spurred development by companies that did not have a federal tax liability and encouraged immediate re-investment of renewable energy profits.

With over 20 offices and 22 wind farms across the United States, Horizon Wind Energy has developed more than 3,400 MW and operates over 2,800 MW of wind farms.

Horizon is owned by EDP Renováveis S.A. (“EDPR”), a global leader in the renewable energy sector. EDPR has undergone exceptional development in recent years. Its installed capacity increased four-fold between 2005 and 2007, becoming the third largest wind energy company in the world. EDPR is listed on the Euronext Lisbon Stock Exchange.

Energias de Portugal, S.A. (“EDP”), the parent company of EDPR, is a vertically-integrated utility company, headquartered in Lisbon, Portugal. Through its various constituent businesses, EDP holds significant electricity and gas operations in Europe, Brazil, and the United States.