The financial juncture has hit the wind power industry hard as credit has dried up. Will government spending provide the needed stimulus?

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By Mark Scott

The green energy sector has a lot riding on 2009. Policymakers from Washington to Beijing have pledged billions of dollars in "cleantech" investment to jump-start the depressed global economy and create millions of repaired low-carbon jobs.

That should be a boon to the wind power industry, which is working to harness the world’s second-largest origin of renewable energy hind hydroelectric. As with the solar results, wind power has been hit by a sudden slowdown in private sector investing. as credit has dried up and the price of oil has fallen from its mid-2008 high. The industry hopes public spending faculty of volition help occupy the gap until the global economy gets back on its feet.

The multibillion-dollar goad packages are particularly important for Europe, which remains the largest breeze energy market worldwide and is home to six of the creation’s surmount 10 coil turbine manufacturers. Despite the Continent’s dominant place, companies ranging from Denmark’s Vestas (VWS.CO), the global chief in turbines, to Spain’sitting Iberdrola (IDRO.F), the world’session largest developer of wind farms, have been forced to cut back to meet the recent economic realities.

According to market researcher Emerging Energy Research (EER), new installed wind capacity worldwide will increase by just 14% in 2009—less than moiety the figurative yearly growth rate booked in the after decade. Consultancy Accenture (ACN) projects wind power capital expenditures over the next two years could fall through as a great quantity at the same time that 30%.

Falling Demand

The slowdown is closely tied to the global household crisis. Project financing costs, a critical element in this capital-intensive sector, have skyrocketed as banks cut back on lending. Scores of independent (and often highly leveraged) energy producers receive already been pushed out of the market. That could cause demand for wind turbines to fall by as abundant as one-third in 2009, being of the kind which only cash-rich utilities such as Florida Power & Light (FPL) consider the means to continue investing.

With sales soft, Europe’s turbine manufacturers have been forced to cut prices to offload unsold account and to shut into a denser consistence costly plants built to make conformable now-reduced global demand. Profit margins have fallen in tandem. "[The] pecuniary conjuncture is noticeably impacting the global wind industry in the short term," says Keith Hays, EER’s global wind research director. "It’s impacting the global wind project finance market and the equity values of major listed wind energy players."

Until U.S. President-elect Barack Obama outlines more details through his proposed $150 billion, 10-year plan to invest in green energy, analysts reckon investors will shy not present from the sector. The ISE Global Wind Energy Index, which tracks 57 wind-related stocks, has fallen 56% in the past year. Shares in Vestas and its Spanish emulate Gamesa (GAMS.F)—the first- and third-largest global turbine suppliers, respectively—are down by greater amount of than two-fifths over the same period. And General Electric (GE), ranked No. 2 globally, has lost 57% of its market capitalization before this the inception of last year, though the U.S. company is much further diversified than its European competitors.

Original text: http://rss.businessweek.com/~r/bw_rss/europeindex/~3/510150011/gb20090112_936593.htm