According to reports, five of the biggest wind-turbine makers have been shut out of Brazil’s $3.5 billion market by the national development bank BNDES after failing to meet local- content requirements.
Vestas Wind Systems A/S (VWS), Suzlon Energy Ltd. (SUEL), Siemens AG (SIE), Acciona SA (ANA) and Fuhrlaender AG aren’t getting at least 40 percent of their parts from local suppliers and are no longer eligible for BNDES financing, the country’s only source of loans for turbines, Elbia Melo, executive president of the wind-industry trade group, Associacao Brasileira de Energia Eolica, said in an interview.
Developers can’t tap BNDES loans for 2,000 megawatts of turbines they agreed to buy from the suppliers, and will either suspend construction on some projects or switch vendors, Melo said. The world’s top turbine makers are setting up Brazilian plants to meet surging demand and haven’t established the domestic supply chain they pledged to create, according to government officials.
“BNDES and the turbine makers agreed on a timeline to develop factories and turbine makers didn’t keep to it,” Henrique Tinoco, a director at state development agency Superintendencia do Desenvolvimento do Nordeste, said in a telephone interview. “This is a public bank with limited resources. Of course it’s going to prioritize the acquisition of capital goods produced nationally.”
Wind-turbine installations in Brazil may almost triple to 1,695 megawatts this year from 2011, making it the fifth-largest market, according to Bloomberg New Energy Finance, and the country is promoting policies to ensure the boom benefits other parts of its economy.
BNDES, formally Banco Nacional de Desenvolvimento Economico e Social, conducted an unannounced audit last month of companies in Brazil providing turbines to developers that use government loans, according to a bank press official who didn’t want to be named because of a company policy.
The audit found that Fuhrlaender and Acciona have yet to build factories, while Siemens, Vestas and Suzlon have facilities that aren’t meeting the 40 percent requirement, Melo said. Suzlon, India’s biggest turbine company, hasn’t been notified about the suspended financing and asked BNDES for more information, according to a press official who didn’t want to be named because of company policy.
Acciona will build a hub factory in Bahia state by October and source blades from a factory in Fortaleza “to meet the requirements established by the BNDES” to qualify for loans, Elisa Banos, a spokeswoman for the Alcobendas, Spain-based company, said in an e-mail.
Siemens, based in Munich, is asking BNDES to explain why its turbines no longer qualify for financing. Liebenscheid, Germany-based Fuhrlaender didn’t reply to calls seeking comment.
Foreign turbine-suppliers rushed to set up factories in Brazil after the government organized an auction in 2009 for contracts to sell wind power, said Eduardo Tabbush, a wind analyst with New Energy Finance in London. Countries in other regions were ratcheting back renewable-energy subsidies following the economic downturn.
Brazil auctioned contracts for 2,905 megawatts of wind farms in three auctions last year, according to the national energy agency Empresa de Pesquisa Energetica. Those turbines will cost about $3.5 billion, Tabbush estimated.
The five turbine companies are seeking to requalify for BNDES financing before two energy auctions set for October when developers will apply for loans to buy turbines. They are competing for a limited, and possibly inadequate, supply of local components, Melo said.
“For some suppliers it’s going to be practically impossible to meet their requirements,” she said. It can take eight to 10 years to create a local supply chain. “Brazil’s industry is very new. You can’t create a whole supply chain overnight.”