Spanish Energy Spin-off Takes Flight

December 14, 2007 04:07 PM
by findingDulcinea Staff
Spanish utility company Iberdrola launches Iberdrola Renovables, a spin-off of its “green energy” unit; analysts debate the potential for future renewable energy initiatives and the wisdom of spin-offs that are driven by investment fads rather than good business sense.

30-Second Summary

Iberdrola, a Spanish power company, announced the sale of 20 percent of its shares of its wind turbine subsidiary. It is spinning off the unit into an independent corporation called Iberdrola Renovables, which had an initial valuation of €22 billion, or some $32.31 billion.

According to Business Week magazine, Iberdrola is the world’s top producer of wind energy.

Recent investment in “green energy” is the result of both growing social awareness as well as the incentive provided by government subsidies, which, according to the research director at the Barcelona office of consulting firm Emerging Energy, are making the wind energy sector “highly competitive territory.”

Depending on the success of Iberdrola Renovables, other European power producers may follow suit, such as Portugal’s EDP and Accionas, another Spanish firm.

Even Google is entering the green energy sector. At least one writer believes it is doing so with an eye to spinning off the unit in the future.

Financial blogger Brian White writes that if the popular search engine “is grooming several businesses now that end up being spun off in the next few years, we may all soon see just how little this company has grown so far, even in the midst of a $120-plus billion market cap.”

However, companies looking to move into the rapidly expanding wind turbine market should consider the current shortage of components. Danish firm Vestas, which produces more than one-quarter of the world’s turbines, is just one of several such companies to face a production slowdown due to a lack of essential parts.

From a business standpoint, Investopedia contributor Ryan Barnes argues that it is only prudent for companies to take on green energy initiatives, or “they will risk falling behind their competitors in knowledge and shareholder image.”

Headline Links: Spanish utility spins off wind turbine business

Background: What is a spin-off?

Historical Context: The ups and downs of spin-offs

Opinion & Analysis: The business pundits

Related Topics: From green to greenbacks

Reference Materials: Winds of change


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