Sapec plans asset sales to fund wind farm construction in U.S.

Sapec SA, the third-largest supplier of crop-protection products on the Iberian Peninsula, plans to raise cash for construction of U.S. wind farms by selling other alternative-energy projects after they are completed this year.

Grupo Naturener SA, Sapec's renewable-energy unit, will complete work on four Spanish photovoltaic projects by August, earning 45 euro cents ($0.70) for each kilowatt-hour generated, and plans to connect its first 107-megawatt wind farm in the U.S. to the power grid this year.

"We will have the solar-energy projects in Spain,'' Antoine Velge, managing director of Sapec, said after the annual meeting in Brussels yesterday. "We could sell a couple of those.'' He also said that Sapec has no plans to sell new shares and won't put more fresh capital into Naturener, in which it owns a 57.8 percent stake.

Acquisitions of wind-farm projects in the U.S. and Canada as well as two capital infusions for the Madrid-based renewable- energy company pushed up Sapec's net debt to 270 million euros at the end of last year, or 1.6 times shareholders' equity. The development of 1,100 megawatts of wind-power capacity over the next 3 1/2 years will require spending of at least $1.6 billion, a quarter of which will have to be financed with equity.

Sapec, which made its debut on the Brussels stock exchange in 1926 as an owner of pyrite mines in Portugal's Alentejo region, generates most of its earnings from supplying pesticides and raw materials used in animal feed to farmers in Spain and Portugal. It also owns port terminals as well as small-scale hydroelectric power plants in Spain.

Facing Delays

The wind farm projects in the U.S. are facing delays amid uncertainty about the extension of renewable-energy tax credits and problems getting the turbines from Spain, according to Velge.

Naturener, which had planned to install 210 megawatts of capacity in Montana this year, will complete only 107 megawatts of the Glacier Wind project this year. The first project in Canada will not be completed until 2010, rather than in 2009.

The tax credits, which give producers of wind power and other renewable energy sources 2 cents for each kilowatt-hour generated, will expire at year's end unless extended by law. President George W. Bush has threatened to veto a bill that would use $13 billion in oil and gas subsidies to pay for the tax benefits.

Naturener has so far ordered turbines from Spanish construction company Acciona SA, providing a power capacity of 470 megawatts. The tax credits would account for about 20 percent of revenue, Velge said. Cuenca, Spain-based savings bank Caja de Ahorros de Castilla La Mancha owns the remaining shares in Naturener.

Potential Gains

Potential gains from selling renewable-energy assets may help to offset a decline in profit from selling cereals and proteins used in animal feed, the largest contributor to Sapec's earnings last year.

"Our trading business is suffering badly from the farmers' protest in Argentina,'' Velge said. Sapec buys most of its corn and soybeans in Argentina.

Interpec Iberica SA, the main trading unit in Spain, lost more than 2 million euros in March and April because of the protests against higher export taxes in Argentina, Chairman Eduardo de Almeida Catroga told investors at the meeting.

Still, first-half operating profit will surpass the 10.6 million euros reported in the six-month period a year earlier, on sales of crop-protection products and other chemicals, he said. He declined to give a forecast for second-half earnings, citing increased volatility.