E.ON, Siemens in big wind deal

German powerhouses E.ON (OTC: EONGY) and Siemens (NYSE: SI) announced a supply deal today for 1,150 megawatts of wind turbines for projects covering both sides of the Atlantic.

Under the agreement, Munich-based Siemens, one of the largest electronics and engineering companies in the world, will supply 500 turbines to Duesseldorf-based E.ON, one of the largest power companies in Germany.

Financial terms of the contract were not disclosed, but Christian Drepper, a spokesman for E.ON, told the Cleantech Group that E.ON previously reported earmarking €4 billion for renewable energy for 2008 to 2010.

"We are now at around 1.5 gigawatt installed capacity," said Drepper. "The target is to have at least 10 GW by 2015, and by 2030 a minimum of 25 GW, maybe more."

That would be a quarter of the company's total installed capacity, which by 2030 is expected to increase to about 100 GW.

E.ON already has a hand in one of the biggest wind power projects in the world. It joined with Denmark's DONG Energy in July to bulk up its interest in the London Array offshore wind farm, buying out Royal Dutch Shell's (NYSE: RDS.A) stake (see E.ON, Dong buy Shell's stake in London Array).

E.ON and DONG became 50-50 partners in the £2 billion project, which is expected to be the world's largest offshore wind farm, with a planned capacity of 1 GW of power.

The wind turbines from today's deal are scheduled to be delivered and installed in 2010 and 2011.

"It's more or less the backbone of wind farms," said Drepper. "These are not the exciting four of five megawatt turbines, but the middle range of 2.3, 2.4 megawatt that you usually use for large onshore wind farms."

It was the largest single wind power deal for Siemens, and one of the largest orders ever made, but Texas billionaire T. Boone Pickens may have topped it with a deal earlier this year.

In May, Dallas-based Mesa Power, formed by Pickens, announced a contract to order 667 wind turbines from Fairfield, Conn.'s General Electric (NYSE: GE) (see Mesa Power makes big order for GE turbines). The order was part of the $2 billion first phase of a giant wind farm to be built in Texas.

Mesa said at the time the turbines would be capable of generating 1,000 MW of electricity, calling the deal the world's largest single-site wind turbine purchase order.

The E.ON order is for a number of wind farm sites, but the company has not disclosed which sites the turbines will be used for. E.ON did say that 600 MW of wind power capacity is reserved for U.S. projects, with 550 MW to be installed in Europe.

In the U.S., renewable tax credits set to expire at the end of this year, but E.ON may have enough wind farms in the works to offset that risk.

"We have such a good pipeline of already very well developed projects," said Drepper, noting, "We won't go for anything that is not profit-enhancing."

GE made a bid to extend the U.S. tax credit in June, releasing a report that argued that the credit generates more federal tax revenue than the cost of the incentive program (see GE fights to keep tax credits alive).

GE has a big stake in the wind industry as a manufacturer and a financial backer. It's the leading manufacturer of wind turbines in the U.S., and wind makes up 80 percent of GE Energy Financial Services' more than $3 billion global renewable energy portfolio.

The deal between E.ON and Siemens goes beyond turbine supply, with both companies also agreeing to work together to boost the performance of wind power.

"We want to further develop the technology to make it even more safe, even more reliable," said Drepper. "And to make maintenance, which is a really big thing if you have wind farms with more than 100 installed turbines, to make that even more simple."