EDP Renovais (PK) (USOTC:EDRVF)
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The third-biggest U.S. wind-power developer will continue to cut investment with no clear national energy policy in place and amid a continued slump in electricity prices.

EDP Renovaveis SA (EDPR.LB), through its U.S. subsidiary Horizon Wind Energy, will reduce spending by more than half to less than $300 million in 2011 from around $700 million this year, with further cuts possible in following years, Chairman Antonio Mexia said in an interview Friday.

"What makes sense is postponing [projects]," he said.

The downward shift by Madrid-based EDP Renovaveis comes as the U.S. renewable sector faces growing uncertainty. The country's biggest wind-power company, NextEra Energy Inc. (NEE) said earlier this year that it will scale back on U.S. development. EDP's Horizon Wind already had cut its planned wind-generation build-up by nearly 30% from 2009 levels, saying it would build 500 megawatts of new generating capacity each year in 2010 and 2011. The company now plans to create only 200 megawatts of new generating capacity in 2011.

Mexia said three factors are driving the company's pullback: the lack of a clear U.S. energy policy; recession-driven demand declines; and slumping prices for wholesale electricity. Federal legislation that would put a price on emitting carbon dioxide and require a certain percentage of electricity sales to come from renewable sources collapsed in the U.S. Senate this summer after passing in the House last year.

"You have to have long-term visibility," said Mexia, expressing little optimism about the passage of federal energy legislation in the near future.

At the same time, state renewable electricity requirements have softened amid a pullback in power demand, while wholesale power prices remain well below 2008 highs. Depressing power prices is a sharp decline in the cost of natural gas, which is a key power plant fuel.

Mexia said EDP's Horizon Wind will focus its U.S. investments in and around California, as well as in the nation's largest electricity market, the PJM Interconnection, which includes 13 states in the Mid-Atlantic, Southeast and Midwest. It won't invest in Texas, which is flush with wind projects, he said.

Mexia, who also serves as Chief Executive of EDP-Energias de Portugal SA (EDP.LB), which holds about 77% of EDP Renovaveis, said overall development of new wind power in the U.S. will slip to 5,000 or 6,000 megawatts in 2010, from about 10,000 megawatts installed last year. This could drop to less than 4,000 megawatts in 2011.

A megawatt can provide enough electricity to power between 500 and 1,000 typical homes, yet challenges come with wind generation since it doesn't blow constantly.

-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com

(Juan Montes in Madrid contributed to this article.)