Energy Bet Puts Wind at Property Firm’s Back

September 25, 2013 by  
Filed under Green Energy News


GOTHENBURG, Sweden—In 2006, a decade and a half after taking over for his father at the helm of one of Sweden’s biggest property firms, Hans Wallenstam bet billions of Swedish kronor that a clutch of wind farms scattered across the Scandinavian nation eventually could save the company money and lure high-dollar property seekers eager to consume “green” energy.


Wallenstam, one of Sweden’s biggest property firms, has built 57 turbines.

The bet looks like it is paying off. Wallenstam AB

has built 57 turbines and named its wind parks after long-serving employees, like Benny Olsson. With more than enough homemade energy to power the 9,000 households and 1,000 companies occupying Wallenstam buildings, the 69-year-old company is entirely self-sufficient now.

In an interview, Mr. Wallenstam acknowledged he was “a little bit frightened” by upfront costs, but that “the best way to control the costs is to make energy yourself.” The publicly traded firm offers electricity to tenants at a lower price than what utilities can charge.

Long dependent on hydropower, Scandinavian countries have become front-runners in developing wind power. Denmark was one of the pioneers in the business and currently is the base for some of the largest turbine manufacturers.

In Sweden, there are about as many wind turbines as gasoline stations, with production capacity more than tripling in the past four years alone. Though still smaller than Germany or Spain in terms of overall capacity, Sweden is adopting wind at one of the highest growth rates in the European Union.

In most parts of the world, energy companies have taken the lead role in developing wind power, which currently produces 2.5% of the global electricity supply, a rate that is rising by about 10% to 15% a year, according to the Global Wind Energy Council. But in Scandinavia, real-estate owners increasingly are among the investors.

Landlords are embracing the technology partly as a way of cutting heating and electricity costs. Many are finding that tenants are willing to pay higher prices to locate in green buildings.

The strategy comes with risks. Wind parks can take up to a decade to build, eat up a massive amount of capital and operate well below capacity if the wind isn’t blowing.

But companies like Wallenstam are beginning to see returns on their investments. In the initial years, Wallenstam spent disproportionately more on managing energy than on traditional management tasks. This has changed as more scale is added. The company made the equivalent of $4 million in the first six months of 2013 selling wind, according to its filings.

Wind-power investments for landlords can be trickier than other alternative energy sources such as solar, which can be generated by slapping panels on a roof. Wind farms need scale—in both the size and number of turbines—and often are in remote locations needing big investments in transmission lines.

But a number of big property owners, ranging from California’s Google Inc.

to Sweden’s IKEA, are entering into long-term leasing contracts for wind power or buying entire wind farms. These deals insulate the companies from the risk of volatile energy prices.

At the same time, as the wind sector has matured, investors in wind farms are changing from speculators looking for quick returns to investors with longer horizons, such as pension funds and insurance companies, according to Omid Ashrafi, a strategist with Newsec Asset Management in Stockholm.

Wind experts say investors view it as a hedge against inflation. The price of other types of power, like oil and coal, are tied to the cost of these fossil fuels.

On the other hand, the cost of wind will forever be free. Once the turbines, transmission lines and other installation costs are paid, the cost of producing power will be predictable. “It will be the same today as in 2030,” said Steve Sawyer, secretary-general of the Global Wind Energy Council. “Lord knows what rate you’re going to be paying out of the meter in 2030.”

Steve Howard, IKEA’s chief sustainability officer, said the company’s wind investment is a central part of its plan to cut down on global energy costs. IKEA owns a massive amount of property, with 6.9 million square feet in China alone. Its holdings include shopping malls, factories and even hotels.

A team of five manages the company’s renewable-energy assets and invests on a case-by-case basis. In some cases, IKEA makes excess energy and sells it. “We’re not going to throw money away,” Mr. Howard said. “We want a decent return on equity.…It is a balanced strategy to build the business in a clean way.”

Mr. Howard said the company’s annual generation of its own electricity is “worth €100 million of revenue” based on his “back-of-the-envelope calculation.”

Mr. Wallenstam sees marketing benefits as well. The Swedish property company builds and owns housing and commercial real estate in Gothenburg and Stockholm, which are two of Sweden’s most constrained markets in terms of availability.

Mr. Wallenstam competes in the upper tier of that market and said those buyers are tending to care more about the state of the planet than the size of their energy bills. “People are more and more interested in where the energy comes from,” he said.

Write to John D. Stoll at

A version of this article appeared September 25, 2013, on page C11 in the U.S. edition of The Wall Street Journal, with the headline: Bet Puts Wind at Firm’s Back.

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