Alternative Renewable Energy WIND POWER. For more information, please contact Daniel M. Miller, Institutional Sales,

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Felix Lewis
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One Corporate Center Rye, NY 10580-1435 Tel (914) 921-5193 Fax (914) 921-5118 www.gabelli.

Alternative Renewable Energy WIND POWER The Future >1,000kW The Past and the Present <100kW For more

1 One Corporate Center Rye, NY Tel (914) Fax (914) December 20, 2002 Gabelli & Company, Inc. Alternative Renewable Energy WIND POWER The Future >1,000kW The Past and the Present <100kW For more information, please contact Daniel M. Miller, Institutional Sales, Please Refer to Important Disclosures at the End of This Report-

Inc. Gabelli & Company, WIND TURBINE COMPONENTS Gearbox Metso (MEO1V FH, Finland) Flender (Germany) Hansen (USA) Blades LM Glassfiber (Denmark) NOI Group (Germany) A&R Rotec (Germany) For composite

2 Inc. Gabelli & Company, WIND TURBINE COMPONENTS Gearbox Metso (MEO1V FH, Finland) Flender (Germany) Hansen (USA) Blades LM Glassfiber (Denmark) NOI Group (Germany) A&R Rotec (Germany) For composite materials: Hexcel (HXL US, USA) SP Systems (UK) Generator Loher (Germany) ABB (ABBN VX, Switz.) Alstom (ALS FP, France) Electrotecnia (Spain) VA Tech. (VATC AV, Austria) Tower Local companies, due to high transportation costs - 2 -

3 IS WIND THE ANSWER? Wind energy represents one of the cleanest ways to produce renewable energy and it is expected to become one of the most attractive sources of alternative energy. Companies in the sector, and the current valuation, represent a compelling investment opportunity. Wind energy is generated by plants which transform wind into electricity through a generator installed on the top a tower (up to 100 meters high) fitted with blades. Wind plant diffusion started in the mid 90s, mainly in Europe, and wind energy now represents 0.7% of the total energy produced in Europe and 0.1% in the US. The biggest markets are Denmark and Germany, where wind plants represent almost 20% and 8% respectively of the total capacity installed. The wind sector has a current market size of more than 7bn. The combination of a number of positive factors leads us to conclude that the wind energy sector is poised for recovery: - Wind energy is becoming price competitive - Government policies are supporting development - Valuations have fallen to attractive levels - Consolidation in the sector is likely Table 1 Historical Trend in Energy Production TWh US CAGR Coal % % 1, % 1, % 2, % 4.1% Nuclear power % % % % % 20.5% Natural gas % % % % % 3.5% Hydroelectric % % % % % 1.6% Oil % % % % % 2.3% Biomass/Waste % % % 30.2% Wind % % 10.5% Solar % % 3.2% Other % % % % 11.9% Total US % 1, % 2, % 3, % 4, % 4.2% Europe Nuclear power % % % 7.6% Coal % % % 0.3% Hydroelectric % % % 1.6% Natural gas % % % 6.4% Oil % % % -3.7% Biomass/Waste % % % 6.2% Wind % % 46.0% Other % % % 4.8% Total Europe 2, % 2, % 3, % 2.4% Rest of the World Coal % 1, % 2, % 5.8% Hydroelectric 1, % 1, % 1, % 3.1% Natural gas % 1, % 1, % 6.2% Oil 1, % 1, % % -0.6% Nuclear power % % % 7.5% Biomass/Waste % % % 1.9% Wind % n/a Other % % % 9.2% Total Rest of the World 3, % 6, % 8, % 4.1% TOTAL 8, , , % Source: International Energy Agency - 3 -

4 TRENDS IN WIND ENERGY Kyoto protocol: to satisfy the target of a 5.2% reduction in greenhouse gas by , most European countries set a target of 12% electricity production to be derived from renewables by The U.S. did not sign the agreement and there are no formally ratified targets, however some states set certain targets (Texas: 10% by 2010). Cost of producing wind energy: decreased by 80% in the last 20 years to around 0.07 per kwh, but it is still not competitive with nuclear ( 0.06) and gas/coal ( 0.04). In the next 2-3 years, the cost is expected to decrease to the same level as fossils due to the introduction of bigger turbines. Solar energy is still the most expensive source at 0.50 per kwh, meaning that the future development of renewables will be concentrated in the wind segment. Government incentives: A key driver of the development of the industry. These incentives are based in Europe on fixed guarantee selling prices ( 0.09), which include a premium over the market prices, and in the U.S. on tax credits. The uncertainties related to the renewal of these incentives can cause a significant swing in wind turbine demand. This happened in the U.S. in 2002 and it could happen again in 2004 if the Energy Bill is not approved this year or next. MW turbines: The trend for increasing the capacity of wind turbines in order to reduce fixed costs of installation and to improve the electrical efficiency. The so-called MW turbines (capacity over 1 MW) represented less than 10% of the market in 1997 and have now reached 40%. CAPEX reduction: The cost of installing wind farms, currently around 900 per kw, has been decreasing by around 5% per year. This compares to 700 for gas, 1,200 for coal and 1,600 for nuclear plants. Off shore plants (1): These still face technological challenges but will solve several environmental problems such as the availability of land for wind farms. There is also some criticism of the aesthetics of land based wind farms. The off shore plants can be economically feasible by using the biggest available wind turbines. Norway, Sweden and Denmark have started small offshore installation projects. In addition, UK authorities strongly favor this solution. MAIN WIND ENERGY MARKETS Table 2 World Wide Capacity Installed (M W ) Electricity Capacity Installed 2001 Wind Total Wind % CAGR 98-'01 Germany 8, , % 45.0 % Spain 3,550 49, Denmark 2,456 13, Italy , United Kingdom , France , n/a Other 1, , n/a Total Europe 17, , n/a US 4, , China , Rest of the W orld 2,915 1,722, n/a Source: European Wind Energy Association, BTM Consult (1) Wind towers are embedded into the sea floor like oil production platforms; towers are constructed 0-30 km off the coast, in water up to 30 meters deep

5 Europe (70% of global wind capacity): Germany is the largest market due to its tax incentives, even though it has some of the worst wind conditions in Europe. The Danish wind market is mature, with incentives expected to be reduced in a few years. Spain is also near saturation. The most promising markets are the UK (which has the best wind conditions) and France. Considering the targets set by EU governments, conservative expectations are for an additional 10,000 MW of installed capacity in Europe in 5 years (CAGR 10-15%). United States: holds some of the largest wind resources in the world but represents only 6% of the global capacity. Main plants are located in California (40% of total capacity) and Texas (26%). The driver is the Production Tax Credit (PTC) incentive system (1.5 /kwh for electricity generated). The PTC was renewed last March and will last until the end of Uncertainties related to its renewal caused a drop in the demand of new installations by 60% in The Energy Bill, though not yet approved, would extend the PTC to In case of renewal the capacity installed could almost double in 5 years. China: has set a target of 2% production by The driver is not environmental concerns, but simply the need for additional energy. SECTOR CHARACTERISTICS AND COMPANIES Systems: wind turbines are composed of blades (in house production: 60%), generators, gearboxes, electrical control systems and towers. These components account for 2/3 of the total cost, while the remaining 1/3 arises from the design and installation of the wind farm plants. Barriers to entry: the technology of blades (aerodynamics efficiency), and the gearbox that allows the electricity generation with different wind conditions. Market concentration: the first seven companies control 89% of the market compared to 81% in Competitive threats: in May 2002 GE acquired the Enron s wind division, renamed GE Wind, with factories in US, Spain and Germany. GE can offer the technology and most importantly, project financing services which utilities need. Furthermore, it has aggressive plans to become the leader in the sector. Table 3 Companies Market Share Top Wind Players Domestic Global mkt share Symbol country Vestas VWS DC Denmark 15.2 % 17.7 % 23.0 % Enercon Not listed Germany NEG Micon NEG DC Denmark GE Wind Not listed US Gamesa GAM SM Spain Bonus Not listed Denmark Nordex NDX NM Germany Total Source: European Wind Energy Association, Companies Financial Statements - 5 -

6 Inc. Gabelli & Company, Gamesa (GAM SM Spain): is the leader in Spain with 70% market share and is #5 worldwide with 10% market share. The company is focusing exclusively on wind turbine production following the pending spin off of its aeronautical division. Aggressive international expansion will be financed through the progressive disposal of wind farms it owns. Moreover, its selling prices are 20% lower than its competitors, which are based in high labor cost countries (Germany and Denmark). The company has a high visibility on future sales due to a backlog of almost 4 years of production. Our 2004 PMV is 22 per share, based on 7x EBITDA for the aeronautical division, 1.18m per MW for the wind farms and 7x EBITDA for the wind turbine production business. Table 4 Gamesa Private Market Value Model 2000A P ( in millions, except per share data) E 2003P 2004P 2005P Wind turbine production Revenue , ,324.0 EBITDA Multiple (x EBITDA) Segment Value , , ,526.9 Aeronautical business Revenue EBITDA Multiple (x EBITDA) Segment Value Total Private Market Value 1, , , , ,882.8 Less: Net Debt/(Cash) Less: Minority Interests Plus: Hidden Assets (Wind Euro 1.2mx MW) Equity Private Market Value 1, , , , ,039.7 Shares O/S - fully diluted PMV per share Source: Gabelli & Company, Inc. estimates and company data.: Nordex (NDX NM Germany): The 7 th largest wind company with a global market share of 7% (strong position in Germany and China), focused mainly in MW turbines. It has a market cap of 150m, has no debt and its main shareholder is a private equity fund (WestLB with 30%). It would fit perfectly Gamesa s urgent need for expansion outside Spain, and for technology of bigger turbines. Moreover, Gamesa is planning to dispose of some wind farms, which would give it the financial flexibility it would need to acquire Nordex. Our PMV is 4.5 per share based on 6x EBITDA for the wind turbine production business. Table 5 Nordex Private Market Value Model 2000A 2005P ( in millions, except per share data) E 2004P 2005P FY 9/30 Revenue EBITDA Multiple (x EBITDA) Total Private Market Value Less: Net Debt/(Cash) (61.0) (48.5) (26.0) (10.5) (6.5) Less: Minority Interests Equity Private Market Value Shares O/S - fully diluted PMV per share ONE CORPORATE CENTER RYE, NY GABELLI & COMPANY, INC. TEL (914) FAX (914) Gabelli & Company, Inc. ( we or us ) attempts to provide timely, value-added insights into companies or industry dynamics for institutional investors. We do not have any formal ratings system for our research reports, and we do not undertake to upgrade or downgrade ratings after publishing a report. We generally write reports on securities that we believe to be undervalued and do not issue any sell ratings. Thus, virtually all of our reports containing recommendations would be considered buy ratings. We prepared this report as a matter of general information. We do not intend for this report to be a complete description of any security or company and it is not an offer or solicitation to buy or sell any security. All facts and statistics are from sources we believe to be reliable, but we do not guarantee their accuracy. We do not undertake to advise you of changes in our opinion or information. Unless otherwise noted, all stock prices reflect the closing price on the business day immediately prior to the date of this report. We do not use price targets predicting future stock performance. We do refer to private market value or PMV, which is the price that we believe an informed buyer would pay to acquire 100% of a company. There is no assurance that there are any willing buyers of a company at this price and we do not intend to suggest that any acquisition is likely. Additional information is available on request. In the last 12 months, we have provided investment banking services to 37% of the companies that were the subjects of our research reports (all of which would be considered buy ratings). Our affiliates beneficially own on behalf of their investment advisory clients or otherwise less than 1% of GAM and NDX. Because the portfolio managers at our affiliates make individual investment decisions with respect to the client accounts they manage, these accounts may have transactions inconsistent with the recommendations in this report. These portfolio managers may know the substance of our research reports prior to their publication as a result of joint participation in research meetings or otherwise. The analyst who wrote this report may receive commissions from customers transactions in the securities mentioned in this report and may receive compensation that is based upon (among other factors) our revenues from acting as a syndicate or selling group member in underwritten offerings.

7 Source: Gabelli & Company, Inc. estimates and company data. Gabelli & Company, Inc

Global Wind Energy Market Report. Wind Energy Industry Grows at Steady Pace, Adds Over 8,000 MW in 2003

Global Wind Energy Market Report Wind Energy Industry Grows at Steady Pace, Adds Over 8,000 MW in 2003 World Growth Cumulative global wind energy generating capacity topped 39,000 megawatts (MW) and reached