Pelamis Wave Power Ltd., supplier of the world's first multiple-machine wave farm, is in talks on a partnership to expand as it prepares for an influx of orders.

Pelamis is in discussions with several companies and making “good progress” toward an agreement, Richard Yemm, founder and director of the Edinburgh-based developer, said in an interview. Pelamis needs the “right solution” in place before receiving orders for multiple machines in one to two years, Yemm said.

The company’s technology, which uses the motion of waves to generate power, received a boost from the U.K. and Scottish governments in 2011 with an increase in the incentives provided for marine-energy production. While no commercial-scale wave or tidal projects are in operation, government data show they have the potential to meet as much as 20 percent of Britain’s current electricity demand, spurring Pelamis to prepare for expansion.

“When we reach the stage of the big array orders — considering that even a 10-megawatt array is 60 to 70 million pounds ($96 million to $113 million) — the company needs to have a decent balance sheet behind it,” Yemm said. That will “reassure the customers that the company will stand behind the technology and is going to be around in 10 years from now.”

Pelamis has already sparked interest from European utilities: Germany’s EON AG and Iberdrola SA’s Scottish Power Ltd. are testing two Pelamis machines in Orkney, Scotland, and Vattenfall AB is helping the company build a 10-megawatt project off the Shetland Islands. Pelamis supplied the world’s first multiple-machine wave farm to Portugal’s Enersis in 2008.

Partnership Plan

The developer is “open-minded” to the structure of any partnership, Yemm said by phone. Whether the tie-up is effected through an investment or acquisition is “less crucial” than the resources it brings, he said. “It’s really their presence and additional skills that are needed.”

Marine-energy companies have attracted investments from industrial groups as renewable-energy output expands. Siemens AG, Europe’s largest engineering company, bought Marine Current Turbines Ltd. in February. Alstom SA acquired Tidal Generation Ltd. from Rolls-Royce Holdings Plc last month. ABB Ltd. invested in wave-technology maker Aquamarine Power Ltd. last year.

Pelamis said last November it was looking to team up with a “strong” industrial company and had hired Ernst & Young LLP to facilitate the process. The most likely strategic investors would be large power engineering companies that haven’t already backed wave technology, Angus McCrone, a senior analyst at Bloomberg New Energy Finance, said at the time. They include Siemens, Areva SA and General Electric Co., he said.

Copyright 2012 Bloomberg

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