UPDATE 2-EDP says to sell 20-25 pct of renewables business

(Updates with quotes, more details)

By Sergio Goncalves

PORTO, Portugal, Jan 31 (Reuters) - Portugal's EDP (EDP.LS), the world's fourth-largest wind power company, said on Thursday it planned to sell 20 to 25 percent of its renewable energy unit via a capital increase to fund its investment plans.

EDP said the initial public offering of EDP Renovaveis, the renewables unit, is expected to take place in the second quarter of 2008, depending on market conditions.

A new business plan for the renewables business will be presented at the time of the IPO.

"The global energy market is changing and renewables are an unstoppable tendency," EDP Chief Executive Antonio Mexia said at a company investor day, when the plans were presented.

In a statement, the company said wind and hydro power should represent 45 percent of earnings before interest, tax, depreciation and amortization (EBITDA) by 2010 and 68 percent of capital expenditures.

In 2007 wind and hydro represented 34 percent of EDP's overall EBITDA.

EDP has an investment plan of 6.2 billion euros for wind power during 2007-2010, which represents 60 percent of total investment for the company in that period. It is hoping to increase wind-power capacity to 7,600 megawatts (MW) by 2010 from 3,640 MW at the end of 2007.

In 2011-2013 it is aiming to add 1,200 mw a year. The company also said it has the ability to raise its hydro power capacity by 50 percent in 2007-2015.

EDP's plans to boost alternative energy output are supported by high oil prices and Brussels' push to cut greenhouse gas emissions.

The European Commission approved a plan last week to cut greenhouse gas emissions by one-fifth and asked EU states to produce 20 percent of all power from renewable sources such as wind by 2020.

EDP said it had appointed Morgan Stanley, UBS, Citigroup and Portuguese banks BES Investimento, Caixa BI and Millennium bcp investimento to carry out the IPO.

EDP Renovaveis comprises Neo Energia, which groups its European renwables business, and U.S. wind-power company Horizon Wind Energy.

At 1130 GMT shares in EDP were 0.12 lower at 4.275 euros. The shares rose sharply on Wednesday after the company first said it planned to launch an IPO of its renewables business but they are still 4.25 percent lower than at the beginning of 2008. (Reporting by Sergio Goncalves, writing by Axel Bugge, editing by Will Waterman)