India's Suzlon plans China expansion as wind-turbine `epicenter' shifts

www.bloomberg.com
Sep 14, 2010

Suzlon Energy Ltd., India's biggest maker of wind-turbine generators, said it plans to expand capacity at its plant in China as that market gains importance and the company returns to profit this financial year. The Ahmedabad-based manufacturer will make turbines capable of generating a combined 1,000MWs in China by 2013. Chairman Tulsi Tanti said yesterday in an interview in Tianjin. China. That's 67% more than the current capacity of 600MWs, which Tanti said will be used fully next year. "In the long term, the epicenter of our industry and our business will move to China", he said. "China will remain the largest market for the next 10 years".

Suzlon Energy joins General Electric Co, and European rivals that are introducing newer technology and opening factories in China, the world's fastest-growing green energy market, as they compete for orders. The country plans to add 18GWs of wind capacity this year, which Bloomberg New Energy Finance estimates is double what's expected in the US, the No. 2 market. "It's a good idea to expand in emerging markets like China", Anuj Upadhyay, a Mumbai-based analyst with Wallfort Financial Services Ltd., said by telephone yesterday. "It doesn't cost much to expand the existing capacity. The country has huge wind power potential".

The Indian turbine maker is looking to form partnerships with Chinese companies to develop offshore wind projects using 5-MW and 6-MW turbines, he said. Orders from China and India may help Suzlon Energy offset slowing orders in Europe after the debt crisis made it difficult to raise funds for renewable energy projects.

Losing Abroad
"We have a good home market", Tanti said. "India is good. China is good, profitability is good. What we were losing was our international operations". Suzlon's loss in the three months ended June 30 doubled as a weaker euro devalued the company's overseas assets, though the company expects to return to profit this financial year. Analysts are not all in agreement. "In view of the company's current order book, it will be difficult for Suzlon to break even this fiscal year", Upadhyay said. Suzlon shares fell 0.7% to 51 rupees in Mumbai trading yesterday.

Tanti said Suzlon isn't selling stakes in its European units, including REpower Systems AG, a German wind turbine maker. Suzlon is in talks to sell as much as a 25% stake in REpower for $500 million, the Economic Times reported on Aug. 16. "It's a strategic investment and we would like to integrate the company", Tanti said. Suzlon held 90% of REpower as of March 31, according to data compiled by Bloomberg.

Stake Sales
Suzlon won't sell its interest in Hansen Transmissions International NV until it can get a better valuation for the Belgian gearbox maker. Tanti said. "There's no benefit for us at this valuation to sell", Tanti said. "At an appropriate and good and right valuation, we might think of an exit". Suzlon retains a 26% stake in Hansen after selling a 35.2% interest in the company for 224 million pounds on Nov. 19 to help pare debt. Hansen's share price has fallen 50% this year, according to data compiled by Bloomberg.