Mumbai: Changing their minds for the fourth time in a little over two months, the board of German wind turbine company Repower AG switched allegiance, asking shareholders to accept a €1.34 billion (Rs7,638 crore) offer from Suzlon Energy Ltd.
Suzlon has been battling Areva SA of France for the German company and had recently increased its offer to €150 a share, €10 per share higher than what Areva had offered. Both Suzlon and Areva also own stakes in Repower.
In its statement, Repower’s management and supervisory boards said that they regarded both Suzlon and Areva as “appropriate strategic partners for the accelerated growth in the international wind energy industry,” but were approving the Suzlon offer.
Suzlon has been trying to increase overseas sales as spiralling land prices, controversy over Special Economic Zones (SEZs) and forced land acquisitions at home are threatening to pay havoc with its ability to deliver and commission wind farms on time.
The company is learnt to have recently cancelled a contract for almost 160 megawatt of turbines, to be installed in Maharashtra, due to agitation by local people.
“We have had some problems with both our sites in Maharashtra as regards acquisition of land. We have not had much support from the state government or help from the state administration. This has led to shifting of some projects to Gujarat, deferment of some to this fiscal year and cancellation of a small percentage of the orders,” said a spokesperson.
A recent report by brokerage Merrill Lynch forecasts that sales from international operations of Suzlon, which were Rs367.2 crore in 2005-06, will rise to Rs2,445.6 crore in 2006-07 and overtake domestic sales of Rs4,551.8 crore in fiscal 2007-8.
The potential acquisition of Repower will help the company boost its global market share by 50% to 9% of the global wind energy market.
Europe is also the world’s largest wind power market, accounting for 50% of the global market.
A recent research report by brokerage Macquarie Securities forecasts that a number of European markets will grow at almost double the global average growth rate.
Suzlon currently has a weak European presence that it hopes to plug with the Repower acquisition.
Suzlon, meanwhile, said it wants to retain all members of that company’s management and board if the bid goes through.
“Suzlon considers Repower’s management to be a key factor for the development of the business…(and) expects that the current members of the management board will continue,” says a regulatory filing made by the world’s fifth largest wind turbine maker to the German authorities.
Repower’s supervisory board will remain in office till the next general meeting (to be held) in 2011, the filing adds.
It appears that Suzlon would like to retain Repower as a separate company.
Repower will be run almost independently except in areas like the supply chain where Suzlon will use its excess capacities in India and elsewhere to supply key components needed for the manufacture of wind turbines.
However, Suzlon will enter into a ‘domination agreement’ with the third largest wind power player in Germany that will give it the ‘right to issue instructions to the Repower management’.
Suzlon wants to leverage Repower’s research and development expertise to achieve worldwide technology leadership in the wind business.
Suzlon has also committed to making Germany the global headquarters for research and development, technology and product development.
Amsterdam is currently the global headquarters of the company while the corporate office is located in Pune.
“The combined group will be able to penetrate faster in new markets and facilitate development of more reliable and cost-effective competitive machines,” says Suzlon.
This will be done by establishing a global technology centre for wind power in Hamburg, Germany, jointly with Repower.
Suzlon intends to follow a dual brand strategy by retaining use of the Repower brand as well as its own.