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Suzlon aims to add market share, eyes South Africa

Suzlon aims to add market share, eyes South Africa
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First Published: Wed, Aug 03 2011. 04 04 PM IST
Updated: Wed, Aug 03 2011. 04 04 PM IST
Mumbai: Indian wind turbine maker Suzlon Energy plans to grow its market share this year, helped by growth in Europe, emerging markets such as India, Brazil and South Africa, and through orders for offshore turbines, its chairman said on Wednesday.
Suzlon, the No. 5 global wind turbine maker by capacity, is considering setting up a manufacturing plant in South Africa, which has recently opened up its wind energy market, Tulsi Tanti told Reuters in an interview.
It is now building a plant in Brazil.
“India, China, Brazil -- they need any electrons -- they need energy,” said Tanti, who founded Suzlon in 1995 after his then-textile business was plagued by power shortages, a common problem in India.
While the US market is less promising for the firm because of a sluggish economy and cheap natural gas, growth in Europe will be driven by government targets for renewable energy, Tanti said at the Pune-based firm’s suburban Mumbai offices.
“We are not concerned about Europe because for the wind industry, there is a regulatory target. Now governments’ focus is also on renewables,” Tanti said.
Suzlon has been under pressure for the last few years as global turbine sales slowed and it was weighed down by debt after buying majority stakes in Belgian gearbox maker Hansen Transmissions in 2006 and Germany’s REpower Systems in 2007.
Last week, Suzlon sold its 26% stake in Hansen to Germany’s ZF Friedrichshafen AG for $187 million and plans to use the funds to cut its estimated debt of Rs12,300 crore ($2.8 billion).
Suzlon also plans to take full ownership of REpower Systems after raising its stake to more than 95%, which analysts have said will allow it to access technology and cash on the German firm’s books.
“We have kept the focus on technology, which is paying now. We have optimized our cost structures, and we are positioned very well in high-growth markets,” Tanti said.
Its key products include REpower’s huge offshore turbines, where its main rival is Germany’s Siemens.
Suzlon raised $175 million in a convertible bond issue in April. Macquarie said in a note that Suzlon can “easily” repay $650 million in debt principal that comes due in 2012, with cash from REpower after it takes full control, and proceeds from the Hansen sale.
Industry overcapacity
Suzlon, whose biggest markets include India, China and Brazil, intends to expand its global market share to 9-10% from 7% last year, Tanti said.
“The industry will grow by 15% and our order book will grow more than 15% globally. If we are growing faster than market, we will add about 2% market share,” Tanti said.
The global wind turbine industry is saddled with about 30% overcapacity, putting pressure on margins, Tanti said, but added he was confident of delivering on Suzlon’s 8% EBIT margin target. He expects industry capacity to be fully utilized in about three years.
Suzlon has been the subject of occasional market reports of a possible sale, which were denied by Tanti, who said the founders remain firmly committed and believes the worst is behind the company.
Suzlon, whose rivals include Denmark’s Vestas and Spain’s Gamesa, reported a profit for the three months through June on the back of a sharp rise in sales after posting a loss in its most recent financial year, prompting some analysts to lift their outlooks.
Shares in Suzlon, worth $2.2 billion, have lost 5.8% in 2011, better than the 12.5% fall in the main index, and were up 0.58% on Wednesday at Rs52.45. The stock peaked at Rs431.96 in 2007 amid a global boom in renewable energy shares.
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First Published: Wed, Aug 03 2011. 04 04 PM IST