Suzlon turns to emerging markets growth

Suzlon Energy, the world’s third-largest turbine supplier, is embarking on a significant push for new business in emerging markets as it battles a depressed market in the developed world, where it built its reputation.

The group, with headquarters in Pune in India’s Maharashtra state, plans to refocus its business more sharply on the fast-growing emerging markets of its own country, China, South Africa and Brazil, amid a dismal outlook for wind turbines in the US and Europe.

A senior executive said on Monday the lossmaking company might position Repower Systems, Suzlon’s German subsidiary, to supply more developed markets such as the US, Europe and Australia, with an emphasis on offshore wind farms. The parent company would pursue high-growth opportunities in Asia, Africa and Latin America to build its order book quickly.

“We are aiming to break even by the end of the financial year,” said Nicholas Archer, global head of public relations. “If we can get some of the orders in then our fortunes should change pretty quickly.”

The tilt towards emerging markets comes as analysts predict slower than expected growth in wind power, particularly in the US and Europe, over the next two years. The short-term future for solar power, by comparison, is far rosier.

Last week, Barclays Capital, the UK-based investment group, cut its forecast for global wind power demand by 4 per cent for this year.

HSBC is also pessimistic. “Weak electricity demand resulting from energy efficiency measures and recessionary forces have made national wind installation targets easier to achieve ... This is bad news for wind turbine demand,” the bank said in a report.

Of particular concern is the US market, where proposed renewable energy laws have laid the ground for flat wind power growth over the next decade.

Suzlon, which has annual revenues of $5.5bn and commands 10 per cent of the global wind turbine market, plans to integrate Repower by raising its 91 per cent stake in the German engineering company to at least 95 per cent in the coming months.

The integration is expected to give management an opportunity to reinvigorate brands and streamline the corporate structure from almost 60 subsidiaries at present.

The company, headed by Tulsi Tanti, was at the forefront of India’s global acquisition rush in 2006-07. But its highly leveraged expansion at a time of high asset values came under severe strain in the financial crisis and led to a refinancing of $2.5bn debt last year.

Suzlon views Brazil, where a new government may embrace a 20 per cent renewable energy target by 2020, as having strong growth potential.

“We are really quite excited about the Brazilian market,” confirmed Mr Archer.