Suzlon has been looking towards China to end its 2 year old slump with its profits and stock price crashing to new lows everyday.The company reported a very bad quarter with margins and sales taking a big hit.The company remains burdened with a huge debt load due to its expensive acquisitions of Hansen and RePower during the peak of the cycle.With Global Wind Energy Demand in doldrums as electricity and gas prices remain low,Suzlon is finding it tough to recover.While its low stock price has attracted some buyers it remains more of a falling knife than a fallen angel.Global Wind Energy Leaders like Vestas and Gamesa are also struggling to face the onslaught of Chinese and Korean Competition amidst precipitous fall in their end markets.
Can China Resurrect Suzlon
Suzlon is looking towards China to turnaround its sinking fortunes with even future plans of listing itself in HongKong.Suzlon has a 600 MW Wind Turbine Capacity in Tianjin,China which it is looking to expand to 1 GW in 2013.It has built this capacity not only to cater to the huge local demand from China but also to use it as a low cost export centre.China is on tract to install a massive 18 GW of capacity this year which will be almost 40-50% of the Global Demand.This has attracted global companies in droves to take advantage.However local Chinese companies like Sinovel,Goldwind and Dongfang are dominant in this market with almost a 85% marketshare.Low cost and Local connections makes it impossible for foreign companies to compete in the current market.Growth in Demand has been more than met by the Growth in Chinese local capacity.20 GW of Capacity is expected to be built by 2010 end in China up from around 10 GW in 2009.Fierce Competition in the Wind Turbine Market has led to increasing distress for smaller players.Sinovel the biggest Wind Turbine maker which sold 3.5 GW in 2009 has been using price as a weapon to drive away competitors.These Companies are now trying to expand internationally.Korean Companies like Samsung,Hyundai are investing heavily in the Wind Sector and are on track to become formidable competitors in a few years.Suzlon’s Chinese Dreams looks difficult to implement in reality.
Suzlon Energy, the wind turbine major, has big plans in China, though these may take some time to put through. These include a research and development centre and listing its Chinese subsidiary, Suzlon Energy [ Get Quote ] (Tianjin) Ltd, on the Hong Kong Stock Exchange, in a few years.
There are medium-term plans to list the Chinese subsidiary, but Tulsi Tanti did not specify any time frame. Suzlon is the world’s largest wind energy turbine maker and is listed on the Bombay Stock Exchange [ Images ]. It is yet to finalise location and size of investment for the R&D Centre, said the reports. A few weeks earlier, it had opened a new R&D centre in Germany [ Images ]. It also has one at its Pune headquarters.
The Ahmedabad-based manufacturer will be capable of making turbines with a combined electricity generating capacity of 1,000 megawatts each year at its China plant by 2013, Chairman Tulsi Tanti said in an interview in Tianjin, China, yesterday. That’s 67 percent more than the current capacity of 600 megawatts, which he said will be used fully next year.
“In the long term, the epicenter of our industry and our business will move to China,” Tanti, 52, said. “China will remain the largest market for the next 10 years.”