Suzlon needs to invest in property for wind farms and power distribution equipment to maintain its dominant share of the Indian wind market, which is expanding by 40 percent annually, according to Chairman Tulsi Tanti.

“We need some liquidity” to fund expansion, he said in an interview this week in Durban, South Africa, at international climate talks. There’s “nothing wrong” with founding investors, known in India as “promoters,” selling small stakes that will bring big benefits, he said.

Tanti’s remarks counter speculation by analysts and traders that the 1 billion rupees ($19.3 million) in proceeds may have been raised to meet margin calls on bank loans backed by shares. Samanvaya Holdings Pvt., a holding company of various promoters, sold 2 percent on Nov. 17 as Suzlon slid toward an all-time record close of 21.35 rupees and its second-worst month on record in the stock market.

“It’s not a good sign because it could mean they’re running out of cash,” said Raj Kothari, a London-based bond trader at Sun Global Investments Ltd., which owns Suzlon convertible debt. “Even if he’s going to put the money back in the company, that’s not reassuring,” Kothari said by phone.

Suzlon lost 40 percent in November for its second-worst month since it began trading in 2005, according to data compiled by Bloomberg. “With the share price falling, they may have to get money for the company to meet margin calls,” Kothari said.
Company Denial

The company denied that suggestion in an e-mailed response to questions from Bloomberg. Separately, it said promoters have been increasingly pledging shares against loans either to borrow more, to repay loans or for minor “top-ups” of collateral.

Declining stock prices in Asia’s worst-performing major market this year has forced Indian companies to pledge shares worth 1.1 trillion rupees as collateral to banks for loans as of Nov. 18, according to a report by Standard & Poor’s Indian unit Crisil Ltd.

“In the backdrop of inadequate disclosure levels on share pledging, investment in such companies exposes an investor to severe price volatility,” Crisil said.

Suzlon has $569 million of foreign-currency convertible bonds that mature next year, the company said in an e-mail response to questions on Nov. 30.

Tanti declined to say whether the company was approaching bondholders to buy back those notes before they mature. They’re apt to miss the threshold at which investors would convert them into equity. “We have a very clear plan,” Tanti said. “We are comfortable to repay bondholders in a time schedule.”

If the stock price continues to fall, Suzlon’s credit spread might increase, meaning its borrowing costs for new debt or for refinancing existing loans could also rise, Priyo Mayengbam, a Singapore-based analyst at Frontier Investment & Capital Advisors, said in a Nov. 18 response to questions.

A wider group of Suzlon’s founding shareholders had pledged a total of 76 percent of their holdings as of Oct. 21 in exchange for loans, according to data from the BSE Ltd. and National Stock Exchange of India Ltd. In total, 41 percent of the company’s outstanding shares have been posted as collateral.

When a large amount of shares are pledged, it reduces the founders’ ability to absorb volatility in the stock price, said Atul Gharde, a Hong Kong-based credit analyst at SJS Markets Ltd.

“Falling stock can lead to margin calls, which leads to more shares pledged or dumping of stocks by creditors to cover losses, a negative spiral,” he said.
Agencies

The anticipated capacity addition would be 39 per cent higher than that of 2,142 Mw witnessed last year, according to a HSBC Global Research.Further, the country is projected to have wind capacity addition of nearly 7,500 Mw between 2011-15 period. “The key drivers for growth are primarily a strong policy framework and improving cost competitiveness of wind technology compared to conventional generation,” the report said.

Going by projections, this year alone would see a capacity addition of 2,984 Mw. The country had a wind energy capacity of nearly 15,000 Mw at the end of August 2011, as per official data. Historically, a significant proportion of installations in the Indian wind market have been by non-utilities/ non-developers.

However, the past two to three years have seen emergence of various renewable developers, with the Indian market growing from 1,600-1,800 Mw to a 2,000 Mw market, the report said. In recent times, many entities are getting into renewable power generation segment, especially focusing on wind energy.

HSBC Global Research said that over 2011-15, about 7,500 Mw of new wind capacity — average of 1,500 Mw per annum — would be installed by “new breed of developers alone”.

“We, therefore, retain our wind installation forecasts for 2012-15, with 2,400 Mw installations in 2012 and 2,700 Mw in 2015,” it added.
Agencies

Greenko, which develops, owns and operates clean energy projects, has raised the funding for its newly created wind holding company Greenko Wind Project Pvt Ltd. Greenko, which is backed by PE firms like TPG Growth and Aloe Environment Fund, has recently raised US $80 million through a primary and secondary offering for its wind strategy. “Greenko Wind Project expects to raise further equity and debt in due course to support this area of business,” the company stated. Greenko is also expected to commit US $65 million to the new unit.

The funding from GE Energy Financial Services will help Greenko Wind Project develop the initial 500 Mw out of its planned development of 1 GW of wind energy projects across India. The investment will be done in two tranches of US $25 million for equity shares and $25 million for convertible preference shares in Greenko Wind Project. The deal is subject to completion of reorganisation of Greenko’s wind energy division and the commissioning of Greenko’s Ratnagiri wind energy project.
Agencies

According to the statement from the company, the new turbines at a wind speed of 7.5 m/s the turbine delivers a net wind farm capacity factor of up to 42 per cent, equivalent to 3,600 full-load hours each year. Its 122-metrerotor diameter and swept area of 11,700 m2 – the largest in the 2 MW to 3 MW turbine segment – maximise the harvest of energy and the return on investments from low wind sites.This rotor in the 2 Mw to 3 Mw turbine segment delivers around 25 per cent increased wind farm yield.

Alfonso Faubel, Senior VP,  Alstom’s wind business said, “With the ECO 122 and other turbines in our ECO 100 platform, we’re leading the development of the new generation of high power, high-efficiency turbines. Longer blades capture more power more effectively, and with its swept area much larger than current generation machines, the ECO 122 has set a new standard for low wind sites around the globe.”

The ECO 122produces about 25 per cent increased wind farm yield on a given piece of land compared with today’s 1.5 – 2 Mw turbines, and fewer turbines need to be installed. As an example, on a typical low wind site, six current generation 1.5 – 2 MW turbines will produce around 40 GWh/year2, compared with more than 50GWh/year with only five ECO 122 turbines.”

An ECO 122powered wind farm can reduce balance of plant costs by 10-15 per cent, compared with a farm using typical 1.5 – 2 MW machines, due to fewer foundations, platforms and roads, and less cabling.

The ECO 100platform now has more than 350 MW installed or under construction worldwide and over 200,000 cumulative operating hours since 2008. All Alstom wind turbines are based upon the unique and proven ALSTOM PURE TORQUE® rotor support concept that protects the drive train from deflection loads, ensuring higher reliability and lower maintenance costs. The first ECO 122 will be installed in mid 2012 with first commercial deliveries expected in early 2013.

Orient Green Power Europe a subsidiary of OGPL also synchronized 10.5 Mw in Croatia recently. With these additions, OGPL has attained an operating capacity of 250 Mw of wind energy apart from the 50 Mw of Biomass based power.

With 245 Mw of green power in Tamil Nadu, OGPL is one of the leading renewable energy IPP in the state. OGPL’s total operating capacity totals to 300 Mw comprising both wind and biomass. During the current financial year the company has added 80 Mw till date and plans to add another 147 Mw before this fiscal. Another 100 Mw of Wind capacity is planned to be added by June’12 – before the beginning of next wind season. Plans are on to add further capacities in Karnataka, Andhra Pradesh and also in possibly Maharashtra. The steady increase in capacity will see the company consolidate its position as the leading independent renewable energy-based power generation company in India.

T Shivaraman, vice chairman, OGPL, said, “We plan to cross 500 Mw mark by Q2 of 2012-13 and will continue to be a significant player in the Renewable Energy space in India. This capacity addition will lead to enhanced availability of power, especially in rural Tamil Nadu and also offers employment to the people in the region directly and indirectly

ReNew Wind Power was founded by Sumant Sinha, has signed business framework agreements with Kenersys GmBH, Regen Powertech Pvt and Suzlon Energy Ltd to establish and operate wind farms throughout India and will expand its wind portfolio by 200 – 300 Mw annually.  Currently, ReNew Wind Power has a 25 Mw wind farm in Gujarat and 60 Mw wind farm in Maharashtra.  The company aims to reach 1 gigawaat by 2015.

Sumant Sinha, Chairman and CEO, ReNew Wind Power said, “This deal reinforces our commitment to developing sustainable energy solutions for India. Goldman Sachs’ global experience and network in the alternative/clean technology industry will provide us with additional momentum. Our vision is to be the leading renewable energy generation company in India.”

Ankur Sahu, co-Head of private equity in Asia at Goldman Sachs said, “This investment underscores Goldman Sachs’ continued commitment to India and support for the country’s clean energy needs.  ReNew Wind Power stands out as an example of Indian entrepreneurial excellence and we look forward to teaming with the management, both financially and operationally, to help the company become a leader In India’s renewable energy sector.”

Globally, Goldman Sachs has invested over US $1.5 billion in alternative/clean energy-related companies, including Horizon Wind Energy and Nordex AG. Horizon Wind Energy is a Houston-based, leading wind power company that develops, constructs, owns and operates wind farms throughout North America.  Nordex AG is developer and manufacturer of multi-megawatt wind turbines based in Germany.

The government wants to axe an accounting rule next year that encouraged companies to erect most of the 14,157 Mw in wind projects as a way of cutting taxes rather than generating power. It favours a less-generous subsidy that companies have been slow to adopt.

“We could see some disturbance in demand and some filtering out of smaller players,” said Mahesh Makhija, director of renewables at the local unit of CLP Holdings Ltd. (2), Hong Kong’s biggest power supplier and India’s largest developer of wind farms. A 400-megawatt slump in demand could cut investment by Rs 2400 crore ($540 million) based on current construction costs.

Biggest property developer DLF Ltd. (DLFU) and Hindustan Zinc Ltd. (HZ), a mining unit of billionaire Anil Agarwal’s Vedanta Resources Plc (VED), used the tax benefit called accelerated depreciation to build some of the country’s largest wind farms, project design documents show. The accelerated depreciation accounting method allows companies to write off investments at a faster rate than normal, which reduces tax liabilities.

“The wind farm was really more of a financial instrument than a power plant,” said Arvind Prasad, managing director of the power unit of Ushdev International Ltd. (UTF), the third- largest non-state metal trader, which also develops wind parks. “It’s not the best way to address the country’s power issues,” said Prasad, who heads the Indian Wind Power Association’s chapter in the state of Maharashtra.

The government says an alternative subsidy will do more to address a power deficit that tops 39 per cent in some areas, hampering the second-fastest growing major economy after China. The Generation-Based Incentive rewards projects on how much clean energy they produce instead of the size of installations.

“Wind projects need to increase generation, not be put up just for tax benefits,” Renewable Energy Minister Farooq Abdullah said in February. The finance and renewable energy ministries plan to discontinue the benefit next April, when India is expected to introduce a new tax code, he said.

The upcoming Direct Tax Code doesn’t explicitly propose to change current income tax laws that permit accelerated depreciation, the Finance Ministry’s Central Board of Direct Taxes said in response to questions. The government is still discussing the matter, Dilip Nigam, the renewable energy ministry’s head of wind power policy, said. The lack of clarity is likely to prompt a temporary jump in demand amid a rush to build projects in the current financial year, said Sethia of New Energy Finance, a London-based researcher. Even if the government decides to continue the tax break, wind projects may drop by 250 Mw next year, he said.

A shakeout may intensify turbine suppliers’ push for new business as wind installations peak in developed markets in the U.S. and Europe. Turbine suppliers in India jumped by a third to 20 last year as the country installed about $3 billion of wind capacity, the most after China and the U.S.
While global wind farm installations declined for the first time in almost two decades in 2010, India overshot the government’s target by 18 per cent. Anticipating that trend to continue, Siemens AG (SIE) plans its first 500-megawatt wind turbine plant in India by 2013, Gamesa Corporacion Tecnologica SA aims to complete three facilities by 2012 and GE opened a turbine assembly plant in India this year.

The alternative subsidy favored by the government “will shift the market focus from investment incentives to production incentive, which is very relevant in the backdrop of energy shortfalls in the country today,” GE said.

“This will attract new developers” that will focus on making power more available more efficiently, it said in an e- mailed response to questions.

Suzlon Energy Ltd. (SUEL), India’s dominant supplier, said in an e-mail that it welcomed “this shift across investor groups” who are now looking with a long-term view that would mean larger- sized projects, lower transaction costs and more evenly distributed demand throughout the year for the industry. Enercon India Ltd., India’s second-biggest turbine supplier, declined to comment on whether the end of the tax break could impact demand.

Suzlon faces increasing competition from new entrants. Its share of new wind installations in India dropped below 50 percent for the first time last year while Spain’s Gamesa topped Vestas Wind Systems A/S to emerge as the nation’s third-biggest wind supplier after just 18 months in the market.

The Generation-Based Incentive pays wind farms Rs 500 for every Mw-hour fed to the grid. Wind developers are pressing to double that to Rs 1,000 and remove an overall cap of Rs 6.2 million per Mw to make the subsidy as lucrative as accelerated depreciation, said K. Kasthoorirangian, chairman of the Indian Wind Power Association.
Only 543 Mw of wind projects have signed up for the Generation-Based Incentive since its introduction in December 2009, which is available for as much as 4,000 megawatts of projects, according to ministry data. State electricity regulators are also gradually raising the tariffs they pay for wind-powered electricity while tradable renewable-energy certificates issued to clean-power utilities could make projects more profitable.

Helpful as an early catalyst, the tax break is now distorting the sector, CLP’s Makhija said. “It’s high time that it goes,” he said.
Agencies

India according to Tanti will “register close to 40 per cent growth rate in the wind segment. And also will continue to contribute the maximum to the renewable energy mix in the country in the short term.”

The new S9x series has been designed to cater to the global market. This series produces 14 million kilowatts of more power in twenty years in comparison to the existing S88 series. “The S9X series has a energy yield  of 14 per cent more, a greater grid compliance and technologically very advanced, ” pointed out  John O’Halloran, President Technology in his presentation. This new equipment is also enhanced with flexible speed technology which will enable it to manage the sudden fluctuations in the grid.

Tanti pointed out that the company’s order book stands at US $6.5 billion which is a clear indication of the global growth in this segment. Suzlon has presence in 28 countries globally with 17,000 Mw operational. He added that the aim is make the company from 17 Gw to a 100 Gw by 2020. That means he said,an addition of 4500 Mw an year both from offshore and onshore put together.

The S9X wind turbines take advantage of low-to-moderate wind speeds. “The features of S9X-2.1 Mw turbine deliver a high return on investment for the customer,” said Andris Cukurs, CEO, Suzlon Wind Energy Corp. The project at full capacity can power more than 11,000 homes in Canada. Pursuant to a ten-year warranty, maintenance and service pact, Suzlon will provide operation services to the Amherst project.

Suzlon Group had secured 300 Mw orders from Canada in January this year
Agencies