Fund-starved wind turbine maker Suzlon Energy has put on hold its capacity expansion plans in India in the wake of the global financial crisis and dwindling orders from its main markets — the US and Europe. The Tulsi Tanti-led company was planning to expand its capacity from 3,200 MW to 5,700 MW with Rs 2,600-2,800 crore.
"We have put on hold the expansion plans. If required, we can augment capacity further by smaller investments in buildings and ancillary equipment, since the basic platform is ready," said Sumant Sinha, chief operating officer, Suzlon.
The activated capacity has increased to 4,200 MW so far with the completion of an integrated manufacturing facility in Karnataka's Mangalore. This 1,500-MW capacity is adequate to meet the current and immediate future demand, Sinha told Business Standard.
The capacity expansion was planned two years ago, with a deadline for completion before March this year. Three months ago, Suzlon dropped its plans to set up a tower manufacturing facility at Kandla near Gujarat to save Rs 669 crore, and to reduce its capex burden for the year to about Rs 930 crore.
The current move to downsize the expansion will help in saving another Rs 250-300 crore. A few weeks ago, Suzlon sold 10 per cent stake in its Belgium-based subsidiary Hansen Transmission to a London-based specialised investment firm Ecofin for about Rs 600 crore to acquire a stake in another subsidiary REpower. Market conditions had forced Suzlon shelve its plans of raising Rs 1,800 crore through a rights issue to fund this acquisition.
As per the terms, Suzlon has to increase its stake in Germany's REpower to 91 per cent, by acquiring the 22 per cent stake of Portugal's Martifer. Suzlon can pay it in three tranches by payment of ¤65 million in December 2008 (already paid), ¤30 million in April 2009, and ¤175 million in May 2009.
Suzlon was planning investments in four export-oriented special economic zones (SEZ) — at Kandla in Gujarat to manufacture tower equipment, a forging facility at Baroda, a wind turbine and rotor blade manufacturing unit at Mangalore and a plant in Coimbatore to make control systems and generators.
Another Suzlon Energy subsidiary SE Forge, which is setting up one of the largest foundry and forging capacities in the world with an investment of about Rs 1,100 crore in Coimbatore, had divested about 20 per cent stake to IDFC Private Equity to raise Rs 400 crore to fund the facility. The foundry is likely to be fully operational within a few months with about 120,000 MT capacity and a 42,000 rings per annum of ring-rolling forgings, required for wind turbine manufacturing.
Suzlon is reportedly in talks with private equity funds to raise more funds. It has to buy back foreign currency convertible bonds (FCCB)s worth $500 million raised for REpower buyout, which will be due in the coming years.
