Suzlon readies euro 625 mn for REpower purchase

Ahmedabad"�based Suzlon Energy has tied up funds for its €1.2 billion (Rs 6,543 crore) bid for the German power company, REpower, even before the last date for raising bid by the rival French giant Areva expires on Thursday.

Sources close to the company said it had organised funds worth €625 million (Rs 3,408 crore) through two bridge loans, a €325 million (Rs 1772 crore) 10-month tranche and a €300 million (Rs 1,636 crore) 18-month tranche. ABN Amro is the lead manager for the fund collection.

Suzlon, which holds 30 per cent stake in REpower along with its partner Martifer, needs the funding to acquire the remaining 70 per cent.

It also plans to raise €300 million five-year loan to repay the €450 million 12-month bridge loan raised in March 2006. Suzlon had raised the term loan to partly finance its €465 million acquisition of Belgium's Hansen Transmissions International.

Sources said there might be some minor deviations in the proposed plan at the time of raising the funds.

If Suzlon's attempt to acquire REpower does not succeed, it will go ahead with the five-year loan. In that case, the bridge loans of €625 million may be cancelled.

Macquarie Research, which today downgraded the Suzlon stock to "underperform" from "neutral with a target price of Rs 1,020 against today's close of Rs 1,132, said in a report: "On the REpower bid, we see a pragmatic approach being taken, whereby the Suzlon-Martifer consortium will either take control of REpower, work together with Areva, or sell out to the highest bidder."

Macquarie downgraded its recommendation on the Suzlon stock "mainly based on continued pressure on EBITDA margins and the company paying some price for 'learning' to operate its increasingly global business effectively.

The EBITDA margin stood at 17 per cent at the end of Q4 FY07 against 26 per cent in Q4 FY06.