Indian Wind Power Giant Faltering

[Riaz Haq]

Indian Wind Power Giant Faltering
By Riaz Haq
www.riazhaq.com

India's Suzlon Energy (SUZL: BSE), with 8% market share of wind turbine in the US, is beset by quality issues at home and abroad, according the Wall Street Journal.

Suzlon Energy, with market cap of INR 270B, is a wind power company in India. In terms of market share, the company is the largest wind turbine manufacturer in Asia and the fifth largest worldwide. With headquarters in Pune it has several manufacturing sites in India including Pondicherry, Daman, Bhuj and Gandhidham as well as in mainland China, Germany and Belgium. The company is listed on the National Stock Exchange of India and on the Bombay Stock Exchange.

The window of opportunity for Suzlon opened up with growing demand for green energy amid global-warming fears and the soaring cost of oil, coupled with shortages of turbines from more established players. The company's less-expensive turbines raised hopes for a reduction in the cost of wind power, which currently is subsidized in many countries, including the U.S.

Suzlon's problems in India come as the company also is stumbling in the U.S. Blades on turbines sold to U.S. customers Deere & Co. and Edison International's Edison Mission Energy began splitting last year, leading to a blade recall for strengthening. Indian customers say the turbines have technical problems that make them vibrate excessively when operating at high wind speeds. Some turbines have run out of control in strong gusts, leading to generator blowouts and blades splitting.

The Wall Street Journal reports that Madras Cement has bought 36 units of Suzlon's 1.25 megawatt turbines since 2003. A.V. Dharmakrishnan, executive director of finance for the Chennai-based company, says excessive vibrations at high wind speeds, forcing turbines to run below capacity, are costing the company about $4 million in lost power this year. "The turbines are not capable of producing [electricity] even when the wind is there," he says.

Speaking to Wall Street Journal, Suzlon spokesman Vivek Kher denied the company's turbines have experienced technical problems in its home market. Any drop in performance, he said, is because of falling wind speeds in India in the past couple of years and regular problems connecting to India's shaky electricity grid, which frequently causes turbines to shut down. "There are many companies who are extremely happy with their investment in Suzlon wind turbines," Mr. Kher said.

These latest reports are clearly a blow to a rising Indian company at the forefront of the green energy revolution. How it addresses these issues will clearly determine its future.

The Suzlon shares closed at INR 207.45, down 1.55 from the opening bid of INR 209.00 in latest trading. However, Suzlon is down more than 50% from its 52 week high of INR 460 hit on Jan 9 of this year.