Mergers And Acquisitions Suzlon And Repower Marketing Essay

When Suzlon entered the global market in 1998, it had been able to grab a big share of the market almost immediately. There was a huge demand for wind turbines as governments across the world looked for environment friendly alternative energy sources that would reduce dependence on hydrocarbon and coal based power plants. There was a big shortage of suppliers in the market, and that worked to its advantage. Big brands such as GE and Denmark’s Vestas AS were unable to fill in the demands. Suzlon was able to capture this negative initially.

In March 2006 Suzlon Wind Energy signed a definitive agreement for the strategic acquisition of Hansen Transmissions. Hansen Transmissions is a major wind turbine gearbox manufacturer with state of the art manufacturing facilities in Edegem and Lommel in Belgium. Hansen Transmissions International NV (“Hansen”), headquartered in Belgium has a strong R&D capabilities and modern manufacturing facilities. Suzlon gains technological leadership from the integration of research and development, design and production to evolve the next generation of more reliable wind turbines.

Suzlon Energy Limited (“Suzlon”) with its subsidiary, AE – Rotor Holding BV based in Netherlands entered into definitive agreements to acquire Hansen Transmissions International NV, for EUR 465 million (RS 2511crores) enterprise value, in an all cash transaction.

Suzlon is a vertically integrated wind power company, having end-to-end solutions from assembly, installation to commissioning. The company manufactures blades, generators, panels, and towers in-house, as well as gearboxes through its partial ownership of Hansen Transmissions and state-of-the-art large or offshore turbines through its subsidiary REpower. Suzlon is integrated downstream and delivers turnkey projects through its project management and installation consultancy, and operations & maintenance services. Suzlon has offices, R&D and technology centers, manufacturing facilities and service support centers spread across the globe.

Planning of Wind Farm Systems, Land Acquisition, Development and Technical Design, Infrastructure and Equipment, O&M services. Suzlon offers customers’ end to end wind energy solutions, including wind resource mapping, site development and installation, and finally operations & maintenance services in India. This allows Suzlon to offer Indian customers economies of scale, and eliminates the need for customer involvement in the complex process of wind farm development.

The Electricity Act, 2003, specifies that a minimum percentage of power generation should come from non-conventional energy sources. For example, the Karnataka government has mandated 5% from non-conventional sources, and the Madhya Pradesh government 0.5% This reflects the government’s intention of reducing the dependence on fossil fuels and cut down carbon dioxide emission. Moreover, perennial power shortages assure a sustained growth in demand for power generation.

Suzlon Energy is expanding overseas, where major players have established markets. The advantage of new markets and new orders may take time, while marketing, personnel and other initial costs could jump. Hence, this may put pressure on the margin in the short run. Risks involved in overseas business are also higher, Company is facing liquidity crunch to pay its debt recently promoters had sold their holding in the company. So expansion plan may further increase the burden on the company balance sheet.

Suzlon is in need of restructuring the debt of about Rs 11,800 crore which it raised for various national & global acquisitions. The Company faces foreign exchange loss of nearly Rs 435 crore because of that 500 million zero coupon convertible foreign Currency Convertible Bond (FCCB) which is still pending are due in 2012. The blade retrofits and consequentially availability charges of nearly Rs 307 crore is another concern area and the third is the mark-to-market MTM) loss of nearly Rs 215 crore which is on account of foreign exchanges forwards options contract which the company has taken to hedge. These are the three important areas – the foreign exchange loss, blade retrofits and MTM loss which can affect the company’s profitability in coming time.

Probably, the biggest problem for Suzlon is that wind energy requires so much government support to be a viable market. Take away the sops or put the government stimulus behind other alternative sources of energy such as solar, the impact it will have on wind power companies will be devastating. Changes in Government policies in European countries during economic slowdown impacted Suzlon’s growth in big markets.

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