Indian Energy Giant Suzlon Faces Economic Backlash

Wind energy giant Suzlon, once a star of India’s green technology, is facing a stormy future after aggressive expansion left it mired in debt at a tricky time for the industry, analysts say.

The world’s fifth largest wind turbine firm this month made the biggest default on repayments by an Indian company, after bondholders rejected its request for a four-month extension to more than $200 million of debt. Investors are watching with concern to see if founder Tulsi Tanti can steer them out of a desperate fund-crunch over the coming crucial months, in an uncertain global business environment.

The picture was once far rosier for Suzlon, headquartered on a sprawling 10-acre campus on the outskirts of Pune, a city in western India.Before the global financial crisis, the firm was the bluest of blue-chips and chairman Tanti, fondly called the “Wind-Man of India”, was a poster-boy for entrepreneurship and unbridled ambition in the country’s growth story.

He had capitalised on rising international concern over global warming and climate change to rapidly expand his firm, which generates nearly 20,000 megawatts of wind energy capacity in 30 countries worldwide, including North and South America, Europe, Asia and Africa. In 2005, Forbes ranked Tanti as India’s eighth richest man, but this year he has fallen off the list of the country’s richest 100 people.

His company’s fortunes have mirrored the slide, which analysts blame on an over-aggressive expansion, compounded by its unfortunate timing just before the global economic bust.Suzlon spent more than $2 billion, largely raised through debt, on two large acquisitions in Europe: Belgium’s Hansen Transmissions, which made wind gear boxes, and Germany’s wind turbine maker giant REpower.

The firm stumbled in 2008 when the credit markets froze after the collapse of Lehman Brothers, a big lender to clean energy projects. Lehman’s demise made other banks reluctant to lend to wind farming, which needs large funds.The following year, Suzlon’s global revenues fell by 30 percent and it reported its first net loss in more than 10 years.

Tanti then decided to focus on the domestic market in India but things have not improved much since, despite steps by the firm to reduce debt, including selling off its Hansen stake by 2011.The firm is rapidly losing market share in India due to competition from new rivals, such as ReGen Power and Orient Green Power.

Suzlon has posted losses for the last three financial years and had a net debt of 130 billion rupees ($2.5 billion) in June-end this year.Suzlon has embarked on a cost-cutting drive to reduce operational expenses and manpower by 20% by the end of 2012, but the firm declined to talk about the debt default and other concerns despite requests from AFP.