India’s largest wind energy solutions provider, Suzlon Energy, is planning to sell its German subsidiary Senvion for €1 billion. Suzlon had acquired Senvion (originally REpower) in 2007 at €1.35 billion with a plan to expand into the European wind energy sector.
The deal was rumoured for the last few weeks but Suzlon Energy had repeatedly denied those rumours. The news of the sale was reported by a leading business daily in India, the Economic Times. According to the report the company will be sold to US-based equity fund Centerbridge Partners. The valuation of €1 billion is believed to be 40% lower than what Suzlon Energy paid for REpower in March 2007.
The sale of Senvion is crucial for Suzlon Energy’s short to medium-term plan to reduce its huge debt. The shares of Suzlon Energy have seen a massive value erosion with the price falling to a fourth of what it was five years ago. The single biggest reason for the significant devaluation of Suzlon Energy has been the mounting debt.
The company currently has a debt of $2.5 billion which was cumulated over a period of 2 to 3 years when the Indian government had withdrawn major financial incentives for the wind energy sector. Emergence of new wind energy companies which offered services at a highly competitive rates also had an adverse impact on the company’s top line.
While Suzlon may sell off Senvion, it is expected to continue its expansion in the offshore wind energy sector which was the focus area for Senvion. Suzlon is expected to enter the offshore wind energy sector itself in India, probably using the technology lessons learnt since 2007. A 300 MW offshore wind energy project is being planned by the company off the coast of the Indian state of Gujarat. Once the project is successfully implemented, Suzlon Energy may look to replicate it in other developing markets. The company has also announced a very aggressive investment strategy and is looking to invest billions of dollars within India to set up 100s of megawatts of renewable energy capacity.
With the sale of Senvion, Suzlon Energy may look to turn a new leaf in its renewable energy business. In addition to entering the offshore wind energy business in India the company is also planning to enter the solar power market. The company already provides end-to-end solutions in the wind energy sector and is now looking to replicate this model in the solar energy sector in India which is set for a revolution.
Image Credit: Suzlon Energy
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