Yet another renewable energy major in India is facing a huge financial challenge and has attracted interest from foreign investors.
Suzlon Energy, one of India’s leading wind energy solutions provider, has reportedly approached Canada’s Brookfield Asset Management to sell a majority stake. Suzlon Energy has had a very long history of a troubled balance sheet and has now run out of money to repay its creditors. A potential deal with Brookfield is being reported as a one-time settlement in exchange of the principal and interest that Suzlon Energy owes to various creditors and lenders. Brookfield was also reported to be interested in buying a stake in renewable energy developer Mytrah Energy.
According to media reports, Suzlon Energy has a net consolidated debt of around US$1.12 billion, which includes US$547 million of foreign currency convertible bonds (FCCBs) and around US$490 million in working debt. The company had opted for conversion of US$375 million of FCCBs into equity till December 2018, however, the company is currently in no position to honor the balance FCCBs worth US$172 million which are set to mature this month, reports added.
According to CARE Ratings, the company may not have the option to convert the balance FCCBs into equity to reach a settlement with the creditors due to the significant difference between the current stock price and the conversion terms for the FCCBs. As per CARE, the FCCBs set to mature this month have conversion terms at a stock price of Rs 15.46 (around US¢0.23) while the closing price of the company’s share on 5 July was Rs 4.85 (around US¢0.07).
The company has already defaulted on a payment of Rs 412 crore (US$60 million) earlier this year. The major reason behind Suzlon’s financial problems is the ballooning debt. The company reported that its total debt increased four times in the financial year 2018-19 compared to the previous financial year. Poor volumes due to highly regulated capacity addition in the Indian wind energy sector and increased competition are the prime reasons for poor revenue and profits.
Suzlon has been trying hard to reduce its debt and has sold off some non-core assets. The company sold off a stake in its 210 megawatt solar power portfolio to CLP India.
Suzlon Energy is believed to have offered a majority stake in the company’s operations and maintenance arm which services over 18 gigawatts of wind energy capacity across the world. Earlier, the company was approached by Danish turbine manufacturer and its competitor in India Vestas, but the deal fell through.
CARE recently downgraded short and long-term back facilities as well as commercial paper ratings of Suzlon Energy. Around 15% of the promotors’ stake in the company is pledged to creditors.
We recently covered a story about the planned sale of 685 megawatts of stressed solar power assets by an Indian industrial group that is also struggling to repay its outstanding debt.