Suzlon's Senvion sale aimed at reducing debt

Troubled wind energy player Suzlon' s decision to sell off its wholly owned German subsidiary Senvion (earlier REpower) is its last effort to sail through its growing debt. The deal is to help Suzlon cut down its humongous debt of Rs 17,323.23 crore (consolidated as on 30 September). The company is undertaking a Rs 9,500-crore corporate debt restructuring exercise.

The irony in the deal is that Suzlon will get just Rs 7,500 crore from the sell-off, compared to its Repower purchase cost of Rs 7,314 crore in 2007. In addition, the company had invested additional few millions of euro for purchasing shares from minority shareholders.

Suzlon on Thursday signed a binding agreement with the US based private equity firm Centerbridge Partners to sell its entire stake in Senvion for EUR 1 billion (approx Rs 7,200 crore) in an all-cash transaction and future earning of up to an additional EUR 50 million (approx Rs 360 crore).

The deal also includes Suzlon's licence for Senvion's off-shore technologies for the Indian market. In turn, Suzlon will give Senvion its S111-2.1MW licence for the US market.

"The proceeds would be used for debt repayment thereby reducing interest cost and augmenting business growth. We will focus on high growth markets like India, US and other emerging economy markets," says Tulsi Tanti, Chairman and Managing Director.

In the eight years of owning Senvion, Suzlon had struggled to gain full ownership of the company and could not gain much from the acquisition either financially or technologically, say former company employees.

Hamburg-headquartered Senvion has more than 3,400 employees worldwide and has installed more than 5,800 wind turbines around the world.

Suzlon acquired Repower in 2007 by teaming up with Portugal builder Mota Engi-owned Martifer, in a bidding war with French energy major Areva. Suzlon paid 1.35-billion (about Rs 7,314 crore). Areva retained its stake of over 30 per cent and Martifer offered to sell its stake within two years for 265 million.

REpower was formed in 2001 by merging four wind turbine companies in Germany (the name Repower was taken on lease for a licence period upto December 2012 from Swiss energy company Ratia Energie). The acquisition was an opportunity for Suzlon to enter the US market and access Repower's off-shore wind turbine technologies and products, with rated outputs ranging between 1.5 and 6.15 megawatts. While Suzlon makes only onshore small turbines, Repower had a wide basket, including big offshore turbines.

Sources say Fritz Vahrenholt, the then CEO of Repower, an influential German politician and former minister, had various differences with the Indian company and did not allow Tanti and his team to take full control of the company. "It was essentially the local Germans not accepting a new Indian owner and they feared Suzlon will take away Repower's technologies and money," says an industry insider.

The German laws also restrained Suzlon from accessing Repower's technologies, since both the companies were competitors in the German market.

Tanti and his team got a say in running the company only after almost two years and gaining over 75 per cent controlling stake. Soon Fritz Vahrenholt was replaced by a Danish executive Per Hornung Pedersen as CEO. By 2011, Suzlon managed to buy out the minority shareholders and delisted the company to take full control of Repower.

However, Tanti's plans of merging Repower with Suzlon did not materialise. What also happened was that the owner of the Repower brand name - Ratia Energie - changed its own name to Repower in December 2012 after the licence period ended. Thus Suzlon was forced to rename Repower as Senvion.