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Chennai, April 16 The shares of Suzlon Energy Ltd, the largest wind turbine manufacturer in the country and the fifth largest in the world, fell nearly 19 per cent on the National Stock Exchange on Thursday on media reports of problems in supplying blades to REpower in China.

Suzlon owns 74 per cent of REpower of Germany and is on course to increase its stake beyond 90 per cent.

The company, however, denied any such problem and said prototypes were still being tested with actual delivery scheduled to begin in a month or two.

The media reports said the prototypes supplied by Suzlon to REpower have been rejected by the latter for its project in Shandong province in China and that it had obtained the blades from another manufacturer.

Suzlon denied that the blades had been rejected and said only the prototypes had been developed and it was discussing and testing the prototypes with REpower.

Suzlon’s Rs 2 share opened at Rs 69.50, touched a high of Rs 73.15 and closed at Rs 55.95, a fall of 18.68 per cent from its previous close of Rs 68.80.

When contacted, Mr Sumant Sinha, Chief Operating Officer, Suzlon Energy, denied there were any such problems and added that actual deliveries of the blades would start in the next month or two. Only prototypes of the blades were ready and Suzlon was working closely with REpower to meet the design specifications and quality standards. “We will begin supplies only after we are convinced of the quality and after our client approves of it,” he said.

A Suzlon press release said that the blade design was REpower’s and the manufacturing process required Suzlon to adjust the specifications and processes of the existing manufacturing facility in Tianjin, China, to meet these specifications. Suzlon would begin manufacturing the blades only after it completes the prototype testing.

“If financial liabilities exist related to the delivery issues that REpower may intend to seek Suzlon’s assistance with, that matter will be a subject for discussion between both parties. However, any such liabilities, if they occur, would be non-material and insignificant. Additionally, it should be noted that Suzlon owns 74 per cent of REpower and this is a transaction between related parties,” the release said.

According to reliable sources, the order size is about $ 15 million and the liability (in case of delayed delivery or other problems) on this will be much lower. In any case, even if Suzlon were to pay REpower, the money would only go to a sister company, the sources say. Mr Sinha declined to talk about the order size.

Suzlon, according to reliable sources, is also discussing with Martifer of Portugal to stagger the payments for acquiring its stake in REpower. Simultaneously, Suzlon is exploring options to raise funds to pay Martifer.

Suzlon acquired REpower of Germany in May 2007 and signed an agreement in September 2008 to acquire Martifer’s 22.48 per cent stake for €270 million. This transaction was to have been completed by December last, but Suzlon negotiated a revised payment schedule with Martifer. Under this, the Pune-based wind turbine manufacturer paid €65 million in December with another €30 million to be paid in April 2009 and the balance €175 million in May.

According to sources in the know, the company’s options include raising money from private equity funds, which will be done only if the valuation is good. Another option being considered is selling part of its stake in Hansen, the Belgium wind turbine gearbox manufacturer. Suzlon had also considered a Rs 1,800-crore rights issue last year but gave up the proposal after the stock markets fell.

More Stories on : Non-conventional Energy | Stocks | Suzlon Energy Ltd

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