Question: What does the sale of Senvion by Suzlon mean for the wind industry?
Philip Totaro, CEO and founder, Totaro Associates
Senvion has historically had a pervasive impact on technology development and global turbine design proliferation, with steady performance and past investments in innovation.
The €1 billion acquisition by Centerbridge is certainly below the €2 billion valuation Suzlon had hoped for as recently as six months ago, but is also below the present full value of the company. This indicates a savvy deal for Centerbridge with an expectation for near-term value recognition in Senvion.
Now free to pursue their commercial strategy, the industry should expect to see Senvion make progress in their core markets as well as expansion in Eastern Europe and Latin America.
Senvion appears to be well positioned to at least double in value within the next five years, but will need to focus on product strategy and firming their sales pipeline in order to achieve this. Centerbridge has already publicly acknowledged the need to continue investments in research and development to bolster product competitiveness.
Successful execution by Senvion will eventually enable Centerbridge to find an industrial partner seeking to enter the wind industry.
Private equity firms have already played a large role in reinforcing the wind industry, and their ability to unlock value will continue to drive wind energy forward.
Jesse Broehl, senior research analyst, Navigant Research
This is a loss of a revenue generating asset in Senvion and the accompanying market share loss in global markets of the U.K, northern Europe, and Canada where Senvion has enjoyed a brisk business.
However, what is most important for Suzlon is to reduce debt and strengthen its balance sheet. Buyer confidence is paramount in the wind industry and carrying unsustainable debt erodes buyer confidence, resulting in reduced sales.
The upside prospect for Suzlon is that the cash infusion could reverse the erosion in buyer confidence that has been the case over the years.
This could in turn improve turbine sales in Suzlon's target markets, increasing market share, sales, and profitability and thus offsetting the loss of Senvion.
And it will also support capital needs for operations, manufacturing, and R&D in order to continue evolving its product line to stay competitive. India will of course continue to be its primary market focus where it enjoys a home-turf domestic advantage.
A financially stronger Suzlon will aim to recapture market share that it has lost in India to companies like GE and Gamesa that have moved quickly to increase sales there.