Making sense of takeover deals

The consolidation of wind-turbine OEMs has taken another couple of small steps in recent weeks. First came the rumours that Vestas was considering acquiring a controlling stake in troubled Indian manufacturer Suzlon.

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Then Enercon confirmed that it would be taking Lagerwey entirely under its wing, the brand name only surviving as a development unit within the group.

Understandably, Vestas has been tight-lipped over a possible Suzlon takeover, restricting itself to a bland statement about being "open to additional bolt-on opportunities to accelerate our growth strategy should such arise".

And while it is easy to see some benefits from such a deal — India’s huge potential for growth, Suzlon’s 2.1GW order backlog, and an inevitably low purchase price for the firm given its current debt levels — there are substantial pitfalls for Vestas, too.

Whatever the asking price, Suzlon would still represent a significant drag on Vestas’ finances for years to come. India’s wind-power market remains volatile, with serious investment required to improve grid access to facilitate further growth. And any takeover deal would surely require extensive rationalisation of the two manufacturers’ product ranges.

A Vestas takeover of Suzlon is not beyond the realms of possibility, even if it looks unlikely at this stage. However, the fact that Suzlon’s share price jumped by 50% after the rumours were broadcast by an Indian business news TV channel is an indication of shareholder enthusiasm for a deal.

Enercon’s decision to subsume Lagerwey is rather less controversial. The acquisition of the Dutch turbine maker in late 2017 always looked like a good match, as both firms specialised in similar direct-drive technology.

Importantly for Enercon, now well underway with its transition to compact and modular design and manufacture, spearheaded by its new EP3 platform, the purchase of Lagerwey gives it newly developed turbine models to compete in the growing 5MW-plus onshore sector.

Product development in this class is proceeding at a rapid pace. GE recently installed the first prototype of its 5.3MW Cypress turbine, while Vestas’ new EnVentus platform, described in the February issue of Windpower Monthly, has set the bar high with a 5.6MW power rating and rotor diameters of up to 162 metres.

But the Lagerwey-derived turbines, now dubbed Enercon’s EP5 platform, have well over a year of field-testing in prototype form behind them, giving the German manufacturer something of a head start over GE and Vestas. 

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