Ready to grow big on its own -- Vestas sheds Indian partner

Losing the world's leading turbine supplier as its sole partner "has created a win-win situation," for Vestas RRB India, says the company's Sarvesh Kumar. Vestas relinquished its 49% holding in Vestas RRB last month in a decision which was no surprise to the Indian wind industry. The ownership stake was transferred to Rakesh Bakshi, now the sole owner and managing director.

"The repositioning was done to ensure the business interests of both parties were not affected," says Thorbjørn Rasmussen of Vestas Asia Pacific. For the Danish firm this means concentrating on selling larger turbines to the Indian market through its 100% subsidiary, NEG Micon India Ltd, which produces 750 kW and 1.6 MW machines. The focus on one company, says Rasmussen, will safeguard NEG Micon's future and in the long term enable it to capture market share from Suzlon, the dominant turbine supplier in India. Last year, Suzlon took 53% of India's market while Vestas had just under 30% from the joint efforts of Vestas RRB and NEG Micon India. Traditionally, NEG Micon has been the larger player of the two, though was only just ahead of RRB last year.

Vestas in Denmark will continue to assist Vestas RRB to further "indigenise" components like blades and control systems for the wind turbine models it currently produces. For Vestas RRB, says Kumar, the agreement means it has the freedom to pursue its ambitious expansion plans while still maintaining the relationship with its Danish roots. Vestas RRB is intent on capturing more of its home market, expanding its local manufacturing capability -- an $8 million blade factory for 225 kW, 500 kW and 600 kW machines should be ready by April -- and increasing its overseas presence. It is initially aiming for exports to make up 15-20% of its sales for the 2006 fiscal year up to the end of March.


While restricted to only using the Vestas RRB name when selling turbines under 750 kW in capacity, the Indian company is expected to eventually move into selling larger models. Indeed the blade factory under construction with assistance from Vestas will produce 350 blade sets in its first year, but under further expansion plans is set to ramp capability up to 700, sets which would include larger blades for 750 kW machines. In addition, Vestas RRB's nacelle assembly plant capacity is also being increased to 700 MW from the present 300 MW.

One industry watcher, Chintan Shah of Senergy Global, says he expects Vestas RRB to go public with a listing on the stock exchange after a year or two and the company to pursue research and development through a new joint venture. Spain's Gamesa, Mitsubishi and small German Fuhrländer are just three potential partners for Vestas RRB being debated in the market, Shah says.

"We're not a closed chapter for a joint venture," says Kumar. "After dealing with world-class technology, we have a market acceptability and our benchmark is high for any deals we do in future." Word has it that Vestas RRB is planning a strategic buy and is already talking with a component supplier. Kumar neither confirms or denies plans to acquire a gearbox manufacturer.

He is, however, vocal in his belief Vestas RRB can challenge Suzlon on home soil, particularly with its 600 kW machine. "We have the Vestas technology edge and name over Suzlon, and over 500 corporate clients and parcels of land that we have invested in," he says. Turbines smaller than 750 kW hold 50% of the Indian market, he adds. The company is investing $106 million in 100 MW of wind plant this year in Maharashtra on over 1200 acres of land in Dhule district. Having acquired land in Saurashtra and Kutch regions of Gujarat, a further investment of $190 million is planned for 2006-2008.

Vestas RRB is now free to export machines to South America, Europe, and the US. Kumar points out that Vestas' split with Gamesa has already set a precedent for what can be achieved once a partner is set free. "Vestas RRB has good experience to come up just as Suzlon did," says Project & Marketing Consultants chief, Shrikant Kulkarni. Nirmal Gupta of LM Glasfiber India is more cautious. "It has the advantage of being presently technically supported by Vestas, but eventually Vestas RRB may lose the name of Vestas," he says. "Rakesh Bakshi's capability as an astute businessman need hardly be debated. It is a question of how long the brand name will last and who will put the money behind the venture."

In the 2005 fiscal year which ended in March, Vestas RRB installed 130 MW to achieve a turnover of $138 million. It expects to gross a turnover of $227 million in the current financial year, he says. Based on market projections, it is aiming for a turnover over $680 million in fiscal year 2007.

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