Currency exchange losses of INR 2.3 billion ($46.4 million) bear much of the blame for the radically altered picture, along with a 55% surge in interest payments to INR 1.9 billion ($38.3 million). An increase in the cost of materials has also played its part. But revenues for the period were up by 33% compared with last year, to INR 41.8 billion ($843.5 million).
"We are today in the midst of navigating through a challenging economic landscape," says Suzlon boss Tulsi Tanti. "The crisis in credit and capital markets has affected the economy at large. The wind industry has also seen the impact of these changing economic conditions." Suzlon's order book, at INR 140 billion ($2.8 billion), is 15% down on the INR 165 billion ($3.3 billion) reported at the end of the first quarter and 24% down on the INR 183 billion ($3.7 billion) reported at the end of the financial year ending March 31. Current orders comprise 2269 MW destined for overseas markets and 236 MW for India. Additional orders in its component business total INR 10.8 billion ($217.9 million).
Tanti acknowledges that with the finances of customers hit worldwide and delays in payments from banks disturbing cash flows, business in the next two to three months could be affected. Despite the hard times, the market's fundamentals remain sound, he says. "A majority of our customers are large utilities with robust balance sheets...the overall imperative for sustainable development and wind energy remain strong with the world's limited supply of fossil fuels and a looming climate crisis." He also notes that the price of raw materials is coming down.
Meantime, Suzlon had to suspended plans to add to its 66% ownership of German turbine supplier Repower ahead of schedule (Windpower Monthly, November 2008). In an agreement with Portugal's Martifer, Suzlon is obliged to buy Martifer's 22.4% stake in Repower by May 2009. If Suzlon cannot arrange payment before May, it will be forced to use a bank guarantee, a situation it hopes to avoid.
He rejects criticism that Suzlon has spread itself too far and too thin. Its global reach and business diversification should work in its favour. He points to Suzlon's position in China as a pillar of strength should the credit crisis last more than six months. He also has high hopes of a strong American market under the presidency of Barack Obama. If Obama carries out his stated renewables policy, "We will look at expanding our manufacturing base in the US, including another rotor blade and tower production facility," says Tanti.
In India, the market will slow, but Tanti is confident that government support will remain. He praises Prime Minister Manmohan Singh for setting a 5% renewables target for India by 2010 and requiring an annual 1% increase until 2020 to reach a renewables contribution of 15%. The government, however, must send a clear message to banks to give priority to wind power, says Tanti, and the Indian Renewable Energy Development Agency needs to speed up its processing of projects. "In addition, public sector enterprises must continue plans to invest in wind."
Suzlon says its plans to increase turbine manufacturing capacity by 3000 MW to 5700 MW by the end of this financial year are on schedule, although it has cancelled plans for a tower manufacturing facility in Tamil Nadu, reducing its capital expenditure plans from INR 15 billion ($302.7 million) to INR 8.3 billion ($167.5 million). This is "due to changing business dynamics making it more economical to outsource tower production to local markets," says the company.