India spawns a leader without brakes

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Having conquered its home market and gained strong footholds in China and the US, Indian wind turbine maker Suzlon has just secured its first large European orders, is considering a factory in Brazil and has designs on Australia and New Zealand. Meantime, it is building the world's largest wind plant, a 1000 MW facility in India, with the first 500 MW to be completed this year

Tulsi Tanti scoffs at the oft repeated notion that Suzlon came from nowhere to take its position as the world's fifth largest wind turbine manufacturer. His company's success, stresses Suzlon's founder, a one time textiles tycoon, is not an overnight miracle but the result of a decade of carefully laid strategy and hard work. Last year, Suzlon expanded faster than any other wind turbine manufacturer, bar GE Energy, doubling its market share to 6.1% of the 11,400 MW of wind capacity installed around the world, according to BTM Consult's annual World Market Update of the wind sector.

Suzlon's order book may be bulging at the seams, but Tanti says the company has no intention of slowing down or failing to meet demand for its wind turbines. A tight focus on planning and execution has made his company what it is today, he says, and so it will continue.

A year ago this month the company was floated on the Bombay Stock Exchange. Its share issue was oversubscribed 16 times after just three minutes of opening. Suzlon's market capitalisation today is around $5 billion. The money raised has been used to pursue an aggressive overseas growth strategy and establish or acquire manufacturing and research and development facilities across the globe to secure its supply chain. Its international headquarters is located in Denmark. The strategy has not only gained widespread approval from the financial world, but has propelled Suzlon into the wind sector's elite.

In India, Suzlon has supplied well over half of the country's 5300 MW of wind power capacity to date, with its machines installed across all seven states promoting renewable energy development. Further expansion of its already substantial manufacturing base in India is planned; the company is also expanding its activities in Europe, the US, China, Australia and Korea; and it is taking first steps in Brazil, Mauritius and New Zealand. The aim is to be the fourth largest turbine manufacturer by the end of the year -- in line with India's current ranking as the fourth largest wind market.

Suzlon expects a 20% compound annual growth rate over the next five years. It grew by nearly 100% in the last financial year and by the end of March 2006 had sold a cumulative total of 2321 turbines with a combined capacity 2108.09 MW. By the end of June 2006, its accumulated sales were $1.06 billion. Suzlon's latest published results, for the second quarter of the year, report sales of $202.38 million, up three-fold on the $66 million registered for the same period a year earlier. Its net value increased to $647.34 million. Overseas orders have long surpassed those from the home market. By the end of July 2006, domestic orders totalled $149.02 million and international orders $634.98 million.

Securing supplies

In a market where global demand for wind turbines is outstripping supply, the heart of Suzlon's strategy -- described by Tanti as its unique selling point -- is its "backward integration" program to secure the entire supply chain. Failure to secure the right component at the right time results in delayed deliveries of products and services, dissatisfied customers and even penalties, says Tanti. The company is set on making India a global manufacturing hub for wind turbines and components.

"One of the critical differentiators for Suzlon has been its early endeavour to vertically integrate its operations and manufacture critical components such as rotor blades, generators, gear boxes, control systems and towers in-house, aiming to be an end-to-end solution provider to save costs," Tanti says. Its March EUR 465 million acquisition of Belgian gearbox manufacturer Hansen Transmissions is a vital part of the strategy. Suzlon expects to equip 50% of its turbines with Hansen gearboxes by 2009, with the rest coming from German gearbox supplier Winergy's Indian factory in Chennai, located relatively close to Suzlon's main production facility at Pondicherry.

"Technology is the heart of the issue," says Tanti. "Suzlon has focused its energies on developing technologies to make wind turbines more reliable and reducing the end-cost of generating power from wind." He adds: "Our consistent, aggressive growth validates our strategy and direction." In three or four years, the strategy is likely to gain the company a cost benefit and additional margins of 2-3%, he says.


With seven manufacturing facilities in India with a combined production capacity of 1500 MW, a rotor blade facility planned for Minnesota in the US and a wind turbine factory in Tianjin, China, the company expects to have a manufacturing capability of 2700 MW by the end of this month. By June 2007 it will have reached 4200 MW a year, or more than a third of all the wind power installed in the world in 2005.

The huge boost in production capacity is coming from a new integrated turbine manufacturing facility in the west Indian state of Karnataka. Built to eventually produce 1500 MW of wind turbines a year, it is costing Suzlon $170 million, all to be invested in the special economic zone at Udipi near the port of Mangalore. Suzlon is negotiating for 400-500 acres of land from private parties. The plant will produce turbines, rotor blades, towers and control systems. Gearbox production capacity at Hansen is to be raised to supply 4500 MW of wind turbines a year by 2009, up from today's 3300-3500 MW. Hansen gearboxes are also made for Suzlon's rivals, world leader Vestas among them.

Suzlon is expanding its wind turbine line too, which now ranges from turbines rated at 350 kW to 2.1 MW, with specially adapted models for low wind operation at typical sites in large parts of China and India. "After the 2 MW, it is the 3 MW turbine that is ideal for commercialisation," says Tanti. A 4 MW model for offshore use is planned and expected to be available in around three years, primarily for export.

In establishing its global headquarters in Aarhus, Denmark, Suzlon gained immediate access to a hub of wind power expertise, which it supplements with staff training in corporate excellence in Germany and New Zealand. The knowledge base is being further extended with a corporate learning centre at Suzlon's main base in Pune, India, for all employees. In Denmark it is planning an innovation centre to focus on new solutions, materials, and manufacturing processes. Tanti says a big challenge today is in the manufacture of towers, given their volume. "Steel needs specialised skills and it is a big challenge to train and uplift skills," he says.

India's rulers need to understand much more about wind power and the infrastructure needed to support it, says Tanti. "Investment is no problem if there is good planning," he says. Suzlon is providing a graphic demonstration of Tanti's philosophy in Tamil Nadu, where it is not only building a substation but also transmission lines for the Tamil Nadu Electricity Board. Suzlon will have access to 40% of the transmission capacity it provides.

"Clients are freezing their power cost by investing in development of wind energy," Tanti says. "Tax benefit is an additional perk." He cites Bajaj Auto, a large manufacturer of scooters and a Suzlon client, as a typical example. Bajaj gets 90% of its power from wind energy. "The company will have recovered its capital investment in four years given the low power cost and carbon credit benefits," says Tanti. Even smaller customers can get benefits for carbon credits, he adds, and his team works actively to help customers access them.

Suzlon's most ambitious project to date is the ongoing expansion of the 400 MW facility at Dhule in Maharashtra to 1000 MW. Depending on when the final phase is compete, it may secure Suzlon the title of supplier of the world's largest wind power plant. Indeed, the massive Dhule project will reach 500 MW by the end of the year, which potentially already makes it the world's largest wind plant.

Having secured a firm foothold in both Asia and the United States, Suzlon if turning its sights on the European markets for the first time. Last month the company announced first time orders for its new 2.1 MW turbine from customers in both Italy and Portugal. Maestrale Green Energy is set to take delivery of 21 MW for installation in Italy and Portugal's Tecnologias Energticas SA has chosen Suzlon turbines for a 40 MW project in the Penamacor region. Deliveries are scheduled for the spring.

Springboard into Europe

Suzlon's CEO, Per Hornung Pedersen, sees the orders as a springboard into the European market. "We are building up our organisation in Europe to cope with increasing business," he says. "Our main focus this year will be the emerging markets in Europe and Latin America, says Tanti. "We are currently negotiating for orders in Italy, France, Greece and Portugal. We are also looking at entering the Latin American markets through Brazil. We expect that 40% of our top line this year will come from these markets against 10% in the last fiscal year." To meet Brazil's demand that 60% of turbine content be locally manufactured, Suzlon is planning a factory there.

For the time being, however, the Asian market is to remain paramount. Suzlon's factory at Tianjin, with an annual production capacity of 600 MW, will enable it to meet the Chinese government's stipulation that by next year 70% of the content all wind turbines must be locally manufactured. Of the 3000 MW expected to go up in China in the next five years, Tanti expects to install 30%.

In New Zealand, the Suzlon team is working to secure a Class 1 wind site. Its first turbine in the country is being tested on a Class II site and by the second quarter of 2007 it expects to have secured its first sales. "In Australia and New Zealand, it is more the quality projects and a strong grid that give technical edge benefits. This is a good certification for us," Tanti says. In Australia, where Suzlon's client, Australian Gas and Light, is integrating gas and wind power, the company is learning a lot, adds Tanti. "We are developing technology that will be suitable for India in ten years."

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