The Suzlon Group is selling its wholly-owned Chinese subsidiary Suzlon Energy Tianjin to China Power (Tianjin) New Energy Development Company for $60 million (approximately R340 crore). Suzlon said it has signed a binding term sheet for the sale, which is part of its attempt to raise funds to clear its debt obligations for the financial year. ?This is in line with our previously announced strategy to dispose of non-critical assets to reduce our long-term debt,? chairman Tulsi Tanti said.
Suzlon aims to raise $360 million by July 24 and $209 million by October 2012 to settle its debt obligations. It is also raising fresh debt to pay its foreign currency convertible bond holders. Suzlon?s 600-MW integrated Tianjin facility supplies turbine generators in China and had an installed base of 1,163 MW as on December 2011.
The company also had a framework agreement with China?s CGN Wind Energy for 800 MW. China accounted for 3% of Suzlon?s order book as on May 2012. Suzlon, which started selling in China in 2005, set up its own facility in 2006.
China is the world?s largest wind energy market and has also become a global supplier of wind turbines and components with companies like Sinovel and Goldwind among leading global players.
However, overcapacity and the rising share of domestic companies have made things tougher for foreign players. ?The dynamics of the wind energy market had changed considerably over the past year and Suzlon was realigning its strategy to the China market with an agile, asset-light business model to achieve high growth and margins but with lower investments,? Tanti said.
?We believe this is a positive, strategic move for both companies; the Suzlon Group monetises a high-quality enterprise that we have built up since 2006, and CPNE expands its base and capabilities in a highly competitive marketplace,? Tanti added.
The world?s fifth largest wind power maker by installed capacity, Suzlon has over R10,000 crore in debt, out of which around R6,000 crore in working capital loan and R4,000 crore in long-term debt.