Wind turbine manufacturer Suzlon Energy Ltd has sold its wholly owned China manufacturing subsidiary for Rs 340 crore ( $60 million). Suzlon has signed a binding term sheet with China Power (Tianjin) New Energy Development Company Ltd (CPNE).
The deal for the sale of Suzlon Energy Tianjin Limited to CPNE with the majority of its assets and liabilities is subject to regulatory approvals, the company informed the stock exchanges. The share price of Suzlon Energy shot up by 4.32 per cent to Rs 18.1 in early trade on Monday on the Bombay Stock Exchange.
The sale of the unit comes as Suzlon has to meet its FCCB obligations of $569 million (Rs 3,229.6 crore) this financial year. While $360 million has to be paid in July, another $209 million is due in October. The company recently obtained approval from its bondholders to extend the maturity date for the bonds due for redemption in June by 45 days, till July 27.
After this sale, Suzlon said it will “continue its strong presence in China and complete all existing customer/contract obligations”. Suzlon, which sees China as the world’s largest but a highly competitive wind market, will approach this market “by combining development with an innovative partnership model”.
The Suzlon Group established its marketing operations in China in 2005 and set up its wholly owned manufacturing facility in 2006. The company has so far installed over 900 MW of wind capacity in China.
“The dynamics of the wind energy market have changed considerably over the past year, and we are realigning our strategy to the China market with an agile, asset-light business model to achieve the high growth and margins, but with lower investments. Therefore, we have decided to realign our business there, as reflected in this transaction. This is also in line with our previously announced strategy to dispose of non-critical Group assets to reduce our long-term debt," said Tulsi Tanti, Chairman of Suzlon Group.
Last month, VCCircle reported that Suzlon is in advanced stages of raising up to $300 million as new facilities from senior secured lenders. In April, Suzlon sold some of its wind farms in India in April to raise $40 million. Last year, it concluded the sale of its remaining 26.06 per cent stake in Belgium-based Hansen Transmissions International NV to German engineering firm ZF Friedrichshafen AG for Rs 890 crore (GBP 115.25 million). Hansen is a London Stock Exchange-listed wind turbine gearbox and industrial gearbox designer, manufacturer and supplier, which was acquired by Suzlon in 2006.
Suzlon had acquired stake in Hansen and Germany's REpower during 2006-2008, but had to start a debt recast programme as its borrowings increased to $2.5 billion during mid-2009. Since then, the firm has been cutting its stake in Hansen, while increasing its holding in REpower.
(Edited by Prem Udayabhanu)