In a $1.2 billion all-cash transaction, Suzlon Group has signed a binding agreement to sell turbine subsidiary Senvion to Centerbridge Partners, a private equity firm with $25 billion in assets under management.
The deal is subject to regulatory and other closing conditions and is expected to close by the end of the year.
Suzlon first acquired a minority stake in the former REpower Systems in 2007. Four years later, the turbine manufacturer acquired all REpower shares.
The sale – rumored for some time – was necessitated by Suzlon's debt obligations. Reportedly, the company is planning to emerge from debt reorganization in March. Going forward, Suzlon says it will focus on the India, U.S. and China wind markets, as well as emerging sectors, such as Brazil, South Africa, Turkey and Mexico.
As for Senvion, the deal allows the turbine maker to realize its full potential in the wind market, according to CEO Andreas Nauen.
‘Successful energy reform on a global level requires both onshore and offshore wind power, and Senvion has the right turbines to support both. Our objective is to continue growing profitably and to gain additional market share in our top five markets in Germany, Great Britain, Australia, Canada and France, as well as in our target markets. We also aim to maintain a strong position in the offshore sector.’
Many industry watchers characterize the deal as mutually beneficial for both parties.
Bruce Hamilton, energy director at Navigant Consulting, says that Suzlon gets its much-needed cash while Senvion gets itself out from under the money troubles of its former owner.
‘It's never good to have a broke parent,’ quips Hamilton. On the flip side, he says, Suzlon retained a license to use Senvion's offshore wind technology in the India offshore wind market.
‘That's a tremendous part of this deal,’ Hamilton explains. ‘It keeps Suzlon's finger in the [offshore wind] pie. [The fact] that Suzlon gets to do that in its home market gives them a tremendous advantage.’
Just the same, there are some questions. For example, Suzlon granted Senvion access to the S111- 2.1 MW license, a machine that appears to compete with Senvion's 3.2 MW MM 114 wind turbine.
‘It remains to be seen how they will work together,’ he says. ‘Perhaps, the benefit comes from common sourcing,’ Hamilton speculates.
Other analysts questioned if Centerbridge has a core competency in wind turbine manufacturing.
‘It is hard to see what the strategies are behind this deal for Centerbridge,’ notes Feng Zhao, head of wind energy at FTI Consulting's energy practice. ‘It is difficult to run a big turbine manufacturing business without direct experience.’Â
On the flip side, however, Zhao says it is hard to argue with the purchase price, noting that the private equity player obtained Senvion for far less than what Suzlon paid four years ago.
‘Centerbridge could make a lot of money if they decide to sell it later on. Senvion is a good firm with established track records in both on- and offshore wind.’