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Suzlon Plans China Expansion as Wind-Turbine Epicenter Shifts

Suzlon Energy Ltd., India’s biggest maker of wind turbines, said it plans to expand capacity at its plant in China as that market remains the world’s largest and the company returns to profit this financial year.

The Ahmedabad-based manufacturer will be capable of making turbines with a combined electricity generating capacity of 1,000 megawatts each year at its China plant by 2013, Chairman Tulsi Tanti said in an interview in Tianjin, China, yesterday. That’s 67 percent more than the current capacity of 600 megawatts, which he said will be used fully next year.

“In the long term, the epicenter of our industry and our business will move to China,” Tanti, 52, said. “China will remain the largest market for the next 10 years.”

Suzlon joins General Electric Co. and European rivals that are introducing newer technology and opening factories in China, the world’s fastest-growing green energy market, as they compete for orders. The country plans to add 18 gigawatts of wind capacity this year, which Bloomberg New Energy Finance estimates is double what’s expected in the U.S., the No. 2 market.

“It’s a good idea to expand in emerging markets like China,” Anuj Upadhyay, a Mumbai-based analyst with Wallfort Financial Services Ltd., said by telephone yesterday. “It doesn’t cost much to expand the existing capacity. The country has huge wind energy potential.”

Suzlon shares gained 1.7 percent to 51.85 rupees at 11:56 a.m. in Mumbai trading after rising as much as 6.9 percent. The company, which posted losses in the past two quarters, has declined 43 percent this year, compared with an 11 percent increase in the benchmark Sensitive Index.

China Order

The Indian turbine maker is looking to form partnerships with Chinese companies to develop offshore wind projects using 5-megawatt and 6-megawatt turbines, Tanti said.

Suzlon received an order from a power producer in China for 24 turbines to generate a combined 50 megawatts, the company said in a statement to the Bombay Stock Exchange today, without identifying the buyer. The turbines are for delivery to a wind farm in Inner Mongolia between October and December and will take Suzlon’s installations in China to 1,119.8 megawatts, according to the statement.

China, the world’s biggest emitter of greenhouse gases, wants about 15 percent of its energy to come from non-fossil fuels by 2020. The target includes an installed capacity of 100 gigawatts of wind power and 20 gigawatts of solar units, Zhang Guobao, head of the National Energy Administration, said in May.

Europe Market

The wind energy market in China and India may help Suzlon offset slowing orders in Europe after the debt crisis made it difficult to raise funds for renewable energy projects.

“We have a good home market,” Tanti said. “India is good, China is good, profitability is good. What we were losing was our international operations.”

Suzlon’s loss in the three months ended June 30 doubled to 9.1 billion rupees ($196 million) as a weaker euro devalued the company’s overseas assets. Tanti said he expects the company to return to profit this year. Not all analysts agree.

“In view of the company’s current order book, it will be difficult for Suzlon to break even this fiscal year,” Upadhyay said.

Tanti denied an Aug. 16 report by the Economic Times that Suzlon is in talks to sell as much as a 25 percent stake in Repower Systems AG, a German wind turbine maker, for $500 million. Suzlon held 90 percent of Repower as of March 31, according to data compiled by Bloomberg.

Hansen Stake

“It’s a strategic investment and we would like to integrate the company,” Tanti said.

Suzlon isn’t selling stakes in its European units, including Repower and Hansen Transmissions International NV, he said.

Suzlon won’t sell its interest in Hansen until it can get a better valuation for the Belgian gearbox maker, Tanti said. Hansen’s share price has fallen 51 percent this year, according to data compiled by Bloomberg.

“There’s no benefit for us at this valuation to sell,” Tanti said. “At an appropriate and good and right valuation, we might think of an exit.”

Suzlon retains a 26 percent stake in Hansen after selling a 35.2 percent interest in the company for 224 million pounds on Nov. 19 to help pare debt.

To contact the Bloomberg staff on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net.

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