Green Infra to Ditch Supplier-Led India Wind Farm Model

Green Infra Ltd., backed by IDFC Private Equity, will start developing wind farms from scratch next year, ditching a business model in India that favors dominant turbine supplier Suzlon Energy Ltd. (SUEL) over competitors such as General Electric Co. (GE)

The New Delhi-based developer seeks to bring down project costs by acquiring land and clearances for new projects, tasks traditionally handled by the turbine supplier in India, Chief Operating Officer Sunil Jain said.

“From 2013, we’ll start doing this ourselves,” Jain said in a phone interview yesterday.

Green Infra joins independent wind farm developers such as Greenko Group Plc (GKO) and Mytrah Energy Ltd. (MYT) in separating project development from turbine orders to drive better deals from suppliers. A global supply glut has driven down the price of wind turbines by 23 percent since 2009, squeezing turbine makers’ margins and intensifying competition for orders in India, the world’s third-biggest wind market, according to data compiled by Bloomberg.

Unlike most markets, suppliers in India tend to hand over completed wind farms to owners and investors, negotiating deals that include project development costs as well as turbines.

Photographer: Daniel Acker/Bloomberg

A worker guides a rotor assembly into place during the construction of a Suzlon Energy Ltd. wind turbine. Close

A worker guides a rotor assembly into place during the construction of a Suzlon Energy Ltd. wind turbine.

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Photographer: Daniel Acker/Bloomberg

A worker guides a rotor assembly into place during the construction of a Suzlon Energy Ltd. wind turbine.

That model has benefited manufacturers such as Suzlon, Spain’s Gamesa Corp. Tecnologica SA (GAM) and Denmark’s Vestas Wind Systems A/S (VWS), which grabbed 54 percent of Indian installations last year, according to data from the Indian Wind Manufacturers Association. In contrast, GE and Siemens AG (SIE), who do turbine-only deals, didn’t install any machines in the country.

Project Development

Turbine suppliers in India are quoting prices of about 63.5 million rupees ($1.2 million) per megawatt, Jain said. They’ve refused to lower prices despite a turbine oversupply, citing escalating project development costs, he said.

By handling its own project development, Green Infra will consider a broader range of suppliers, including GE and potentially Chinese manufacturers such as Sinovel Wind Group Co. (601558) and China Ming Yang Wind Power Group (MY) if they’re able to get their machines approved by regulators, Jain said.

“We don’t believe suppliers have the right approach,” Greenko President Mahesh Kolli said in an interview last month. Greenko signed a deal with GE to buy at least 450 megawatts of turbines over the next three years. That contract will supply machines that are 20 percent more efficient than the average available in the market for the same price, Kolli said.

Standard Chartered Deal

Green Infra, which bought BP Plc (BP/)’s Indian wind-energy portfolio of 100 megawatts in 2009, has 232 megawatts of wind farms and a 10-megawatt solar plant in the country.

It has secured financing to build two more solar projects totaling 25 megawatts by early 2013 that will use thin-film panel technology, said Jain, who declined to name the supplier or banks involved. It will also add another 100 megawatts of wind capacity by the end of this year.

Jain denied a report by the Hindu Business Line newspaper this week that said Standard Chartered Plc (STAN) bought a 26 percent stake in Green Infra.

Standard Chartered and its unit, Scope International, want to buy 11.5 million units of clean electricity directly from Green Infra’s wind farms. That required the bank to purchase a less than 1 percent stake in Green Infra’s wind unit, Jain said, declining to provide further details.

IDFC Private Equity, which manages $1.3 billion in funds for Indian infrastructure investments, set up Green Infra in 2008.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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