Suzlon’s Tanti Predicts ‘Flat’ Wind Turbine Market in 2013
Stock Chart for Suzlon Energy Ltd (SUEL)
Wind turbine installations will probably stall in 2013 as policy uncertainty, financing difficulties and delayed grid connections weigh down on projects, Suzlon Energy Ltd. (SUEL) Chairman Tulsi Tanti said.
Tanti said he expects about 45 gigawatts of installations worldwide this year, little changed from the 44.8 gigawatts of turbines Bloomberg New Energy Finance estimates were built in 2012. The London-based analyst forecasts the market to drop to 39.3 gigawatts this year. Suzlon expects its share to total 4 gigawatts, he said.
“The industry will be flat,” Tanti said Jan. 25 in a phone interview from the World Economic Forum in Davos. “The last two years, the wind industry has been really passing through a difficult time because of overcapacity, uncertainty in a lot of the markets’ policy framework, and the availability of financing.”
Turbine manufacturers from Vestas Wind Systems A/S (VWS), the biggest, to Suzlon, India’s largest, have struggled to make profits as overcapacity depressed prices. Suzlon on Jan. 24 said lenders approved a 95 billion-rupee ($1.8 billion) debt- restructuring plan and a two-year payment moratorium after the Pune-based company on Oct. 11 failed to pay $209 million, India’s biggest convertible note default.
“This year is going to be a tough one for the wind energy business,” said Debasish Mishra, senior director, Deloitte Touche Tohamatsu. “Especially in India, Suzlon and its competitors have to face up to huge overcapacity and falling orders as the government has withdrawn benefits like allowing accelerated depreciation and generation-based incentives.”
Suzlon’s shares rose as much as 4 percent to 21.95 rupees in Mumbai trading and were up 1.9 percent as of 12:04 p.m. They have fallen 25 percent in the past year compared with a 17 percent increase in the benchmark Sensitive Index.
Turbine makers haven’t been helped by uncertainty surrounding government incentives in big markets including the U.S. and India, Tanti said. Grid-connection problems from Germany to China have also stalled projects.
The U.S. on Jan. 1 renewed the production tax credit, which pays wind-farm owners 2.2 cents for every kilowatt-hour of power they produce. Developers had rushed projects to completion ahead of its anticipated Dec. 31 expiration, and without certainty for 2013, had few new farms planned.
“It’s too late for such a capital goods industry to ramp up,” Tanti said.
The executive also signaled he expects the Indian government to bring back incentives to the industry next month, after the market in the country “collapsed by 40 percent” when assistance programs were ended last year. Suzlon has a 40 percent to 50 percent share in the Indian market, he said.
Aside from the biggest markets, countries where the industry looks promising include Canada, Australia, Mexico and South Africa, Tanti said. The Philippines, Indonesia, Thailand and Vietnam are also looking good as “second-tier” markets, he said.
Tanti was more optimistic about offshore wind, which he expects will grow by 30 percent per year for the next five years, led by the U.K. and Germany, with China and Japan following. Suzlon’s Repower Systems SE unit currently has a 6.15 megawatt offshore wind turbine, the biggest available.
“This sector is very very promising,” Tanti said. “Offshore wind is doing well, but a lot of projects are delayed because of the financial situation and some of the grid infrastructure.”
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