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Energy
Hakimi Consultants
SUZLON-Company
Overview
A globalwind powercompany.
Founded by Mr. Tulsi Tanti (Chairman & MD) in 1995.
Headquarter-Pune, India.
Employee Strength over 14000
Suzlon (including REpower) is the world's third leading wind
turbine supplier group in terms of market share.
Global Market share=9.8% (Suzlon:6.4% +REpower 3.4%)
Geographical Presence in
continents
Energy
Security
1600
1400
1200
1000
800
600
400
200
0
2011
2014
2018
2021
and Benefits
Huge
Capital
Threat
of
New
requirement
Entry
Suzlon
as (Low)
a brand is
preferred by clients
Advanced Technology
required
Access to resources
Quality
control
Standards
High
demand
Supplier
Powerfor
components
( Low to
Suzlon
Moderate) has
successfully
adopted
Backward Integration
which has reduced its
dependency
on
suppliers.
For the suppliers
forward integration is
very costly
Suppli
er
Power
Competit
ive
Rivalry
BuyertoPower
Sensitive
pricing
Power (Low)Purchase
Structure
In India Switching
cost is high
Backward integration
for buyers is difficult
Buyer
Powe
r
Threatrenewable
of
Other
Threat
of
Substitu
tes
Competitive Rivalry (Moderate to
High Exit Costs High)
Competitive pricing
Large global players like Vestas, GE wind
etc.
Substitutes
technologies
(Moderate)
Price
substitution
from
conventional
sources
Although
financial
incentives are there
for wind energy from
govt.
SWOT Analysis
Weaknesse
s
Strengths
Technologies &
Development
Capabilities
expertise in key
components
Global resource
pool
for faster
designing
& development
MW and multiMW
WTG models and
Rotor blades
developed
indigenously
Wind
Resource
mapping
Opportunit
ies
Reduces
Integrated
Market Leader
supplier
Among
the top
Business
Model
and Global
dependency
three
WTGs
presence
Benefit from
companies
cost
Global
efficiencies and
presence
economies of
across 5
scale
continents
Hassle free
Market leader
solutions
in
to customers
India
Greater control
over
execution time
line,
End-to-End
cost & quality
Solution
Provider
Site
Identificati
on
Land
Acquisitio
n
WTG and
Component
Manufacturi
ng
Threats
Acquisitions
and Alliances
Competitive
advantage
through
acquisitions of
REpower &
Hansen
Site
Developme
nt,
Infrastructu
re set-up
and WTG
installation
Operation
s and
Maintena
nce
Services
SWOT Analysis
Strengths
Weaknesse
s
Huge growth in
assets is
diminishing the
growth in profits
Unsupportive
Stock Prices
Opportunit
ies
Operational inefficiencies
WEAKNESSES
Threats
Unfavourable
Ratings
from
rating
agencies
SWOT Analysis
Strengths
Weaknesse
s
Opportunit
ies
Threats
Environmental Awareness
Environmental awareness has increased. This factor is favourable for the
wind power energy as its an option to thermal power. Suzlon is the market
leader in India and has a strong global presence in this therefore, there is a
high growth opportunity for Suzlon in future horizon.
Government Initiatives
Govt. is providing tax exemption ,accelerated depreciation tax benefits and
also providing subsidies for encouraging investment in remote areas of the
country to generate employment.
Untapped offshore markets
Suzlon can have advantage of covering untapped offshore market. India
has a coast line of 7600 km. Offshore wind turbines generally yields 40%
higher outputs than turbines on onshore sites. So offshore expansion will
be profitable to Suzlon.
Steady growth in demand
Increased electricity demand, environmental concerns and depleting
sources of fossil fuels have increased the demand of renewable energy
sources. Hence Suzlon can leverage from this growth in demand.
SWOT Analysis
Strengths
Weaknesse
s
Opportunit
ies
Threats
High Competition
The govt. of India has approved FDI limits up to 74%. Although Suzlon is a
market leader, its technology efficiency is not as compared to global giants like
VASTAS, GE Wind etc. So this initiative can be a threat for Suzlon.
Foreign Exchange Risk
Due to global presence of Suzlon, there is default risk of exchange rate
fluctuations. The exchange rates are highly fluctuating since last couple of
years and hence it has become riskier for Suzlon to do business globally.
Technology Risk
Suzlon has to implement the fast changing technologies to compete in the
market otherwise it will lose the competitive advantage.
Hindrances / Objections to Wind Power
The main objection to wind power is due to other environmental costs. Many
wind parks remain shut-down for a part of the year because of bird migration.
Larger turbines produce more power, but they also take more land to operate
safely and effectively. Many eco-warriors object to the installation of wind parks
by lobbying the govt. to look for alternative sources of energy.
Vertical
Integration
Improving Cost
Efficiency
Knowledge
Acquisition
Acquired the
technical
know-how
through
permits and
buying of
smaller wind
technology
firms.
Resource
Mobilization
Optimum
utilization of
low costs
resources,
labour and
other
infrastructural
facilities
Focus on High
Growth Markets
Strategic Focus
on Customer
needs (End-toEnd)
Global Acquisitions
Hansen Transmission-Develops long term
growth driver in terms of wind and industrial
gearbox business.
REpower Systems AG-Entry into large
European markets; Complimentary product
portfolio - offshore technology; Capitalize on
know-how and brand equity
Vertical
Integration
Mergers and
Acquisitions
To eliminate
supply chain
constraints
and ensure
quicker
delivery to
customers
Boosting its
core
competencies
Integrate with
its operations,
and
Have
manageable
consolidation
R&D and
Innovation
Organizational Structure
Corporate
services
R&D
Functio
nal
Areas
Manufactu
ring
Suzlon
Technology
Group
Product and
Project
Management
Organization
Functional
Organization
Business
Units
Suzlon has opted Project Centered Matrix Organization which focuses on two
key factors:
Customer Orientation
Technology Leadership
The Product & Project Management Organization ensures that customer expectations
are met.
The functional organization focuses on the technical side of the business.
Issues with the current Organizational Structure
The employees may experience dual authority like reporting to two bosses .
The matrix structure forces the managers to spend a great deal of time in meetings,
hence time consuming
Proposed Organizational
In the near future as Suzlon increases its foothold to other
Geographical
Organizational
Structure
geographies,
Structure will be more efficient in terms of managing different units of Suzlon and
facilitating
manufacture and deliver of products.
Better quality control over various geographic locations.
It will reduce cross culture management issues.
CMD
Suzl
on
Asia
Austra
lia
Europ
e
North
Americ
a
South
Americ
a
Functio
nal
Groups
Functio
nal
Groups
Functio
nal
Groups
Functio
nal
Groups
Functio
nal
Groups
Techni
cal
groups
Manufactu
Manufactu
ring
ring
Techni
cal
groups
Manufactu
Manufactu
ring
ring
Techni
cal
groups
Manufactu
Manufactu
ring
ring
Techni
cal
groups
Manufactu
Manufactu
ring
ring
Techni
cal
groups
Manufactu
Manufactu
ring
ring
Argentina,
Uruguay
Morocco
Egypt
Japan, Philippines,
Taiwan, Thailand
Its wind resources are unrivalled in the Latin American region and estimated
to be enough to supply the regions entire electricity demand several times
over, but till date only a tiny amount of the potential, 60 MW has been
developed .
Thailan
d
Philippi
nes
Mexico
Others
Repowering involves the replacement of old WTGs with new and more cost
efficient WTGs.
According to industry research, over 10,500 machines that were installed during
the mid 80s and 90s will soon be replaced by larger, more efficient turbines.
Our Recommendation
Repowering is one of the growth drivers to the future market for wind power
Our Recommendation:
B-to-C
Consum
ers
B-to-B
Consum
ers
Today
Ample evidence of
the power of internet
in the B2B space
What if something could convert this scope into business inflow for Suzlon?
onse to this highlighting Suzlon could straight away get the business for
Suzlon by being live in the Social Media can generate more business
Ruthless
focus on
financial
returns
Innovative
ness 20%
revenues
from
products
launched in
the last 3
years
Lead, or
aspire to
lead Be
#1 or #2
in the
business
Global
Potentia
l Explore
the world
markets
Suzlons
Wind
Turbines
business should aim to fit
into each of the following 5
Blue-Chip Mantras:
1. Suzlon is a world class player
in wind turbines.
2. Global potential
3. R&D provides innovation
4. Promising Returns
5. Extremely Customer Centric
Debt Restructuring
Presently outstanding debt of USD 2.6 bn (including FCCBs of USD 654 mn)
Debt repayment schedules of USD 150 mn and 283 mn for FY13E and FY14E,
respectively.
FCCBs worth USD 389 mn due for conversion in FY13E, USD 90 mn in FY15E,
while the balance USD 175 mn in FY16E
Proceeds of USD 187 mn from the Hansen stake sale of 26% and receivable of
approx. USD 200 mn from Edison, to aid the debt repayments
Company to raise USD 1.1 bn via equity and debt in 2011
Suzlon has burdened itself
with high debt on its balance
sheet with a leverage of 1.9x
with interest payments of
more than INR 1000 cr
annually
It should not take further
obligations that might affect its
financials negatively in the
short term
Financial Strategies
Future Projections
(Rs cr)
2010-11
2010-11
Q4
2011-12
2012- 20132011-12E
Q1
13E
14E
Revenue
18090
7372
4326
26000
29900
34385
Net Profit
-1103.43
309
60
2080
2392
3782
Strategic Roadmap
Focus on geographical diversification of business to reduce
risk
Exploit huge opportunities in the German market where
Nuclear Plants are being phased out and Wind energy share
is expected to increase
Forward integration in the value chain by Electricity
Generation
Gain competitive advantage through Corporate Social
Responsibility
Achieve Six-Sigma standards in manufacturing operations
Reduce carbon footprints by focusing on addressing
emissions in all phases of wind plants life cycle
Improvements in turbine size, efficiency, reliability and
lifetime.
Development of cost-effective local storage solutions
such as fuel cells.
Research on new cost effective technologies like Vertical
Axis Turbines,
Gorlov Helical Turbines .
Diversify into other renewable technologies like Solar PV .
References
www.suzlon.com
Annual Reports and Investors
Presentations
http://economictimes.indiatimes.com/
http://www.bloomberg.com
http://www.wikipedia.com/wiki/
Reports (Source: http://www.gwec.net/)
Indian Wind Energy Outlook 2011
Global Wind Energy Outlook 2010
Thank You