Suzlon 'not out of woods' – Insight

Despite making huge progress, Indian wind group Suzlon still faces big hurdles on the way to sorting out its financial problems and may be over-optimistic about the equity value of its Senvion subsidiary, according to Recharge Insight. 

A new research note from the business analysis service says a combination of improving results, debt restructuring, favourable policy signals in its Indian domestic market and upbeat remarks from senior executives have given Suzlon plenty of positive momentum in recent months.

Recharge Insight director Robert Clover says "to its immense credit, Suzlon has managed its way through its protracted financial crisis". For example, the restructuring of its foreign-currency convertible bonds (FCCBs) should see $547m cut off its $2.5bn debt pile, assuming the new in-the-money FCCB is converted to equity before maturity.

But further plans to raise up to €1bn via Senvion and to further consolidate the Germany-based turbine-maker "face considerable legal and financial obstacles", according to Clover.

The plans – outlined by Suzlon founder and chairman Tulsi Tanti in a recent TV interview – would see 25% of Senvion listed in London to raise about €500m, and a further €400m-500m of debt raised against the German unit.

The Recharge Insight note takes a detailed look at a range of factors it claims could undermine those ambitions.

Those issues include banking arrangements that prevent the pooling of Senvion assets with Suzlon – a legacy of Senvion's current banking arrangements which ring-fence Senvion's finances from those of its parent – and the possible impact of technical problems with its offshore turbines.

The €2bn equity valuation of Senvion suggested by Tanti's plans also "looks optimistic" according to Clover, who cites a lower figure as an alternative.

"Suzlon is not out of the woods yet, but is getting closer," he concludes.

Recharge Insight subscribers can access the full research here. A free trial is also available.

Recharge Insight is a premium subscription service aimed at providing renewables thought leaders and decision-makers with best-in-class analysis of key issues facing the industry. For more information on Recharge Insight, contact Ksenia Burkova at ksenia.burkova@rechargenews.com

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