Suzlon Group, the Pune-based maker of wind turbines and end-to-end EPC player in the wind energy space, announced its entry into the solar power space on Wednesday. This is the first time that the company led by Tulsi Tanti, who will turn 58 this February, will diversify outside the wind energy space where it is one the leading players globally.
In a statement issued on Wednesday, Suzlon said it had won a contract from the Southern Power Distribution Company of Telangana Ltd, also known as TSSPDCL, through a competitive bidding process, to develop 210 MW of solar power in the state.
The 210 MW of projects consists of six different units – one of 100 MW, one of 50 MW and four units of 15 MW each – located across the newly created state of Telangana. The company will be signing six different power purchase agreements (PPA) this month with the state utilities for a period of 25 years each. TSSPDCL had invited bids for these solar power projects in April 2015. The projects will be commissioned in FY2016-17, according to Suzlon’s statement.
The statement also mentioned that five of the six special purpose vehicles (SPV) that will be signing PPAs with the state utility have been acquired by Suzlon. “These acquired companies do not have any operations or assets currently and are acquired primarily to be used as SPVs for the proposed solar projects. The acquisitions have been made at face value,” the statement added.
Suzlon’s statement did not reveal from whom these companies were acquired and at what cost. In response to an email, a company spokesman said the companies were acquired “to enable speed and at a nominal cost”.
The company also did not divulge the investment that Suzlon would be making to develop its maiden solar power project. But as a thumb role, it costs around Rs 6 crore to develop one megawatt of solar power. By this calculation, Suzlon may have to shell out around Rs 1,260 crore to develop 210 MW of power.
Industry observers feel that around Rs 5 per kilowatt hour (kWh) is a tariff at which a solar power project may remain commercially viable in the country. Suzlon’s spokesman added that the tariff at which the company intended to sell power to the Telangana state utility from the six solar power units it will develop will range from Rs 5.49 to Rs 5.59 per kWh.
“This 210 MW-project will reinforce our commitment to execute tangible capacities in solar energy every year while expanding our footprint,” said Rohit Modi, CEO (international operation and new business), Suzlon. “Suzlon will develop these projects on a turnkey basis.”
Suzlon Group’s chairman Tulsi Tanti said in the statement that solar and wind energy was complementary and Suzlon would leverage its project execution capabilities and end-to-end solutions to deliver solar projects. “We are also working on integrated renewable energy solutions by combining wind and solar projects at a single location.”
The current government, under the leadership of Prime Minister Narendra Modi, has been bullish on the prospects of developing renewable power in the country and has set a target of developing 60 GW (gigawatt) of wind power and 100 GW of solar power by 2022.
Suzlon has been struggling with losses since FY2009 and only posted its first quarterly operating profit in three years in the first quarter of the current fiscal. Due to a combination of domestic and international headwinds in the wind energy space and the overall economy, Suzlon found itself laden with significant debt and mounting losses.
However, a round of debt restructuring, sale of the company’s crown jewels like Senvion, a German wind turbine maker, in 2014, and the entry of Sun Pharmaceutical Industries’s managing director Dilip Shanghvi as a white knight investor are helping Suzlon regain its feet.
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