Autor: Geoff Hiscock
UK-based Caparo Group is pushing into the Indian renewable energy market, striking a $US1.28 billion deal with leading Indian wind-turbine maker Suzlon to develop 1000 megawatts (MW) of wind power there over the next two years.
The deal, announced in Pune on January 28, brings together two high-flying entrepreneurs: Tulsi Tanti, billionaire founder of Suzlon, and Angad Paul, chief executive of the Caparo Group started by his industrialist father Lord Swraj Paul in the UK in 1978.
Tanti, whose family holds a 58 per cent stake in listed Suzlon Energy worth about $1.1 billion, has built the company into the world’s third-largest wind-turbine maker over the past 15 years and now operates in 32 countries. But the global financial crisis of 2008-09 hit Suzlon hard. The company carries a heavy debt load and the company has posted losses in recent quarters, making the big Caparo order and other January sales to companies in Brazil and Canada all the more valuable.
While the takeover of REpower has given it a combined global market share of 9.8 per cent in wind-turbine production, the Hansen purchase and other expansionary moves of the last few years left Suzlon heavily in debt. After a restructure in early 2010, it was able to announce in May that it had successfully refinanced $US2.4 billion of debt, including winning a two-year holiday on principal repayments. It also sold off 35.2 per cent of Hansen for $US370 million, leaving it with a stake of just over 26 per cent.
Last week’s Caparo order signifies the growing importance to India’s renewable energy market of wind power, which accounts for about 6 per cent of India’s total installed power base. According to projections by India’s Ministry of New and Renewable Energy, grid-connected wind power is expected to grow from about 12,000 MW at the end of 2009 to an expected 16,000 MW by 2012 and to as much as 38,500 MW (or 38.5 gigawatts) by 2022.
Between now and March 2013, Suzlon will supply its wind turbines to Caparo Energy (India) Ltd for a series of wind farms that will be built initially in Gujarat, Maharashtra and Rajasthan states. The first 500 MW is due for installation by March 2012, with the remainder to follow in the ensuing 12 months.
Caparo’s move is the single biggest order by an independent power producer in the Indian wind power market, where recent government policies to promote renewable energy make for an attractive investment environment.
London-based Angad Paul described India’s energy market as one of the most buoyant in the world. “With the supportive regulatory framework, we see a great opportunity to invest as an independent power producer (IPP) in what is the world’s fifth largest wind energy market,” Paul said in a January 28 statement.
For his part, Tanti said Suzlon was pleased to “kick off what I am sure will be a successful long-term partnership.
Caparo’s ambitious plans underscore the maturity and growing appetite for IPPs in India’s energy matrix.”
According to Suzlon, four per cent of India’s energy needs currently are met by renewable energy, with wind power accounting for 70 per cent of this.
That, it says, is enough power to light more than 10 million Indian households.
Tanti, not surprisingly, is a fervent advocate of wind power. He calls it a sunrise industry that is already cost-competitive with conventional energy sources, though not yet seen as an attractive investment alternative. That may be about to change now that Caparo is bidding to become a significant independent power producer in India.
Like Suzlon, Caparo suffered during the 2008-09 recession, but was able to effect a turnaround last year. Initially, Caparo was known as a specialty steel and engineering group. Later it moved into automotive technology in the UK and India; it also has interests in the hotel business and now the Indian energy business.
Globally it is best known as the builder of the blindingly fast Caparo T1, a high-tech sports car with F1 performance. The T1, which does 0-100km/h in 2.5 seconds, made its debut at global motor shows in 2007, but only a handful have been registered for road use.
Lord Swraj Paul, who moved from India’s Punjab to the UK in 1966 and set up Caparo in 1978, remains the group’s founder-chairman. Since 1996, his youngest son Angad has been chief executive, while Angad’s elder brother Ambar runs the hotel business.
Swraj Paul, who will turn 80 this month, was made a UK Labour life peer in 1996 as Lord Paul of Marylebone, and is chairman of Westminster and Wolverhampton Universities. In October 2008 the World Punjabi Organisation awarded him the ‘Punjab Ratan’ (Jewel of Punjab) title in recognition of his achievements in business, politics and public service. But his reputation suffered in the UK peers expenses scandal, which saw him suspended from the House of Lords for four months in October 2010.