Case Study

Suzlon

Wednesday, July 16, 2008

Abstract

Suzlon, an India-based wind energy company, had made quite a splash in its first three-and-a-half years on the international stage.  By the end of 2007, the company was the market leader in Asia and had completed projects in fourteen countries across five continents. But many investors believed these first years were just a warm-up for what was to come (the company’s market capitalization had doubled since its IPO in 2005). Global demand for wind energy remained strong and Suzlon had added significant capacity.

Indian textile manufacturer Tulsi Tanti founded Suzlon in 1995 to avoid having to rely on India’s notoriously unpredictable and expensive electric power grid to power his family’s textile operations. After commissioning two wind turbines, Tanti discovered that wind energy was an even better business than textiles. Within six years of its incorporation, Suzlon had become the dominant player in the Indian wind industry. 

In June 2004, Tanti hired a Dane, Per Hornung Pedersen, to lead Suzlon’s entrance into the global wind market. It had been an opportune time to enter the international wind energy business. The demand for electricity was booming, while environmental concerns over greenhouse gases emitted by coal-fired electrical plants had mounted and the price of fossil fuels had skyrocketed.  With little more than a cell phone and the internet, Pedersen set to work building Suzlon’s international presence. 

While Suzlon pursued wind farm projects in markets Pedersen had targeted, the company also made significant acquisitions. In 2006, Suzlon bought Hansen Transmissions, a Belgian manufacturer of wind turbine gearboxes, and thereby became the world’s most vertically integrated wind turbine manufacturer as well as a supplier to some of its competitors.  

In 2007, Suzlon purchased REPower, a German manufacturer of large wind turbines, for $1.8 billion. REPower built some of the world’s largest wind turbines, including a 6 megawatt model under development.  REPower’s large turbines augmented Suzlon’s product line and would allow Suzlon to enter the off-shore wind farm market that appeared ready to take-off.

At the beginning of 2008, Suzlon was set to double its manufacturing capacity by year’s end. The company was the fifth largest wind turbine manufacturer in the world, but had designs on moving into the top three.  Pedersen, therefore, was faced with the challenge of finding additional markets to fuel the company’s continued growth.