Suzlon Energy Ltd · NSE:SUZLON
Suzlon Energy — Investor Presentation (May 2009)
41 slides from Suzlon Energy's investor presentation, May 2009
Slide 1: Suzlon Energy Limited Investor Presentation May 2009
Suzlon Energy Limited Investor Presentation May 2009
Slide 2: Disclaimer
Disclaimer •This presentation and the accompanying slides (the “Presentation”), which have been prepared by Suzlon Energy Limited (the “Company”), have been prepared solely for information purposes and do not constitute any offer, recommendation or invitation to purchase or subscribe for any securit
Slide 3: Contents
Contents • Industry overview • Suzlon Overview • Q3 FY09 updates • Recent Developments • Annexes 3
Slide 4: Wind: a promising renewable energy source
Wind: a promising renewable energy source Fastest growing renewable energy source* Potential to power the future Critical Success Parameters Wind Energy Status 100% 1 3 52 Cost Competitiveness ✔ 90% (Median cost - EUR 65 / MWh) 36 80% ✔ 4 Established Base (Total of 122 GW capacity 111 by 2008 end) 7
Slide 5: Compelling industry growth dynamics
Compelling industry growth dynamics Concern Demand Catalysts • Kyoto Protocol: CO2 emissions to reduce by 5.2% of 1990s levels by 2012 Climate Change • EU RE law: 20% from RE by 2020 Zero carbon and • US: 22 States with 10% to 20% RPS mandates solution Global Warming • China RE law: 15% by 2020 from
Slide 6: 2004-08: Strong historical growth
2004-08: Strong historical growth Industry growth in last 5 years 28,190 : 28% Supplied MW 19,791 GR CA 15,016 11,542 8,154 2004 2005 2006 2007 2008 • Renewed interest in the US: energy security, employment generation and economic stimulus • Strong policy support in EU: climate change • Growth in As
Slide 7: CY 2008 & 2009: A period of financial crisis
CY 2008 & 2009: A period of financial crisis • Impact on wind industry – Subdued growth forecasts • Slowdown in order intake • Customers unwilling to pay advances for deliveries beyond near term • Industry-wide order book visibility contracting from 2-3 years to 1-2 years – Concentration of projects
Slide 8: Industry outlook CY 2009: Change in industry scenario
Industry outlook CY 2009: Change in industry scenario • Positive impact of the 2008 crisis – The last few months have witnessed a substantial shift in the industry leading to • Significant reduction in commodity prices • Reduction in logistics costs • Reduction in inventory • Reduction in overall pr
Slide 9: Long term story still intact
Long term story still intact • USA: President Obama approves $787 bn stimulus package (American Recovery and Reinvestment Act) – $70 bn assigned for renewable energy industry includes tax incentive and government spending • EU: Parliament and heads of nations commit to Renewable Energy Directive – 2
Slide 10: US Stimulus Package: Growth opportunity for wind
US Stimulus Package: Growth opportunity for wind • Tax incentives – Multi year extension of Production Tax Credit (PTC) till 31st Dec 2012 – Investment Tax Credit (ITC) @ 30% on value of the project – Developers may opt to receive a cash grant benefit equal to 30% of a project's cost in lieu of tax
Slide 11: Contents
Contents • Industry overview • Suzlon Overview • Q3 FY09 updates • Recent Developments • Annexes 11
Slide 12: Company overview
Company overview Amongst the Top 5 Wind Turbine Manufacturers Globally (2008) Enercon Suzlon Gamesa 10.0% 12.0% 9.0% • End-to-end solution provider Repower 3.3% • No. 1 supplier to the Indian market for the last 10 years Siemens 6.9% • Truly Global Player in terms of GE Wind 18.6% Sinovel 5.0% • Mar
Slide 13: Key competitive advantage: Vertical integration
Key competitive advantage: Vertical integration • Wind Industry facing supply chain • Critical Competitive Advantage with bottlenecks • Better control over time, cost & quality • Long lead time of production in key Integration • Long-term service support to customers components such as Bearings, Gea
Slide 14: Company snapshot
Company snapshot 91% * 61.3% ** 5th Largest globally in Wind energy Recognized technology leader with 2nd Largest globally in Wind sector strong presence in Europe gearboxes ** India, the USA, China, Australia, Europe, China (mainly Germany with Geographical Presence Europe, Latin America with 9.0%
Slide 15: Suzlon and REpower: Synergies
Suzlon and REpower: Synergies • Accelerate REpower’s volumes and improve margins through Suzlon’s supply chain linkages – Supply of rotor blades, gear box, generator, control panel, forging and casting parts, converters etc. – Reduce cost through moving supply chain partially to low cost manufacturi
Slide 16: Suzlon and Hansen: Synergies
Suzlon and Hansen: Synergies • Hansen is an independently managed company – Transactions between Hansen and Suzlon are on arm’s length basis • Supply chain management – Plugs a gap in Suzlon’s supply chain for gearbox and technology – Key components of gear boxes would be sourced out of India and Ch
Slide 17: SE Forge Limited: Component business development
SE Forge Limited: Component business development • IDFC PE invested Rs.400 cr. for 17.1% stake in Sept. 2008 • Manufacturing facilities – 70,000 MT p.a. forging and machining unit in Vadodara, western India – 42,000 rings of 5m diameter, largest in India – High precision forging and machining capabi
Slide 18: Pioneering end-to-end wind power solutions
Pioneering end-to-end wind power solutions • Allows customers to benefit Tata Wind resource mapping from cost-efficiencies and Power economies of scale in wind farms Bajaj Auto Site Identification • Avoids need for customers to undertake cumbersome wind farm development process Essel Leverage Land a
Slide 19: Integrated R&D and design capabilities
Integrated R&D and design capabilities ► Integrated product, component and system design under one organization Results in high reliability and – Global resource pool for quicker design, development and credibility among Customers upgrade ► Developed own MW and multi-MW WTG models and rotor blades ►
Slide 20: Strong international client base in key markets
Strong international client base in key markets Europe# & South US China Australia / NZ America Total in 2008: 8,358 Total in 2008: 6,246 Total in 2008: 619 MW Total in 2008: 4,910 Installations* MW MW Forecast in 2009-13: MW Forecast in 2009-13: Forecast in 2009-13: 3,950 MW Forecast in 2009-13: 52
Slide 21: Experienced management team
Experienced management team Board Members Group Executive Council CEO’s Office Mr.Kirti Vagadia Mr. Tulsi Tanti Mr. Sumant Sinha Mr.Girish Tanti Group Supervisory CMD COO ED, Head - HR Counsel Mr.Andris Cukurs Mr.Dan Hansen Mr.Rohit Modi Mr.Erik W. Pedersen Mr.Paulo Soares Head - USA Head - ANZ Head
Slide 22: Suzlon: Strategy
Suzlon: Strategy Suzlon’s Vision Suzlon’s Mission • Technology leadership in the Wind sector • To contribute to sustainable development of • Be among the top 3 wind companies in all the Wind Energy sector through an integrated the key markets of the World product design and manufacturing strategy •
Slide 23: 2009: Our year of consolidation
2009: Our year of consolidation • Subdued markets give an opportunity to consolidate business after 5 years of steep growth – Overcome present challenges • Business • Working capital management • Strategic financial management – Integration of strategies – Expand markets for component business • No
Slide 24: Overcoming present challenges: Business
Overcoming present challenges: Business • Blade cracks – Retrofit exercise under way after satisfactory conclusion of RCA and solution validation • Order book slowdown – S88 V3, with demonstrable performance, positioned as mainstay for international market – Strong pipeline of potential customers –
Slide 25: Overcoming present challenges: Working capital management
Overcoming present challenges: Working capital management • Working capital reduction plan designed in association with AT Kearney – Receivables • Program management for order fulfillment • Improvement in production planning process • Improvement in documentation and certification process – Inventor
Slide 26: Overcoming present challenges: Strategic finance management
Overcoming present challenges: Strategic finance management • Funding REpower stake acquisition – Acquired partial stake worth EUR65 million from Martifer in December 2008, paving way for further steps – Funding for balance EUR205 million stake to be met through combination of working capital manage
Slide 27: Contents
Contents • Industry overview • Suzlon Overview • Q3 FY09 updates • Recent Developments • Annexes 27
Slide 28: Consolidated financial results
Consolidated financial results (Suzlon Wind + Hansen + REpower) INR Cr. Particulars YTD FY09 (unaudited YTD FY08 (Unaudited FY08 condensed consolidated) condensed consolidated) (Audited) Sales 17,255 8,756 13,679 Raw Material cost 11,306 5,722 8,870 Gross Profit 5,949 3,034 4,809 Gross Profit margin
Slide 29: Consolidated financial results
Consolidated financial results INR Cr. YTD FY09 (Unaudited condensed consolidated) YTD FY08 (Unaudited condensed consolidated) Particulars Wind Hansen REpower Wind Hansen REpower Sales MW 1,744 Nm nm 1,546 nm nm Sales 10,198 2,942 4,656 7,273 1,540 -- Raw Material cost 6,583 1,394 3,811 4,995 784 --
Slide 30: Suzlon Wind: Order outlook
Suzlon Wind: Order outlook • Industry’s order visibility reduced in light of financial crisis – Credit crisis has impacted finance availability, not demand – Customer preference shifting to shorter-term planning due to easier availability of equipment • 2009: as the industry expects slowdown in grow
Slide 31: Contents
Contents • Industry overview • Suzlon Overview • Q3 FY09 updates • Recent Developments • Annexes 31
Slide 32: Recent developments
Recent developments • 2% stake sale by Promoters / Persons forming part of Promoters Group (13th May 2009) – Sold 30 mln equity shares – Promoter / Promoter group holding in company now 63.82% • Orders received totalling to 387 MW in China, Australia and USA in line with Management indication of 100
Slide 33: Liability management exercise (FCCBs)
Liability management exercise (FCCBs) USD mln. Particulars June 2007 October 2007 Total FCCBs Original FCCBs Value 300.00 200.00 500.00 Exchange (59.33) (34.67) (94.00) Cash Buyback (29.37) (43.96) (73.33) Total original FCCBs outstanding 211.30 121.37 322.67 New FCCBs issued 35.59 20.80 56.39 Total
Slide 34: Thank you
Thank you For additional information please contact: investorrelations@suzlon.com
Slide 35: Contents
Contents • Industry overview • Suzlon Overview • Q3 FY09 updates • Recent Developments • Annexes 35
Slide 36: Blade crack rectification
Blade crack rectification Background – Reports from in service S88 V2 turbines begin to surface of a common crack appearing c. 5m from the hub fairing – Suzlon announces retrofit for 1,251 blades majority of which are sold in the US • Crack faults observed in 172 blades by 25th Jan 2009 – Next gen
Slide 37: Blade crack rectification
Blade crack rectification • Introduction of V3 blade – V3 blade development was initiated as a next generation development aimed at achieving improved aerodynamic performance • Incorporates stronger structure as compared to V2 – V3 was an independent development made before the V2 blade crack issue
Slide 38: Blade crack rectification: Summary and provisioning
Blade crack rectification: Summary and provisioning Blade Cracked Replaced/ Balance (Nos.) (till Jan 25, 2009) Retrofitted 1,251 172 363 888 Provisions (Rs. crores) Particulars FY08 H1 FY09 Q3 FY09 Total Retrofit and replacement 122 -- 171 293 Availability compensation 20 74 62 156 Total 142 74 233
Slide 39: Explanation to blade provisioning
Explanation to blade provisioning • Initial internal RCA pointed to design weakness and possible solution – Budget of Rs.122 crore provided for 45 blades’ replacement and full retrofit – Exercise was to be completed by September 2008 • Delay in commencing retrofit exercise as full RCA and validation
Slide 40: Suzlon Wind: Exceptional Items
Suzlon Wind: Exceptional Items INR Crs. Particulars Q3 FY09 Q3 FY08 YTD FY09 FY08 Blade retrofit provisions 171 19 171 122 Availability related to blade cracks 62 -- 136 20 FCCB MTM Loss / (Gain) 92 (12) 435 (4) Other MTM Loss / (Gain) 124 -- 215 23 Others -- -- -- 125 Total 449 7 956 285 40
Slide 41: Suzlon Wind: Sales and order breakup
Suzlon Wind: Sales and order breakup Orders as New Orders Sales in Q3 Orders as Sales in Sales in Region on 29/10/08 Orders Adjustment FY09 on 26/01/09 9m FY09 FY08 (in MW) (in MW) (in MW) (in MW) (in MW) (in MW) (in MW) India 236 135 (105)* 168 98 519 975 USA 1,215 0 0 202 1,013 582 593 China 512 5