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Suzlon Energy Ltd.
Impact analysis: Caparo’s 2GW
order on Gamesa
„Indian wind market shift to IPPs / sustainable; Buy Suzlon
Caparo Energy (CEL LN - a client of Suzlon) signed a framework agreement with
Gamesa of US$2bn to supply of 2GW wind turbines for phase II expansion by
2016. Three implications: a) we see the order as validating our argument of the
Indian wind market shifting towards IPPs and we believe that makes it a
sustainable market v/s tax break driven markets, b) it should improve funding
prospects for Suzlon’s 1GW order should CEL be able to secure equity funds
following 19% stock run-up led by its order on Gamesa and c) we believe it should
increase competitive intensity over the medium term, in-line with our view.
Maintain our recent upgrade to a Buy on Suzlon, on a turnaround. Risks to our
non-consensus Buy call are delivery push-back, currency and execution.
Show me the land & money – $260mn CEL places $3.5bn order
„ CEL intends to set up 5GW of wind power assets in India, for which it may
use 2-4 vendors to diversify suppliers. Phase – I of 3GW for which it has an
agreement with Suzlon and Phase - II was of 2GW.
„ CEL placed its 1
st
firm order of 1GW with Suzlon on EPC including land, its
competitive advantage and with better margin. CEL in its release indicates
taking delivery of 100MW in 1QFY12, 400MW in 2HFY12, and 500MW in
FY13E, which should re-assure markets, worried on execution of the order.
„ CEL signed framework agreement with Gamesa (phase II) on turbine EPC
basis (no land), where it may have obtained better pricing and also achieved
vendor diversification. We were not expecting Suzlon to get this repeat order.
„ CEL, has funds for ~250MW of the 3GW pipeline yet. Should CEL able to
secure equity /mezz. funds following stock run-up (+19% since last week low)
led by its order on Gamesa. This fund raising shall only improve visibility for
Suzlon's top-line (250MW in FY12E and 500MW in FY13E in BofAMLe).
„ If CEL is able to raise funding and secure land for 2GW (a big challenge –
CEL claims to has it even before installing wind masts!), Gamesa could get
established as a top 3 player in India behind Suzlon. However, which player it
takes the spot from (Vestas / Enercon), remains to be seen.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Suzlon Energy Ltd.
Impact analysis: Caparo’s 2GW
order on Gamesa
„Indian wind market shift to IPPs / sustainable; Buy Suzlon
Caparo Energy (CEL LN - a client of Suzlon) signed a framework agreement with
Gamesa of US$2bn to supply of 2GW wind turbines for phase II expansion by
2016. Three implications: a) we see the order as validating our argument of the
Indian wind market shifting towards IPPs and we believe that makes it a
sustainable market v/s tax break driven markets, b) it should improve funding
prospects for Suzlon’s 1GW order should CEL be able to secure equity funds
following 19% stock run-up led by its order on Gamesa and c) we believe it should
increase competitive intensity over the medium term, in-line with our view.
Maintain our recent upgrade to a Buy on Suzlon, on a turnaround. Risks to our
non-consensus Buy call are delivery push-back, currency and execution.
Show me the land & money – $260mn CEL places $3.5bn order
„ CEL intends to set up 5GW of wind power assets in India, for which it may
use 2-4 vendors to diversify suppliers. Phase – I of 3GW for which it has an
agreement with Suzlon and Phase - II was of 2GW.
„ CEL placed its 1
st
firm order of 1GW with Suzlon on EPC including land, its
competitive advantage and with better margin. CEL in its release indicates
taking delivery of 100MW in 1QFY12, 400MW in 2HFY12, and 500MW in
FY13E, which should re-assure markets, worried on execution of the order.
„ CEL signed framework agreement with Gamesa (phase II) on turbine EPC
basis (no land), where it may have obtained better pricing and also achieved
vendor diversification. We were not expecting Suzlon to get this repeat order.
„ CEL, has funds for ~250MW of the 3GW pipeline yet. Should CEL able to
secure equity /mezz. funds following stock run-up (+19% since last week low)
led by its order on Gamesa. This fund raising shall only improve visibility for
Suzlon's top-line (250MW in FY12E and 500MW in FY13E in BofAMLe).
„ If CEL is able to raise funding and secure land for 2GW (a big challenge –
CEL claims to has it even before installing wind masts!), Gamesa could get
established as a top 3 player in India behind Suzlon. However, which player it
takes the spot from (Vestas / Enercon), remains to be seen.
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