Suzlon Energy- To squeeze out Repower minority shareholders :JPMorgan

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Suzlon Energy Ltd Neutral
SUZL.BO, SUEL IN
To squeeze out Repower minority shareholders


Suzlon has initiated the acquisition of balance 4.8% stake in Repower, at
€142.77/share. This would entail an expenditure of €63M (Rs4B)
 Post recent FCCB issuance (US$175M = Rs7.8B), Suzlon has the
requisite cash to fund this buyout. The squeeze-out will likely enable
Suzlon to use REpower cash to the tune of Rs17B, and also use
Repower balance sheet to raise further funds.
 At this point, the biggest challenge for Suzlon is to raise funds for the
potential redemption of legacy FCCBs of US$480M which are out of
the money and due for redemption in FY13/14. The liability including
redemption premium is Rs49B, in our estimate. Besides Repower cash,
sale of remnant stake in Hansen (Rs4.5B at CMP), receipt of Edison
receivables (US$204M = Rs9B) and strong operating cash flows from
business would likely be necessary to keep the lenders at bay.
 As always, we expect Jun-q to be weak for Suzlon both in terms of
order flows and profits. Reported orders were only 82MW. As Jun-q is
seasonally weak, we expect consol. loss of Rs4B. Recently, Suzlon
announced 100MW order from Orient Green Power with implied price of
Rs65M/MW (which looks very profitable).