According to reports, Indowind Energy Ltd. (IEL), an owner of wind farms in India, is buying turbines for its next project from Shanghai Electric Group Co. and said it may partner with the Chinese company to assemble the machinery locally.
Chennai-based Indowind placed the 28-megawatt order three months ago and expects Shanghai Electric to start shipments by December, said A. Raja Sukumar, head of corporate communications at BVK Group, Indowind’s parent.
“We’re looking at a long-term relationship with Shanghai Electric now that we’ve made a deal,” he said. “We will try to manufacture the same models here. This is the future plan.” A phone call and e-mail to Shanghai Electric Group Co.’s investor relations department weren’t answered today.
Sinovel Wind Group Co. and Xinjiang Goldwind Science & Technology Co., which rank among the world’s top five suppliers, sell most of their turbines in China. The state-run China Development Bank has provided at least $12.5 billion in financing to help these Chinese manufacturers expand abroad as growth slows at home in the world’s largest wind market.
Shanghai Electric is supplying its 2-megawatt turbines to Indowind’s project, slated to be completed by 2012. As part of the deal, Shanghai Electric will train Indowind employees to install the machines and service them so that the Indian company can get a vendor license, Raja Sukumar said.
He declined to give a value for the deal. The average cost of a wind turbine contract in India is about 65 million rupees ($1.4 million) per megawatt, he said.
India, the biggest market for new wind installations after China and the U.S., is dominated by Ahmedabad-based Suzlon Energy Ltd. (SUEL), which installed 41 percent of new capacity in the last financial year. Foreign suppliers are seeking to penetrate the growing market, and Sinovel and Dongfang Electric Corp. were among the first Chinese suppliers to win orders in India.
“This is another opportunity to try a 2-megawatt machine,” said Sukumar. “We have nearly 250 machines and have tried all the manufacturers,” he said.
Suzlon imports components from China and assembles its turbines in India, he said. “It makes sense for us to directly go there,” he said. “The margin that Suzlon charges is saved.”
Indowind also had discussions with China Ming Yang Power Group Ltd. and South Korean suppliers to get “the best deal,” Sukumar said.
The two companies may consider setting up a joint venture to assemble Shanghai Electric’s turbines in India after the first wind farm is completed, he said.
In India, unlike most markets, the biggest turbine suppliers like Suzlon, Gamesa Corporacion Tecnologica SA and local unit of Germany’s Enercon GmbH, in addition to providing the machinery, also tend to develop projects. They acquire land and deal with permits to hand over a ready wind farm to the owner or investors.
Indowind, which plans to own 72 megawatts of capacity by March, wants to have its own turbines to avoid waits of up to two years for projects because suppliers are backlogged, he said.
“When we have money, they don’t have projects readily available or they demand a premium,” he said. “It’s better to have our own source.” A joint venture would allow Indowind to do that without having to pay a “hefty” royalty to acquire the technology to design and make turbines on its own, he said.
Shanghai Electric will operate and maintain the turbines for the first two years at the project for which sites in Tamil Nadu and Karnataka states have been identified, he said.