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Suzlon mulls sale or listing a stake of RePower Systems

According to reports, Suzlon Energy Ltd. (SUEL), Asia’s third- biggest wind-turbine maker by sales, is studying options for its German Repower Systems SE (RPW) subsidiary, including a sale or listing a stake, people with knowledge of the matter said.

Suzlon, based in Pune, India, is seeking at least 1.5 billion euros ($1.96 billion) from a sale, while a listing of Repower’s international operations or Repower itself are among options that have been considered, said the people, who declined to be identified as the discussions are private. A sale may be preferred to an IPO for now, one of the people said.

Wind turbine makers face narrowing margins after reducing prices to compete for orders as U.S. and European governments cut clean-energy incentives to curb budget deficits. Suzlon is struggling to meet debt repayments, and losses at the company grew to 2.86 billion rupees ($56 million) in the three months through December, the most in five quarters. That prompted the company’s auditors to examine its ability to raise funds to make debt repayments due this year.

No firm decision on any sale has been made, as deliberations are at an early stage, the people said. Repower may return to the stock exchange in May or June, Manager Magazin reported on March 21.

Spokesmen for Suzlon and Repower in Hamburg declined to comment.

Suzlon has held initial talks with potential buyers including Alstom SA (ALO), General Electric Co. (GE) and Siemens AG (SIE), the Wall Street Journal said on March 15. Siemens won’t buy Repower, Siemens board member Michael Suess told the Journal on March 20.

On March 15, Alstom’s chief executive officer, Patrick Kron, discredited reports about acquisition plans to bulk up in wind power, saying the articles are speculation and he won’t sell shares in “unfavorable conditions” to finance a deal.

Suzlon’s ability to repay $700 million of debt may be less than expected after U.S. customer Edison International (EIX) said the earliest it’ll pay off a contract with the turbine-maker is next year. Suzlon had hoped to recoup a $206 million payment from Edison before June, when the first of its foreign-currency convertible bonds matures. Edison’s latest 10-K filing said the soonest that could happen is next February.

Suzlon lost its chief financial officer last month when Robin Banerjee quit. Kirti Vagadia, the head of corporate finance, has assumed his responsibilities.

Areva SA (AREVA), a Paris-based French nuclear reactor maker, owned a stake in Repower, but abandoned plans to acquire the rest of the company in 2007, saying the price was too high. The French company sold its 30 percent stake in Repower to Suzlon in 2008.

It took Suzlon four years to buy Repower. It began in April 2007 by acquiring a 7.7 percent stake and gradually expanded its holding. In October, the company bought out minority shareholders’ remaining 4.8 percent stake. Suzlon’s bid in April 2007 valued Repower at 1.2 billion euros.

Repower, based in Hamburg, was among the pioneers of the German wind-energy boom spawned by government subsidies a decade ago. The company employs about 2,700 people and has installed about 3,600 wind-energy systems to date.

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