Centerbridge Partners to acquire turbine unit for $1.2bn

March 2015 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Suzlon Energy Ltd announced on 22 January that it had agreed to sell its German wind turbine unit, Senvion SE, to private equity firm Centerbridge Partners for around $1.2bn.

The all cash deal, which is subject to regulatory approval and a number of other conditions, is expected to be completed by the end of April. On top of the agreed purchase price, Suzlon stands to earn another €50m from the deal, dependant on Senvion fulfilling certain performance conditions in the future.

The decision to sell the unit is part of Suzlon’s renewed focus on domestic projects, high growth foreign markets and emerging markets. The sale will finally see Suzlon exit the Senvion business, a move the company was reportedly considering for some time, in part due to the group’s onerous debt obligations. India based wind-power company Suzlon has been selling its assets for a number of years. The firm has been forced to pursue divestitures due to the $2.6bn debt pile which it accumulated during an ill-fated decade long expansion and acquisition spree. In addition to the unit sales, Suzlon has been required to restructure a number of local loans. It has also refinanced some of its international debt and reduced its existing workforce following weaker than expected demand for its wind turbines. The Senvion exit is unlikely to be the firm’s last, with more asset sales and cost reductions expected in the coming months.

According to an announcement from Suzlon, the firm will be exiting the Senvion business at a small loss. Suzlon initially acquired a minority stake in REpower Systems, which would later become Senvion, in 2007. The company completed the acquisition of the remaining REpower shares in 2011, paying a total of around €1.8bn.

“We are pleased to announce this development which is in line with our strategic initiative to strengthen our balance sheet,” said Mr Tulsi Tanti, chairman of Suzlon, in a statement announcing the deal. “Suzlon will offer its wind and solar hybrid technology solutions to contribute towards achieving the country’s target of ‘sustainable energy for all’. With our market leadership, right technology, proven project execution capabilities and best in class services, we are best positioned to tap the high growth potential in home market. Suzlon Group is proud to have played a significant role in Senvion’s growth story, making it globally competitive driven by state of the art technology. Over the years, both Suzlon and Senvion have mutually benefited and added value to each other’s growth and development and sharing of best practices.”

Senvion, which is headquartered in Hamburg, Germany, develops, manufactures and markets wind turbines with rated outputs of 1.8MW to 6.15MW. The unit employs around 3400 people across a number of sites globally.

Following the completion of the deal, Centerbridge has noted that it does not intend to scale back Senvion’s research and development departments. The firm has also confirmed that it does not plan to reduce Senvion’s staffing levels moving forward. In a statement, Stefan Kowski, managing director of Centerbridge, said “Senvion is a company with impressive technology and leading market positions. The global market environment for renewable energies is promising for a wind turbine manufacturer, particularly for one of the most experienced players in the industry with onshore and offshore capability. We are confident that Senvion will continue its track record and, together with the company’s management, we look forward to supporting its continued development as a profitable and growing company.” Senvion and Suzlon have also reached a reciprocal licensing agreement under the terms of the deal. Senvion will provide Suzlon with the licence for offshore technologies for the Indian market and in return Suzlon will give Senvion the S111-2.1MW licence for the US market.

Centerbridge closed a $6bn private equity fund in October 2014, the largest raised since the firm formed in 2005. Though the fund can be utilised for a variety of different purposes, one of Centerbridge’s biggest focuses to date has been the acquisition of companies out of bankruptcy proceedings or other restructurings. Accordingly, the firm’s deal for Senvion is well within Centerbridge’s remit. Centerbridge, which has offices in both New York and London, currently has around $25bn of capital under management.

Richard Summerfield