Key Takeaways
- TPG has acquired a majority stake in Siemens Gamesa’s onshore wind turbine business in India and Sri Lanka through its Rise Climate fund.
- The deal aims to revitalize Siemens Gamesa’s troubled operations, offering new capital and restructuring support.
- The new venture will focus on producing competitively priced turbines tailored for Indian conditions while expanding export capabilities.
Major Deal to Boost Wind Energy in India
US buyout firm TPG has finalized an agreement to purchase a majority interest in Siemens Gamesa’s onshore wind turbine generator manufacturing business located in India and Sri Lanka. The deal, announced on Wednesday, will be facilitated through TPG’s Rise Climate fund and marks the inaugural investment from TPG’s Global South initiative, launched during the COP28 climate summit in collaboration with Altérra, a prominent climate finance investment group.
Siemens Gamesa, part of Siemens Energy, has faced significant challenges, including soaring costs, substantial debt, and product-related issues. The investment will be crucial in rehabilitating the company’s operations. TPG is spearheading a consortium of investors, which includes Prashant Jain, former CEO of JSW Energy, and Mavco Investments, controlled by key figures from the Murugappa Group. Jain and Mavco will acquire minority stakes in a new entity created for the transition of Siemens Gamesa’s existing manufacturing capabilities, which can produce approximately 10 GW annually at facilities in Tamil Nadu and Andhra Pradesh, alongside managing a workforce of around 1,000 employees.
The financial structure reveals that the consortium will inject approximately Rs 1,000 crore of primary capital into the new venture and pay Rs 4,500 crore to Siemens for the acquisition of shares. The business currently holds Rs 2,000 crore in debt. Vellayan Subbiah from Mavco will chair the board, with Jain as executive vice chairman and Vinod Philip from Siemens Energy representing Siemens Gamesa.
Ankur Thadani, head of TPG Climate in Asia, underscored the commitment to tackling climate issues and emphasized the potential for capital investment in the industrial sector. The objective is to position the new company as a leader in low-cost wind power generation while catering to local needs and competing against both western and Chinese manufacturers.
The strategic plan includes localized production to reduce costs, leveraging India’s vast manufacturing capabilities, particularly since up to 90% of the wind energy supply chain is produced within the country. “This is a great opportunity for India to become part of a global supply chain,” Jain remarked, highlighting intentions for customized products suited to local conditions of low wind speeds and high ambient temperatures.
Certain legacy service contracts, including ongoing litigation with Singaporean utility Sembcorp, will be excluded from the new enterprise, while other active and future agreements will be incorporated. The leadership team believes that enhanced product quality, competitive pricing, and advanced technology will differentiate their offerings in the market.
Subbiah assured that ownership change will not compromise the venture’s business focus, with immediate plans to engage with existing and prospective clients to ensure seamless operations and address any production challenges.
As India’s energy demand continues to rise, the country aims to achieve 500GW of non-fossil fuel energy capacity by 2030. Given the government’s renewable energy commitments, the wind energy market is anticipated to experience significant growth, with an additional 57 GW forecasted by 2032. Jain reiterated the importance of fair competition and sustainable pricing strategies to support the burgeoning local wind industry. Morgan Stanley and Barclays facilitated advisory roles for the transaction.
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