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Suzlon to pay Rs 590 cr as damages  

Suzlon Energy Ltd, one of the top five wind power equipment makers in the world, is planning to set aside Rs 590 crore for paying damages to its clients who are facing output losses due to defective blades installed by the company.

Suzlon will compensate customers John Deere Wind Energy and Edison Mission Energy for output losses because of cracked turbine blades, news agency Bloomberg said today, quoting Chief Financial Officer Kirti Vagadia at the Nomura Asia Equity Forum in Singapore.

“We have made a cummulative provision of Rs 5.9 billion in the balance sheet as of March 31, 2008. We are giving availability compensation to John Deere and Edison under the contractual terms,” the agency quoted the official.

Suzlon is yet to make any official announcement on the issue.

Recently reports said Suzlon’s turbines installed at wind farms of Deere and Co were not producing enough power due to technical issues such as inability to adapt to the US power grid. Suzlon has supplied over 250 wind turbines for Deere and Co. So far Suzlon has not commented officially on this issue.

Edison Mission Energy reported to its investors in January 2008 that some of its wind turbines supplied by Suzlon were suffering from blade cracking problems. Suzlon confirmed this in January 2008 and wrote off Rs19 crore in the third quarter of last year for the replacement of 34 blades of its 2.1 Mw turbines installed in the US that developed cracks. Later, Suzlon provided for a further provision of Rs 100 crore in the next quarter to strengthen 1,251 blades. Later Edison also cancelled an order for supply of 315 Mw in 2009, numbering about 150 S88-2.1 Mw turbines. Edison had placed orders for 300 turbines in two phases worth 630 Mw capacity, in 2008 and 2009.

Suzlon also has a two-year deal with the US Energy department, along with GE Energy, Siemens Power Generation, Vestas, Clipper Turbine, and Gamesa Corp, for technology research and development and site strategies to boost wind turbine manufacturing capabilities in the US.

Business Standard

11 July 2008

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