Der Spiegel on Tulsi Tanti

 

Here are 2 articles on Green -Warrior Tulsi Tanti,one dating from 2008 and the second a few days back that appeared in Der Spiegel.Enjoy them.Tulsi Tanti might not be a media darling today but the man does have much to recommend him.These articles provide an insight into the mind of the entrepreneur who named his company Suzlon,’Suz’ from the Gujarati Suz-buz (intelligence)and ‘lon’, the Gujarati way of saying bank loan.

 

Tulsi Tanti’s Success Story

The Rise of Indian Wind Power

By Michaela Schiessl

Indian businessman Tulsi Tanti has built one of the world’s largest wind turbine companies in an incredibly short amount of time. Now that he has bought a German company, however, his popularity may be on the wane.

The water buffalo stands, like a statue, in the middle of the path, staring at the SUV bearing down on it at an alarming speed. The driver honks his horn and revs the engine, but the animal doesn’t budge a centimeter. It’s accustomed to giant machines — much, much bigger than the one coming at it.

Long convoys of heavy, oversized trucks are a regular spectacle as they pass through the farming communities near the Indian city of Dhule. The flatbed vehicles carry steel pipes, heavy generators and 40-meter (131-foot) blades. The materials stand in stark contrast to the rural surroundings, where the India of the future is taking shape not far from the local farmers’ teams of oxen. Dhule is the home of India’s largest wind farm.

Hundreds of white towers already protrude from the barren landscape of the Maharashtra Plateau. The wind farm now produces 640 megawatts of electricity, and it will produce 1,100 once construction is complete — the equivalent of one nuclear power plant. It is the fullfillment of Tulsi Tanti’s dream, a dream he has turned into reality in the short space of 13 years. As dreams go, Tanti’s is a big one. Suzlon Energy, the company he founded in 1995, is already the world’s fifth-largest wind turbine manufacturer, and Tanti himself, who is worth $3 billion (€1.9 billion), is one of India’s richest men.

His more established competitors in Europe realized long ago how much of a threat this short man, with his carefully combed hair and thin moustache, posed. Despite his serious demeanor and modest appearance, Tanti is known for his cunning and aggressive takeover tactics.

Interest in his Solution

His name is already mentioned in the same breath as that of steel magnate Lakshmi Mittal and Ratan Tata, president of the Tata Group, which acquired British carmaker Jaguar in 2008. And Tanti is still a long way from reaching his goal, even though his rise to prominence began with a great deal of aggravation.

At the time he was managing the family textile business in Surat, a city in western India. The business was languishing, mainly because electricity was extremely expensive for businesses and the power grid was plagued with outages. It was a source of great annoyance for Tanti. In 1994, he ordered two wind turbines from Danish manufacturer Vestas, essentially taking his factory off the power grid.

Other business owners began showing an interest in his solution, prompting Tanti to wonder whether he might be in the wrong business. Wasn’t wind energy the real business of the future? He discussed his ideas with his three brothers. Together they scraped together $600,000 (€387,000) in seed capital, founded Suzlon Energy and moved to Pune, a city near Bombay in southwestern India.

 There was only one problem. None of the four brothers, all engineers, knew anything about wind energy. But as customers, they were all too familiar with the inadequacies of the industry. The turbines were supplied by the manufacturer, installed by another company and maintained by a third. By the time a turbine was up and running, the customer was often at his wits’ end.

Tanti, realizing that a change was sorely needed, came up with the idea of offering a complete package of wind energy services. Suzlon would simply handle everything. Customers would not even have to install wind turbines on their own premises — instead, a customer could buy a turbine at a faraway wind farm and would then own that turbine’s output.

Without a Fight

The innovative aspect of Tanti’s idea had more to do with the service he was providing than with any feat of engineering. But it was a concept that would revolutionize the wind energy business.

The brothers planned to purchase the sophisticated technology abroad, eventually producing the turbines in India, where low production costs would give them an unbeatable competitive edge. But there was only one problem: The leading European manufacturers were not about to give up their engineering achievements without a fight.

Suzlon was forced, grudgingly, to enter into joint venture agreements without gaining access to the technology. Tanti began his operations as a distributor of wind turbines manufactured by the German company Südwind. Despite his initial reluctance, the arrangement would prove to be a stroke of luck for Tanti’s business.

Although Südwind, a small company founded by students at the Technical University of Berlin, built exceptional turbines, its engineer-owners knew very little about running a business. Südwind went into bankruptcy in the late 1990s and Tanti seized the opportunity, acquiring parts of the Germany company’s R&D division. But instead of simply moving the technology to India, Tanti hired the former Südwind employees and set up an R&D laboratory in the northern German city of Rostock. Existing designs were fine-tuned at the laboratory, which also served as a training ground for young Indian technicians, who would later return to India to build turbines with their newly acquired expertise.

Similarly, Tanti managed to acquire a Dutch blade manufacturer. In 1999, when the Indian state of Maharashtra, where his business was located, passed a law that allowed companies to claim the costs of installing wind turbines as a tax deduction, Tanti had it made. By 2002 sales at Suzlon quadrupled to $131 million (€85 million).

One of the World’s Top Wind Companies

Four years ago, investors urged him to sell the company. Tanti begged off, telling them: “In a few years, Suzlon will be buying up the leading European companies.” As it turned out, he was right.

A trip to Pondicherry reveals that the Indians were already closing in on the Europeans at the time. The plant that Suzlon opened in this former French colony on India’s east coast in 2004 can easily hold its own with Western competitors. The plant’s enormous production buildings are well lit and almost clinically clean. Many of the men who assemble the turbines and sand the rotors there learned their trade at Tanti’s German laboratories.

There are more than 1,200 workers at the Pondicherry plant, many with German expertise — but being paid Indian salaries. It is these local production conditions that enable Suzlon to boast a 14 percent profit margin. The standard in the industry is 8 percent.

Three years ago, in 2005, Tanti converted his advantages over the competition into cash when he orchestrated a brilliant initial public offering. Suzlon raised $340 million (€219 million) and, from one day to the next, catapulted its founder and his family in the realm of the subcontinent’s ultrarich. Tanti himself currently owns 16 percent of Suzlon, while the family owns 66 percent.

The down-to-earth Tantis have yet to succumb to megalomania. The company’s Pune headquarters occupies a modest fifth floor of an office building. The 50-year-old CEO lives with his wife in a rented apartment next door to his brothers. Their two children attend university. The large clan gets together for meals as often as possible.

Tanti spends 300 days a year traveling, and yet he hasn’t splurged on a private jet. Instead of acquiring these playthings of the nouveau riche, Tanti is far more interested in pursuing his plan: He is determined that Suzlon become one of the world’s top three wind companies.

Acquisitions have helped the company reach fifth place on the list, helped along by perhaps its greatest coup of all: In 2007, Tanti suddenly entered the bidding for Repower, a major German wind turbine producer, and ended up outbidding the French nuclear energy giant Areva.

It wasn’t cheap, but it was a sensation. In May 2007, Suzlon paid €450 million ($698 million) for 33.6 percent of Repower. It was the largest acquisition an Indian company had ever made in Germany.

But from the very beginning, the German turbine builders were never quite comfortable with their new bosses, fearing that their turbine blueprints would soon be copied in India. Tanti, who had assumed the chairmanship of Repower’s supervisory board, insisted that he had no such intentions.

In fact, German corporation law would have made such a technology transfer impossible. Suzlon would have needed a subordination agreement to gain access to the blueprints. To that end, Tanti would have had to submit a takeover bid to Repower shareholders, but first would have had to acquire shares from the major shareholders, including Areva. The French had an option, exercisable after a year, to sell their stake in Repower.

The year had not yet expired before the first dispute erupted over whether Repower was being sucked dry by the Indians. Tanti was annoyed and publicly complained about the Hamburg-based company’s lack of respect for his commitment. After all, he said, he was creating jobs. But he left no doubt that he wanted to gain a majority stake in Repower. That was exactly what the market wanted to hear. In mid-May, the company’s stock price shot up to over €240 ($372), from €160 (€248) at the time of the takeover.

Tanti’s problem was that the Areva shares, which he planned to acquire in late May, were suddenly very expensive. What he did next, though, no one saw coming. Four days before the expiration of Areva’s sales option, he suggested, during a financial press conference in Mumbai, that Suzlon might consider selling some of its Repower shares to turn a profit.

Talking Down the Shares

The news had its desired effect. Repower fell from €240 to €200 ($310) a share. Executives at Repower’s Hamburg headquarters were livid. It was unprecedented, a major shareholder talking down the company’s share price.

Tanti’s behavior triggered “major irritations,” a company spokesman says diplomatically. The Indian’s effort to appease the Germans in an e-mail had little effect, as did the news, a few days later, that he intended to buy the shares owned by Areva and the Spanish energy company Martifer after all.

Whatever the purpose of Tanti’s maneuver was, it attracted the attention of Germany’s Federal Supervisory Authority for Financial Services (BaFin). “There is no investigation underway, but we are observing the situation,” says BaFin spokeswoman Anja Engelland. Her agency’s interest in the case is likely to have increased significantly last week.

On Thursday, Suzlon announced its purchase of the Areva shares. According to traders, Tanti paid less than the current share price, but Areva was apparently satisfied to walk away with a profit of €350 million ($543 million). In addition, the Indians have quietly bought Repower shares on the market in recent days, bringing their stake in the company to 66 percent of its stock. This was not welcome news to investors and, on Friday, the Repower stock price dropped by 6.5 percent. Once again, concerns over a possible know-how transfer are making the rounds. Although a Suzlon spokesman called these concerns “pure speculation,” the company didn’t exactly deny that they were justified.

But, more recently, Tanti faces problems that could be far more threatening than disgruntlement at Repower. In the United States, Suzlon is currently experiencing the biggest debacle in its relatively short history. The Indians were forced to recall 1,251 rotor blades from a wind farm in the Midwest when many of the blades broke after being used for only a short period of time.

A Suzlon spokesman blames the broken blades on an unpredicted, strong shift in wind direction and says that the company now plans to reinforce the giant blades — at an estimate cost of $30 million (€19 million). Industry insiders doubt that this will be enough. Repairs to a weak point in a blade are costly, they say, and usually last only a few years. Besides, Suzlon could face claims for damages from the customer.

Numbers Are Good

But Tulsi Tanti sees none of these problems as being insurmountable. He has faith in his numbers, and the numbers are good.

The company’s sales grew by 71 percent, three times the industry average, in the last fiscal year. Suzlon’s revenues amounted to $3.4 billion (€2.2 billion), and its pre-tax gain climbed to $480 million (€310 million). The company dominates the Indian market and holds a 14 percent share of the global market. Its factories are humming away in Pipestone, in the US state of Minnesota and in Tianjin, China. It has orders on the books worth $4.3 billion (€2.8 billion). And it plans to double annual production by 2010.

But there could be a bump in the road ahead. What happens if the advantages he reaps from being based in India begin to fade? Suzlon owes much of its success to lower production costs. What if they go up? Even Indian farmers, the ones who toil away in the fields next to the wind turbines, have figured out that someone is making a lot of money with those turbines. “Suddenly they’re asking 20 times as much for their land,” officials at Suzlon complain. Others want lease payments for the turbine sites, as well as compensation for the use of their right-of-way.

If Suzlon refuses to pay, the farmers block the access routes with their buffaloes. In 2007, 44 wind turbines, or one-third of total capacity, had to be shut down temporarily in Sangli because of such campaigns. In another location, the poverty-stricken rural population made off with aluminum ladders and copper cables from 63 new turbines and sold the valuable parts to scrap metal dealers.

In the village of Chikhli in the Satara district, angry residents recently caused turbines to be shut down, because they felt that real estate brokers had cheated them when they sold their land. Although the sales took place 10 years ago, the former landowners are convinced that there is still money to be had. Whether or not Suzlon decides to play along, the company will suffer the consequences.

 

03/08/2011

 Wind Turbine Tycoon Tulsi Tanti

‘We Should Not Fear China, But Learn from Them Instead’

He is rich, Indian and head of the fast-growing wind turbine manufacturer Suzlon. Tulsi Tanti spoke with SPIEGEL ONLINE about his plans for wind energy in Germany, the future of nuclear energy and what the West can learn from China.

SPIEGEL ONLINE: Mr. Tanti, in 1990 you bought two wind turbines for your textile company — and then proceeded to develop one of the largest wind energy companies in the world. Is your success story symbolic of the rise of emerging economies?

Tanti: I always wanted to build up a company that was a global player. In the textile industry, however it was not possible. That was my motivation.

SPIEGEL ONLINE: Even so, people in the industrialized world are fearful of an economic power shift toward India and China. Are they right to be worried?

Tanti: Forget this distinction between East and West. In our industry, the aim is to supply almost 7 billion people with energy while at the same time not polluting the earth. To do this, we have to work together at the global level. Asia is the market and the location where production is inexpensive. The technological expertise and specialist knowledge comes from the industrialized world. The aim is to combine them.

SPIEGEL ONLINE: You own more than 90 percent of the Hamburg wind turbine manufacturer Repower. When you bought in, there was concern that you were only interested in their know-how. Can you understand such worries?

Tanti: When German companies take over firms in India, it is seen as normal. When an Indian buys one or two firms in Germany, that is something special. If I pay money for a company, the know-how then belongs to the group, and I want to use it to the benefit of all. Suzlon is a strategic investor. In the past three years we have created over a thousand jobs in Europe — mainly in Germany. Germany has seen enormous benefits as well.

SPIEGEL ONLINE: What are your plans for Repower?

Tanti: We want to position the company to be even more global. I believe that if we can really bring Suzlon and Repower together, we will be able to position Repower as the global market leader in particular fields in three to five years.

SPIEGEL ONLINE: Are you planning to buy additional companies in Germany?

Tanti: No. Together, Repower and Suzlon have the know-how for the different markets in industrialized and emerging countries. We have a global supply chain and production sites in inexpensive countries. In our company there is currently no piece of the puzzle missing. Furthermore, it is not easy to invest in Germany as a foreign company.

SPIEGEL ONLINE: What are the hurdles?

Tanti: I have a request for your government: Germany should become more global, the legislation should become more open. This is very important for the development of your economy. If a German company takes over 51 percent of an Indian one, it is given far-reaching controlling rights. But if an Indian company owns the majority of a German company, it is granted only very limited influence. That is unfair. If we want to make decisions we have to conclude a so-called domination agreement. This is only possible with a stake of 75 percent or more and even then it is still difficult.

SPIEGEL ONLINE: Wind energy, it would seem, has gone from being a booming business to an industry in crisis. You also faced losses in 2010. Have the good times come to an end?

Tanti: I am convinced that 2011 will be better. The construction of offshore wind farms offers great opportunities in Germany. Such projects could double the already-existing land-based capacity of 25 gigawatts.

SPIEGEL ONLINE: In Germany, however, coastal environmental conservation zones mean that the turbines must be located much further offshore than in comparable projects. Isn’t the idea a bit crazy?

Tanti: It is fundamentally crazy to build wind farms out at sea. But it works! We have already installed facilities 40 kilometers off the coast at a depth of 50 meters. But calculating the time new developments take is always difficult. A lot of tests and approvals are required.

SPIEGEL ONLINE: Hasn’t enthusiasm for offshore wind parks evaporated? The German government, after all, has recently extended the lifetimes of the country’s nuclear power reactors.

Tanti: I don’t believe so. We not only need wind power, but also nuclear and solar energy. All three forms are relatively climate friendly and energy requirements are increasing all the time. There is, however, a clear political stipulation that the share of renewable energies should grow to 20 percent worldwide by 2020. So far, we have reached 2 percent.

SPIEGEL ONLINE: In the meantime, China has overtaken the US and Germany as the leading market for wind turbines and the country is also a central growth market for your company. But the Chinese government mainly promotes domestic companies. How difficult has it been for you to break into the Chinese market?

Tanti: One has to understand China correctly. Our management there consists of native Chinese, we produce locally and our suppliers also come from China. In this way, we too can also enjoy the cost advantages.

SPIEGEL ONLINE: Nevertheless, Chinese companies sell their products at a much cheaper price. Will Chinese companies soon be leaving Suzlon and Repower behind on the international stage?

Tanti: No. Chinese products are perhaps cheaper to purchase. But if you consider the overall lifetime of a system over 20 years, we are less expensive. Chinese companies may well be competitive on their domestic market, but it will be another 6 to 8 years before they become serious competitors internationally. We should not be afraid of China, but should learn from them instead.

SPIEGEL ONLINE: In what way?

Tanti: The government there first opens all business opportunities to firms in the domestic market, which is huge. In the coming 10 years, wind energy systems with a total capacity of up to 200 gigawatts will be installed. That is almost seven times the current level in Germany. In so doing, Chinese companies are able to gather experience. Then three or four particularly good firms will be specifically made into global champions.  

SPIEGEL ONLINE: Once that happens, will German companies stand a chance?

Tanti: Several smaller German firms will have to join forces to cope with the competition. But the level of know-how in Germany is high. Not for nothing do we have four development centers in the country. With their experience gained from having produced the existing systems, German engineers can develop the next generation of turbines. They have to be successful on the world market with better technology, not lower prices.

Interview conducted by Anne Seith