Siemens Gamesa Renewable Energy, the second-largest wind turbine maker in the world, will stay away from bidding for Indian wind power projects owing to changes in regulatory policy.
The company, however, is looking at a strong engineering procurement and construction (EPC) market in the country as the demand for cost-efficient wind turbine generators grows.
Talking to Business Standard, Markus Tacke, Siemens Gamesa Renewable Energy chief executive officer (CEO), said changes in the regulatory regime in India had a considerable impact on the global business of the company.
“India is a key market which accounted for 30 per cent of company’s revenue (Mw equivalent) till last year. As there was a freeze in the Indian market after bidding was introduced, our profits fell here,” said Tacke.
The company, in its results for the quarter ended June 2017, said its revenues were down 7 per cent to €2,693 million owing to a “temporary downturn in the Indian market”. It also reported a 25 per cent decline in sales and 21 per cent decline in y-o-y EBIT (earnings before interest and taxation).
In February this year, the company’s financial report said the freeze in the Indian market on the back of the disruptive transition from feed-in tariffs (FiT) to auctions was a major problem it faced.
“The Indian market represented approximately 30 per cent of Gamesa’s revenue, and an over-proportional part of its profit, making this a serious issue for our company,” it said.
The government last year retired the 25-year-old FiT mechanism to award wind projects and introduced competitive bidding.
Tacke said, “The wind energy industry always had FiT as a young market. Bidding supports a mature market so we were surprised by the consequences.”
Ramesh Kymal, Siemens Gamesa onshore CEO for India, said: “We will not bid. We will continue to be in the EPC business because it is a proven business model for us and gives us a competitive advantage.”
Gamesa, a Spanish wind power giant that has been operating in India for a decade, was taken over by Siemens in 2016.
“Globally wind turbine manufacturers are facing pricing pressure as governments are withdrawing subsidies and pitting renewable energy against conventional energy sources like coal and gas, but Siemens Gamesa is optimistic about the future.
Internal and external market parameters indicate that the pricing pressures are stabilising. We are focused on improving efficiency and are building larger turbines that will enhance energy generation without significantly increasing costs,” said Tacke.
Siemens Gamesa commissioned a cumulative 5,000 MW in India, thus becoming the second-largest player in India by cumulative installed capacity.