The new concerns come as Suzlon is trying to raise funds, including through selling a stake to private-equity firms. The company may be at risk of breaking debt covenants and has to pay €205 million, or about $275 million, over the next six weeks to complete an acquisition.
The latest issues concern blades for a project in China’s Shandong province. Early last year, Suzlon won a contract with Germany’s REpower Systems AG to produce blades for 75 turbines for the China project and an option on 75 more. But REpower rejected Suzlon’s prototype for the initial blades for not meeting REpower’s quality standards and obtained them from other suppliers, according to people familiar with the matter.
The problems come at a difficult time for the Pune-based company. Suzlon already is spending $100 million to fix blade cracks on its turbines in the U.S., Europe and Brazil. Suzlon’s export-order backlog was down 38% at the end of last year from a year earlier.
New financing has been hard to come by, and as a result, Suzlon may be in danger of breaching its debt covenants, according to analysts and one of the people familiar with the matter.
Other recent efforts to raise capital haven’t borne fruit. Suzlon shelved a $360 million rights issue late last year because its stock price had fallen sharply. Its shares Wednesday were off 79% from a 52-week high reached last May, putting the company’s market value at $2.1 billion. Suzlon also has been attempting to sell a stake to private-equity firms.