INTERVIEW - Suzlon China output nears 70-80 pct capacity

A windmill stands in a field on the Danish island of Samso in this May 2008 file photo. Suzlon Energy Ltd, the world's fifth-largest wind turbine maker, said on Tuesday that its 600 megawatt (MW) factory in China would reach 70-80 percent of capacity within the next year.

BEIJING (Reuters) - Suzlon Energy Ltd, the world's fifth-largest wind turbine maker, said on Tuesday that its 600 megawatt (MW) factory in China would reach 70-80 percent of capacity within the next year.

Suzlon, which began production in China in mid-2006, is keen to reach capacity within a few years to take advantage of strong demand, although government restrictions in the procurement process could limit foreign firms to a 35 percent market share, said Paulo Soares, Suzlon China's chief executive.

China, the world's second-largest energy user, will have 100 gigawatts (GW) of wind-power capacity by 2020, eight times more capacity than in 2008, and aims to increase capacity by 20 percent a year, a Chinese energy official said last month.

That is more than triple the 30 GW target the government laid down just 18 months earlier.

"We are looking at 70-80 percent capacity in the next year," Soares told Reuters in an interview on the sidelines of an energy conference.

Suzlon doubled its Chinese business in the fiscal year that ended in March, and its factory in northern China could reach capacity in the next two years.

"That would make my boss very happy," he said.

However, a tariff system that favours local producers and an opaque procurement process could mean foreign participation in the fast growing market could be limited.

"We think the maximum available to international producers will be 35 percent of the market," he said.

Suppliers to China's wind sector include China Wind Systems, China High, Hansen Transmissions, Siemens, Vestas and local leader Goldwind Science & Technology Co. Ltd.

Chinese producers also have a cost advantage over foreign producers, said Soares.

"If you get into higher end turbines, you may get up to 30 percent price difference," he said.

Large state projects tend to be awarded to domestic manufacturers with little transparency in the process, he added.

"Let the market decide," he said, repeating a common complaint of foreign manufacturers in China.

"Don't pre-select things in a way that is not fair."

Both wind and nuclear power have been boosted by China's 4 trillion yuan ($585 billion) stimulus plan, which promises more nuclear spending and upgrades to the power grid, which should help stranded wind farms get connected.

Coal will continue to dominate China's energy market, but will likely slip from its current 80 percent share.

Suzlon slipped to a loss in the last quarter of 2008 on costs due to faulty turbine blades and foreign exchange losses, but the company said growth would pick up from 2010.

($=6.83 yuan)