Thursday, March 24, 2011

Enercon’s India Venture Turns Sour German - Energy Company Hits Headwinds in Indiacom 
For Enercon of Germany, one of the world’s biggest makers of wind turbines, India is shaping up as a disaster.

The company says it has just lost its entire Indian subsidiary, a major operation with annual sales of more than $566 million, after a dispute with a local partner and a run-in with Mumbai law enforcement authorities.

Enercon also says it has lost control of its patents in India and fears its technology could be appropriated by competitors in a country where wind energy is a big and growing market.
Lately, foreign companies and investors have started to grow weary of the country’s endemic corruption, weak infrastructure and government limits on foreign investment in industries like insurance and retailing. Foreign direct investment in India fell by more than 31 percent in 2010, compared with the previous year.

Enercon, based in Aurich, near Germany’s windswept North Sea coast, portrays its Indian debacle as a government-abetted theft of its joint venture with a local partner.

That account is strenuously disputed by a lawyer for the partner, a businessman named Yogesh Mehra, who is also an executive member of the Indian Wind Turbine Manufacturers Association.
Around 2005, according to Enercon, the partners started to argue about company strategy. The Germans wanted to move cautiously and invest profits in the business. But Enercon says Mr. Mehra wanted fast growth with an eye toward a stock market listing.
India is the world’s fifth largest user of wind power, and is adding capacity fast. The country’s biggest wind supplier by far is India’s Suzlon, but others, including General Electric, are also here.

As the partners debated strategy in September 2008, two Enercon executives were summoned to police headquarters in Mumbai and questioned for at least five hours, according to the executives. They say police officials told them that they were suspected of conspiring against their Indian partners.
Enercon executives say that Mr. Mehra, though a minority shareholder, progressively cut the German executives off from information and shut them out of management decisions. They say they believe they have been effectively banished from India.

“We have completely written off our investment in Enercon India,” said Mr. Knottnerus-Meyer.
In late 2006, Aloys Wobben, the chairman and managing director of Enercon, offered 40 million euros ($56.9 million) to buy a 6 percent stake in the Indian company from Mr. Mehra. But a few weeks later he amended his proposal to 40 million euros for a 12 percent stake, according to Mr. Parthasarathy.
To be sure, Enercon has a bit of a history of misadventure abroad. The company has never exported to the United States, after losing a court dispute there in the mid-1990s, in which a wind turbine maker, now defunct, accused Enercon of infringing on its patents.

The decision resulted in Enercon’s being banned from the United States for several years. The ban was later lifted, but the experience soured Mr. Wobben on the American market, Mr. Knottnerus-Meyer said.

by Jack Ewing and Vikas Bajaj
The New York Times
March 23, 2011

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