Suzlon Energy

The world is today in the midst of unprecedented economic upheaval. The
 credit crisis, triggered mainly by a sub-prime mortgage bust centered
 in the United States, has had a cascading effect on the global economy
 - disrupting the economic landscape and forcing a re- evaluation of the
 perception of growth and prosperity that we have held unquestioned for
 so long.
 
 However, while the credit crisis has wreaked havoc across nations,
 economies and industries - it has also forced a much needed
 re-evaluation of our economic priorities, the pattern of human
 consumption and the very way we look at growth and development. The
 lessons we learn do not just apply to the financial world.  The
 challenges we face
 
 fundamental insights into how we as citizens, industries, economies and
 nations need to meet the changing face of the world we live in - and
 the ever increasing climate crisis.
 
 If we examine it at a fundamental level - both crises are a direct
 result of our insatiable thirst for resources, and drive
 
 for consumption regardless of consequences. The question we should be
 asking ourselves is - can we go on like this?
 
 As Albert Einstein once famously noted, “We cant solve problems by
 using the same kind of thinking we used when we created them.” This
 holds true today more than ever.
 
 Our approach to the way we consume the resources available to us have a
 clear, direct impact on our future - and every decision we make, needs
 to measure up to the greater good of the entire world.
 
 At Suzlon, this is neither new nor news. We have long held that
 development needs to be fundamentally sustainable to be considered
 development. For sustainable development, we only need to look for the
 one common, fundamental denominator for all human activity - energy.
 
 The acceptance of this reality is now universal, and is demonstrated in
 the commitment of nations and corporations to adopt renewable energy as
 a mainstream source of power. Wind energy is by far the most advanced
 utility scale renewable energy technology available to the world today,
 and the growth of the industry reflects wind energy taking its place as
 a mainstream and long term source of power. At Suzlon, we have been at
 the forefront of the wave.
 
 The past year has brought many challenges, with unprecedented changes
 to the economic climate and we have proven ourselves fully capable of
 changing with the environment, adjusting our strategies to take on a
 dynamic business landscape.
 
 Despite the global economic slowdown, 2008 saw another record year for
 new installations in wind industry. Global capacity surged by 28.8% in
 2008 with the worlds total installed capacity reaching 120GW at the
 end of 2008, over 27GW of which came online in 2008 alone. This 120 GW
 of global wind capacity installed will produce 260 terawatthours (TWh)
 of electricity and save 158 million tonnes of CO2 every year.
 
 Notably, the US surpassed Germany to become the number one market in
 wind power in terms of annual installations.  China continued to grow
 with its total capacity doubling for the fourth year in a row.
 
 Looking ahead, all of the fundamental drivers behind the growth of the
 wind industry remain in place. However, the concerns about the
 financial crisis and its spillover into the real economy may affect the
 pace of growth of the wind industry in the near term. While long term
 secular outlook continues to be robust, due to lack of liquidity we can
 expect to see a temporary slowdown in the growth story for nine to
 twelve months. However, with the high focus on sustainable and secure
 energy sources, the wind energy sector will be among the leaders in
 rebounding from recessionary conditions. In fact, the Global Wind
 Energy Council (GWEC) projects that global wind generating capacity
 will stand at 332GW by 2013 up from 120GW at the end of 2008 thereby
 registering a growth of 176.7%.
 
 We have over the past few months already begun to see encouraging
 signs, with a significant reduction in commodity prices, logistic
 costs, inventory and project costs which has translated into overall
 cost reductions for customers.
 
 We have achieved all this in a very difficult environment by responding
 quickly and effectively to dynamic changes in the market place,
 focusing our energies on - improving cost efficiency; focusing on high
 growth markets; customer centricity; improving product quality through
 R&D and innovation, and building a strong leadership team.
 
 The result is clearly seen in our market standing. Suzlon and REpower,
 if taken together, stand as the worlds third leading wind turbine
 supplier group in terms of market share. We also ranked as the leading
 supplier in India and Australia in 2008, retaining market leadership in
 India for the ninth consecutive year. Our focus on excellence also
 shows through in other landmark achievements, in different verticals
 and business functions in the past year.
 
 Human Resources
 
 We won Indias Golden Peacock National Training Award for our
 philosophy and practices in Learning and Development.
 
 In our pursuit to develop leadership bandwidth within the company, we
 signed a Memorandum of Understanding (MOU) with the Centre for Creative
 Leadership and Indian School of Business, Hyderabad to develop our
 leaders on global practices.
 
 Extending our vision of sustainable development, we signed a MOU with
 TERI University to establish Indias first Post Graduate Programme in
 Renewable Energy and Management.
 
 One of our goals as a company is to be the best employer in wind
 industry, and in driving towards this goal we conducted our Employee
 Engagement Survey, to measure engagement levels and to identify areas
 for improvement to create a more cohesive, integrated global Suzlon
 family.
 
 Our new home in Pune, the Sulzon campus named One Earth is nearing
 completion and will soon provide a world- class work environment to
 nearly 2,500 employees in a green, energy self-sufficient, integrated
 campus.
 
 Technology
 
 At Suzlon we derive our technological development programme from a
 close collaboration between our development teams in Germany, the
 Netherlands, Denmark and India, the Business Units that market and
 operate wind turbines in all regions of the world, the production units
 in India, China and USA, suppliers in Europe, Ameri c a and Asia and
 Research Centers experienced in wind energy such as Risø in Denmark,
 Energy Research Centre (ERC) in the Netherlands and FGH Test Systems in
 Germany.
 
 To cope with the increased requirements of the expanding global
 business and our marke t-leading vertical integration, Suzlon has been
 continuously investing in expanding its development facilities. We now
 have over 500 specialists engaged in R&D evenly split between its sites
 in India and Western Europe. The European locations were particularly
 selected in close proximity to where the technical talent resides. The
 teams cover the full scope of R&D from fundamental material research to
 systems design, integration and field analyses.
 
 Our focus is to design reliable products irrespective of the conditions
 the turbines have to operate in. Suzlon opened a new cutting-edge Rotor
 Blade test facility in Vadodara in 2008 equipped to fully validate
 multiple Rotor Blades up to 65 meters length to standards that far
 surpass prior practices and are among the most stringent in the
 industry.
 
 The joint Suzlon-REpower initiative - the Renewable Energy Technology
 Center (RETC) - also gathered momentum over the past year. The RETC is
 primarily focused on fundamental research - such as advanced material
 sciences and applications - that can shape the direction of wind
 turbine design for the future.
 
 The rising momentum of our technology programme is reflected in our
 increased patent activities markedly in the past year, applications.
 
 Supply Chain
 
 Suzlon is the most vertically integrated wind turbine maker in the
 world, having manufacturing capability for all key components. New
 manufacturing facilities in India were commissioned, increasing our
 manufacturing capacity from 2,700 MW to 4,200 MW in one year.
 
 Suzlons subsidiary SE Forges forging facilities of 42,000 rings of up
 to 5 metre diameter and foundry facilities of 120,000 metric tonnes
 capacity also entered commercial production in the past year.
 
 We initiated Project SOAR - Strategizing and Operationalizing Action
 for Results - and other continuous improvement initiatives to bring
 improvements in quality, productivity and throughput time.
 
 Financial year 2009-10 will see the consolidation and streamlining of m
 an ufacturing processes, capacities and infrastructure for high
 quality, efficient and competitive operations across all units.
 
 We have established a Cental Integrated Planning Cell to manage an
 end-to-end planning cycle to optimise supply chain planning process
 focusing on full delivery .
 
 We have undertaken measures to reduce working capital and improve
 liquidity. Structural changes in the planning process to ensure that
 the procurement is completely aligned with the dynamic market
 conditions, and shortening the sales to cash cycle have been
 implemented.
 
 We maintain a close control on logistics, manpower and other costs,
 maximising efficiency within systems.
 
 Financial Remodeling
 
 We recently undertook, amongst others, a Liability Management exercise
 for the existing USD 500 million Foreign Currency Convertible Bonds.
 The debt covenants have been modified and redefined.  There has been a
 reduction in the liability by USD 111 million through buyback and
 exchange mechanism. It will be our endeavour to continue consolidating
 our financial and business structure in FY 2009-10. Our focus will be
 on continuous reduction in the intensity of working capital deployment
 and inherent reduction of the quantum of debts.
 
 Corporate Social Responsibility
 
 Corporate Social Responsibility is integral to Suzlon - its the way we
 do business.
 
 Our CSR effort is based on the premise that the business and its
 environment are inter-dependent. It focuses on strengthening this
 organic link through the development of the five capitals - financial,
 natural, social, human and physical - upon which both business and
 development depend. We believe that a higher degree of sustainability
 can be achieved in business by balancing growth in all these areas.
 Suzlons CSR framework is strategically designed to encompass all the
 five capitals in our initiatives through transformative, responsive and
 proactive programmes.
 
 This CSR programme is today an active component of our business and we
 are committed to building sustainable business practices and fruitful
 partnerships with all stakeholders including communities and the
 environment.
 
 Group Updates
 
 Suzlon achieved the completion of the acquisition of 91% stake in
 REpower, marking in a major step in harnessing group-wide synergies.
 Both companies have already achieved closer cooperation with agreements
 to supply components to REpower turbines from the Suzlon supply chain.
 
 Suzlon subsidiary Belgium-based Hansen Transmissions commenced
 commercial operations at its new facilities in India and China, while
 Suzlons forging and foundry subsidiary SE Forge also commenced
 commercial production, supplying components to Suzlon and other
 companies.
 
 Growth
 
 Looking ahead, we see the economic crisis reshaping the landscape of
 the business in the coming years. While the growth potential continues
 to be strong, order visibility may decrease from two years to one year,
 requiring companies to respond more flexibly to changing demand cycles.
 More countries will adopt wind power, with specific policies to
 encourage renewable energy technologies and those geared to drive
 against climate change.
 
 All major economic forces have announced measures to support renewable
 energy, underlining the key drivers for renewable energy - energy
 security, sustainable power sources and climate change concerns. Major
 wind energy markets including China, the EU, India and the United
 States have announced aggressive targets and policy supports for
 renewable energy adoption and many more countries around the world are
 following suit.
 
 These are challenging times, but opportunities are aplenty.  The
 changes in both the physical climate and the economic climate will
 provide major opportunities and challenges in front of us, in the
 coming years, to address and move forward. We at Suzlon are fully
 prepared to take on these challenges. With nearly 27,000 MW installed
 amidst the global economic slowdown in 2008, there is no doubt that the
 wind industry will be among the first to emerge from the crisis and be
 a catalyst for overall industrial growth.
 
 At Suzlon, we believe that our mission is not just limited to
 commercial success, but also to drive sustainable development across
 the social, economic, and ecological sphere. Every project we
 undertake, every geography we enter, and every community we touch is a
 reflection of our mission. And we are confident that with your support,
 we are ready to tackle the challenges and act on the opportunities in
 our pursuit to power sustainable development with the clean, renewable
 power of the wind.
 
                                                         Regards,
                                                   Tulsi R Tanti
                                  Chairman and Managing Director
                                           Suzlon Energy Limited