Alternative energy watchers are all too aware of the polysilicon shortage on solar pv. But here's a similar angle that plays in the wind industry that we don't hear much about - fibers, the feedstock for turbine blades. And Vestas, the world's no. 1 wind turbine is taking action by closing a long-term supply deal with Zoltek.

Zoltek expects to provide Vestas with over $300 million of carbon fiber and carbon fiber materials over the first five years of the agreement, for the manufacture of rotor blades for wind turbine generators. Zoltek also anticipates expanding nameplate carbon fiber capacity from 2,800 metric tons in 2005 to 10,800 metric tons by early 2008.

There is a professional difference of opinion over the merits of glass fiber or carbon fibers for wind turbine blades - see this detailed anonymous article which disparages Zoltek (not least because back in April, he was shorting it) here. Zoltek is obviously in the carbon fiber camp and supplies Gamesa as well as Vestas. On the other side exist LM Glasfiber who supply - you guessed it - glass fiber turbine blades to Enercon, GE, Siemens, and Suzlon.

Broken turbine blades are worryingly frequent - perhaps this is ultimately why commercially available turbines cannot seem to surpass a size of 5 MW, because the blades are just not strong enough. If and when that does happen, maybe through nano-engineering, then 40 MW turbines become possible and the price of windpower will plummet like it did in the 1990s again.

Ok, this is extraordinary news.

A dynamic and successful Indian Wind turbine manufacturer - Suzlon - has outbid a French nuclear company - Areva - for control of a German wind turbine manufacturer - Repower Systems AG.

Talk about chutzpah!

I've had my doubts about this deal - I still do. But Suzlon's rationale behind it is the following;

i) REpower will give Suzlon access to high-value, high-capacity turbines ranging between 1.5-5 MW
ii) These are more likely to generate sales in developed countries
iii) They will also get Repower's technology for offshore turbines

All of that makes sense enough. Although a distinguished economist I was speaking to recently thought that many takeovers and mergers fail because those firms omitted to conduct an audit of the intellectual property assets. This has often led to an exercise in brand destruction - think of Daimler Chrysler. Mix up high-quality, medium production runs with low-quality, high production runs and what happens to the brand name?

Obviously, this isn't a like for like comparison. But I tend to think that organic growth is a better path in manufacturing. 2 years from now, we'll have a much better idea of whether this takeover has really worked - or not.

Suzlon is nothing if not determined to take over Repower Systems AG.

Sources close to the company said it had organised funds worth €625 million (Rs 3,408 crore) through two bridge loans, a €325 million (Rs 1772 crore) 10-month tranche and a €300 million (Rs 1,636 crore) 18-month tranche. ABN Amro is the lead manager for the fund collection.

I've been an admirer of Suzlon for some time - there's something hugely admirable about an Indian firm that turns up and blows a whole lot of competition out of the water, whilst impressing the analysts with its high double-digit margins.

Yet somehow I sense that they are losing focus in their quest for scale - e.g. the interest in solar power and biodiesel, the unwelcomed takeover bid for Repower Systems AG and above all, the declining margins - EBITDA margin stood at 17 per cent at the end of Q4 FY07 against 26 per cent in Q4 FY06.

FORBES, 21st May: Vestas Wind Systems, has just won high praise from New York's Reputation Institute, which has just published global reputation rankings of 600 companies, for improving its reputation. Vestas has jumped 25 places for 2007 from 2006 to become the 17th most reputable company in their universe.

To paraphrase the article . . .

This has been put down to the late flowering of a merger with NEG Micon which didn't work out well in 2004/2005. Since then, a new CEO and senior leadership team have been put in place and last year was the first time the company turned a profit. Said Kruse, Vice-President of Vestas Communications, the company has also benefited from a global media strategy--instead of focusing communication efforts on Danish media, it's reaching out to the international media. The company was recently featured in Newsweek, CNN and Bloomberg Television.

Ok, well that secures Kruse's job then !

Seriously though, I have my doubts about global reputation rankings because unlike profits or losses, a reputation is not actually something you can put a black and white number on. Could you imagine a blue chip accountancy firm doing a reputation audit?

And I'm not too sure about Gazprom - the state-owned Russian hydrocarbon firm and arguably the right arm of President Putin's foreign policy - jumping 289 places to rank 28th in the world for 2007.

Investment may be an art rather than a science, but reputation is a truly intangible, immeasurable asset. I could just see disproportionate lobbying by PR firms really distorting the picture, which of course they would love to do. My feeling is that alternative energy companies - like any other - would do best to concentrate on making profits. After all, why would any company not choose to have a good reputation?

Suzlon Energy, the Indian wind turbine manufacturer, has just reported Rs 437.82 crore net profit for Q4 compared to Rs 360.16 crore a year ago. Normally, you'd think this is pretty good, but worse than expected by analysts, so the stock took a hit. Yet it's the investment plans of the company that are perhaps more eye-catching - they are huge.

Rs 3,300 crore is to be invested during the current fiscal to enhance its wind turbine and gear box manufacturing capacity - 2,500 of which will be in India and the rest in its subsidiary in Belgium, Hansen transmissions. Right now, Suzlon's annual turbine output is 2,700 MW and they believe that will rise to 4,800 MW by the end of 2008.

Meanwhile, Suzlon's bid for Repower AG hangs in the balance. The date to watch is the 24th May when all final bids have to be in. Will Suzlon raise it's offer for Repower?

Will they join forces with Areva?

Will Areva seek to trump Suzlon?

Maybe Suzlon should bow out of this deal - the gain in Repower's manufacturing capacity will be offset with their much lower margins and rightly or wrongly, one senses that the German company would be less willing to work with Suzlon than with Areva. My gut feeling is that they are better off expanding organically and buying key component manufacturers where necessary - the Hansen deal seems to have worked. How about a US tower manufacturer?

The costs of towers has been rising and ownership of a tower manufacturing plant could protect them from any further price increases.