Suzlon Energy Ltd. of India, the world's fifth-largest wind-turbine manufacturer by sales, said Edison Mission Energy, its largest U.S. customer, canceled an order for 150 turbines.
The cancellation comes after blades on turbines that Edison Mission bought from Suzlon began cracking last year because of design problems. Edison Mission, of Irvine, Calif., has decided not to buy the 2.1-megawatt turbines, which were due for delivery in 2009, Suzlon said in a filing to the Bombay Stock Exchange.
Vivek Kher, a Suzlon spokesman, declined to comment on the reason for the cancellation beyond saying Edison Mission had signed an agreement a year ago to buy 300 units -- half this year and half in 2009 -- and had the contractual right to cancel the second half of the order.
A spokesman for Edison Mission, Douglas McFarlan, said the company didn't want to make further purchases while it is still trying to discover the cause of cracked blades on other Suzlon turbines it has purchased. Edison Mission, which has had to delay some wind-farm projects because of the cracked blades, is instead in talks to buy turbines from other producers, Mr. McFarlan said.
In February, Edison Mission, a unit of Edison International, said in a filing with the Securities and Exchange Commission that windmill blades it had bought from Suzlon had begun to crack at three wind-power sites in the Midwest.
Suzlon, based in Pune, India, has recalled 1,251 blades from its top-of-the-line turbines, representing the majority of blades the company has sold in the U.S. The company says it has spent $30 million to repair cracked blades and reinforce the rest. Tulsi Tanti, founder and managing director of Suzlon, played down the blade-cracking issues during an interview in March. Only 45 blades have cracked, he said, and the other recalls were precautionary.
Suzlon, which has expanded rapidly since its launch in 1995, is moving to improve its technology through the purchase of REpower Systems AG, one of Germany's largest wind-turbine manufacturers. REpower's technology could boost Suzlon's product line and give it access to larger offshore wind technology.
A year ago, Suzlon agreed to acquire REpower in stages in a deal valued at $1.8 billion. Initially, Suzlon took a 34% stake and voting rights for 87% of REpower's shares. Under German corporate law, Suzlon can't get access to REpower's technology until it offers to buy out minority shareholders.
Last week, the Indian company moved a step closer to that goal by purchasing an additional 30% stake in REpower from French state-controlled nuclear-engineering company Areva SA. Suzlon says it now holds about 66% of REPower.