US Wind-Power Firm Retools After Setback In China
February 09 2012 - 9:15PM
Dow Jones News
American Superconductor Corp. (AMSC) is maintaining a laser
focus on expanding in China, despite its disastrous relationship
with Sinovel Wind Group Co. Ltd. (601558.SH), China's largest
wind-turbine maker.
The Massachussetts-based company, which makes software and
hardware for wind turbines and electric transmission systems, has
seen its revenue and stock price plunge since March, when American
Superconductor, or AMSC, says Sinovel stopped paying its invoices
and stopped accepting previously scheduled shipments.
On Thursday, AMSC booked revenue of about $48 million for the
nine months ended Dec. 31, about one-fifth of its revenue for the
same period in 2010.
AMSC is seeking $1.2 billion in payments and damages from
Sinovel in lawsuits and an arbitration proceeding it filed last
year in China. The U.S. company has accused Sinovel of stealing
valuable trade secrets, copying protected software and canceling
contracts.
A court in China's Hainan province dismissed one of the three
lawsuits last week. AMSC had sought $200,000 for copyright
infringement from Sinovel and Guotong Electric Co. Ltd. AMSC said
although the amount is relatively small, it plans to appeal the
decision.
In September, a former AMSC employee was convicted in an
Austrian court of corporate espionage after admitting to having
stolen AMSC's wind-power control software and having sold it to
Sinovel through an intermediary.
Despite the setback, AMSC is expanding in China, where half the
global wind-power market is centered and where interest in grid
improvements is rising, AMSC Chief Executive Dan McGahn said
Thursday.
"I don't believe this is a referendum on China or the Chinese
wind industry," McGahn said in an interview, referring to the
company's cases against Sinovel. "It's the action of one
company."
McGahn said China is rapidly developing and building
infrastructure for nearly all types of energy, including energy
conservation, which is a key market for AMSC's smart-grid
products.
"The way that the Chinese build anything, they do as many things
as they possibly can in parallel, as fast as they possibly can,"
said McGahn, who said he spent half his time in China when he ran
AMSC's Asian business in 2007 and 2008, before being named CEO last
year.
After a major restructuring and with about $300 million in
contracts, the company aims to expand both its wind-power and
electric-grid businesses in several countries to become profitable,
McGahn said.
Some analysts said that although AMSC has made progress, it has
a long way to go.
Earnings "and operating cash flow are set to stay negative for
the foreseeable future," said Raymond James analyst Pavel
Molchanov. "As the company turns the page from the Sinovel chapter
of its history, the focus is now squarely on rebuilding its order
book."
The company has manufacturing facilities in China, the U.S. and
Europe. It also licenses its technology to other manufacturers.
AMSC's Chinese partners include China State Grid; Beijing
Jingcheng Machinery Electric Holding Co. Ltd.; Dongfang Electric
Corp. Ltd. (DNGFF, 600875.SH, 1072.HK) and Shenyang Blower Works
Group.
In South Korea, AMSC has partnerships with Doosan Heavy
Industries & Construction Co. Ltd. (034020.SE) and Hyundai
Heavy Industries Co. Ltd. (009540.SE) and in India, it is a partner
with Inox Group.
On Thursday, AMSC reported a loss for its fiscal third quarter
of $26.3 million, or 52 cents a share, on revenue of $18.1 million.
That compares to a loss of $18.2 million, or 38 cents a share a
year earlier. The company forecast a fiscal fourth-quarter loss of
less than 42 cents a share on revenue of more than $27 million
AMSC shares closed 7.6% lower Thursday at $5.57 and were down
about 80% from a year ago.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468;
cassandra.sweet@dowjones.com