CWP Clipper Reg S

RNS Number:4323M
Clipper Windpower PLC
24 January 2008


                                   
                     CLIPPER WINDPOWER PLC - TRADING UPDATE

    Highlights

   -137 turbines completed in first full year of production
   -Foundations in place for growth:
    - 311 turbines expected for 2008 production
    - In excess of 400 turbines per annum capacity at expanded Cedar Rapids 
      facility
    - Substantial increase in firm order book during 2007
    - New firm order for 155 turbines for delivery in 2009 - 2011; cumulative
      third party firm orders now total 825 turbines

   -Supply chain risks substantially reduced:
    - Average number of vendors for key components nearly doubled in 2007
    - Contracts and/or purchase orders covering approximately 90% of key
      components with respect of 2008 production
    - Commissioned second drive train test station in state-of-the-art testing 
      facility
   -H207 net loss expected to be of similar magnitude to H107.
    - Year end 2007 cash level in excess of US$100 million.
    - 2008 to be a year of transition financially; 2009
      earnings expected to benefit from substantially improved
      turbine pricing and moderating component costs

London, (UK), Carpinteria, CA (USA) - January 24, 2008 
Clipper Windpower Plc ("Clipper"), a rapidly growing manufacturer of advanced 
wind turbines and developer of wind energy projects, is issuing this update 
ahead of its preliminary results to be released in late March 2008.

In 2007, Clipper's first full year of production, a total of 137 turbines (343
MW) were completed at Clipper's Cedar Rapids manufacturing and assembly
facility, compared to eight produced in 2006. This is within the Company's
guided range of 125 - 145 turbines expected for 2007.

As stated in the trading update in December 2007, the Company expects that 2008
production will meet firm orders totaling 311 turbines. Shipments above that
level are dependent on the drivetrain remediation program, component
availability, and potential modifications to timing of customer deliveries.


During 2007, we equipped and expanded the manufacturing and assembly facility.
Floor space increased from 215 to over 330 thousand square feet, whilst the
Cedar Rapids workforce increased by 95% from 152 in 2006 to 296 in 2007.
Clipper's combined engineering, procurement and quality team nearly doubled,
increasing to 136 employees by year end. In December, we completed the
commissioning of a second drive train test station in our state-of-the-art
testing facility. We now have plant capacity and equipment, a trained workforce
and processes in place to assemble over 400 turbines per year, with potential
for further capacity extensions at the Cedar Rapids facility.


As announced in the interim results on 27 September, production in 2007 was
negatively affected by a component supplier quality deficiency for Liberty's
drivetrain. This deficiency was addressed and the Company continues to ship
turbines qualified through the new drivetrain test facility and advanced quality
control processes. From a combined total of 145 turbines produced in 2006 and
2007, 63 required drivetrain remediation work and, as of 31 December 2007, the
first eight replacement drivetrains have been completed. Existing components
within the pool of drivetrains to be remediated can be used for an expected 20 -
40% of the turbines which require remediation.


Clipper's blade reinforcement program is also moving ahead within expectations.
Reinforcement work based on blade test results has already commenced and is
being coordinated with the drivetrain remediation program for efficient
utilization of field crews and equipment to minimize costs. Approximately 260
rotors will be reinforced, including over 150 rotors already delivered to
customers that will be reinforced in the field.


Substantial completion of Clipper's drivetrain remediation and blade
reinforcement program is expected by Q308 with completion dates affected by
factors such as weather and crane scheduling.


Clipper expects that the drivetrain and blade remediation efforts now underway
will significantly reduce future turbine warranty costs and further heighten
customer confidence in the technology.


The market for Clipper's Liberty 2.5 MW turbine continues to strengthen in
recognition of the technology advantages of the machine and through the positive
response of customers to the diligence and responsiveness which the Company has
demonstrated in its manufacturing and field services activities. In this
respect, we are pleased to announce that a subsidiary of UPC Wind has placed a
new firm order for 155 Liberty turbines (388 MW) for delivery between 2009 -
2011.


Cumulative third party firm orders increased substantially from 370 units
(925MW) at the end of 2006 to 825 units (2,063 MW) currently. In addition, as of
31 December 2007, Clipper had approximately 1,500 units (3,750 MW) in contingent
orders and joint development / contingent sale agreements.


It is noteworthy that our customer base includes some of the largest, most
experienced and sophisticated power generators in the wind industry, all with
substantial operating experience with most major turbine brands. Several sale
agreements originate from customer repeat orders.


Clipper has expanded and strengthened its global supply chain capability with
on-site supplier quality engineers at key component suppliers. This has greatly
broadened our component sources in a number of areas considered critical earlier
in the year, and the Company has contracts and/or purchase orders covering
approximately 90% of key components with respect to 2008 production. While
Clipper still has single sourcing for blades and generators, the average number
of vendors for key components nearly doubled in 2007 compared to 2006.


Financials

Results for the year ended 31 December 2007 have not yet been audited. However,
as described more fully below, earnings results for 2007 will include
significant charges for non-recurring costs incurred and anticipated to address
drivetrain remediation, blade upgrades, resulting customer delivery delay
penalties, and reserves taken for losses anticipated on two construction-related
contracts. Additionally, as a result of delayed revenue recognition and higher
second half operating expenses due to factors such as plant capacity expansion
and a higher average number of employees, the second half net loss is expected
to be of similar magnitude to the first half.

As identified in July 2007, Clipper's operating results for the first half of 
2007 included a US$23 million charge, principally for estimated cost overruns 
on the Group's turnkey construction project and one other construction-related 
sale contract.  Due to the extension and rescheduling of completion times as a 
consequence of the above mentioned remediation work, Clipper expects to incur 
an additional charge of US$7 - 10 million in the second half of 2007 on 
these contracts. Future turbine sales will typically not include 
construction-related sale contracts of this nature.


Combined estimated costs associated with the blade upgrade program, drivetrain
remediation plan, high speed pinion and other minor component upgrades, continue
to be in the previously guided estimate of US$33 million. Clipper continues to
expect turbine delivery delay penalties of up to US$12 million to be incurred
over the next 12 months, a portion of which is expected to be recognized in H207
earnings results. A substantial amount of the cash flow impact from expenses
accrued in 2007 earnings results for the blade upgrade program, drivetrain
remediation, and delivery delay penalties will be realized in 2008.


As identified in December 2007, revenue recognition for 2007 was negatively
affected by a range of factors, such as Clipper's blade reinforcement program
and a customer's updated grid interconnection schedule. Clipper recognized
revenue on nine turbines in 2007. Substantial milestone payments have already
been received from customers on other orders, so the delayed revenue recognition
on non-construction related turbine sale contracts creates modest cash flow
impact.


As previously indicated, there will be some strain on working capital in early
2008 due to the delay in completion of the 40-turbine turnkey construction
contact. Completion of remediation work at the turnkey construction project
during the course of 2008 is expected to result in customer milestone payments
and therefore release a significant amount of cash currently tied up in the
construction project. The Company finances a substantial amount of inventory
purchases with advance payments from customers. Clipper continues to receive
payments from customers for new turbine shipments, and the year-end 2007 cash
level exceeded US$100 million.


CAPGEN

In September 2007, Clipper announced that it would combine the renewable energy
assets held by its Clipper Windpower Development subsidiary with the renewable
assets of Helium, a fast growing renewable energy company based in Spain, to
form Clipper Capital and Generation ("CAPGEN"). Additionally, Clipper announced
that CAPGEN was in the process of leading a fundraising initiative to finance
the build out of its project portfolio and the growth of its business over the
next two years. The fundraising initiative is progressing as previously
announced and Clipper will continue to update the market on its progress as
reportable developments occur.


7.5 MW Turbine

In September Clipper announced that One NorthEast, the Regional Development
Agency for the North East of England, had agreed on a package of support of �5
million for Project Britannia, the development of Clipper's planned 7.5 MW
offshore turbine.


The support package for the Britannia project includes use of facilities with a
total of 1,800 square meters of offices and assembly bays. The New and Renewable
Energy Centre (NaREC) is adjacent to Clipper's facilities and will provide
state-of-the-art test facilities for blades, gearbox and generators. Clipper's
facilities include cranes and waterside access.



Outlook

Earnings results for 2007 were significantly affected by non-recurring expenses
and the cost of ramping up all facets of the organization to support future
growth. 2008 is expected to be a transitional year in which substantial revenues
are recognized and margin improvements start to materialize in second half
results, as described below. We expect significantly improved margins and
earnings in 2009, with a key contribution from improved turbine pricing.


2008 results are expected to benefit from higher levels of turbine shipments and
revenue recognition compared to 2007. However, average selling prices to be
recognized in 2008 revenues will reflect only modest increases compared to 2007
because of factors such as remaining legacy pricing from contracts negotiated in
2006 and remediation program delivery rescheduling. Moderately positive gross
profit margins are therefore expected in 2008. First half 2008 results are
expected to be more heavily affected by lower average turbine prices compared to
the second half.


2009 results are expected to be favorably affected by improved turbine pricing
combined with moderating component costs. 2009 turbine sale revenues will
reflect substantially higher selling prices, with average contracted turbine
prices that are 15 - 20% higher than Clipper's average 2008 contracted prices.
Firm orders for delivery in 2009 total 205 turbines, excluding additional
contracted customer options and deliveries rescheduled from 2007 and 2008.


A moderating cost trend is clearly evident in our historic and contracted
turbine component costs. Costs for the top 10 turbine components, representing
approximately 70% of the Liberty 2.5 MW total turbine component cost, have
increased on average by approximately 5%, 3% and 2%, respectively, in successive
six month periods leading up to year-end 2007; average contracted costs for the
first half of 2008 are essentially flat compared to the end of 2007. This
favorable trend reflects market conditions, but is also due to growing economies
of scale from volume purchasing, an expanding number of suppliers, and Clipper's
expanded global supply chain organization.


Forward Looking Statements

Statements contained in this press release and the conference call, particularly
those regarding the possible or assumed future performance of the Company,
industry growth or other trend projections and any estimated company earnings
are or may be forward looking statements and as such involve risks and
uncertainties. Any such statements may be influenced by factors that could cause
actual outcomes and results to be materially different from those expressed or
implied by these statements.


Conference Call


Clipper's management will host a conference call for analysts and shareholders
with a live audio webcast presentation today at 09:00hrs (London time). To join
the conference call please dial +44 (0) 20 7138 0833 (listen only). A copy of
the investor presentation will be available on http://www.clipperwind.com at 
08:50hrs (London time). To listen to the live webcast, please visit 
http://www.clipperwind.com/tradingupdate.php or http://www.clipperwind.com



For further information please contact:


Investors

Isabel Lutgendorf

Investor Relations Director

+44 (0)20 7820 1078


Financial Press

Patrick d'Ancona

M:Communications

+44 (0)20 7153 1547






                      This information is provided by RNS
            The company news service from the London Stock Exchange

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