TIDMCWP
RNS Number : 9261Z
Clipper Windpower Plc
30 September 2009
CLIPPER WINDPOWER PLC - ANNOUNCEMENT OF 2009 INTERIM RESULTS
London, (UK), Carpinteria, CA (USA). Clipper Windpower Plc ("Clipper" or the
"Company"), a wind turbine manufacturer and wind project developer, announces
its interim results for the six months ended June 30, 2009.
- The Company is in advanced negotiations with a number of multi-national
industrial companies and financial investors to provide capital to strengthen
its balance sheet and to position the Company for renewed growth as industry
conditions improve.
- 1H'09 Revenue was $ 357.3 million from the sale of 127 turbines (317.5 MW)
(1H'08: $156.1 million from the sale of 46 turbines - 115 MW).
- 1H'09 Net loss of $120.2 million (1H'08: $211.2 million). The current period
loss is primarily due to $68 million of expenses attributable to previously
identified remediation programs (1H08 $139 million) and lower than expected
sales due to customer deferral of turbine commissioning. Deferred sales are
estimated to provide $36 million of gross margin.
- Turbine fleet availability exceeds 95%, excluding impact of blade remediation;
380 turbines have now operated in excess of 1,000 hours, with total fleet
approaching 2 million hours.
- UK Department for Energy and Climate Change (DECC) awards Clipper a
GBP4.4million grant toward costs associated with the development of blades for
the Britannia Project.
- 2009 Outlook: Full year revenue expected to be approximately $750 million from
approximately 260 turbines (650 MW) delivered. Turbine production and deliveries
for 2009 have been reduced by the deferral of 130 turbine shipments from 2009 to
2010/2011. The deferral of shipments negatively impacts anticipated margins for
2009 by $94 million. No customer orders have been cancelled.
- Firm turbine orders for 2010 currently total 175 units (437.5 MW).
- 2010 Outlook: Expect improvement in 2010 margins through higher contracted
pricing and lower component costs leading to positive operating income.
Conference Call
Clipper's management will host a conference call to discuss the Group's
developments today at 9:00 am (UK Time). To join this call, please dial +44
(0)20 7806 1955 for UK, +1 718 354 1389 for U.S.
(Conference code: 1840491). Replay telephone numbers: +44 (0)20 7111 1244 for
UK, +1 347 366 9565 for U.S. Replay access code: 1840491#.
For further information please contact:
Investors:
Jenny Matthews
Investor Relations Director
+44 (0)20 7820 1078
JPMorgan Cazenove (Nominated Adviser and Corporate Broker to Clipper)
Patrick Magee
+44 (0)207 588 2828
Financial Press:
Patrick d'Ancona / Charlotte Kirkham
M: Communications
+44 (0)20 7920 2347 / 2331
Joint Statement by the Chairman and the President and Chief Executive Officer
With financial markets stabilizing, we have begun to see encouraging activity in
the wind sector. Recently, Clipper turbines were part of a $191 million
financing package established by First Wind, a Clipper customer since 2007.
Still, the wind energy industry so far has received only a fraction of funding
from the 2009 American Reinvestment and Recovery Act (ARRA) for renewable
projects for new wind farms and other renewable projects. We expect that as the
DOE loan guarantee program will be implemented in the coming months, along with
other financing capacity increases for the wind industry, stalled wind projects
will be reactivated, absorbing deferred turbine purchases and leading to
increased turbine order flow in 2010. Forecasts for the U.S. market are 8,500 MW
in 2010; 10,000 MW in 2011; and 13,000 MW in 2012.
During the recent severe downturn, Clipper faced its challenges head on. We cut
operating expenses and manufacturing overhead costs, reduced inventories and
restructured supplier contracts. We have also built, installed and commissioned
329 turbines (822.5 MW) since July 1, 2008, of which 127 (317.5 MW) were
completed in the first half of 2009. We have worked in close partnership with
our suppliers to improve quality, and the operating reliability and efficiency
has risen approaching industry standard levels.
The economic downturn dramatically reduced the availability of financing for
wind projects. Clipper's customers responded by deferring construction of wind
projects and reducing capital budgets, thus deferring current turbine orders and
associated milestone payments. Some have also chosen not to exercise options for
new orders. As a result, we have seen a sharp reduction in customer payments on
which we depend to finance our working capital needs, however, through early
diligent work with our customers, we have established a firm rescheduling of
payments and turbine deliveries through 2014.
We have also faced significant expenses to complete blade remediation activities
in 2009, and to bring the Liberty turbines to high-operating reliability and
performance. The direct and indirect costs of these remediation programs total
approximately $290 million of actual costs and provisions since January 2008,
including provisions to complete the remediation in progress by year end 2009.
As a consequence of these internal and external factors and to solidly position
Clipper for the forecasted uplift in the wind industry, we are in the process of
raising additional capital to strengthen Clipper's balance sheet and assure
operating flexibility. A strengthened balance sheet is necessary to assure
customers of the Company's long-term viability, a requisite to attracting new
orders for turbines as the market improves.
Capital Raising and Strategic Parties
The Company began a comprehensive capital raising process during 2009 and has
also been approached by a number of strategic investors. We are presently in
active negotiations with a number of industrial multinational and financial
investors intended to result in a significant investment into the Company and
possibly provide synergies for added market expansion and growth. Based on
transaction size and structure, the new capital provider could range from owning
a substantial minority position to acquiring the entire Company. The process has
accelerated in recent months as capital markets improved and could potentially
lead to a transaction before year-end; however, there can be no assurance that
any such transaction will be finalized.
The Company also filed an application with the U.S. Department of Energy (DOE)
for a loan guarantee to support certain costs associated with the full
commercialization of the Liberty turbine. Subsequent detailed discussions have
taken place and are expected to soon lead to a DOE determination, but there is
no assurance as to when or if the loan guarantee will be issued.
Financial Results
In the first half of 2009, the U.S. market for wind turbines froze due to the
impact of the global financial crisis, particularly the credit market collapse
and unavailability of project and tax equity financing. This resulted in a
dramatic industry-wide decrease in new turbine orders in the U.S. market versus
the first half of 2008. These market conditions caused Clipper customers to
delay wind projects into 2010 and later, thus delaying the delivery of turbines
and the receipts of progress payments from the customers. Clipper has worked
closely with its customers to negotiate the deferral of deliveries while
endeavoring to minimize the cash flow impact with improved payment terms.
Significantly, no orders have been cancelled. Clipper has also taken aggressive
actions to conserve cash by managing working capital and downsizing operations
to reduce operating expenses and product costs.
The conscious choices made to manage the Company to optimize cash flow,
including agreements to defer turbine deliveries, will result in deferral of
reported revenue recognition and gross margin contribution from 2009 into 2010
and 2011. Specifically, the deferred of production and delivery of 130 turbines
from 2009 to 2010 and 2011 is projected to reduce 2009 revenue by approximately
$400 million and gross margin by approximately $94 million. However, these
deferrals will reduce 2009 cash outflows by at least the amount of lost margin
contribution, as component purchases to build these turbines are being deferred.
Clipper revenue for the first six months of 2009 was $357.3 million for the sale
of 127 turbines (317.5 MW). This compares to revenue of $156.1 million and 46
turbines (115 MW) for the first six months of 2008. Despite the increase in
revenue, the Company reported a net loss of $ 120.2 million due to: (i) lower
"legacy" pricing on turbines delivered against sales contracts entered into in
2006 and 2007; (ii) lower sales from delays of turbine commissioning into the
second half of 2009 and 2010 due to customer requests for deferred shipments and
later than expected timing of customer grid connections (these deferred sales
are estimated to provide $36 million of gross margin); (iii) $9 million in
higher component costs (mostly the impact of higher steel prices on towers
purchased in the second half of 2008); and (iv) $68 million in additional
provisions for remediation and related costs. The net loss for the comparable
period in 2008 was $211.2 million, including $139 million in charges relating to
remediation of gearboxes and blades.
The Group's consolidated cash position of $105.8 million at June 30, 2009 has
decreased to approximately $40 million as of the end of September 2009
reflecting delayed receipts of several key milestone payments from customers,
continued cash spending to complete the remediation programs and delayed closing
of new business opportunities from the third quarter to the fourth quarter.
Clipper expected to receive approximately $50 million in milestone payments
during the third quarter from existing customers for already delivered turbines.
Those receipts are now scheduled for receipt in the fourth quarter.
Liberty Turbine Performance Milestones
The Company's top operational priority is proving the Liberty Turbine's
performance and operational advantages. Clipper has aligned all internal
functions and resources to achieve this objective with three key targets:
- Exceed industry averages for turbine availability - target 96% in 2009;
- Qualify the Liberty turbine for project financing; and
- Complete blade remediation activities in 2009.
Liberty Turbine Availability
The Liberty turbine continues to demonstrate improved operating performance with
over 460 turbines installed in 17 projects, and 380 turbines that have operated
over 1,000 hours. Average Liberty fleet availability, excluding the impact of
blade remediation activity, was above 95% in August, above expectations for a
new generation of technology and well on the way to exceeding our year-end
target of 96%. With over 1.8 million fleet-wide operating hours, the Liberty
turbine's major components have now undergone extensive technical vetting, along
with refinements in quality processes, component and full system testing, and
exposure to extreme operating conditions. Further, the Liberty turbine power
curve has now been tested (IEC compliant) by leading certification agencies
validating conformance to Clipper's warranted power curve. The foregoing adds to
our confidence that the technology adoption issues are rapidly diminishing and
that the majority of the remediation efforts and costs are now behind the
Company.
Turbine Financing Progress
Recognition by wind industry financing institutions that the Liberty turbine is
cost-effective technology and commercially proven is an important driver in
Clipper's future growth. Therefore, a key Clipper objective for 2009 is to
establish sources of project financing based on the Liberty turbine. Two wind
energy projects with Clipper 2.5 MW Liberty turbines were among three projects
for which a $191 million financing was announced by First Wind in July 2009.
First Wind is an independent developer and operator of wind power in the U.S.
and one of Clipper's long-standing customers. First Wind obtained debt financing
for the three projects totaling 202 MW, weighted toward 145 MW of Clipper's
Liberty turbines. Clipper is working with other customers and other project
finance institutions, with the expectation that additional project financings
will be completed in coming months.
Remediation Completion Scheduled in Q409
As previously reported, in September 2008 the Company detected a number of blade
skin defects during routine turbine service inspections. Engineering analysis
determined the root cause to be a faulty manufacturing process at the blade
supplier, which, by October 2008, was corrected for all new blade production. To
ensure the integrity of Clipper's turbine performance and reliability, the
Company implemented a field remediation program for all previously produced
blades, totaling almost 1,200 blades installed at sites and in transit or
inventory. This and previously completed extensive remediation efforts have been
expensive - approximately $290 million as described above. As of the end of
September 2009, approximately 78% of the blades have been repaired, and the
remediation is expected to be completed by year-end 2009. The estimated costs to
complete the repairs have been provisioned within the 2009 interim accounts and
are included in total remediation and related expenses of approximately $68
million for the period.
Britannia Gains Further UK Government Support
Clipper Windpower Marine Limited, a UK subsidiary of the Group, recently
received further UK Government support with the award of a GBP4.4million grant
by the UK Department for Energy and Climate Change (DECC). The grant funding
will contribute towards costs associated with the development of blades for the
10 MW Britannia turbine.
The Company's Britannia turbine development base is in Blyth Harbour, UK,
adjacent to the planned NaREC (New and Renewable Energy Centre) state-of-the-art
Wind Energy Test Facility. Blyth will also serve as the base for introduction of
a 50Hz 2.5 MW Liberty turbine into the European market in 2010.
The Britannia 10 MW wind turbine design will be completed in 2009 and component
fabrication and testing is planned to start in 2010. The project has been
revised to an extended schedule, reflecting a more conservative budget due to
current economic conditions with turbine certification expected in 2012. The
design processes has yielded significant new technology and patent filings,
further strengthening the potential for product line extensions and firming
Clipper's technology lead in the fast-growing class of very large offshore
turbines aimed at approximately 50,000 megawatts of development over the coming
decade.
Clipper has seen considerable interest from offshore wind development
participants seeking to engage, at an early stage, in the engineering and
testing of the Britannia turbine. The objective of these participants is to
perform technical due diligence necessary for reserving future turbine
production and committing to turbine purchases during Britannia's move through
development, testing, and certification. Accordingly, Clipper has initiated
Britannia turbine purchase proposals with several utilities active in European
offshore wind project development. It is Clipper's intent to establish customers
for the Britannia turbine, targeting orders for 2012 and beyond.
Titan Project Phase I Launched
In October 2008, Clipper completed a 50/50 joint venture agreement with BP Wind
Energy in the 5,050 MW Titan Wind Project in South Dakota. Phase One of the
project, which is fully owned by BP, is currently under construction using 10
Clipper Liberty turbines (25 MW). If built out to its full capacity, the Titan
Wind Project has the potential to be the largest wind development in the U.S. at
5,050 MW. BP and Clipper are joint development partners for the remaining 5,025
MW of the Titan Wind Project, which is expected to be built in multiple phases.
The joint venture includes a Master Turbine Sale Agreement for the supply of up
to 2,020 Clipper Liberty turbines to the project as it is built out.
Government Stimulus Reaches Wind Energy
In February 2009, the U.S. Congress passed the American Reinvestment and
Recovery Act (ARRA or Stimulus bill) which included significant legislation to
support the growth of renewables consistent with the Obama Administration's
goals of doubling power from renewables over three years and achieving 20% of
the U.S.'s power from renewables by 2020. The ARRA included a three-year
extension of the Production Tax Credit (PTC), extension of bonus depreciation
for capital expenditures through 2009 and the ability to take an up-front 30%
investment tax credit (ITC) or equivalent cash grant in lieu of the PTC tax
credits. The grants replace previous regulations that supported financing for
major wind projects through PTC tax equity financing, which were rendered
ineffective over the past year with the economic downturn and credit crisis. To
further stimulate wind industry growth and reinvigorate the project finance
market, the ARRA also included $6 billion in Department of Energy (DOE) loan
guarantees to support financing for a targeted $60 billion of new wind farms and
other renewable projects.
Implementation of these federal programs has been slow and the U.S. wind
industry effectively has been on hold, with no new turbine orders, until DOE
program rules are released. At the end of July, new PTC grant guidelines were
released and the DOE began accepting applications under the cash and ITC grant
program. Over $1 billion in grants have been awarded as of late September and
the new ITC "refundable" tax credit plan is having a positive impact on the U.S.
wind market. The guidelines for the other critical $6 billion DOE project loan
guarantee program are expected to be released soon, further supporting future
wind growth with increased project funding. The consensus of the industry and
analysts suggests that the U.S. wind market is set for a strong, sustained
recovery, however, the timing is dependent on the full implementation of the
ARRA programs, continued improvement in the credit markets and a firming in
energy prices.
Outlook - Cautiously Brighter
Clipper expects operating results in the second half of 2009 to improve, as
margins should benefit from lower component, manufacturing and remediation costs
compared to the first half of 2009. Clipper currently forecasts to recognize
full year revenue of approximately $750 million based on delivery of
approximately 260 turbines (650 MW) in 2009. These amounts reflect the deferral
of 130 turbine deliveries originally scheduled in 2009 into 2010 and 2011 as
described above. The deferral of orders will negatively impact recorded revenue
and contribution margin in the second half, thus operating income is projected
to be negative in the second half of 2009.
Looking forward to 2010, at a minimum the Group expects to deliver its currently
contracted order book of 175 turbines (437.5 MW) with higher sales pricing and
lower component costs relative to 2009. Average sales prices within the
Company's order book for 2010 represent an increase greater than 10% compared to
2009 and turbine component costs at year end 2009 are forecast to be at least
10% lower than costs at year-end 2008. These positive trends, coupled with the
completion of the current remediation programs and continued diligent management
of operating expenses and working capital, support the Company's expectations
that it will generate a positive operating income performance in 2010.
Given this position, we look to the future where the financing / strategic
partner solution will best move forward the strong elements of value that we
believe Clipper represents:
- Substantive wind power technology and intellectual property keyed to market
demand for further scaling up of turbine size and reliable long-term
performance;
- A refined supply chain and quality wind turbine manufacturing capacity;
- Liberty turbine's significant U.S. market position (8% share of the largest
global market in 2008);
- A project development business with greater than 9,000 MW wind resource
portfolio, with potential for up to 4,600 Liberty turbines (including the Titan
Joint Venture) additional to future third party sales; and
- The advanced technology 10 MW Britannia turbine project, solidly positioned
for the emerging giant UK-European offshore market.
Therefore, we strongly believe that these elements, strengthened with added
financial resources and the determination that drives the Clipper
organization, set the stage for becoming a major factor in the wind power
industry.
We especially thank our Clipper employees for their dedication to building this
vital and dynamic enterprise.
James G.P. Dehlsen Douglas A. Pertz
Chairman President and Chief Executive Officer
Financial Review
Results for the six month periods ended June 30, 2009 and June 30, 2008 are
un-audited. The results for the year ended December 31, 2008 have been extracted
from the statutory financial statements of Clipper Windpower Plc ("the Company")
and subsidiaries (together, the "Group", or "Clipper").
Financial Summary
Revenue for the six months ended June 30, 2009 was $357.3 million and was
primarily from the sale of 127 turbines, compared to revenue for the six months
ended June 30, 2008 of $156.1 million from the sale of 46 turbines. In the
current period, turbines were commissioned at five separate customer sites in
the United States.
The net loss for the June 30, 2009 and 2008 six month periods was $120.2 million
and $211.2 million, respectively.Excluding remediation related costs, net loss
was $52.5 million and $72.3 million, respectively (See note 5 herein).
Results of Operations
Cost of sales, excluding remediation related costs, increased from $180.1
million to $371.1 million, primarily due to the incremental sale of 81 turbines
for the six months ended June 30, 2009 as compared to the same period last year.
Total cost of sales, including remediation related expenses, were $438.8 million
for the first half of 2009 as compared to $319.0 million for the first half of
2008. Cost of sales included $67.7 million and $138.9 million of remediation
related costs for the period ended June 30, 2009 and 2008, respectively. For the
first half of 2009 remediation related costs included; $41.2 million primarily
related to blade skin remediation; $21.1 million in liquidated damages under
turbine sales contracts for turbine availability; and $5.4 million in other
related costs. For the first half of 2008, such remediation related costs
included; $76.2 million primarily related to gearbox and blade skin remediation;
$33.4 million in liquidated damages under turbine sales contracts for turbine
availability; $24.2 million for inventory write downs; and other associated
remediation costs of $5.1 million (See note 5 herein).
For the first half of 2009, project development costs, which primarily include
costs associated with identification of potential wind project sites, securing
land rights, and pursuing various permits and studies, were $6.3 million or
broadly flat with the same period last year.
Product research and development costs were $12.1 million in the current period
compared to $10.9 million for the six months ended June 30, 2008. The increase
represents the Company's continuing investment in new technology and includes
amounts for Clipper's Project Britannia, a large offshore wind turbine under
development in Northeast England, and for additional funding for a development
stage wind tower manufacturing company.
Administrative expenses were $18.3 million in the current period compared to
$27.7 million for the six month period ended June 30, 2008. The $9.4 million
decrease from the prior period was primarily due to lower litigation related
expenses of $6.2 million and professional fees of $2.2 million. At June 30,
2009, Clipper's employee count was 748 as compared to 695 at June 30, 2008.
Finance income was $0.5 million for the six months ended June 30, 2009 compared
to $1.3 million for the same period last year, reflecting interest earned on
lower average cash balances.
Finance costs were $0.1 million for the six months ended June 30, 2009 compared
to $5.1 million in the same period last year. The 2008 result included
$3.3 million for accelerated amortization of fees and other expenses associated
with terminating a credit facility.
Balance Sheet
Inventories totaled $456.0 million at June 30, 2009 compared to $557.4 million
at December 31, 2008. The $101.4 million decrease primarily results from revenue
recognized on 127 turbines sold and a $30 million reduction in component
inventory. The $456.0 million balance at June 30, 2009 includes $7.5 million in
development projects compared to $6.6 million at December 31, 2009.
Prepaid inventory totaled $34.5 million at June 30, 2009, compared to $33.0
million as of December 31, 2008. Prepaid inventory includes advance payments to
certain long lead time suppliers prior to the shipment of components.
Trade receivables were $91.9 million and $97.9 million for the periods ended
June 30, 2009 and December 31, 2008, respectively and represent amounts due from
customers for turbines sold and project cost reimbursement.
Deferred revenue represents turbine sale deposits received from customers. The
current portion of deferred revenue totaled $538.8 million at June 30, 2009
compared to $668.1 million at December 31, 2008. Non-current deferred
revenue totaled $154.0 million, compared to $134.5 million as of December 31,
2008. The $109.8 million combined decrease since December 31, 2008 was due to
revenue recognized in excess of new deposits received during the first six
months of 2009.
Cash on hand at June 30, 2009 was $105.8 million as compared to $209.0 million
at December 31, 2008. The decrease was primarily due to negative cash flows from
operating activities for the first six months of 2009.
Note 1 to the financial information sets out the Directors' consideration of the
risks and uncertainties that could affect the Group's forecast cash flows. The
Directors have concluded that those risks and uncertainties represent a material
uncertainty that casts significant doubt upon the Group's ability to continue as
a going concern. Nevertheless, after making enquiries, reviewing forecast cash
flows and considering those uncertainties, the Directors have a reasonable
expectation that the Group has adequate resources and operating flexibilities to
continue in operational existence for the foreseeable future. For those reasons
they continue to adopt the going concern basis in preparing the interim
financial information.
This announcement was approved by the Board of Directors on September 28, 2009.
The ordinary shares of Clipper Windpower Plc are traded on AIM, a market
operated by the London Stock Exchange, and are not registered under the U.S.
Securities Act of 1933, as amended. Such shares may not be offered or sold to
residents of the United States or to persons acting on their behalf, or to other
persons who are "United States Persons" within the meaning of the Regulation S
as promulgated under the Securities Act of 1993, unless such shares have been
registered under the Securities Act or there is an available exemption from
registration.
Clipper Windpower Plc
Condensed Consolidated Income Statement
+-----------------------------+-------+----------------+----------------+---+-------------+
| | | Unaudited | | Audited |
+-----------------------------+-------+---------------------------------+---+-------------+
| | | Six months ended | | Year ended |
+-----------------------------+-------+---------------------------------+---+-------------+
| | | June 30, | | December |
| | | | | 31, |
+-----------------------------+-------+---------------------------------+---+-------------+
| | | | | | |
+-----------------------------+-------+----------------+----------------+---+-------------+
| | Notes | 2009 | 2008 | | 2008 |
+-----------------------------+-------+----------------+----------------+---+-------------+
| | | (Dollars in thousands, except per share amount) |
+-----------------------------+-------+---------------------------------------------------+
| Revenue | 4 | 357,258 | 156,086 | | 737,326 |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Cost of sales | 5 | (438,804) | (319,011) | | (988,109) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Gross loss | | (81,546) | (162,925) | | (250,783) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Project development | | (6,302) | (6,134) | | (15,735) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Research and development | | (12,107) | (10,945) | | (21,064) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Administrative expense | 5 | (18,333) | (27,735) | | (55,720) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Other operating income / | | 120 | (24) | | (207) |
| (expense) | | | | | |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Share of loss from joint | | (2,449) | (156) | | 601 |
| ventures | | | | | |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Profit on sale of | | - | - - | | 30,908 |
| subsidiary undertakings | | | | | |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Operating loss | 5 | (120,617) | (207,919) | | (312,000) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Finance income | | 527 | 1,264 | | 3,119 |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Finance costs | | (111) | (5,081) | | (4,358) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Loss before tax | | (120,201) | (211,736) | | (313,239) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Income tax | | (3) | 556 - | | (57) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Loss for the period | | (120,204) | (211,180) | | (313,296) |
+-----------------------------+-------+----------------+----------------+---+-------------+
| | | | | | |
+-----------------------------+-------+----------------+----------------+---+-------------+
| | | | | | |
+-----------------------------+-------+----------------+----------------+---+-------------+
| Loss per share ($/share) | 6 | (0.92) | (1.84) | | (2.56) |
| basic and diluted | | | | | |
+-----------------------------+-------+----------------+----------------+---+-------------+
Clipper Windpower Plc
Condensed Consolidated Balance Sheet
+----------------------------+-------+--------------+-+--------------+-+--+-+--------------+
| | | | Unaudited | | Audited |
+----------------------------+-------+----------------+----------------+--+----------------+
| | | | As of June 30, | | As of December |
| | | | | | 31, |
+----------------------------+-------+----------------+----------------+--+----------------+
| | | | | | |
+----------------------------+-------+--------------+------------------+--+----------------+
| | Notes | 2009 | 2008 | | 2008 |
+----------------------------+-------+--------------+------------------+--+----------------+
| | | (Dollars in thousands) |
+----------------------------+-------+-----------------------------------------------------+
| Non-current assets | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Intangible assets, net | | 1,518 | 692 | | 1,179 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Property, plant and | | 39,599 | 39,451 | | 40,871 |
| equipment, net | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Other investments | | 15,515 | 8,969 | | 15,789 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Investment in joint | | 2,372 | 17 | | 4,546 |
| ventures | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Other assets | | 16,596 | 1,115 | | 16,604 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Non-current assets | | 75,600 | 50,244 | | 78,989 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Current assets | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Inventories | 7 | 455,959 | 675,554 | | 557,446 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Trade and other | | 91,949 | 47,439 | | 97,940 |
| receivables, net | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Prepaid inventory | | 34,494 | 60,784 | | 32,951 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Other current assets | | 12,366 | 12,832 | | 12,874 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Cash | | 105,844 | 268,121 | | 208,988 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Current assets | | 700,612 | 1,064,730 | | 910,199 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Total assets | | 776,212 | 1,114,974 | | 989,188 |
+----------------------------+-------+----------------+----------------+----+--------------+
| | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Current liabilities | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Deferred revenue | 8 | 538,804 | 669,733 | | 668,085 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Trade and other payables | | 131,143 | 153,688 | | 140,580 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Provisions | | 122,897 | 18,933 | | 117,817 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Income tax payable | | 2,634 | 3,198 | | 2,467 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Obligations under finance | | 236 | 1,104 | | 243 |
| leases | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Total current liabilities | | 795,714 | 846,656 | | 929,192 |
+----------------------------+-------+----------------+----------------+----+--------------+
| | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Non-current liabilities | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Deferred revenue | 8 | 154,029 | 253,468 | | 134,458 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Provisions | | 23,927 | 14,688 | | 23,924 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Note payable | 9 | 20,000 | - | | - |
+----------------------------+-------+----------------+----------------+----+--------------+
| Obligations under finance | | 283 | 341 | | 240 |
| leases | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Other non-current | | 595 | - | | 734 |
| liabilities | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Total liabilities | | 994,548 | 1,115,153 | | 1,088,548 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Net liabilities | | (218,336) | (179) | | (99,360) |
+----------------------------+-------+----------------+--------------+------+--------------+
| | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| (Deficit) / Equity | | | | | |
+----------------------------+-------+----------------+----------------+----+--------------+
| Share capital | 10 | 24,078 | 24,027 | | 24,076 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Share premium account | | 374,671 | 374,429 | | 374,655 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Other reserves | | 64,032 | 60,323 | | 62,832 |
+----------------------------+-------+----------------+----------------+----+--------------+
| Retained loss | | (681,117) | (458,958) | | (560,923) |
+----------------------------+-------+----------------+----------------+----+--------------+
| Total (deficit)/equity | | (218,336) | (179) | | (99,360) |
+----------------------------+-------+----------------+----------------+----+--------------+
| | | | | | |
+----------------------------+-------+--------------+-+--------------+-+--+-+--------------+
Clipper Windpower Plc
Condensed Consolidated Statement of Cash Flows
+-------------------------------------------+-----+----------------+----------------+
| | | | Unaudited |
+-------------------------------------------+-----+----------------+----------------+
| | | | Six months |
| | | | ended |
+-------------------------------------------+-----+----------------+----------------+
| | | | June 30, |
+-------------------------------------------+-----+----------------+----------------+
| | | | |
+-------------------------------------------+-----+----------------+----------------+
| | | 2009 | 2008 |
+-------------------------------------------+-----+----------------+----------------+
| | | (Dollars in thousands) |
+-------------------------------------------+-----+---------------------------------+
| Cash flows from operating activities | | | |
+-------------------------------------------+-----+----------------+----------------+
| Net loss | | (120,204) | (211,180) |
+-------------------------------------------+-----+----------------+----------------+
| Adjustments to reconcile net loss to net | | | |
| cash flows: | | | |
+-------------------------------------------+-----+----------------+----------------+
| Depreciation and amortization | | 6,704 | 7,161 |
+-------------------------------------------+-----+----------------+----------------+
| Write off of construction-in-progress | | - | 403 |
+-------------------------------------------+-----+----------------+----------------+
| Loss on disposal of assets | | 180 | 12 |
+-------------------------------------------+-----+----------------+----------------+
| Share-based compensation | | 2,217 | 1,299 |
+-------------------------------------------+-----+----------------+----------------+
| Loss from investments in joint ventures | | 2,449 | 156 |
+-------------------------------------------+-----+----------------+----------------+
| Decrease / (increase) in receivables | | 5,596 | (45,201) |
+-------------------------------------------+-----+----------------+----------------+
| Decrease / (increase) in inventories | | 101,487 | (152,359) |
+-------------------------------------------+-----+----------------+----------------+
| Increase in other current assets | | (1,039) | (13,069) |
+-------------------------------------------+-----+----------------+----------------+
| Increase in trade and other payables | | 5,899 | 63,254 |
+-------------------------------------------+-----+----------------+----------------+
| (Decrease) / increase in provisions for | | (8,932) | 20,759 |
| liabilities and charges | | | |
+-------------------------------------------+-----+----------------+----------------+
| Increase / (decrease) in income taxes | | 475 | (1,112) |
| payable | | | |
+-------------------------------------------+-----+----------------+----------------+
| (Decrease) / increase in other noncurrent | | (985) | 202 |
| liabilities | | | |
+-------------------------------------------+-----+----------------+----------------+
| Decrease / (increase) in other assets | | 23 | (566) |
+-------------------------------------------+-----+----------------+----------------+
| (Decrease) / increase in deferred revenue | | (109,705) | 299,834 |
+-------------------------------------------+-----+----------------+----------------+
| Interest paid | | (113) | (4,524) |
+-------------------------------------------+-----+----------------+----------------+
| Interest received | | 361 | 1,264 |
+-------------------------------------------+-----+----------------+----------------+
| Income tax received | | - | 1,190 |
+-------------------------------------------+-----+----------------+----------------+
| Net cash used in operating activities | | (115,587) | (32,477) |
+-------------------------------------------+-----+----------------+----------------+
| | | | |
+-------------------------------------------+-----+----------------+----------------+
| Cash flows from investing activities | | | |
+-------------------------------------------+-----+----------------+----------------+
| Investment in subsidiaries and joint | | - | (2,474) |
| ventures | | | |
+-------------------------------------------+-----+----------------+----------------+
| Purchase of property, plant and equipment | | (5,460) | (11,254) |
| | | | |
+-------------------------------------------+-----+----------------+----------------+
| Additions to intangible assets | | (345) | - |
+-------------------------------------------+-----+----------------+----------------+
| Net cash used in investing activities | | (5,805) | (13,728) |
+-------------------------------------------+-----+----------------+----------------+
| | | | |
+-------------------------------------------+-----+----------------+----------------+
| Cash flows from financing activities | | | |
+-------------------------------------------+-----+----------------+----------------+
| Proceeds from note payable | | 20,000 | - |
+-------------------------------------------+-----+----------------+----------------+
| Proceeds from issue of share capital | | - | 199,719 |
+-------------------------------------------+-----+----------------+----------------+
| Costs associated with issue of share | | - | (314) |
| capital | | | |
+-------------------------------------------+-----+----------------+----------------+
| Capital element of finance lease payments | | (111) | (111) |
+-------------------------------------------+-----+----------------+----------------+
| Proceeds from exercise of share options | | 15 | 795 |
+-------------------------------------------+-----+----------------+----------------+
| Net cash from financing activities | | 19,904 | 200,089 |
+-------------------------------------------+-----+----------------+----------------+
| | | | |
+-------------------------------------------+-----+----------------+----------------+
| Net (decrease) / increase in cash and | | (101,488) | 153,884 |
| cash equivalents | | | |
+-------------------------------------------+-----+----------------+----------------+
| | | | |
+-------------------------------------------+-----+----------------+----------------+
| Cash and cash equivalents at beginning of | | 208,988 | 114,420 |
| period | | | |
+-------------------------------------------+-----+----------------+----------------+
| Exchange losses on cash and cash | | (1,656) | (183) |
| equivalents | | | |
+-------------------------------------------+-----+----------------+----------------+
| Cash and cash equivalents at end of | | 105,844 | 268,121 |
| period | | | |
+-------------------------------------------+-----+----------------+----------------+
| | | | |
+-------------------------------------------+-----+----------------+----------------+
Clipper Windpower Plc
Condensed Consolidated Statement of Changes in Shareholders' Equity
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+-----------+
| | | | | | Foreign | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| | | | | Other | currency | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| | Share | Share | Revaluation | reserves | translation | Retained | Total |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| | capital | premium | reserve | (Note | reserve | earnings | equity |
| | | | | 11) | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| | (Dollars in thousands) |
+---------------------------+-----------------------------------------------------------------------------------------------------+
| Balance at January | 19,772 | 188,982 | 265 | 51,605 | (131) | (248,181) | 12,312 |
| 1, 2008 | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Net loss for the period | - | - | - | - | - | (211,180) | (211,180) |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Exchange differences | - | - | - | - | (64) | - | (64) |
| arising on | | | | | | | |
| translation of foreign | | | | | | | |
| currency | | | | | | | |
| recognized directly in | | | | | | | |
| equity | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Shares and warrant issued | 4,056 | 186,647 | - | 10,766 | - | - | 201,469 |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Less: cost of shares and | - | (1,796) | - | - | - | - | (1,796) |
| warrant issued | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Tax payable on warrant | - | - | - | (3,014) | - | - | (3,014) |
| issued | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Employee share option | | | | | | | |
| scheme: | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Exercise of options | 199 | 596 | - | (403) | - | 403 | 795 |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Issuance of options | - | - | - | 1,299 | - | - | 1,299 |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Balance at June 30, 2008 | 24,027 | 374,429 | 265 | 60,253 | (195) | (458,958) | (179) |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------------------+
| Net loss for the period | - | - | - | - | - | (102,116) | (102,116) |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Exchange differences | - | - | - | - | 1,069 | - | 1,069 |
| arising on | | | | | | | |
| translation of foreign | | | | | | | |
| currency | | | | | | | |
| recognized directly in | | | | | | | |
| equity | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Shares and warrants | 27 | (28) | - | 2 | - | - | 1 |
| issued | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Less: cost of shares and | - | (11) | - | - | - | - | (11) |
| warranties | | | | | | | |
| issued | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Tax payable on warrant | - | - | - | (1) | - | - | (1) |
| issued | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Employee share option | | | | | | | |
| scheme: | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Exercise of options | 22 | 265 | - | (151) | - | 151 | 287 |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Issuance of options | - | - | - | 1,590 | - | - | 1,590 |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Balance at December 31, | 24,076 | 374,655 | 265 | 61,693 | 874 | (560,923) | (99,360) |
| 2008 | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Net loss for the period | - | - | - | - | - | (120,204) | (120,204) |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Exchange differences | - | - | - | - | (703) | - | (703) |
| arising on translation | | | | | | | |
| of foreign | | | | | | | |
| currency recognized | | | | | | | |
| directly | | | | | | | |
| in equity | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Employee share option | | | | | | | |
| scheme: | | | | | | | |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Exercise of options | 2 | 16 | - | - | - | 10 | 28 |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Issuance of options | - | - | - | 1,903 | - | - | 1,903 |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+
| Balance at June 30, 2009 | 24,078 | 374,671 | 265 | 63,596 | 171 | (681,117) | (218,336) |
+---------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-----------+-----------+
1. Basis of preparation
The consolidated results of Clipper Windpower Plc for the six months ended June
30, 2009 have been prepared in accordance with IAS 34 Interim Financial
Reporting, and using accounting policies consistent with International Financial
Reporting Standards (IFRS) adopted for use in the European Union.
The information for the year ended December 31, 2008 does not constitute
statutory accounts as defined in section 435 of the Companies Act 2006. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors' report on those accounts was not qualified, did not
draw attention to any matters by way of emphasis, and did not contain statements
under section 498(2) or (3) of the UK Companies Act of 2006.
This interim report was approved by the Board of Directors on September 28,
2009. The interim report is unaudited but has been reviewed by the auditors
whose report is set out on page 24.
Going concern
The Company has historically met its operating capital requirements with equity
capital provided by institutional investors and from deposits and progress
payments made by customers on contracts for future turbine deliveries. The Group
has only $20 million of funded debt, but has significant obligations to (i) its
customers under completed turbine sale agreements (including warranty and
performance availability obligations); (ii) its customers under turbine sales
agreements for future deliveries; and (iii) its vendors and suppliers for
services performed and for components purchased.
The Group's operating results and financial position have been negatively
impacted by a combination of external and internal factors. Most importantly,
the global economic and credit crisis that began in September 2008 has
materially impacted the availability of financing for wind projects, causing
many of the Company's customers to reduce capital expenditures, delay projects
and defer turbine deliveries under existing contracts. Further, customers have
dramatically reduced new orders for turbines until market conditions improve.
Lower energy prices for oil, natural gas and coal have contributed to lower
electricity prices in many markets, putting further uncertainty on wind
developments. Internally, the most significant factor affecting the Group's
financial position has been the high cost of various remediation programs. The
direct and indirect costs of these remediation programs total approximately $290
million for the 18 months ending June 30, 2009.
The Group's consolidated cash position of $105.8 million at June 30, 2009 has
decreased to approximately $40 million as of the end of September 2009
reflecting delayed receipts of several key milestone payments from customers,
continued cash spending to complete the remediation programs and delayed closing
of anticipated new business opportunities during the third quarter.
As explained in the Joint Statement by the Chairman and President and Chief
Executive Officer, the Group is in active negotiations with a number of
strategic and financial investors to secure additional capital funding.
Management and the Directors will pursue these initiatives vigorously and
believe a satisfactory financing transaction can be arranged; however, there can
be no assurance that any such transaction can be completed. For purposes of
evaluating the going concern status of the Company, the Directors have not
assumed that a capital raise transaction will be completed.
Without the reliance on a positive outcome of the capital raise efforts,
Management has prepared operating plans and projections to reasonably ensure the
Company has adequate resources and operating flexibilities. The principal
sources of projected cash inflows are: continued receipts from customers on
existing turbine contracts (both for delivered turbines and turbines slated for
future delivery); sales of one or more development sites; and potential new
turbine orders. The Company maintains an ongoing dialogue with existing
customers to ensure that contractual payments from customers are received in a
timely manner and, where payments are dependent on remediation or other
activities, that such activities are completed efficiently and effectively. The
Company is also in active discussions for sales of one or more development
assets, including related turbine sales agreements; however, until a transaction
is completed, there can be no assurance it will happen or when it may occur.
The Directors have concluded that the combination of these circumstances
represent a material uncertainty that casts significant doubt on the Group's and
the Company's ability to continue as a going concern and, therefore, that it may
be unable to realize its assets and discharge its liabilities in the normal
course of business. Nevertheless, after making enquiries, reviewing forecast
cash flows and considering the uncertainties described above, the Directors have
a reasonable expectation that the Group and the Company have adequate resources
and operating flexibilities to continue in operational existence for the
foreseeable future. For these reasons, they continue to adopt the going concern
basis in preparing the interim report and accounts.
2. Accounting policies
Except for the adoption of IFRS 8 as discussed in note 3 herein, the accounting
policies are consistent with those adopted in the preparation of the Group's
annual financial statements for the year ended December 31, 2008.
3. Segment information
The Group implemented IFRS 8 - Operating Segments on January 1, 2009. Under IFRS
8, the Group has two operating segments: turbine technology and manufacturing,
and wind project development. Turbine technology and manufacturing includes
designing, manufacturing and the sale and servicing of wind turbines. Wind
project development includes activities associated with developing wind energy
facilities, including wind resource assessment, site planning, site control and
interconnection to the power grid. The wind project development segment did not
meet the quantitative thresholds specified in IFRS 8 for the periods reported.
Accordingly, no individual segment information is presented here.
All of the Group's revenue is from external customers located in North America.
Three customers accounted for 46%, 30% and 15% of revenue for the period ended
June 30, 2009 and one customer accounted for 66% of revenue for the period ended
June 30, 2008. Three customers accounted for 57%, 20% and 12% of revenue for the
period ended December 31, 2008.
4. Revenue and income
The Group recorded the following categories of revenue and income:
+------------------+--------------+--------------+--------------+----+----------------+
| | Six months ended | | Year ended |
| | June 30, | | December 31, |
+------------------+--------------------------------------------+----+----------------+
| | | | | |
+------------------+--------------+-----------------------------+----+----------------+
| | 2009 | 2008 | | 2008 |
+------------------+--------------+-----------------------------+----+----------------+
| | | (Dollars in thousands) |
+------------------+-----------------------------+------------------------------------+
| Sale of turbines | 353,639 | 150,051 | | 736,386 |
| and construction | | | | |
| assets | | | | |
| | | | | |
+------------------+--------------+-----------------------------+----+----------------+
| Turbine service | 2,155 | 158 | | 743 |
| revenue | | | | |
+------------------+--------------+-----------------------------+----+----------------+
| Development | 525 | 150 | | - |
| revenue | | | | |
+------------------+--------------+-----------------------------+----+----------------+
| Other revenue | 939 | 5,727 | | 197 |
+------------------+--------------+-----------------------------+----+----------------+
| Total revenue | 357,258 | 156,086 | | 737,326 |
+------------------+--------------+-----------------------------+----+----------------+
| Profit on sale | - | - | | 30,908 |
| of subsidiary | | | | |
| undertakings | | | | |
+------------------+--------------+-----------------------------+----+----------------+
| Finance income | 527 | 1,264 | | 3,119 |
+------------------+--------------+-----------------------------+----+----------------+
| Total | 357,785 | 157,350 | | 771,353 |
+------------------+--------------+--------------+--------------+----+----------------+
5. Provision for remediation related expenses and other unusual transactions
During the six month period ended June 30, 2009, there were significant
additional charges primarily relating to remediation of supplier quality issues
and blade design. These costs are summarized below.
+------------------------------------+--------------+--------------+-----------+------+-----------+
| | Six months ended | | Year |
| | June 30, | | ended |
+------------------------------------+ +------------------+-----------+
| | | | December |
| | | | 31, |
+------------------------------------+-----------------------------+-----------------------------+-----------+
| | | | | |
+------------------------------------+--------------+--------------+------------------+-----------+
| | 2009 | 2008 | | 2008 |
+------------------------------------+--------------+--------------+------------------+-----------+
| | (Dollars in thousands) |
+------------------------------------+------------------------------------------------------------+
| Provision for remediation related | | | | |
| expenses: | | | | |
+------------------------------------+--------------+--------------+-----------+------------------+
| Inventory write down for loss | 1,031 | 5,118 | | 2,866 |
| making contracts | | | | |
+------------------------------------+--------------+--------------+-----------+------------------+
| Provision for turbine and blade | 41,221 | 76,232 | | 134,588 |
| remediation | | | | |
+------------------------------------+--------------+--------------+-----------+------------------+
| Provision for inventory | 4,328 | 24,180 | | 32,385 |
| obsolescence | | | | |
+------------------------------------+--------------+--------------+-----------+------------------+
| Provision for liquidated damages | 21,120 | 33,399 | | 52,111 |
+------------------------------------+--------------+--------------+-----------+------------------+
| | 67,700 | 138,929 | | 221,950 |
+------------------------------------+--------------+--------------+-----------+------------------+
| Provisions for litigation related | - | 6,156 | | 13,000 |
| matters | | | | |
+------------------------------------+--------------+--------------+-----------+------------------+
| | 67,700 | 145,085 | | 234,950 |
+------------------------------------+--------------+--------------+-----------+------------------+
| | | | | |
+------------------------------------+--------------+--------------+-----------+------+-----------+
The provision for loss making contracts relates to wind projects for which costs
will exceed contractual economic benefit. The provision for turbine remediation
relates to the cost to repair blades and gearboxes on wind turbines at customer
sites and held in inventories. The provision for inventory obsolescence pertains
to the difference between inventory's carrying value and net realizable value of
certain un-certified products. The accrual for liquidated damages relates to the
contractual penalties arising from the late delivery of turbines and related
performance guaranties on certain contracts, mostly attributable to turbine
downtime caused by the remediation programs described above.
6. Loss per share
The calculation of the basic and diluted loss per share is based on the
following:
+-------------------------------------------+--------------+-------------+--------------+-------------+
| | Six months ended | | Year |
| | June 30, | | ended |
+-------------------------------------------+ +--------------+-------------+
| | | | December |
| | | | 31, |
+-------------------------------------------+----------------------------+--------------+-------------+
| | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| | 2009 | 2008 | | 2008 |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| Loss | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| Loss for the purpose of basic and diluted | (120,204) | (211,180) | | (313,296) |
| loss per share ($'000s) | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| Number of shares | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| Weighted average number of ordinary | | | | |
| shares for the purpose of basic | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| and diluted loss per share | 130,052,252 | 114,584,677 | | 122,580,643 |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| Basic and diluted loss per share | $(0.92) | $(1.84) | | $(2.56) |
+-------------------------------------------+--------------+-------------+--------------+-------------+
| | | | | |
+-------------------------------------------+--------------+-------------+--------------+-------------+
Unexercised share options and warrants to purchase 18,948,535 shares, 15,664,276
shares and 19,431,902 shares for the six months ended June 30, 2009 and June 30,
2008 and the year ended December 31, 2008, respectively, were not included in
the computation of basic and diluted EPS because the exercise of the options and
warrants would be anti-dilutive.
7. Inventories
+----------------------------+---------------+---------------+-----+----------------+
| | | | | |
+----------------------------+---------------+---------------+-----+----------------+
| | As of June 30, | | As of December |
| | | | 31, |
| | | | |
+----------------------------+-------------------------------+-----+----------------+
| | 2009 | 2008 | | 2008 |
+----------------------------+---------------+---------------+-----+----------------+
| | | (Dollars in thousands) |
+----------------------------+---------------+--------------------------------------+
| Raw materials and | 276,702 | 350,960 | | 205,410 |
| components | | | | |
+----------------------------+---------------+---------------+-----+----------------+
| Less reserves | (29,917) | (73,218) | | (46,999) |
+----------------------------+---------------+---------------+-----+----------------+
| Net | 246,785 | 277,742 | | 158,411 |
+----------------------------+---------------+---------------+-----+----------------+
| | | | | |
+----------------------------+---------------+---------------+-----+----------------+
| Completed assembly | 61,178 | 123,001 | | 81,149 |
+----------------------------+---------------+---------------+-----+----------------+
| Less reserves | - | - | | - |
+----------------------------+---------------+---------------+-----+----------------+
| Net | 61,178 | 123,001 | | 81,149 |
+----------------------------+---------------+---------------+-----+----------------+
| | | | | |
+----------------------------+---------------+---------------+-----+----------------+
| Inventory at project sites | 149,616 | 376,642 | | 320,841 |
| | | | | |
+----------------------------+---------------+---------------+-----+----------------+
| Less reserves | (1,620) | (101,831) | | (2,955) |
+----------------------------+---------------+---------------+-----+----------------+
| Net | 147,996 | 274,811 | | 317,886 |
+----------------------------+---------------+---------------+-----+----------------+
| | | | | |
+----------------------------+---------------+---------------+-----+----------------+
| Total net inventory | 455,959 | 675,554 | | 557,446 |
+----------------------------+---------------+---------------+-----+----------------+
There is no material difference between the balance sheet value of inventories
and its replacement cost.
8. Deferred revenue
+----------------------------+--------------+---------------+---------------+
| | Current | Non current | Total |
+----------------------------+--------------+---------------+---------------+
| | (Dollars in thousands) |
+----------------------------+----------------------------------------------+
| At June 30, 2008 | 669,733 | 253,468 | 923,201 |
+----------------------------+--------------+---------------+---------------+
| Customer deposits received | 526,437 | (119,010) | 407,427 |
+----------------------------+--------------+---------------+---------------+
| Recognized as revenue in | (528,085) | - | (528,085) |
| the period | | | |
+----------------------------+--------------+---------------+---------------+
| At December 31, 2008 | 668,085 | 134,458 | 802,543 |
+----------------------------+--------------+---------------+---------------+
| Customer deposits received | 179,750 | 19,571 | 199,321 |
+----------------------------+--------------+---------------+---------------+
| Recognized as revenue in | (309,031) | - | (309,031) |
| the period | | | |
+----------------------------+--------------+---------------+---------------+
| At June 30, 2009 | 538,804 | 154,029 | 692,833 |
+----------------------------+--------------+---------------+---------------+
| | | | |
+----------------------------+--------------+---------------+---------------+
Customer deposits received reflect receipt of contractually-required advance
deposits to order turbines and milestone receipts for progress on delivery and
commissioning of turbines. The Group uses such receipts to order components and
fund operations to manufacture and deliver turbines ordered.
9. Note payable
On May 13, 2009, the Group entered into an arrangement for a $20.0 million
secured loan funded by a customer associated with the deferral of certain 2009
committed turbine deliveries into 2010. The loan is in the form of a promissory
note with a maturity date of March 31, 2011. Interest will accrue on the note at
the three-month LIBOR rate plus 20 basis points (0.2%). The principal and
interest are due on the maturity date.
10. Share capital
+---------------------------------------+--------------+--------------+----+----------------+-------+
| | As of June 30, | | As of |
| | | | December 31, |
| | | | |
+---------------------------------------+-----------------------------+----+----------------+
| | 2009 | 2008 | | 2008 |
+---------------------------------------+--------------+--------------+----+----------------+
| | (Dollars in thousands) |
+---------------------------------------+---------------------------------------------------+
| Authorized | | | | |
+---------------------------------------+--------------+--------------+----+----------------+
| 165,000,000 ordinary shares of 10 | 27,392 | 27,392 | | 27,392 |
| pence each (June 30, 2008 and | | | | |
| December 31, 2008: 165,000,000 | | | | |
| ordinary shares) | | | | |
+---------------------------------------+--------------+--------------+----+----------------+
| 50,000 redeemable preference shares | 91 | 91 | | 91 |
| of GBP1 each (June 30, 2008 and | | | | |
| December 31, 2008: 50,000 redeemable | | | | |
| preference shares) | | | | |
+---------------------------------------+--------------+--------------+----+----------------+
| | | | | |
+---------------------------------------+--------------+--------------+----+----------------+
| Allotted, called up and fully paid | | | | |
+---------------------------------------+--------------+--------------+----+----------------+
| 130,061,276 ordinary shares of 10 | 24,078 | 24,027 | | 24,076 |
| pence each (June 30 2008:129,749,954 | | | | |
| ordinary shares, December 31, | | | | |
| 2008:130,048,276 ordinary shares) | | | | |
+---------------------------------------+--------------+--------------+----+----------------+
| | | | | |
+---------------------------------------+--------------+--------------+----+----------------+-------+
Issued share capital as at June 30, 2009 amounted to $24.1 million (June 30,
2008: $24.0 million and December 31, 2008: $24.1 million). During the period
ended June 30, 2009, the actual number of shares issued as a result of options
exercised was 13,000 ordinary shares (six months ended June 30, 2008:
879,522 ordinary shares and year ended December 31, 2008: 1,162,720 ordinary
shares). The total consideration received from the exercise of these options was
$28,000 (six months ended June 30, 2008: $0.8 million and December 31, 2008:
$1.1 million).
On June 26, 2009, the Group implemented an Option Exchange Program (the
"Program") in which it granted new share options to certain qualified option
holders with an option price of GBP1.50 per share in exchange for the
surrendering of a larger number of previously granted share options with higher
exercise prices. Under the Program, 3,400,000 pre-existing options in respect of
3,400,000 ordinary shares were surrendered and 1,999,462 new options were
granted in respect of 1,999,462 ordinary shares. The expenses incurred by the
Group under this Program were not material for the six months ended June 30,
2009.
11. Other reserves
+---------------------------+---------+---------+---------+------------+----------+----------+
| | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| | Share | | | Capital | Total |
+---------------------------+---------+---------+---------+------------+---------------------+
| | option | Warrant | Merger | redemption | other |
+---------------------------+---------+---------+---------+------------+---------------------+
| | reserve | reserve | reserve | reserve | reserves |
+---------------------------+---------+---------+---------+------------+---------------------+
| | (Dollars in thousands) |
+---------------------------+-----------------------------------------------------+
| Balance at January 1, | 6,595 | 9,812 | 35,107 | 91 | 51,605 |
| 2008 | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Shares and warrant issued | - | 10,766 | - | - | 10,766 |
+---------------------------+---------+---------+---------+------------+---------------------+
| Tax payable on warrant | - | (3,014) | - | - | (3,014) |
| issued | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Employee share option | | | | | |
| scheme: | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Exercise of options | (403) | - | - | - | (403) |
+---------------------------+---------+---------+---------+------------+---------------------+
| Issuance of options | 1,299 | - | - | | 1,299 |
+---------------------------+---------+---------+---------+------------+---------------------+
| Balance at June 30, 2008 | 7,491 | 17,564 | 35,107 | 91 | 60,253 |
+---------------------------+---------+---------+---------+------------+---------------------+
| Shares and warrants | | 2 | - | - | 2 |
| issued | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Tax payable on warrant | - | (1) | - | - | (1) |
| issued | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Employee share option | | | | | |
| scheme: | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Exercise of options | (151) | - | - | - | (151) |
+---------------------------+---------+---------+---------+------------+---------------------+
| Issuance of options | 1,590 | - | - | - | 1,590 |
+---------------------------+---------+---------+---------+------------+---------------------+
| Balance at December 31, | 8,930 | 17,565 | 35,107 | 91 | 61,693 |
| 2008 | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Employee share option | | | | | |
| scheme: | | | | | |
+---------------------------+---------+---------+---------+------------+---------------------+
| Exercise of options | - | - | - | - | - |
+---------------------------+---------+---------+---------+------------+---------------------+
| Issuance of options | 1,903 | - | - | - | 1,903 |
+---------------------------+---------+---------+---------+------------+---------------------+
| Balance at June 30, 2009 | 10,833 | 17,565 | 35,107 | 91 | 63,596 |
+---------------------------+---------+---------+---------+------------+----------+----------+
12. Contingencies
Contingent asset
In 2006, the Group sold a 50% membership interest in four project limited
liability companies ("LLCs") and an 85% membership interest in one project LLC.
In the event certain notice-to-proceed conditions in the contracts are
satisfied, the Group will receive additional contingent purchase price
consideration for the project companies up to a maximum of $33.3 million for the
first four project companies with payments on the fifth project company based on
the final generation capacity of the site.During the period, no additional
contingent purchase price consideration was received.
Contingent liability
In 2006, the Group sold part of its investment in five subsidiary undertakings.
It has retained an interest, either as a joint venture partner or investor in
each of these wind farm development projects. Each project was sold on the basis
that on completion, it would achieve a contractually-agreed capacity. If one of
the Group's projects has a lower capacity upon completion than that anticipated
at commencement, or falls short of other contractually-agreed commitments, the
Group is required to transfer a new project in its place or, failing that, the
Group is responsible for reimbursing its joint venture partner for any amounts
paid plus interest at LIBOR plus 2% up to a maximum of $4 million. The Directors
consider it remote that any payments will arise under this arrangement and,
accordingly, have recognized revenue based on their view of the probable outcome
of this transaction.
The Group's turbine supply agreements with customers generally require the Group
to make payments to the customers in the event the Group is unable to meet
certain conditions of the contracts relating to delivery, commissioning and
assembly dates in the ordinary course of business. The Group is also
contractually committed for liquidated damages in certain turbine supply
agreements if turbine availability does not meet minimum stated thresholds or
the power curve does not meet specified levels of output. The specific terms
vary by contract but, in general, the maximum potential future payments under
the guarantees are subject to daily and overall project limits. Such costs are
accrued once the agreed delivery date expires, as time passes and in accordance
with contractual terms unless such contracts are loss making, in which case
total losses on the contracts are recognized in full.
13. Related party transactions
In February 2009, the Group made a loan of $1.0 million to a tower company for
which the Group holds a minority interest. This loan has been provided for and
is reflected in research and development expense in the consolidated interim
income statement due to the tower company being a development stage enterprise
with there currently being insufficient certainty that the loan will be repaid.
The son of one of the Group's Directors is a principal of the tower company. Two
of the Group's other Directors are also directors of the tower company.
INDEPENDENT REVIEW REPORT TO CLIPPER WINDPOWER PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended June 30,
2009 which comprises the condensed income statement, the condensed balance
sheet, the condensed cash flow statement, the condensed statement of changes in
shareholders' equity and related notes 1 to 13. We have read the other
information contained in the half-yearly financial report and considered whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued
by the Auditing Practices Board. Our work has been undertaken so that we might
state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended June 30, 2009 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the AIM Rules of the London Stock Exchange.
Going concern - emphasis of a matter
In forming our opinion on the financial information, which is not qualified, we
have considered the adequacy of the disclosure made in note 1 to the financial
information concerning the Company's ability to continue as a going concern. The
Company has experienced reduced orders for turbines and cash out-flow associated
with remediation activities and is attempting to raise additional capital. These
conditions, along with other matters explained in note 1 to the financial
information, indicate the existence of a material uncertainty which may cast
significant doubt about the Group's ability to continue as a going concern. The
financial information does not include the adjustments that would result if the
Group was unable to continue as a going concern.
Deloitte LLP
Chartered Accountants and Statutory Auditors
London, UK
September 30, 2009
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EBLBXKKBZBBD
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