Clipper Windpower is struggling

Clipper Windpower is struggling with falling sales and a shrinking cash holding, and the wind turbine manufacturer is now looking for further investment into the company.

The wind turbine company maintains its forecast of delivering 140-180 wind turbines (350-450 MW) in 2010, but says it now expects deliveries to be in the lower end of the forecast.

Limited warranty

Clipper says one of the reasons for low sales is that Clipper Windpower has not been able to provide wind turbine warranty coverage that is perceived to be consistent with top tier wind turbine manufacturers. However, Clipper has since reached an agreement with United Technologies Corporation (UTC), which will provide warranty support.

The credit crunch

Another impacting factor has been the global economic and credit crisis, which has impacted financing for wind power projects in general. This has lead customers to reduce capital expenditures, delay wind power projects, and defer wind turbine deliveries under existing contracts.

In the USA, project developers and electric utilities have “dramatically reduced” new orders for wind turbines, and lower prices on oil, gas and coal have reduced prices for power purchase agreements, Clipper says.
Significant liquidity strain

Faced with these challenges, the group “expects to face significant liquidity strain within the next year due to lower receipts of deposits and progress payments from customers under new and existing orders, in comparison to the operation cash needed to complete these orders and fund operations.”

Clipper’s consolidated cash position has already dwindled nearly 40% to US$86m between the end of June and the end of August.

Nevertheless, Clipper Windpower says it is expects a net loss of US$26-30 million in the first half of 2010, compared to a net loss of US$120.2m in the same period in 2009.

Seeking capital

Clipper is now “actively seeking additional sources of capital” alongside aggressive marketing and sales reach to non-US markets.

The wind turbine company says it is also exploring numerous alternatives to raise capital, including talking to its largest shareholder, UTC.
UTC may take over Clipper

The discussions with UTC range from providing credit support for a working capital line to equity purchases. UTC has already submitted a non-binding indication of interest to acquire all of the ordinary shares of Clipper.

If financing discussions with UTC, or another partner, are successful, Clipper management has prepared operating plans and projections to ensure the company has enough resources and operating flexibilities.

The main sources of projected cash inflows are: Continued receipts from customers on existing wind turbine contracts; and sales of one or more development sites.

Clipper could fold

If no financing agreement has been reached by the end of September, Clipper says it “expects to disclose within the interim financial statements and opinion that the current business circumstances create 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 realise its assets and discharge its liabilities in the normal course of business.”