Monday, September 20, 2010

Clipper Windpower seeks bailout amid cash flow crunch

Clipper said that it is “exploring numerous alternatives to raise capital including private and public equity issuances and working capital credit lines with certain financial institutions as well as its largest shareholder, UTC (United Technologies Corporation).

Clipper’s end June cash position of $140m had decreased to approximately $86m as of the end of August 2010 “due to continued cash requirements¿.including increased purchases of components for the manufacture of turbines scheduled for deliver in the current year.”

In January 2010, UTC invested $207m in Clipper, after the turbine manufacturer faced an earlier cash squeeze. Clipper says that the agreement contains provisions that generally limit UTC’s shareholding to a 49% stake until January 2012. However, it says that in the case of certain events it can increase its stake to 55%. UTC informed Clipper in mid September that based on cumulative cash outflows, which they say have exceeded the level permitted in the two companies’ agreement that it is allowed to increase it and its affiliates’ shareholding to the 55% level.

Clipper says that it “will continue engaging in negotiations with UTC to determine whether a financing transaction or acquisition proposal can be arranged on acceptable terms.” It warns, however, that “there is no assurance that these discussions will result in a proposal that the Non-UTC Directors believe is appropriate to recommend to the Group’s shareholders.”

Clipper also warns that without an agreement on a substantive new financing transaction by 30 September 2010, it expects to disclose within its interim financial statements an 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.”

Clipper says that revenue for the six months that ended 30 June is expected to be in the range of $150-154m, primarily form the sale of 43 turbines, compared to revenues of $357.3m for the period a year earlier, when the company sold 127 turbines. Clipper says it expects to sell between 140-180 turbines in the whole of 2010.

It says that its sales have been affected negatively in the past by its inability to provide customers with a top level turbine warranty coverage. It says that it has made a “major breakthrough” in this regard with a recently finalized agreement by which UTC will provide warranty support. It has also formed a relationship with UTC’s Pratt & Whiney Power Systems (PWPS) to enable Clipper “to leverage the PWPS global distribution network to sell and service the Liberty turbine and to provide integrated turnkey project capabilities to turbine purchasers.”

No comments: