UNITED STATES: Turbine manufacturer Clipper Windpower and Boston-based developer First Wind are engaged in a near-$60 million lawsuit in Iowa over a disputed wind turbine order.
First Wind, a former major customer of Clipper, has been trying to freeze $59.5 million of Clipper's assets in three different court jurisdictions. The aim is to ensure that the private equity-owned turbine manufacturer can pay an arbitration settlement under way with First Wind in Chicago currently being overseen by the American Arbitration Association.
The allegations contained in the three court cases are at times startling. According to a memorandum filed by First Wind in the New York case, Platinum Equity purchased Clipper in August 2012 for "nothing - in fact, United Technologies Corporation (UTC) had to inject money into Clipper in order to get Platinum to take the manufacturer and its liabilities off UTC's hands". First Wind has also said that Clipper is on the "verge of imploding".Both Clipper and Platinum declined to respond to a request for comment on the financial side of the deal.
In October, Judge Peter Sherwood of the Supreme Court of the State of New York declined to freeze the assets, noting that Clipper had said it was willing to manufacture the turbines if First Wind would only make a firm order. In court documents, First Wind has cited uncertainty over the production tax credit and permitting delays as reasons for not proceeding with its order.
In the Iowa suit, First Wind said that earlier in 2011 Clipper turned down a proposed order for 20 turbines. However, in another court proceeding, Clipper said that First Wind's order was never firm and that Clipper could have assembled the turbines if this was the case. In the Iowa suit, First Wind is reported as claiming it had difficulty obtaining financing for wind projects specifying Clipper turbines because of the manufacturer's financial instability.
NextEra Energy Resources, the largest owner and operator of wind in the US, has become involved. It tried to intervene in the New York suit at the last minute, although the judge ruled before it could do so. In court documents, NextEra said that Clipper was in breach of its warranty obligations - but that the situation would be exacerbated if Clipper was forced into involuntary bankruptcy because First Wind succeeded in freezing its assets.
NextEra declined to comment on its role or whether it is in arbitration with Clipper over warranties. the company has not intervened in the Iowa suit, according to the court clerk's office.
Warranty claims have long been a problem for Clipper Windpower. Just a week before it sold Clipper, UTC said in its financial statements that Clipper had $91 million in reserves for potential warranty claims. Even before UTC bought Clipper in 2010 for $385 million, the Liberty turbine has faced well-known problems such as faulty gearboxes and cracked blades.
There have been reports that Clipper is planning to scale the company back to its servicing operation, which handles the Clipper-manufactured gearbox for the Liberty turbine.
Clipper manufactured the Liberty turbine in Cedar Rapids, Iowa from 2006 until earlier this year. It suspended turbine production and laid off 76 employees after the company was sold to leveraged buyout specialist Platinum Equity. Not long before the purchase, Clipper had warned that it might not be able to keep going without an injection of cash.