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Next step for US blade maker -- Steady growth at TPI

With factories in three countries, $42 million from two rounds of funding and a well-known figure from the energy industry added to its board of directors, TPI Composites is poised to expand its share of the global wind blade market. In 2002 the American company, based in Arizona, established its initial blade plant in Juarez, Mexico, through a partnership with Mitsubishi Power Systems. The joint venture, known as VienTek, began by producing blades for 400 MW a year. VienTek now employs 1500 people and by this year had tripled annual output to 1200 MW.

In 2008, TPI added two factories, in China and the US, to make blades exclusively for GE Energy. Its new facility in Taicang, China, employs 450 workers and its factory in Newton, Iowa, employs 320 and is contracted to boost its payroll to 500 workers in coming months. Long-range plans for expanding to 800 employees are on hold, however.

"Our approach has been to team up with companies like GE and Mitsubishi to build focused factories and grow with our customers," says TPI's Steve Lockard. TPI declines to reveal manufacturing capacity at the two new plant, which are to make blades for GE's 1.5 MW turbines.

Other than blades, TPI makes military and public transportation vehicles in Ohio. The company's development headquarters are in Rhode Island, where TPI started out making composites for boats during the 1960s. But its vacuum infusion technology applied to blades for the wind industry has become the company's greatest source of revenue. TPI is privately held and declines to comment on market share, sales volume or profit.

Location of its factories has been important to its growth. TPI mitigates relatively high domestic payroll costs by choosing manufacturing sites close to states rapidly introducing wind power -- such as Minnesota, Illinois and Iowa -- and to rail lines and the interstate highway system. "If we're trucking blades within 500 miles of Newton, Iowa, we can compete with drawing those blades from Mexico or Brazil or other lower-cost labour regions of the world," Lockard says.

Another considerable portion of blade cost is from raw materials -- some of which have followed oil prices. TPI is working on materials technology to reduce the impact of oil price gyrations, Lockard says, and for making longer blades. "I think the blade sizes will continue to grow with the industry," he says. "But there's no major technology shift needed to go to the 2.5 MW class blades because we're capable of making blades across the spectrum of what's needed with the technology we already have."

Financing

In 2007, the company's initial fundraising effort netted $22 million, while a second round announced in January raised $20 million, with GE Energy Financial Services among several investors. "That first round was used to fund the expansion of the Mexico operations," Lockard says. "The second round was for general growth needs and to strengthen the balance sheet of our company." The company has also received a $6 million tax incentive in Iowa.

As it plots its strategy going forward, TPI expects to benefit from the energy industry experience of Pat Wood, former chairman of both the Federal Energy Regulatory Commission and the Texas Public Utilities Commission. Wood joined the company's board of directors in January. "He's seen the industry from a unique and powerful perspective," says Lockard.

Meantime, Lockard is counting on accelerated expansion of the US wind sector supply chain. "We need to continue to use the volume growth of our industry to help reduce costs," Lockard says. "Transportation costs and incentives provided by local and state economic development groups have moved the needle," he says. "That's what has really made a difference in allowing a few of these US-based blade manufacturing facilities to be launched."

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