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That long awaited sugar daddy deal -- Orders for 4265MW result from BP's alliance with Clipper

Clipper Windpower, an upstart southern California turbine manufacturer and project developer with big ambition, finally nailed down the sugar daddy deal it had to have been seeking when BP Alternative Energy agreed in July to an alliance that includes up to 1706 turbines and 4265 MW of wind development within five years.

Since coming on the scene in 2002, Clipper has shown little beyond the slightly mysterious aura of a would-be player that might eventually put a dent in the ongoing global turbine shortage. Meantime, its engineers worked on perfecting a somewhat newfangled 2.5 MW turbine called Liberty, only one of which, a test turbine in Montana, has yet seen the sky.

Buy suddenly, Clipper's production plant is expected to pump 20 to 30 Liberties out the door each month until well into the next decade. Most immediately, Clipper and BP are to share in the development of five projects with a combined capacity of 2015 MW in New York, Texas and South Dakota. BP has also ordered an additional 2250 MW of Liberties, including 300 MW to be delivered before the end of 2008, while agreeing to infuse Clipper with $90 million over the course of the deal.

Clipper also announced in July that the first eight commercial Liberty turbines produced by the company could begin spinning before the end of this year in a 20 MW development called Steel Winds on the New York shores of Lake Erie. The project is a collaboration with UPC Wind, an established wind project developer based in Massachusetts. Up next will be Clipper's own project, a 100 MW wind farm named Endeavor, to be built near the company's Iowa turbine manufacturing facility in Cedar Rapids and expected online this year or next.

One test turbine

The company is emphatically confident about the performance of its one Liberty turbine to have been operated so far. "We installed it in March of 2005 and took the crane away," says Jim Dehlsen, Clipper's affable founder who has clocked a quarter-century in the wind business. "The crane has never been back. We're taking the technology beyond the current limitations -- not only for the machine we have now but also for a larger machine in the future. We have an all-star engineering team and I take comfort in that. In our view, Liberty is the most efficient turbine in the business. It's not just the productivity. It's the weight, the installation, the transportation. Everything."

Liberty is the fourth turbine to be designed by Clipper's engineers. Much of what makes this one different is that rather than one generator per turbine, each Liberty houses four concurrently running generators. "We have the ability to operate with less than all four," Dehlsen says. "But it's only in the event of a fault in a generator that we'd take one offline and operate under peak capacity. We can also service all the parts with an onboard crane. We think it's a nice advantage to have."

The company developed the machine after winning a grant from the US Department of Energy in 2002. "It was an open solicitation and they were looking for a low wind speed turbine program," Dehlsen says. "Most of the industry responded to it and we won it." Clipper took away nearly $10 million and began to challenge the established order, from design through manufacturing and testing. "The way the industry has done it is to order parts, build a machine, put it up for a while and watch how it runs," Dehlsen says. "But these are purpose-designed components that we're using. Our machine is designed to a 30 year standard, as opposed to the rest of industry, which designs to 20 years."

Sceptics

Dehlsen has heard sceptics before. His former company, Zond, helped to pioneer an early 1.5 MW turbine that also broke conventional norms. The process led Dehlsen to believe larger machines are best operated with low revolutions per minute and high torque. "Gearboxes," he says. "That's really one of the big challenges now. It's on the verge of putting some major companies into serious financial problems. A lot of the industry picks a gearbox out of a catalogue and goes with it. We think that's pretty outmoded. Our design and the testing of a system, then finally putting a machine up to operate, is somewhat different than what the rest of the industry does."

As Dehlsen tells it, Boeing builds an aircraft with a computer, then rolls it out the hangar door and flies it. "That might be a bit of exaggeration or an over-simplification," he says. "But there's a parallel between that and what we do. Numerical tools give you a very good means of providing sound structural design and we feel like we've gone many steps beyond what the wind industry normally does."

Investor confidence

Dehlsen isn't the only one with confidence in his company's ideas. Last year, Clipper floated an initial public offering on the Alternative Investment Market of the London Stock Exchange, proffering about a third of the company. Investors sought three times as many shares as were available and the market capitalisation netted upwards of $300 million.

That the offering took place in the UK, Dehlsen says, is a function of Europe's leadership in renewables. He notes that Europe accounts for some two-thirds of the global wind market, while Germany employs more people in the wind industry than in coal. A stock offering in the US will not happen for at least a few years, he says.

The global wind market is worth $10 billion, says Dehlsen, and Clipper aims to snap up 10-15% of it. "As we see it, the business really has to be global," Dehlsen says. "Our goal is to be sufficiently diversified by 2008 in case there's a delay in continuity with the US production tax credit."

Clipper posted more than $10 million in 2004 revenues, while research, development and manufacturing start up kept the 2005 figure under $3 million. The company currently employs about 160 people and expects to hire 40 more by year end. The future project development portfolio, which Dehlsen says has been built since 2001, now exceeds 6000 MW. "Our real objective is to have projects to offer for utilities to buy and take over -- turnkey projects based on our turbine."

In Europe the company has designs on the offshore wind market. Dehlsen says Liberty should be seaworthy in 2007 and the next generation turbine, with a capacity rating between 5 MW and 7.5 MW, is expected to include telescoping blades that adapt to varying wind speeds. "The main reason for developing a bigger one is to be ready for offshore, but it will also find a home onshore. Offshore could be big but the machines have to be much more cost-effective than now. I think we can get there."

As he approaches 70, Dehlsen admits that the notion of retirement crosses his mind. He plans to eventually turn Clipper's reins over to his 40 year-old son, Brent Dehlsen. "But I love the business and the people involved," he says. "And sometimes you feel like you're having too much fun to be put out to pasture. The good stuff is yet to come."

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