On April 5, AMSC said it would make a loss in the fourth quarter because on March 31, Sinovel refused to accept and pay for contracted shipments of 1.5MW and 3MW wind turbine components, valuing $56 million. AMSC said it believed Sinovel wants to reduce its inventory before accepting further shipments.
In response, Sinovel secretary of the board of directors Fang Hongsong, said the company had acted appropriately.
Additionally, Fang denied market rumours that Sinovel has been receiving smaller than expected turbine demands from wind farms, or that projects are installing turbines behind schedule, and has been placing pressure on suppliers as a result.
In 2008 and 2010, AMSC and Sinovel signed two component supply contracts to the value of nearly $900 million.
Li Shengmao, a senior researcher of China Investment Consulting Corporation, said Sinovel’s abrupt postponement of taking delivery of AMSC components might damage mutual trust in cooperation with AMSC.
Li said: "A wind turbine is produced with many components. If the components are in short supply in the future, Sinovel might be hard to get such components from the supplier."
However, he added Sinovel has the right to independently choose component suppliers.
Market analysts say that according to the 2010 annual report that Sinovel released on April 6, Sinovel had a operating cash flow deficit of CNY1.016 billion ($155 million in 2010, down 173.59 percent from 2009. It was the lowest in the past four years.
Sinovel is not the only turbine maker suffering from tension of cash flow. Goldwind, the second largest wind turbine maker in China, had only CNY186 million operating cash flow in 2010, down 85.95 percent from 2009.