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United States

New focus and a new strategy -- Clipper rethinking

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In a shift in philosophy, American Clipper Windpower is retrenching its wind project development business to focus on its closest customer, BP Alternative Energy, and work on further joint venture project partnerships. The decision comes less than a year after Clipper announced a development partnership called Capgen, with its sights set on advancing 10,000 MW of wind projects in a variety of countries. Clipper has dissolved the plan to court new partners in America.

Capgen, or Clipper Capital and Generation, was a partnership with Hemeretik, a Spanish construction and real estate group. Clipper's core business is as a turbine manufacturer, but it also has project development interests. Capgen formalised these into a dedicated development arm of the company, with Clipper controlling 78%. Partly through Hemeretik's sphere of influence, the push for projects would have been in Spain, eastern Europe and Latin America for completion three and four years ahead.

The new strategy will use Clipper's nearer-term US portfolio in large part to meet the needs of utilities and other energy companies that want to enter the wind market. Clipper does not intend to simply sell off projects but is looking to split them 50/50 with partners. "Companies can come to Clipper and get a pretty decent portfolio of their own as they help us carry the costs of going forward," says Clipper CEO Jim Dehlsen. "Then we'll split the economics. It's a bit of a different model. Frankly, I think it ends up being a more optimum kind of benefit for our shareholders than the Capgen model."

As a turbine manufacturer, Clipper's path to perfecting and commercialising its 2.5 MW Liberty turbine has not been smooth. It has bled more than $33 million to solve gearbox and blade problems, and the price of its stock, traded in the UK, took a nose dive from May before partially rebounding last month. To add to the company's woes, floods in June forced some of its workers out of their homes and lost the company several days of manufacturing at its facility in Cedar Rapids, Iowa.

The tide of misfortune could be turning, however. As of late July, Clipper announced that its machines are performing well, with gearbox and blade repair work on track for completion in this year's third quarter. A financial breakeven point could be reached by year-end and turbine production should reach 300 units this year and 350 in 2009 as orders continue to roll in. At Clipper's California headquarters, Dehlsen is cautiously optimistic. "I think people are getting comfortable with the fact that all of the start-up stuff is pretty well fading behind us now," he says.

Closer to BP

Many of the company's current orders are for BP projects-the 100 MW Flat Ridge project in Kansas and the 60 MW Silver Star project in Texas, as well as 250 MW of the 800 MW Fowler Ridge project in Indiana. BP is also repowering a California project, Edom Hills, with eight Liberty machines. "We believe they've solved the gearbox problem," says BP's Bob Lukefahr.

Clipper's new strategy is to pull itself even closer to the energy giant. Together they have announced Titan, a joint venture to bring 5 GW of Clipper turbines online in South Dakota in the next decade or so. Lukefahr is impressed by Dehlsen's vision of multi-gigawatt projects. The company has paid $26.25 million to buy into the project. BP already owns about 3% of Clipper.

Dehlsen remembers Titan as Rolling Thunder from the decade's early days. "I've always thought it was quite doable," he says. "But the idea did get a good laugh from a number of people when we were first starting out." Clipper is undertaking a transmission study relative to the project. "If a project is big enough, you can absorb the cost of dealing with a line," Dehlsen says.

In the short term, he believes the firm's finances will improve in part by increasing its turbine prices for 2010 to compensate for rising costs of steel. Clipper's prices are locked in through next year due to existing framework agreements. Despite the bumpy road, Clipper's plans remain big. It wants to introduce a 50 Hertz version of its Liberty machine into the European market in the coming months as work continues on a 7 MW machine in the UK intended for offshore use. It also wants to add manufacturing outposts in the US and abroad and introduce a new generation of turbine that will roughly double Liberty's output.

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