Offshore plant owners sue supplier of transformers -- Shareholders' resort to court action against Siemens and others

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As supplier of failed transformers in a 40 MW offshore wind power station in Denmark, Siemens is being sued in a EUR 2.3 million law suit. The transformer breakdowns on 14 of 20 Bonus turbines started within three months of the Middelgrund wind station starting operation off the Copenhagen coastline in May, 2001. The most recent failure occurred on December 23, 2004, on a turbine that Siemens had already retrofitted with a new transformer in December 2001. Bonus was taken over by Siemens six months ago and is now Siemens Wind Power.

xThe legal action is being brought by the 8600 shareholders in the Middelgrund Wind Turbine Co-operative, the owner of ten of the 20 turbines. Transformers have failed on seven of its machines, as they have on seven of the ten turbines owned by Energi E2 through its takeover of Copenhagen utility Københavns Energi. The utility is a defendant in the case alongside Siemens.

xThe series of failed transformers, which Siemens first dealt with by replacing them, prompted the establishment of a working group of all the involved parties in May 2002. But after 18 months of deliberations the group declared it was unable to agree on the reasons for the breakdowns. Alongside this initiative, the Middelgrund co-operative also formed its own working group in 2002, calling on Denmark's Technological Institute (DTI) for help in late spring 2004. The institute discovered cracks in the transformers for reasons that could not be accounted for. Siemens denied the cracks had any relevance to the failures, saying they had occurred when the transformers were cut apart for closer examination.

xSubsequent ultrasound inspection of transformers still in operation, however, revealed cracks in all the units examined. Further inspection by DTI led to the conclusion that the cracks were occurring at a point where different materials did not work well together during temperature changes as the transformers performed their job. "There are thus clear indications that thermal tensions significantly contributed to the cracks that are the cause of the failures," states the institute report from summer 2004.

xWhen the most recent transformer failure occurred on December 23, the short circuit was at the exact point that a crack had already been noted during the working group's inspections. Neither the supplier of the grid connection, NKT, the supplier of the transformer, Siemens, nor the utilities responsible for project planning of the network connection, SEAS and Københavns Energi, will admit responsibility for the problem.

xAfter taking legal advice, the Middelgrund co-operative's executive decided last month to take the matter to an industrial arbitration tribunal to establish who has technical responsibility for the problem before proceeding to sue the identified party or parties. Legal aid is being provided by the co-operative's insurer, the Copenhagen branch of CNA Maritime Insurance Company Ltd.

xThe Middelgrund co-operative feels its best course of action is through the courts. Unlike a major company like Energi E2, it cannot put pressure on suppliers of technology and services who may not be living up to their obligations. Moreover, the suppliers are far more likely to want to maintain good relations with a customer as important as Energi E2.

xThe co-operative puts its success in tracking the problem down to its willingness to play with an open hand of cards, which has enabled technical experts to gain detailed insight into what has gone wrong. Among the co-operative's 8600 members are employees of the defendant companies.

xSiemens has no comment on the matter, says head of communications in Denmark, John Finnich Pedersen.

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