American firm gets foothold in Asia -- Trans Atlantic acquisition

Seizing the opportunity to get a foot in the door of the hugely promising Asian market for wind turbines, American Superconductor (AMSC) is buying Windtec, a little known and privately held Austrian company that specialises in selling turbine designs to developing countries.

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 Windtec's successful niche business -- which is gradually becoming the major sales channel for AMSC's wind electronics -- propelled the acquisition. AMSC is a Massachusetts manufacturer of electronic systems for turbines.


The purchase, valued at $13 million, was made with 1.3 million shares of AMSC stock. Windtec, owned by wind industry veteran Gerald Hehenberger, had revenues of $2.7 million in 2005, expects to reach $13 million for 2006 and has orders that should push revenues to $20 million this year. The transaction includes acquisition of 27 worldwide patents and patents-pending on wind technology. The deal is expected to close this month.

The business relationship between the two companies played strongly in the acquisition. AMSC's flagship product, a device it calls the PowerModule, facilitates the connection of wind turbines to power grids and is used by Windtec in electronic control units it has specially developed for the wind industry, including its own turbine designs. The major part of Windtec's revenues have stemmed from sales of control units as well as engineering and training for companies in China and Japan that build 1.5 MW turbines under licence from Germany's Fuhrländer, a turbine design that originally stemmed from Windtec.

Unique model

The company's business model has a second side to it. Increasingly, Windtec serves customers who request a turbine design according to their own specifications. "Windtec has a unique business model in that they design wind turbine systems literally from the ground up," says AMSC founder Greg Yurek. "They don't make a physical product. They sell their design and collect a royalty. So a Windtec customer isn't a wind farm developer, a Windtec customer is somebody who wants to make wind turbines."

Yurek says Windtec presents an opportunity for established engineering businesses to get into the wind industry. "An engineering construction firm knows how to build big projects but it's unlikely that they're going to know how to handle sophisticated electronics," he explains.

The production under licence of Windtec turbines is expected to expand substantially. According to Windtec's Jürgen Yesenko, the company is in talks to sell licences for a 1.65 MW and a 2 MW turbine, with first contracts expected early this year. A 2 MW prototype is to be installed in the Czech Republic in April. A 1.65 MW prototype will probably be built in October in China or India by a potential customer. Yesenko says AMSC and Windtec believe Windtec licences will especially be in demand in emerging countries where local content is often government-mandated. "We'll go with the customer hand in hand to help ensure local content requirements are fulfilled," he says. AMSC's Yurek agrees. "This is likely to keep happening in fast-growing economies around the world. They need electricity and there's a tremendous opportunity for wind in China, India and Brazil -- as well as North America."

Local content

Enabling local manufacture is key to Windtec's success in China, where government concessions for wind farm construction have favoured local companies. One such Chinese company with extensive industrial construction experience, Dalian Heavy Industries (DHI), entered the Asian wind development market in 2004 and needed home grown wind turbines. In China alone, Windtec went from zero to 785 wind turbine systems within 12 months.

"That represents about 1200 MW of wind generated electricity in China," says Yurek. "And all of it went through DHI. It's a great business model and Windtec is in a tremendous growth mode to license their system. As a result, they needed to expand and we already had the infrastructure they needed," he says.

AMSC was founded in 1987 and its products are used in a variety of applications, including transportation, large ship propulsion motors and defence systems. Its PowerModule electronics are installed in two dozen wind farms totalling some 3000 MW around the world. Yurek says that includes six different turbine manufacturers.

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