More than a year ago, SeaWest Windpower's three top executives exited after a dispute with owner and chairman Charles Davenport III over how to capitalise and grow the company (Windpower Monthly, September 2001). Their departure left SeaWest without top leadership at a time when it was trying to expand into foreign markets while also attempting to increase its market share in the United States.
When the San Diego developer's new chief executive officer and president Christian Engsted came aboard last August, the company was in the midst of its second consecutive year of losses and faced a severe cash crunch going into 2002. The situation caused Engsted and SeaWest, a privately held company, to rethink where the company will grow and how.
To improve cash flow, Engsted and his management team cut the number of employees by 20% and cut two levels out of management. Although the turnaround could take as long as 24 months -- the developer will complete just one project this year, the 25 MW Condon II project in Oregon, and has the 150 MW Caprock Canyon Winds project in the Texas Panhandle in development for 2003 (Windpower Monthly, May 2002) -- Engsted says SeaWest is already in better shape.
"Today, the company is in the best financial place it's been in a long time," he says. "We've reduced our cash burn rate and are now close to cash neutral on a monthly basis." Engsted, a Dane, worked at ABB for nearly 13 years before going to SeaWest. Most recently he was president of ABB Industrial Products Inc and ABB Service Inc.
Shrunk the company
This new financial health, however, may be coming at a price. With fewer people the company can handle fewer projects around the world, so Engsted has also shrunk the company's geographic scope to North America from the worldwide direction it was taking when he took over. Jan Paulin, SeaWest's previous president and CEO, along with Gary Dodak, chief operating officer, and Jeffrey Marks, executive vice-president of development, had a number of European and South American projects in the works when they left SeaWest after disagreements with Davenport about where to get the money to finance all the new development opportunities. (After leaving SeaWest, the three formed Padoma Wind Power, a consulting service to companies that want to develop wind projects.)
The foreign opportunities were straining the company's resources and SeaWest decided to abandon its undeveloped projects outside of North America. That includes the possibility of developing a 500 MW project in northeast and southeast Brazil along with Japanese conglomerate Marubeni that it announced in November 2001 (Windpower Monthly, December 2001). It has also abandoned a feasibility study for a 37.5 MW project for Chile's state copper company, Codelco, that it announced in January.
Nor will the developer participate in a 42 MW offshore wind farm off Nasudden, Sweden, announced in April 2000 (Windpower Monthly, May 2000). The project was being developed by Vindkompaniet, an affiliate of Danish wind turbine manufacturer NEG Micon. "There are plenty of developers in Europe," Engsted says. "Being number 17 is not in our plans." SeaWest's development focus is now firmly on North America. "If there is a market we can dominate, we will do so," says Engsted.
Although SeaWest had some good products in the late 1990s, "the company was getting complacent and not seeing what was happening in the market," Engsted says. "We put all our eggs in one basket, but the market is changing rapidly. Projects are growing in size. This big change puts a stress on a small company like Seawest." There are also bigger players in the market, he adds, such as the heavily capitalised FPL Energy.
While it cannot compete head to head with the big players, SeaWest can partner with them and that is one of four areas, or cornerstones as Engsted calls them, of SeaWest's plan for the future. It will develop large projects with other wind developers that have finance abilities, but it will also help small utilities develop projects in the 5-25 MW range. In addition, it will provide turnkey development, as it has in the past, as well as operations and maintenance services, which Engsted says the company has better than average experience doing.
With its smaller workforce focused on North America, SeaWest now has enough land options in the western US to develop 3600 MW of wind energy and three projects are in the feasibility stage. According to Engsted, with the lean development team and a company in better financial shape, SeaWest should be able to bring the installed cost of those projects down by 15-20%.
SeaWest has installed 827 MW of wind power plant and operates 370 MW of wind turbines in California, Wyoming and Oregon.