Asian firms buy turbine licences -- South Korea and China to make European turbines

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Engineering companies in both South Korea and China entered the business of large wind turbine manufacture last month by buying the rights to two separate turbines designed and developed in Europe. The deals were announced by American Superconductor Corporation (AMSC), which in December bought Windtec, a small privately owned company in Austria devoted to wind turbine and component design (Windpower Monthly, January 2007).

In a deal valued at an initial $2 million, South Korea's Doosan Heavy Industries & Construction Co has bought the rights to a 3 MW turbine under design by Windtec's former owner, Gerald Hehenberger. The prototype will first and foremost be an offshore wind machine, says Hehenberger, but could also be used in onshore applications. It will take some time for the project to get off the ground, but Hehenberger says Doosan intends to eventually sell the unit globally.

In China, Windtec's second licence deal for wind turbine manufacturer in Asia will take far less time to materialise. Zhuzhou Electric Locomotive Research Institute, a division of China-Southern-Loric, has paid $2 million for a manufacturing licence for a Windtec WT1650 turbine. It will also pay royalty fees per turbine produced and AMSC has first right of refusal on supply of critical internal components for the turbines. AMSC, based in Massachusetts, is a publicly traded manufacturer of electronic systems for wind turbines and a long time supplier to Windtec before the two companies joined forces at the end of last year.

The WT1650 is an updated version of Windtec's 1.5 MW unit, currently manufactured in China by Sinovel-Windtec, which is affiliated to the huge Dalian Heavy Industry Group, and in Germany by long established Fuhrländer. Sinoval is producing one 1.5 MW unit per day under a Windtec license, says Hehenberger (Windpower Monthly, November 2006).

Different approach

Now under the AMSC umbrella, Windtec uses turbine licence and component supply agreements as a different way of infiltrating the promising Asian wind markets to that chosen by established wind turbine manufacturers, such as Vestas, Gamesa, and GE Energy. They have either exported machines to China or set up manufacturing in the country. Hehenberger says his approach has advantages. "In Europe we like to outsource and manage," he explains. "Asian countries have much more of a tendency to do everything themselves. I think it's a very established attitude. When you talk to customers you see immediately they want to do everything locally."

That attitude is reflected in China's requirements that 70% of a wind plant's value be made locally -- an advantage for Windtec's business model, says Hehenberger. While nearly all wind turbine technology is still developed in Europe, Hehenberger says China's renowned manufacturing prowess is not to be ignored. "As soon as they have the technology, they are going to do big production."

Intellectual property

With its manufacturing success, however, China has also developed a reputation for playing loose with intellectual property rights. With Windtec's patents infiltrating the Chinese market, Hehenberger says: "We are aware of the situation in China and that is a critical issue, but we pay certain attention and we try to protect our product."

By providing core electrical components that AMSC supplies parts for, Hehenberger says Windtec keeps important proprietary products in its own hands. But he adds that there are signs the attitude to intellectual property is improving in China.

Hehenberger is a 20-year veteran of the wind industry who made his mark in the business in the 1980s running wind farms in California. He founded Windtec in 1995, which has played a strong role in wind turbines produced by Pfleiderer and Fuhrländer, two second tier turbine suppliers in the German wind market. Windtec hit its stride in the past few years licensing turbine designs and selling components to China, says Hehenberger, who says that prior to the AMSC acquisition Windtec sales went from $2.5 million to $10 million in the past two years.

The Asian penetration for AMSC could mean that at least half the company's revenues will come from wind in the next five years, says AMSC's Jason Fredette. "You could call us one of the purist play public wind power companies in the US," he adds, discounting the wind business of GE, which is only a division of the behemoth. AMSC trades on the NASDAQ exchange. Fredette says the $13 million price tag for Windtec has already paid for itself in these first few contracts and a backlog of $35 million in potential contracts.

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