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Growing revenue but higher losses

In Clipper's first year of mass sales for its 2.5 MW wind turbine, revenues in 2008 were $737.3 million for 248 machines, up from $23.8 million the year before on nine units. While the revenue beat expectations, so did losses from manufacturing-related problems that began in 2007 and have hampered the company's efforts since.

The $331 million deficit in 2008 was more than anticipated as repair costs rose from a projected $145 million to $222 million. Subcomponent supplier deficiencies were blamed in 2007 along with later deficiencies found in rotor blade skins. Both required costly repair programs. Around 75% of Clipper's 2008 deficit was connected with repairs and lost electricity sales from late grid connections. The same charges were $107.1 million in 2007. Clipper says remedial drivetrain work is complete and blade repair is halfway done.

Clipper says all expected repair costs are provided for in 2008 financials, leaving it better positioned going forward with "improved operating results" expected in 2009. The global downturn takes some of the blame for Clipper not expecting to get out of the red. Clipper trades on the Alternative Investment Market of the London Stock Exchange.

Although a 20-30% increase in turbine sales is expected for 2009, Clipper has reduced planned expenditure on components in anticipation of lower demand this year and next. The company says a variety of capital management efforts will strengthen its fiscal health. Clipper ended 2008 with $214 million compared with $114.4 million the previous year.

Cash swings are a concern, say analysts at RBC Capital Markets. RBC points out that Clipper's cash holding had dropped to $80 million as of last month. To "give it some headroom," says RBC, Clipper borrowed $20 million from a customer and is in the process of organising a further loan with the US Department of Energy.

RBC believes there is significant hidden balance sheet value in the company's portfolio. Clipper reports 800 MW at an advanced stage of development out of 10 GW in its sights. "The financial outlook for the company in the near future is uncertain," cautions Gurpreet Gujral, an analyst with advisory firm Ambrian Capital.

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