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Poor results and a change at the top

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Long time wind industry veteran and founder of Clipper Windpower James Dehlsen is stepping down from his role as Clipper's CEO amidst what he describes as a "disappointing" first half financial performance for 2008. Interim results released last month for the six-month financial period ending June 30 showed a net loss of $211.2 million, compared to $78 million in the first half of 2007.

The hit reflects continuing fallout from equipment shortcomings discovered last year that required drive-train repair work and the strengthening of hundreds of blades for the company's 2.5 MW turbine. Dehlsen will remain as chairman of the board, but is handing the CEO reins to Doug Pertz, who transferred to Clipper from One Equity Partners, a major shareholder in Clipper, in May.

Turbine repair work identified in 2007 is "essentially complete," says Clipper, though blade problems are not over. Recently, minor defects in the blade skin were detected in a limited number of blades during routine inspections. It is a periodic manufacturing defect where inconsistent layering of laminates allows a skin defect to develop under load. The flawed manufacturing procedure is now corrected within the blade supplier's fabrication process. The problem, described as a "non-structural, manufacturing quality issue," can mainly be fixed without removing the affected blades and its costs are largely provided for in first half 2008 charges.

Drivetrain repairs are essentially complete, allowing Clipper to ramp-up production since mid-year to reach an average build rate of eight turbines a week. Of the total 323 turbines produced as of the end of August 2008, 205 turbines are installed and 81 are commissioned. Clipper says the machines are performing well. As of 30 June 2008, the company had a cash balance of $268.1 million and no significant outstanding debt.

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