Update: AMSC shrinks fiscal Q3 loss

AMSC chief executive Dan McGahn

AMSC chief executive Dan McGahn

AMSC said today that its rebound remains on track, with the US wind-power technology group sharply cutting its losses in the most recent quarter, sending its share price surging in pre-market trading.

Still recovering from its 2011 fallout with China’s Sinovel, formerly its largest customer, AMSC reduced its net loss in the three months to 31 December to $8.4m – compared to net losses of $20.1m in the year-ago period and $14.6m in the previous quarter.

Revenue grew to $20.6m, from $17.4m a year ago.

The sales growth came from AMSC’s wind segment – and “primarily from customers in India and China” – more than offsetting weak revenues from the company’s grids unit.

The amount of cash at AMSC’s disposal also grew during the quarter.

“We increased revenues and cash, reduced our net loss, operating expenses and cash burn year-over-year,” says Daniel McGahn, president and chief executive. “We are managing our costs and our cash.”

Shares in AMSC, which collapsed in 2011 and have continued to fall in the subsequent years, rose nearly 14% in pre-market trading.

While McGahn says he continues to “anticipate challenges in the term”, he adds that “the long-term prospects in our key markets are promising”.

AMSC stood behind its target to rebound to net quarterly cash flows by the end of its 2014 fiscal year.

AMSC is involved in a long-running, complex and international legal battle with Sinovel centring on allegations by the US company of intellectual property theft against its former customer.

India

McGahn remains optimistic about wind growth in India where AMSC licensee Inox is now the third largest turbine supplier. He says AMSC has been consistently delivering turbine electrical control systems to Inox since February last year to meet its growing demand, and it is “reasonable” to expect a follow-on order this year.

He says that Inox expects to double its size within the next few years as India moves to double installed capacity to more than 40GW by 2020. The government is offering low-interest loans for wind projects through the National Clean Energy Fund.

“This creates a stable and predictable policy environment in which businesses can feel comfortable investing in wind energy generation,” McGahn says.

Chinese turbine producers are teaming up with local companies in India but that Inox, rightly or wrongly, does not feel threatened by their emergence.  

“I think the reasons are that they're able to make a turbine at similar costs to a Chinese turbine. So they don't see the Chinese coming in and significantly, negatively affect pricing,” McGahn says, adding that Inox is Indian, part of a large conglomerate, and that matters to local customers.

He acknowledges that in the long-term Chinese players will take some share in India, even from Inox. Still, the Chinese have yet to show much growth beyond their home market and talk they would come to the US never really happened, he says, adding that AMSC’s litigation with  Sinovel over alleged intellectual property theft has to some extent affected all Chinese turbine vendors in the export market..

China

In China – a key to AMSC regaining positive cash flow - the market was flat in 2013, although national government support will continue for the clean energy sector. The National Energy Administration plans to add 18GW of grid-connected capacity in 2014 versus early estimates of 14GW last year.

McGahn says other market positives are that State Grid has made progress in building the first ultrahigh voltage, long-distance transmission line. This will allow wind produced in Xinjiang province to be transported to other regions. Additionally, more ultrahigh voltage lines will be commissioned this year and 2015 that will connect power-producing regions with demand centers. These are all positive signs for the industry, and ultimately, for AMSC.

McGahn says that business for AMSC’s licensees remains sluggish although JCNE indicates that the market is beginning to turn. They have enough stock for the next few quarters but may place orders with AMSC after then.

He says licensee JCNE is “very excited” about a 3MW turbine with AMSC electric control systems that it wants to introduce soon in the Chinese market. AMSC has also cut a deal to develop a 5.5MW turbine with JCNE.

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