AMERICAN SUPERCONDUCTOR: BECAUSE OF WIND, BUY

Writing last week from WindPower 2008, the enormously successful wind energy industry annual convention and exhibition, NewEnergyNews compared what the current, growing wind industry boom is about to do for the U.S. economy to what the auto industry did for the country between 1920 and 1930:

“…the U.S. auto industry became the most important industry in the country…Making cars became the country’s economic driver, consuming 20% of U.S. steel, 75% of U.S. glass, 65% of U.S. leather and 80% of U.S. rubber. There were suddenly jobs to service, repair and fuel cars as well as jobs building roads and parking lots and making road signs and traffic lights. The gas station, motel and roadside restaurant were invented.

What the auto industry did for Detroit, the wind energy industry is going to do for the United States. Between 2005 and 2030, the wind industry is going to go from supplying 0.9% of U.S. power to supplying 20%…The wind energy industry will buy the nation’s material production and use its services and eliminate greenhouse gases. It will provide jobs from big city machine shops to rural wind farms while dramatically mitigating global climate change. New businesses, from wind blade-transport to turbine tower-positioning cranes to electronic internet-connected force monitors to bolt torque measurers are already being born…”

(See WINDPOWER 2008 – OPENING NIGHT: LARGE)

Case in point: American Superconductor (AMSC). The company specializes in electronic components and high temperature-tolerant wiring. Until June 10, the Massachusetts company – though it has tremendous technological capability – was struggling. The market expected little from it. Suddenly, it is a market star. Its stock is zooming up in price and its market valuation is growing dramatically.

Why? A Chinese company called. It wants all the turbine electronic components AMSC can ship – yesterday.

Wind turbines are on back order – for two years – at all the biggest suppliers in the world. The Top Ten (Vestas, GE Energy, Gamesa, Enercon, Suzlon, Sinovel, Nordex, Goldwind, Acciona, Siemens) are making turbines as fast as they can and need all the components they can get their hands on. So it’s one phone call and “Congratulations, AMSC, you’re back in the black.”

This is a story that will be told over and over in the coming decades while the wind energy industry gears up to give the U.S. and the world what coal and nuclear power plants can never give: Clean energy without a significant downside.

China’s installed wind capacity grew 130% to 6.1 gigawatts in 2007. It is expected to grow to 120 gigawatts by 2020.

AMSC has whole systems to facilitate wind energy production. (click to enlarge)

American Superconductor Wins With Wind
Ruthie Ackerman, June 10, 2008 (Forbes)
and
AMSC Recieves $450 Million Follow-On Order from China’s Sinovel
June 10, 2008 (BusinessWire via American Superconductor Corporation)

WHO
American Superconductor (AMSC), Sinovel

WHAT
AMSC announced a new $450 million order from Sinovel Wind for wind turbine electrical components.

Now 6th in the world, look for it to move up. (click to enlarge)

WHEN
- The new contract calls for shipment of the first components by January 2009 and increase in volume through December 2011.
- A prominent market analyst now predicts AMSC will be making electronic components for 1000 wind turbines/quarter by the end of 2010.

WHERE
- Sinovel Wind is a Beijing, China, company.
- AMSC is based in Devens, MASS.

WHY
- The electronic components will be used in Sinovel’s 1.5 megawatt tubines.
- AMSC’s stock jumped 23% on June 10, based on the announcement. At that price, the company’s stockmarket value is $1.9 billion, 16.9 times its 2008 sales through March of $112. 4 million.
- AMSC lost $25.4 million in its latest calculated year.
- An analyst poll previous to the Sinovel contract announcement set expectations for AMSC at a present year loss of $9.0 million and a loss of $1.0 million in the following year.
- AMSC now has 8 wind turbine customers and expects to announce 2 more by the end of 2008.

AMSC also makes high efficiency transmission systems - so when the nation begins rebuilding its grid, AMSC will be even more valuable. (click to enlarge)

QUOTES
- Greg Yurek, founder/CEO, AMSC: "Sinovel is the epitome of business success in China and is one of the fastest growing wind turbine manufacturers in the world…The core electrical components covered under this contract will be used to support more than 10 gigawatts of wind power capacity, nearly double China's total wind power installed base at the end of 2007. It is invigorating to see Sinovel's success in bringing much needed electrical generation capacity to the Chinese power market at a crucial time in that country's expansion. We are proud to work in tandem with Sinovel on this important endeavor."
- Theodore O'Neill, market analyst, Kaufman Bros., raising the stock price target from $37 to $53: “Buy ”