TIDMCWP
RNS Number : 4858J
Clipper Windpower Plc
31 March 2010
Clipper Windpower Plc - Announcement of 2009 Full Year Results
London (UK), Carpinteria, CA (USA) - March 31, 2010. Clipper Windpower Plc
("Clipper" or the "Company"), a wind turbine manufacturer and wind project
developer, announces its full year results for the year-ended December 31, 2009.
· Full year revenue of $743.5 million (2008: $737.3 million), including the
sale of 259 turbines (647.5 MW) (2008: 248 turbines, 620 MW).
· Net loss for the full year totaled $241.4 million (2008: $313.3 million)
mainly due to: 1) customer order deferrals and delayed commissioning of
turbines; 2) costs and increased provisions related to the completed blade
remediation program; and 3) increased warranty provisions for the Company's
installed fleet of 476 turbines. Remediation and other unusual expenses were
$124.0 million in 2009 (2008: $235.0 million).
· Technology and performance continue to advance. Turbine performance
improved with fleet availability currently exceeding 95%; 476 turbines now
operating at 17 project sites, representing over 3.1 million operating hours and
over 1.1 GW. Blade remediation program completed in January 2010.
· In January 2010, United Technologies Corporation ("UTC") purchased a 49.5%
stake in Clipper. Working groups have been established to maximize potential
synergies and benefits.
· Cash balance at year-end of $49.9 million ($61.8 million, including $11.9
million of restricted cash). Clipper received $206.2 million gross cash
proceeds in exchange for approximately 84.3 million new ordinary equity shares
issued to UTC on January 12, 2010.
· Douglas Pertz resigns as President and CEO and Board Director; Mauricio F.
Quintana appointed as new President and CEO and Board Director; Michael E.
Keane, CFO, appointed as Board Director. Kenneth C. Brown, Joseph G. Michels and
Finn M. Hansen resigned from the Board upon completion of the UTC transaction.
Five UTC executives appointed to the Clipper Board which now totals twelve
members.
· 2010 outlook: delivery against firm orders in the range of 140 to 180
turbines with revenue recognition weighted towards the second half of the year.
Favorable component costs and enhanced pricing should enable Clipper to achieve
a break even operating margin for the year if sales levels attain the higher end
of the delivery range. The Company expects to report an operating loss for the
first half and positive operating income for the second half of 2010.
· Clipper Windpower Marine Limited has entered into a long-term lease for a
blade production facility on the Tyne River in Newcastle, U.K. The facility will
test and produce blades for Clipper's 10 MW offshore turbine (the "Britannia
Project") with testing planned in 2011 and 2012.
· Clipper's vision to be one of the leading turbine manufacturers is driven
by four key long-term strategic objectives:
o Position Clipper as a Tier One turbine supplier;
o Strengthen the Group' s future through technology-leading product development
together with improved processes operationally and commercially;
o Initiate marketing and sales for the Liberty turbine in selected foreign
markets; and
o Grow revenue and profit, achieving costs in line with or better than industry
benchmarks.
James G.P. Dehlsen, Clipper's Chairman, commented:
"Clipper has continued to progress despite the extraordinary challenges in a
difficult market environment. With UTC's strategic investment and operational
expertise, Clipper is focused on delivering its vision and strategy, building on
our established platform in the U.S. wind sector through industrial-scale
production of the 2.5 MW Liberty turbine. We are already working very closely
with UTC to deliver real benefits and synergies. I believe that with the
strengthened financial resources and the determination that drives our
organization, Clipper will continue to make substantial advances in wind power
innovation and commercialization."
For further information please contact:
Investors:
Jenny Matthews
Investor Relations Director
+44 (0)20 7840 9581
JPMorgan Cazenove (Nominated Adviser and Corporate Broker to Clipper)
Patrick Magee
+44 (0)207 588 2828
Financial Press:
Patrick d'Ancona or Charlotte Kirkham
M: Communications
+44 (0)20 7920 2347 / 2331
This announcement was approved by the Board of Directors on March 29, 2010. A
copy of this announcement and the Annual Report for the year-ended December 31,
2009, including, in due course, a Notice of Annual General Meeting, will be
available for review on Clipper's website at www.clipperwind.com.
The ordinary shares of Clipper Windpower Plc are traded on AIM of the London
Stock Exchange and are not registered under the U.S. Securities Act 1933, as
amended (the "Securities Act"). Such shares may not be offered or sold to
residents of the United States or to persons acting on their behalf, or to other
persons who are "United States Persons" within the meaning of Regulation S as
promulgated under the Securities Act, unless such shares have been registered
under the Securities Act or there is an available exemption from registration.
This press release contains statements about the Company that are or may be
forward lookingstatements. All statements other than statements of historical
facts included in this press release may be forward looking statements. Without
limitation, any statements preceded or followed by or that include the words
"targets," "plans," "believes," "expects," "aims," "intends," "will," "may,"
"anticipates," "estimates," "projects," or words or terms of similar substance
or the negative thereof, are forward looking statements. Forward looking
statements include statements relating to the following: future capital
expenditures, expenses, revenues, earnings, synergies, economic performance,
indebtedness, financial condition, losses and future prospects, business and
management strategies and the expansion and growth of the Company's operations
and potential synergies between the Company and UTC .
Such forward looking statements involve risks and uncertainties that could
significantly affect expected results and are based on certain key assumptions.
Many factors could cause actual results to differ materially from those
projected or implied in any forward looking statements. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward looking statements, which speak only as of the date hereof. The
Company disclaims any obligation to update any forward looking or other
statements contained herein, except as required by applicable law.
All subsequent written and oral forward looking statements attributable to the
Company or persons acting on the Company's behalf are expressly qualified in
their entirety by the cautionary statements above. The forward looking
statements included herein are made only as of the date of this press release.
The Company does not intend, and does not undertake any obligation, to update
these forward looking statements.
STATEMENT BY THE CHAIRMAN
An analyst recently described the past five years of Clipper's history as "one
of the most ambitious industrial startups in recent times." Come to think of
it, he may be right.
In Clipper's history, we have experienced a number of existential challenges.
First, we entered the mature and highly competitive wind industry, one dominated
by global competitors with significantly more resources than we have. We then
introduced revolutionary new drivetrain technology in a step change larger
turbine. Customers understood and valued the advantages of the technology, and
orders were taken. We began to create large, sophisticated industrial
manufacturing capacity...from scratch. A global supply chain was formed, wind
turbines were manufactured, and over 500 Clipper Liberty 2.5 MW turbines have
been deployed to customer sites around the U.S. Unfortunately-but not
unpredictably for the launch of a large, complex power generation machine-we
encountered some start up problems, mostly caused by component quality issues in
the supply chain. This led to two significant and expensive remediation
programs that have cost us dearly over the last two years. But we have worked
with our customers to remediate the issues and bring the Clipper turbine
performance to levels of our competitor's mature technology. At the same time,
we have strengthened the supply chain and bolstered internal quality processes.
Along the way, a 10,000-megawatt wind resource portfolio was accumulated and we
started driving the next generation technology. As challenges go, did I mention
a global economic recession of generational proportions?
That is a recap of the Clipper story over the past few years. Now we look
forward with the visibility and the resources to move beyond that arduous, early
growth phase to become a major wind turbine manufacturer with technology
recognized for its innovation and competitive advantages.
Significantly, in the fourth quarter of 2009, United Technologies Corporation
("UTC"), a leading global, high technology company, and Clipper began exploring
the merits of a strategic relationship. As we engaged with the senior management
and engineers of UTC's legendary aerospace companies-- the leadership that is
now delivering Pratt & Whitney's revolutionary geared turbofan engine
technology, Hamilton Sundstrand's systems for Boeing's 787 Dreamliner, and
Sikorsky's leading technology helicopters-- it became clear that we had found
the right partner. By joining forces with UTC, Clipper could attain levels of
excellence and scale otherwise beyond reach. In January 2010, through an
investment of $270 million in new and existing ordinary shares, UTC became
Clipper's largest shareholder.
2009 in Review
Clipper continued to progress despite the extraordinary challenges the economy
and debt markets have presented to our customers and the wind market overall.
During the last year and a half, the significant volatility in the energy and
global financial markets has created a challenging operating environment for
the wind energy industry and for Clipper. Since September 2008, this volatility
has sharply reduced commodity prices, credit availability, equity values and,
most significantly for Clipper, caused a substantial drop in the U.S. for new
orders for wind turbines, particularly attributable to the credit market
collapse and resultant lack of project and tax equity financing for wind project
development.
In many instances, these market conditions have caused Clipper's customers to
delay wind projects from 2009 into 2010 and beyond, thus delaying the delivery
of turbines and the receipts of progress payments. During the year, Clipper
worked closely with its customers to negotiate the deferral of deliveries while
successfully minimizing the cash flow impact on the Group with improved payment
terms. Clipper also took aggressive actions to conserve cash by cutting
operating expenses and manufacturing overhead costs, reducing inventories and
restructuring supplier contracts. Notwithstanding these actions, the Company's
liquidity and capital resources were strained in 2009 by the combined effects of
the external market forces described above and by the operating losses sustained
by the Company, primarily as a result of significant remediation program costs
and deferral of customer shipments.
Despite these obstacles, the Group achieved full year 2009 revenue of $743.5
million primarily from sales of 259 turbines (647.5 megawatts ("MW")) compared
to $737.3 million from sales of 248 turbines (620 MW) in 2008. Net loss in 2009
was $241.4 million compared to a net loss of $313.3 million in 2008.
The negotiated deferral of shipments of 130 turbines from 2009 to 2010 and 2011,
mainly due to unavailability of customer project financing, reduced 2009 revenue
by approximately $400 million and reduced gross margin by an estimated $110
million. These shipment deferrals, combined with increased costs for the now
completed blade skin remediation program and warranty provisions, were the
principal contributors to operating losses for 2009. The loss for 2009 included
$124.0 million of provisions for remediation related and other non-recurring
expenses, compared to $235.0 million in 2008.
The Company ended the 2009 fiscal year with a cash balance of $49.9 million
($61.8 million, including $11.9 million of restricted cash). In January 2010,
Clipper completed the previously announced sale of shares to UTC, realizing
$206.2 million in gross cash proceeds for approximately 84.3 million new
ordinary equity shares. The increased liquidity will support the Company's
working capital requirements and growth initiatives.
United Technologies Strategic Investment
In 2009, Clipper undertook a competitive process to raise capital and align with
a strategic partner. This resulted in a $270 million investment by UTC for a
49.5% equity stake in Clipper. UTC purchased approximately 84.3 million new
ordinary shares in Clipper at a subscription price of GBP1.50 per share,
representing a stake of approximately 39% of the issued and outstanding share
capital of the Company. In addition, UTC acquired directly from shareholders
approximately 21.8 million ordinary shares of the Company at a price per share
of GBP1.80, increasing their stake to the 49.5% level.
UTC is a diversified company that provides a broad range of high-technology
products and services to the global aerospace and commercial building
industries. Particularly relevant to Clipper's wind turbine technology and
manufacturing is UTC's Hamilton Sundstrand aerospace and industrial systems,
Pratt and Whitney engines, and Sikorsky helicopters. These UTC companies have
engineering and manufacturing resources highly complementary to Clipper's needs.
To accelerate this alignment and maximize synergies, working groups have already
been established with UTC, along with the addition of five Board of Director
members drawn from relevant UTC management leadership.
Delivering on 2009 Objectives
During 2009, the Company established, as a top operational priority, "to prove
the Liberty Turbine Design and Operational Advantages," with three principal
targets:
1) Turbine Availability to Exceed Industry Averages
Turbine fleet availability has been steadily rising as remediation programs have
been completed and was 95% at the end of February 2010, a level considered to be
well above average for new technology and early stage turbine production and
deployment. Clipper's goal for the second half of 2010 is to exceed 97%
availability. Clipper's entire fleet consists of 476 Liberty turbines,
representing over 1,100 MW of installed capacity with over 3.1 million operating
hours at 17 generating sites across the U.S.
2) Liberty Turbine Project Financing
With the financing markets beginning to recover, the wind sector has begun to
see encouraging activity. Initial progress on Liberty turbine financing took
place in 2009 when Clipper turbines were a significant part of a $191.0 million
financing package established by First Wind, a Clipper customer since 2007.
Further progress came in March 2010 when First Wind received a conditional
commitment from the U.S. Department of Energy ("DOE") for a $117.0 million loan
guarantee to finance the construction of its planned 30 MW Kahuku wind project
in Hawaii using twelve 2.5 MW Clipper Liberty turbines. Under Title XVII of the
Energy Policy Act of 2005, the project is considered innovative for its
inclusion of the Liberty turbine combined with energy storage.
In addition, the Export-Import Bank of the United States ("Ex-Im Bank") has
provided an $80.7 million direct loan for 27 (67.5 MW) Clipper Liberty turbines
for an EDF Energies Nouvelles wind project in Mexico. This transaction marks
Ex-Im Bank's first project financing for wind power and Clipper's first
international project, Recently in the Ex-Im Bank's Annual Banking Conference,
keynoted by President Obama, the Clipper transaction was recognized as the Ex-Im
Bank 2010 "deal of the year" and the largest U.S. wind turbine sale in Latin
America.
Given the recent difficult credit market conditions, the above transactions
indicate growing acceptance and confidence in the Liberty turbine by more
financial institutions, an important driver of Clipper's future sales growth.
Clipper expects additional project financings to complete in 2010.
3) Blade Remediation - Completed
In September 2008, Clipper identified a number of defects on the skins of blades
of its turbines primarily caused by a deficient manufacturing process at the
blade supplier. This defect in the manufacturing process was swiftly corrected
in October 2008 for all subsequent blade production. Concurrently, Clipper
launched a program to inspect and remediate the nearly 1,200 blades that had
previously been placed in service or held in inventory. Clipper completed this
extensive remediation program in January 2010 and has received a very
complimentary response from customers.
Technology advancement: Britannia
The European offshore wind market is becoming one of the most exciting sectors
in the global renewable energy industry. The UK government has been a global
leader in policy support for offshore wind power development and strong
proponent of Clipper's project to develop the 10 MW Britannia turbine. In 2009,
the Group's UK subsidiary received further UK Government support with the award
of a GBP4.4 million grant by the UK Department of Energy and Climate Change
(DECC) for its blade development activities and another grant of GBP2.5 million
for the development of the gearbox.
Clipper has entered into a long-term lease for a blade production facility on
the Tyne River in Newcastle, UK; the groundbreaking ceremony for the blade plant
was led by Prime Minister Gordon Brown. The facility will produce blades for the
10 MW turbine for testing in 2011, and follow on with commercial blade
production once turbine manufacturing is initiated, with site expansion
potential to produce 300 blades per year.
The Britannia Project development base is in Blyth, UK, adjacent to the NaREC
(New and Renewable Energy Centre) state-of-the-art Wind Energy Test Facility for
blades and drivetrains, and strategically located to serve prime offshore
project zones.
The Britannia design processes have yielded significant new technology and
patent filings. These technology advances create opportunities for product line
expansion and extend Clipper's technology lead in the class of very large
offshore turbines, a market expected to exceed 50,000 MW in Europe. These
technology innovations also play back to the next generation land-based turbine
Clipper is now evaluating.
Clipper has seen considerable interest from offshore wind development
participants seeking to observe at an early stage, the engineering and testing
of the Britannia turbine. The objective of these participants is to perform
early technical due diligence necessary for reserving future turbine production
and committing to turbine purchases during Britannia's move through development,
testing, and certification. Accordingly, Clipper has initiated Britannia turbine
purchase proposals with several utilities active in European offshore wind
project development. It is Clipper's intent to establish customers for the
Britannia turbine during the development period, targeting orders for 2012 and
beyond.
Wind Projects Launched
Clipper is engaged in negotiations with a number of parties interested in
purchasing turbines and wind project sites from its 1,000 MW of advanced stage
development projects within its 9,000 MW wind resource portfolio. Project
activities in 2009 include:
Titan Project Phase I Implemented
In October 2008, Clipper completed a 50/50 joint venture agreement with BP Wind
Energy ("BP") in respect of the 5,050 MW Titan Wind Project in South Dakota. The
Titan Wind Project is expected to be built in multiple phases. Phase One, which
is wholly owned by BP, was completed during 2009 using ten Clipper Liberty
turbines (25 MW). BP and Clipper are joint development partners for the
remaining 5,025 MW of the Titan Wind Project. The Titan Wind Project, if built
out to its full capacity, has the potential to be the largest wind project in
the U.S. The joint venture includes a Master Turbine Sale Agreement for the
potential supply of a further 2,020 Clipper Liberty turbines to the project as
it is built out.
70 MW Criterion Project
The Company recently announced an agreement to sell its 70 MW Criterion wind
development project, coupled with a 28 Liberty turbine order for 2010 delivery.
Clipper 2010 Outlook and Objectives
Clipper's market focus has been on the U.S. and recently preparing for the
emergence of European offshore market with the development of Clipper's 10 MW
offshore turbine. In 2010, Clipper will also initiate marketing and sales
activities in selected foreign markets for the 2.5 MW Liberty turbine.
Sector Development - the U.S.
Short term still slow
The American Wind Energy Association ("AWEA") recently published its 2009 report
showing that 9.9 gigawatts ("GW") of new wind capacity was added in 2009 in the
U.S., surpassing previous records. The total installation was heavily weighted
in the fourth quarter, further indicating signs of recovery in the U.S. wind
sector. North America was again the strongest growth market globally. While
positive, the Company believes that most of the 2009 installations were
completions of projects that commenced or were committed to in 2008 and earlier,
and that relatively few new projects or turbine orders were added in 2009 for
future year deliveries. Customers were generally reluctant to commit to new
projects or place new turbine orders in the uncertain energy and capital markets
that prevailed in 2009.
Medium to long-term view intact
Earlier in 2009, the U.S. Congress passed the American Reinvestment and Recovery
Act ("ARRA" or "Stimulus Bill") which included significant legislation to
support growth of renewables consistent with the Obama Administration's goals of
doubling power from renewables over three years and achieving 20% of the U.S.'s
power from renewables by 2020. The Stimulus Bill included the extension of the
Production Tax Credit ("PTC") until 2012; an option for project owners to choose
between 30% Investment Tax Credit ("ITC") or the PTC; and the option to convert
the ITC into a bonus payment in projects where construction is due to start
soon, and which will be connected to the grid by 2013.
Implementation of these federal programs has been disappointingly slower than
expected. As a result, the U.S. wind industry was effectively on hold until the
second half of 2009, when over $1 billion in grants were awarded, thus enabling
the new ITC 'refundable' tax credit plan to have a positive impact on the U.S.
wind industry.
Clipper Outlook
In 2010, the Company expects to deliver within the range of 140 (350 MW) to 180
(450 MW) Liberty turbines of its currently contracted order book and to benefit
from higher pricing and lower component costs relative to 2009. Lower sales
prices in 2009 were largely the result of legacy introductory turbine pricing.
Currently, average 2010 Liberty turbine sales prices represent more than a 10
percent increase compared to 2009. Turbine costs at year-end 2009 were slightly
lower than costs at year-end 2008. New orders in 2010 are expected to be, on
average, at marginally lower pricing.
Of the 140 to 180 projected turbine deliveries for 2010, approximately
two-thirds are projected to be delivered and recognized as sales in the second
half of the year. If the higher end of the delivery range is achieved, the
Company projects that it will record operating losses in the first half of 2010
and positive operating income in the second half, leading to approximately break
even results for the full year.
Strengthened Focus on Clipper's Vision and Strategy
During 2010, Clipper's strategic objectives will again support Clipper's
longer-term vision toward becoming one of the leading turbine manufacturers in
the U.S. and internationally - recognized by wind energy customers as a leader
in innovative technology for delivering customer value. The strategic
relationship with UTC significantly supports this vision. The transaction
provided needed capital and, through synergies associated with UTC's aerospace
business units, Clipper should also benefit from a wealth of strong technical
and operational support.
Supporting this vision are four key long-term strategic objectives:
1) Position Clipper as a Tier One turbine supplier;
2) Strengthen the Group' s future through technology-leading product
development together with improved processes operationally and commercially;
3) Initiate marketing and sales for the Liberty turbine in selected foreign
markets; and
4) Grow revenue and profit, achieving costs in line with or better than
industry benchmarks.
Clipper is well positioned in the manufacturing sector of the wind industry with
its proprietary and proven 2.5 MW turbine technology. Technology development
activities continue to advance the Liberty turbine platform, and are providing
the basis for the next generation land-based turbine. Development of the
Britannia Project is also on track for component testing in 2011 and 2012. This
product will provide a major new market opportunity for Clipper and is directed
to the anticipated upsurge in the European offshore market. We are confident
that these projects will be enhanced with collaboration of UTC technological
expertise.
I strongly believe that with strengthened financial resources, and the
determination that drives the Clipper organization, the Group will continue to
make substantial advances in wind power innovation and commercialization.
Management and Board Changes
As announced on March 8, 2010, Douglas Pertz resigned as President and CEO and
Board Director. The full Clipper Board offers a sincere expression of
appreciation to Doug for his tireless efforts over the past 18 months. From the
time he assumed the CEO role, he faced challenging economic and industry
conditions and we recognize his contribution to Clipper's success and wish him
the best in all his future activities.
The Board of Directors (the "Board") has selected Mauricio F. Quintana, aged 42,
to be President and CEO and a member of the Board. Mr. Quintana most recently
was Director, Corporate Strategy and Development with UTC. He has terminated all
employment ties with UTC to accept the Clipper positions. We welcome Mauricio
and his passion for the Clipper opportunity and its technology drive. He has
been pivotal in UTC's assessment of Clipper's technologies, markets and its
operations, which resulted in their $270 million investment in January 2010.
Mauricio brings a keen insight to the tasks of building Clipper's business in
both the onshore and offshore markets. Mauricio's appointment offers added
advantages as the Clipper/UTC technology and operational paths align and Clipper
moves toward major global markets.
The Board has also voted to appoint Michael E. Keane, aged 54, our Senior Vice
President and CFO since September 2008, to the Board. Mike has provided
outstanding leadership to the Company over the past 18 months and contributed
greatly to the successful capital raise. His selection as a Director recognizes
his significant contributions and value to the Clipper organization.
As of January 12, 2010, on the completion of the UTC transaction, Kenneth C.
Brown, Joseph G. Michels and Finn M. Hansen resigned from the Board. The Board
would also like to extend its deep appreciation to each of these individuals for
their significant contributions to the Company over their years of Board
service. Their insights and perspectives have been valuable to Clipper's
progress and will be missed.
In addition, Ronald E. Bruehlman, Peter Christman, An-Ping Hsieh, Robert Leduc
and Dr. J. Michael McQuade (all of whom were nominated by UTC in accordance with
the terms of the Subscription Agreement between Clipper and UTC) have been
appointed to the Board as non-executive directors effective January 12, 2010.
With these changes, the Clipper Board now consists of 12 directors, five of whom
have been nominated by UTC. I will continue as Chairman of the Board, and
Sidney Tassin, Clipper's first institutional investor and Board member since
2002, will serve as Lead Director.
I welcome each of our new Directors to the Board. I have every confidence that
with their assistance and that of my other colleagues, Clipper is ushering in a
new phase of growth with the potential for rising to the highest levels of the
wind industry.
James G.P. Dehlsen
Chairman of the Board of Directors
FINANCIAL REVIEW
The results for the Group for 2009 and the comparative year have been stated in
accordance with International Financial Reporting Standards ("IFRS").
Summary Financial Results
2009 was the third year of production and the second year of recognizing
substantial revenue from sales of Clipper's Liberty 2.5 MW wind turbines.
Revenue in 2009 was $743.5 million primarily from sales of 259 turbines compared
to $737.3 million from sales of 248 turbines in 2008. Net loss in 2009 was
$241.4 million or $1.86 loss per share compared to $313.2 million or $2.56loss
per share in 2008. The loss in 2009 includes $124.0 million of provisions for
remediation related and other unusual expenses, compared to $235.0 million in
2008. The Group's 2009 result was negatively impacted by the additional
provisions associated with the aforementioned remediation program and negotiated
deferrals of customer orders.
Income Statement
Revenue
Revenue for the year-ended December 31, 2009 was $743.5 million primarily from
delivery and installation of 259 2.5 MW Liberty turbines compared to $737.3
million from delivery and installation of 248 turbines in 2008. In 2009,
revenue was negatively impacted by negotiated deferrals of 130 turbine
deliveries from 2009 to 2010 and 2011, principally due to lack of available
customer project funding.
Gross loss
Gross loss for the year-ended December 31, 2009 was $163.0 million compared to
$250.8 million in 2008. The gross loss includes provisions for remediation
expenses of $124.0 million compared to $222.0 million in 2008 in addition to a
$14.0 million adjustment of standard warranty provisions in 2009. Work relating
to a non-structural blade skin defect identified in the third quarter of 2008
was substantially completed in 2009 with full completion reached in January
2010. The blade supplier's manufacturing process, which was identified as the
primary cause of the defect, was corrected in October of 2008 with no new cases
identified from subsequent production.
Project development expenses
Project development expenses, which primarily include costs associated with
identification of potential wind project sites, securing land rights, and
pursuing various permits and studies, decreased from $15.7 million in 2008 to
$12.4 million in 2009. The decrease is primarily due to a higher proportion of
development costs being capitalized into projects ready for sale in 2009 ($5.0
million) versus 2008 ($1.5 million). As of December 31, 2009, the Company has a
development portfolio approximating 9,000 MW.
Research and development expenses
Research and development expenses, which include engineering costs for both
advanced technology activities such as the 10 MW Britannia Project in Blyth,
U.K. and support of ongoing operations, increased from $21.1 million in 2008 to
$24.5 million in 2009. The increase primarily reflects additional staffing in
2009 for these initiatives.
Administrative expenses
Administrative expenses decreased from $55.9 million in 2008 to $36.5 million in
2009, primarily due to a non-recurring litigation provision in the prior year
for $13.0 million with the remaining decrease primarily due to year over year
cost and headcount reductions.
Share of profit / loss from joint ventures
Share of profit or loss from joint ventures decreased from a profit of $0.6
million in 2008 to a loss of $3.1 million in 2009. These amounts relate
primarily to the Group's share of the operating profits and losses in Titan.
Profit / loss from sale of Group interests
Profit from sale of Group interests decreased from $30.9 million in 2008 to a
loss of $2.8 million in 2009. The 2008 result was primarily from sale of a 50%
interest in an early stage development project referred to as the Titan Wind
Project, which is located in South Dakota and has the potential to become a
5,050 MW wind facility. The 2009 loss was primarily from sale of the remaining
15% interest in Silver Star l.
Balance Sheet
Non-current assets
Non-current assets decreased from $79.0 million at the end of 2008 to $55.0
million at the end of 2009, primarily due to the sale of the remaining 15%
interest in Silver Star I, a project that was categorized as available for sale
in 2008. Most of the remaining decrease was due to a maturing of a long-term
trade receivable to current trade receivables for $6.0 million.
Inventories
Inventories decreased from $557.4 million at the end of 2008 to $167.8 million
at the end of 2009 primarily due to fewer projects in process at year-end 2009
and improved inventory management. In 2008, there were three projects in
process at year-end compared to one at year-end 2009.
Trade and other receivables
Trade receivables decreased from $97.9 million at the end of 2008 to $48.8
million at the end of 2009 due to fewer projects in process at year-end 2009 as
compared to 2008 as well as the completion of remediation activities at most
customer sites.
Cash
Cash and cash equivalents decreased from $209.0 million at the end of 2008 to
$49.9 million at the end of 2009. The decrease is primarily a result of
negative cash flow from operations of $170.5 million, partly offset by a $20.0
million loan from a customer.
Deferred revenue
Deferred revenue (i.e., customer deposits), decreased from $802.5 million at the
end of 2008 to $433.9 million at the end of 2009, reflecting the increased
completion of projects from the backlog at the end of 2008 and less deposits
from new and existing orders.
Debt
On May 13, 2009, the Group entered into an arrangement for a $20.0 million
secured loan funded by a customer associated with the deferral of certain 2009
committed turbine deliveries into 2010 and 2011. The secured loan was expected
to mature upon delivery of certain turbines in early 2011.
Cash Flows
Cash outflows from operating activities increased from $102.3 million in 2008 to
$170.5 million in 2009 despite a $71.9 million improvement in operating results.
The unfavorable change in operating cash flow was mostly as a result of
receiving less deposits on new customer orders, partially offset by improvements
in working capital.
On January 12, 2010, Clipper received $206.2 million in gross proceeds as part
of the UTC transaction discussed in the Chairman's Statement. Clipper's January
month end 2010 bank cash balance was $231.8 million. The increased liquidity
will support the Company's working capital and growth initiatives.
Despite the negative 2009 cash flow, the Directors have a reasonable expectation
that the Group has and will continue to have adequate resources to ensure that
future liquidity will be sufficiently positive to enable the Group to continue
to operate as a going concern for the foreseeable future.
CLIPPER WINDPOWER PLC
CONSOLIDATED INCOME STATEMENT
+--------------------------------+----+-----------+--------------------------+
| | | Year-ended December 31, |
+--------------------------------+----+--------------------------------------+
| | | 2009 | 2008 |
+--------------------------------+----+-----------+--------------------------+
| | | (Dollars in thousands, |
| | | except per share |
| | | amount) |
+--------------------------------+----+--------------------------------------+
| | | | |
+--------------------------------+----+-----------+--------------------------+
| Revenue | | 743,499 | 737,326 |
+--------------------------------+----+-----------+--------------------------+
| Cost of sales | | (906,509) | (988,109) |
+--------------------------------+----+-----------+--------------------------+
| Gross loss | | (163,010) | (250,783) |
+--------------------------------+----+-----------+--------------------------+
| Project development | | (12,433) | (15,735) |
+--------------------------------+----+-----------+--------------------------+
| Research and development | | (24,461) | (21,064) |
+--------------------------------+----+-----------+--------------------------+
| Administrative expense | | (36,500) | (55,927) |
+--------------------------------+----+-----------+--------------------------+
| Share of (loss) / profit from | | (3,071) | 601 |
| joint ventures | | | |
+--------------------------------+----+-----------+--------------------------+
| (Loss) / profit on sale of | | (2,846) | 30,908 |
| Group interests | | | |
+--------------------------------+----+-----------+--------------------------+
| Operating loss | | (242,321) | (312,000) |
+--------------------------------+----+-----------+--------------------------+
| Interest income | | 1,124 | 3,119 |
+--------------------------------+----+-----------+--------------------------+
| Finance costs and interest | | (374) | (4,358) |
| expense | | | |
+--------------------------------+----+-----------+--------------------------+
| Loss before tax | | (241,571) | (313,239) |
+--------------------------------+----+-----------+--------------------------+
| Tax on loss | | 146 | (57) |
+--------------------------------+----+-----------+--------------------------+
| Loss for the period | | | |
| attributable to equity | | | |
+--------------------------------+----+-----------+--------------------------+
| holders of the parent | | (241,425) | (313,296) |
+--------------------------------+----+-----------+--------------------------+
| | | | |
+--------------------------------+----+-----------+--------------------------+
| Loss per share - basic and | | $ | $ |
| diluted | | (1.86) | (2.56) |
+--------------------------------+----+-----------+--------------------------+
| | | | |
+--------------------------------+----+-----------+--------------------------+
CLIPPER WINDPOWER PLC
CONSOLIDATED BALANCE SHEET
+----------------------------+----+--------------+--------------+
| | | As of December 31, |
+----------------------------+----+-----------------------------+
| | | 2009 | 2008 |
+----------------------------+----+--------------+--------------+
| | | (Dollars in thousands) |
+----------------------------+----+-----------------------------+
| Non-current assets | | | |
+----------------------------+----+--------------+--------------+
| Intangible assets | | 1,912 | 1,179 |
+----------------------------+----+--------------+--------------+
| Property, plant & | | 41,101 | 40,871 |
| equipment | | | |
+----------------------------+----+--------------+--------------+
| Other investments | | - | 15,789 |
+----------------------------+----+--------------+--------------+
| Investments in joint | | 1,475 | 4,546 |
| ventures | | | |
+----------------------------+----+--------------+--------------+
| Other assets | | 10,537 | 16,604 |
+----------------------------+----+--------------+--------------+
| Non-current assets | | 55,025 | 78,989 |
+----------------------------+----+--------------+--------------+
| | | | |
+----------------------------+----+--------------+--------------+
| Current assets | | | |
+----------------------------+----+--------------+--------------+
| Inventories, net | | 167,750 | 557,446 |
+----------------------------+----+--------------+--------------+
| Prepaid inventories | | 13,867 | 32,951 |
+----------------------------+----+--------------+--------------+
| Trade and other | | 48,789 | 97,940 |
| receivables, net | | | |
+----------------------------+----+--------------+--------------+
| Other current assets | | 19,096 | 12,874 |
+----------------------------+----+--------------+--------------+
| Cash and cash equivalents | | 49,910 | 208,988 |
+----------------------------+----+--------------+--------------+
| Current assets | | 299,412 | 910,199 |
+----------------------------+----+--------------+--------------+
| Total assets | | 354,437 | 989,188 |
+----------------------------+----+--------------+--------------+
| | | | |
+----------------------------+----+--------------+--------------+
| Current liabilities | | | |
+----------------------------+----+--------------+--------------+
| Deferred revenue | | 316,247 | 668,085 |
+----------------------------+----+--------------+--------------+
| Trade and other payables | | 97,273 | 140,580 |
+----------------------------+----+--------------+--------------+
| Provisions | | 100,222 | 117,817 |
+----------------------------+----+--------------+--------------+
| Notes payable | | 20,000 | - |
+----------------------------+----+--------------+--------------+
| Income tax payable | | 2,544 | 2,467 |
+----------------------------+----+--------------+--------------+
| Obligations under finance | | 309 | 243 |
| leases | | | |
+----------------------------+----+--------------+--------------+
| Total current liabilities | | 536,595 | 929,192 |
+----------------------------+----+--------------+--------------+
| | | | |
+----------------------------+----+--------------+--------------+
| Non-current liabilities | | | |
+----------------------------+----+--------------+--------------+
| Deferred revenue | | 117,666 | 134,458 |
+----------------------------+----+--------------+--------------+
| Provisions | | 36,145 | 23,924 |
+----------------------------+----+--------------+--------------+
| Obligations under finance | | 543 | 240 |
| leases | | | |
+----------------------------+----+--------------+--------------+
| Other non-current | | 627 | 734 |
| liabilities | | | |
+----------------------------+----+--------------+--------------+
| Total liabilities | | 691,576 | 1,088,548 |
+----------------------------+----+--------------+--------------+
| Net liabilities | | (337,139) | (99,360) |
+----------------------------+----+--------------+--------------+
| | | | |
+----------------------------+----+--------------+--------------+
| (Deficit) / Equity | | | |
+----------------------------+----+--------------+--------------+
| Share capital | | 24,115 | 24,076 |
+----------------------------+----+--------------+--------------+
| Share premium account | | 374,890 | 374,655 |
+----------------------------+----+--------------+--------------+
| Other reserves | | 66,204 | 62,832 |
+----------------------------+----+--------------+--------------+
| Retained loss | | (802,348) | (560,923) |
+----------------------------+----+--------------+--------------+
| Total (deficit) / equity | | (337,139) | (99,360) |
+----------------------------+----+--------------+--------------+
| | | | |
+----------------------------+----+--------------+--------------+
CLIPPER WINDPOWER PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
+--------------------------------------+-----+------------+---------------------------+
| | | As of December 31, |
+--------------------------------------+-----+----------------------------------------+
| | | 2009 | 2008 |
+--------------------------------------+-----+------------+---------------------------+
| | | (Dollars in thousands) |
+--------------------------------------+-----+----------------------------------------+
| Cash Flows from operating | | | |
| activities: | | | |
+--------------------------------------+-----+------------+---------------------------+
| Loss after tax | | (241,425) | (313,239) |
+--------------------------------------+-----+------------+---------------------------+
| | | | |
+--------------------------------------+-----+------------+---------------------------+
| Adjustments for non-cash | | | |
| transactions: | | | |
+--------------------------------------+-----+------------+---------------------------+
| Depreciation and amortization | | 12,929 | 12,936 |
+--------------------------------------+-----+------------+---------------------------+
| Loss on disposal of assets | | 213 | 116 |
+--------------------------------------+-----+------------+---------------------------+
| Loss / (gain) from sale of Group | | 2,846 | (30,908) |
| interests | | | |
+--------------------------------------+-----+------------+---------------------------+
| Stock-based compensation | | 4,121 | 3,166 |
+--------------------------------------+-----+------------+---------------------------+
| Loss / (gain) from investments in | | 3,071 | (601) |
| joint ventures | | | |
+--------------------------------------+-----+------------+---------------------------+
| Loss on assets available for sale | | 9,027 | 696 |
+--------------------------------------+-----+------------+---------------------------+
| Loss / (gain) on foreign exchange | | 150 | (278) |
+--------------------------------------+-----+------------+---------------------------+
| Changes in assets and liabilities: | | | |
+--------------------------------------+-----+------------+---------------------------+
| Accounts receivable | | 49,151 | (95,998) |
+--------------------------------------+-----+------------+---------------------------+
| Inventory and contract related | | 405,972 | (34,947) |
| costs | | | |
+--------------------------------------+-----+------------+---------------------------+
| Prepaid expenses and other current | | (8,416) | 13,715 |
| assets | | | |
+--------------------------------------+-----+------------+---------------------------+
| Accounts payable and accrued | | (44,227) | 39,447 |
| expenses | | | |
+--------------------------------------+-----+------------+---------------------------+
| Provisions | | (2,421) | 138,776 |
+--------------------------------------+-----+------------+---------------------------+
| Deferred revenue | | (368,926) | 179,473 |
+--------------------------------------+-----+------------+---------------------------+
| Income taxes payable | | 223 | 2,467 |
+--------------------------------------+-----+------------+---------------------------+
| Other long term assets | | 6,067 | (19,194) |
+--------------------------------------+-----+------------+---------------------------+
| Other long term liabilities | | 358 | 677 |
+--------------------------------------+-----+------------+---------------------------+
| Interest paid | | (57) | (895) |
+--------------------------------------+-----+------------+---------------------------+
| Interest received | | 967 | 2,519 |
+--------------------------------------+-----+------------+---------------------------+
| Income taxes paid | | (146) | (221) |
+--------------------------------------+-----+------------+---------------------------+
| Net cash used in operating | | (170,523) | (102,293) |
| activities | | | |
+--------------------------------------+-----+------------+---------------------------+
| | | | |
+--------------------------------------+-----+------------+---------------------------+
| Cash Flows from investing | | | |
| activities: | | | |
+--------------------------------------+-----+------------+---------------------------+
| Investments in subsidiaries and | | - | (11,958) |
| joint ventures | | | |
+--------------------------------------+-----+------------+---------------------------+
| Proceeds from sale of assets | | 9,725 | 30,908 |
| available for sale | | | |
+--------------------------------------+-----+------------+---------------------------+
| Investment in wind assets under | | (4,992) | - |
| development | | | |
+--------------------------------------+-----+------------+---------------------------+
| Purchase of intangible assets | | (745) | (539) |
+--------------------------------------+-----+------------+---------------------------+
| Purchase of property and equipment | | (11,868) | (20,232) |
+--------------------------------------+-----+------------+---------------------------+
| Net cash used in investing | | (7,880) | (1,821) |
| activities | | | |
+--------------------------------------+-----+------------+---------------------------+
| | | | |
+--------------------------------------+-----+------------+---------------------------+
| Cash Flows from financing | | | |
| activities: | | | |
+--------------------------------------+-----+------------+---------------------------+
| Note payable | | 20,000 | - |
+--------------------------------------+-----+------------+---------------------------+
| Capital element of finance lease | | (465) | (235) |
| payments | | | |
+--------------------------------------+-----+------------+---------------------------+
| Proceeds from the exercise of stock | | 274 | 1,082 |
| options | | | |
+--------------------------------------+-----+------------+---------------------------+
| Proceeds from issuance of share | | - | 200,000 |
| capital | | | |
+--------------------------------------+-----+------------+---------------------------+
| Costs associated with issuance of | | - | (3,329) |
| share capital | | | |
+--------------------------------------+-----+------------+---------------------------+
| Net cash provided by financing | | 19,809 | 197,518 |
| activities | | | |
+--------------------------------------+-----+------------+---------------------------+
| | | | |
+--------------------------------------+-----+------------+---------------------------+
| Net (decrease)/ increase in cash and | | (158,594) | 93,404 |
| cash equivalents | | | |
+--------------------------------------+-----+------------+---------------------------+
| Cash and cash equivalents, beginning | | 208,988 | 114,420 |
| of period | | | |
+--------------------------------------+-----+------------+---------------------------+
| Effect of changes in foreign | | (484) | 1,164 |
| exchange rates | | | |
+--------------------------------------+-----+------------+---------------------------+
| Cash and cash equivalents, end of | | 49,910 | 208,988 |
| period | | | |
+--------------------------------------+-----+------------+---------------------------+
| | | | |
+--------------------------------------+-----+------------+---------------------------+
| Non-cash transactions: | | | |
+--------------------------------------+-----+------------+---------------------------+
| Liquidating damages forgiven | | 2,775 | - |
+--------------------------------------+-----+------------+---------------------------+
| Fixed assets included in accounts | | 1,492 | - |
| payable | | | |
+--------------------------------------+-----+------------+---------------------------+
CLIPPER WINDPOWER PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| | | | | | | Foreign | | |
| | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| | | Share | Share | Revaluation | Other | currency | Retained | Total |
| | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| | | capital | premium | reserve | reserves | reserve | earnings | equity |
| | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| | | (Dollars in thousands) |
+--------------------+----+-------------------------------------------------------------------------------+
| Balance at | | 19,772 | 188,982 | 265 | 51,605 | (131) | (248,181) | 12,312 |
| January 1, 2008 | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Net loss for the | | - | - | - | - | - | (313,296) | (313,296) |
| period | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Exchange | | | | | | | | |
| differences | | | | | | | | |
| arising | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| on translation of | | | | | | | |
| foreign currency | | | | | | | |
+-------------------------+---------+---------+-------------+----------+----------+-----------+-----------+
| recognized | | - | - | - | - | 1,005 | - | 1,005 |
| directly in equity | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Issuances of shares from | | | | | | |
| private | | | | | | |
+-----------------------------------+---------+-------------+----------+----------+-----------+-----------+
| placement | | 4,083 | 186,619 | - | - | - | - | 190,702 |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Offering cost | | - | (1,807) | - | - | - | - | (1,807) |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Warrants issued | | - | - | - | 10,768 | - | - | 10,768 |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Tax on Warrants | | - | - | - | (3,015) | - | - | (3,015) |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Employee share option | | | | | | | |
| scheme: | | | | | | | |
+-------------------------+---------+---------+-------------+----------+----------+-----------+-----------+
| Exercise of | | 221 | 861 | - | (554) | - | 554 | 1,082 |
| options | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Issuance of | | - | - | - | 2,889 | - | - | 2,889 |
| options | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Balance at | | 24,076 | 374,655 | 265 | 61,693 | 874 | (560,923) | (99,360) |
| January 1, 2009 | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Loss for the | | - | - | - | - | - | (241,425) | (241,425) |
| period | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Exchange | | | | | | | | |
| differences | | | | | | | | |
| arising | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| on translation of | | | | | | | |
| foreign currency | | | | | | | |
+-------------------------+---------+---------+-------------+----------+----------+-----------+-----------+
| recognized | | - | - | - | - | (484) | - | (484) |
| directly in equity | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Sale of joint venture | - | - | (265) | - | - | - | (265) |
+-------------------------+---------+---------+-------------+----------+----------+-----------+-----------+
| Employee share option | | | | | | | |
| scheme: | | | | | | | |
+-------------------------+---------+---------+-------------+----------+----------+-----------+-----------+
| Exercise of | | 39 | 235 | - | - | - | - | 274 |
| options | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Issuance of | | - | - | - | 4,121 | - | - | 4,121 |
| options | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| Balance at | | 24,115 | 374,890 | - | 65,814 | 390 | (802,348) | (337,139) |
| December 31, 2009 | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
| | | | | | | | | |
+--------------------+----+---------+---------+-------------+----------+----------+-----------+-----------+
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR-ENDED DECEMBER 31,
2009
1. Announcement based on audited accounts
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended December 31, 2009, but is
derived from those accounts. Statutory accounts for 2008 have been delivered to
the Registrar of Companies and those for 2009 will be delivered following the
Company's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards ("IFRS") as adopted by the European
Union ("EU"), this announcement does not itself contain sufficient information
to comply with IFRS.
2. Critical accounting judgments and key sources of estimation uncertainty
In applying the Group's accounting policies, the Directors are required to make
judgments, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period or in the period of
the revision and future periods if the revision affects both current and future
periods.
Critical judgments in applying the Group's accounting policies
The following are the critical judgments that the Directors have made in the
process of applying the Group's accounting policies and that has the most
significant effect on the amounts recognized in financial statements.
Revenue recognition
Turbine revenue is recognized when the contractual obligations are considered
complete such that the Group has transferred the risks and rewards of ownership.
In making its judgment, the Directors considered the detailed criteria for the
recognition of revenue from the sale of turbines set out in IAS 18 Revenue and,
in particular, whether the Group had transferred to the buyer the significant
risks and rewards of ownership of the goods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future values, and other
key sources of estimation uncertainty, at the balance sheet date that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
Inventory provisions
The carrying value of inventory is assessed regularly and provisions are taken
to reflect the estimated future costs of future contracts, obsolescence, and
remediating certain components.
Included within the calculation of the provision for component remediation are
estimates of labor costs, crane costs, transportation costs, material costs, and
time to complete, which is in itself dependent upon a number of unknown and
uncontrollable factors such as the weather. The Group conducts a detailed study
of the estimated costs to remediate the turbine components and continues to
update such estimates, which may require the Group to make positive or negative
adjustments to the provision in future periods.
If it is determined that the costs of meeting contractual obligations exceed the
economic benefit arising under such contracts, the resulting net loss under the
contract is recognized immediately. The calculation to determine the loss
includes an estimate of the cost to complete a project and the cost of other
associated and unavoidable obligations such as late delivery payments, which are
dependent on an estimate of the time to complete.
Warranty provisions
The Group has established provisions for the future costs estimated under
standard turbine warranties. These provisions are based on estimates of future
costs to repair the turbines and involve substantial levels of judgment due to
the limited operating history of the Group.
Recoverability of development projects held for sale
The Group tests for recoverability of costs compared with the carrying value of
development projects held for sale using relevant facts and circumstances to
create an estimate of future cash flows to determine the appropriate carrying
values of development projects. Where costs exceed the carrying value of the
project value, a net realizable value adjustment is booked to the carrying value
of the work in progress recognized to ensure the value is accurately reflected
at the recoverable amount of the asset. Adjustments will be made in future
periods if future market activity indicates that the net resalable value of the
projects is lower than the value of the asset recognized.
Share based payments
The Group uses the Black-Scholes option pricing model to determine the fair
value of options granted to employees and non-employees under the Group's
equity-based compensation plan. The Company recognized an expense of $4.1
million in 2009 (2008: $3.2 million) on the options, however the model
incorporates various assumptions, the alteration of which would lead to a
different charge. Key assumptions include the volatility of the Company's share
price, the rate of forfeiture of options, the vesting period of the share
options, dividend yield, risk-free interest rate and expected life.
3. Segment information
The Group implemented IFRS 8 - Operating Segments on January 1, 2009. Under
IFRS 8, the Group has two operating segments: turbine technology and
manufacturing, and wind project development. Turbine technology and
manufacturing includes designing, manufacturing and the sale and servicing of
wind turbines. Wind project development includes activities associated with
developing wind energy facilities, including wind resource assessment, site
planning, site control and interconnection to the power grid. Corporate pertains
to administrative functions that support but are not specifically attributable
to the Group's operating segments. The Directors believe that for 2009 and 2008
the Group's only material geographic segment was North America.
+-------------------------+-------------+---------------+------------+-------------+
| | Wind | Turbine | | |
| | project | technology | | |
+-------------------------+-------------+---------------+------------+-------------+
| | development | and | Corporate | Total |
| | | manufacturing | | |
+-------------------------+-------------+---------------+------------+-------------+
| | (Dollars in thousands) |
+-------------------------+--------------------------------------------------------+
| Year-ended December 31, 2009 | | | |
+---------------------------------------+---------------+------------+-------------+
| | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| Income statement | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Revenue | 980 | 742,519 | - | 743,499 |
+-------------------------+-------------+---------------+------------+-------------+
| - Net loss after tax | (25,076) | (180,039) | (36,310) | (241,425) |
+-------------------------+-------------+---------------+------------+-------------+
| -Provisions for remediation | | | |
| related | | | |
+---------------------------------------+---------------+------------+-------------+
| and other unusual | - | (123,959) | - | (123,959) |
| expenses | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| Balance sheet | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Assets | 43,525 | 260,629 | 50,283 | 354,437 |
+-------------------------+-------------+---------------+------------+-------------+
| - Liabilities | (22,495) | (664,789) | (4,292) | (691,576) |
+-------------------------+-------------+---------------+------------+-------------+
| Capital expenditures | 775 | 5,295 | 7,289 | 13,359 |
+-------------------------+-------------+---------------+------------+-------------+
| Non-cash items: | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Depreciation and | 1,089 | 10,617 | 1,223 | 12,929 |
| amortization | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Share based payments | 545 | 776 | 2,794 | 4,115 |
| | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| Year-ended December 31, | | | | |
| 2008 | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| Income statement | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Revenue | 140,197 | 597,129 | - | 737,326 |
+-------------------------+-------------+---------------+------------+-------------+
| - Net loss after tax | (20,017) | (235,716) | (57,563) | (313,296) |
+-------------------------+-------------+---------------+------------+-------------+
| - Provisions for | | | | |
| remediation related | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| and other unusual | (28,733) | (193,217) | (13,000) | (234,950) |
| expenses | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| Balance sheet | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Assets | 44,097 | 726,046 | 219,045 | 989,188 |
+-------------------------+-------------+---------------+------------+-------------+
| - Liabilities | (24,918) | (1,037,101) | (26,529) | (1,088,548) |
+-------------------------+-------------+---------------+------------+-------------+
| Capital expenditures | 582 | 15,770 | 3,880 | 20,232 |
+-------------------------+-------------+---------------+------------+-------------+
| Non-cash items: | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Depreciation and | 811 | 11,322 | 790 | 12,923 |
| amortization | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| - Share based payments | 98 | 539 | 2,529 | 3,166 |
| | | | | |
+-------------------------+-------------+---------------+------------+-------------+
| | | | | |
+-------------------------+-------------+---------------+------------+-------------+
The revenue recorded in the wind project development and turbine technology and
manufacturing segments was generated from external customers located in North
America. Three customers accounted for 32%, 31% and 20% of revenue for the
year-ended December 31, 2009 (2008: 57%, 20%, and 12%).
Segment assets consist primarily of operating and invested cash, inventories,
property, plant and equipment, intangible assets and investments at fair value.
Segment liabilities consist largely of receipts from customers for future
turbine deliveries. Inventory provisions reduce the carrying value of inventory
for the estimated future costs of wind turbine blade and gearbox remediation,
loss-making contracts, and excess and obsolete inventory. Intercompany
transactions have been eliminated and this is reflected in the segment
information.
In 2009, the Group recognized an impairment loss of $6.5 million related to an
asset held for sale in inventory for wind project development. This impairment
was based on the future sale of inventory at a contract price that is below the
carrying amount. The loss is included in cost of sales for the wind project
development segment.
Corporate assets consist primarily of cash and cash equivalents, while corporate
liabilities primarily consist of various accruals and legal provisions.
4. Provision for remediation related expenses and other unusual transactions
In 2008 and 2009, provisions were made for remediation of turbines arising
primarily from supplier quality issues. This has resulted in significant
remediation work and associated costs in each of these years. Of the $241.4
million loss in 2009 (2008: $313.3 million) approximately $124.0 million (2008:
$222.0 million) is directly or indirectly attributable to significant
remediation activities. The remediation costs include direct costs to devise and
implement repair solutions, costs to mobilize the workforce and equipment to
perform the repairs, inventory obsolescence and liquidated damages to compensate
customers for delays in power generation. The costs provided in 2008 and 2009
are summarized below:
+--------------------------------------------+-----------+------------+
| | Year-ended December |
| | 31, |
+--------------------------------------------+------------------------+
| | 2009 | 2008 |
+--------------------------------------------+-----------+------------+
| | (Dollars in |
| | thousands) |
+--------------------------------------------+------------------------+
| Provision for remediation related expenses | | |
+--------------------------------------------+-----------+------------+
| Provision for loss making contracts | 11,856 | 2,866 |
+--------------------------------------------+-----------+------------+
| Provision for turbine and blade | 82,555 | 134,588 |
| remediation | | |
+--------------------------------------------+-----------+------------+
| Provision for inventory obsolescence | 7,319 | 32,385 |
+--------------------------------------------+-----------+------------+
| Provision for liquidated damages | 22,228 | 52,111 |
+--------------------------------------------+-----------+------------+
| | 123,958 | 221,950 |
+--------------------------------------------+-----------+------------+
| Provisions for litigation related matters | - | 13,000 |
+--------------------------------------------+-----------+------------+
| | 123,958 | 234,950 |
+--------------------------------------------+-----------+------------+
| | | |
+--------------------------------------------+-----------+------------+
5. Inventories
+--------------------------------------+-----------+-----------+
| | As of December 31, |
+--------------------------------------+-----------------------+
| | 2009 | 2008 |
+--------------------------------------+-----------+-----------+
| | (Dollars in |
| | thousands) |
+--------------------------------------+-----------------------+
| Raw materials and components | 98,135 | 205,410 |
+--------------------------------------+-----------+-----------+
| Less reserves | (16,535) | (46,999) |
+--------------------------------------+-----------+-----------+
| Net | 81,600 | 158,411 |
+--------------------------------------+-----------+-----------+
| | | |
+--------------------------------------+-----------+-----------+
| Completed assembly | 40,842 | 81,149 |
+--------------------------------------+-----------+-----------+
| Less reserves | - | - |
+--------------------------------------+-----------+-----------+
| Net | 40,842 | 81,149 |
+--------------------------------------+-----------+-----------+
| | | |
+--------------------------------------+-----------+-----------+
| Inventory at project sites | 46,951 | 320,841 |
+--------------------------------------+-----------+-----------+
| Less reserves | (1,643) | (2,955) |
+--------------------------------------+-----------+-----------+
| Net | 45,308 | 317,886 |
+--------------------------------------+-----------+-----------+
| | | |
+--------------------------------------+-----------+-----------+
| Total net inventory | 167,750 | 557,446 |
+--------------------------------------+-----------+-----------+
The carrying value of inventory has been reduced by $18.1 million in the
year-ended December 31, 2009 (2008: $50.0 million) reflecting the estimated
future costs of remediating certain components, estimated loss on future
contracts and excess and obsolete inventory. The inventory component of cost of
sales in 2009 was $654.0 million (2008: $687.0 million).
6. Trade and other receivables
+--------------------------------------+-----------+-----------+
| | As of December 31, |
+--------------------------------------+-----------------------+
| | 2009 | 2008 |
+--------------------------------------+-----------+-----------+
| | (Dollars in |
| | thousands) |
+--------------------------------------+-----------------------+
| Trade receivables | 49,456 | 97,574 |
+--------------------------------------+-----------+-----------+
| Other receivables | 315 | 431 |
+--------------------------------------+-----------+-----------+
| Less: allowance for doubtful | (982) | (65) |
| accounts | | |
+--------------------------------------+-----------+-----------+
| | 48,789 | 97,940 |
+--------------------------------------+-----------+-----------+
Included in the balance shown above are debtors with a carrying amount of $10.0
million (2008: $26.1 million) which are past due at the reporting date for which
the Group has provided an allowance of $1.0 million (2008: $0.1 million). The
Group does not hold any collateral over these balances. The credit period was
in some cases extended while remediation was ongoing; however, the Directors
believe full recovery will be made of the carrying value of trade receivables.
The average age of these overdue receivables is 282 days (2008: 105 days).
Aging of past due receivables:
+----------------------------------+-----------+-----------+
| | As of December 31, |
+----------------------------------+-----------------------+
| | 2009 | 2008 |
+----------------------------------+-----------+-----------+
| | (Dollars in |
| | thousands) |
+----------------------------------+-----------------------+
| 60-90 days | 174 | 17,811 |
+----------------------------------+-----------+-----------+
| Over 90 days | 9,830 | 8,292 |
+----------------------------------+-----------+-----------+
| | 10,004 | 26,103 |
+----------------------------------+-----------+-----------+
7. Deferred revenue
+----------------------------+-----------+-------------+-----------+
| | Current | Non-current | Total |
+----------------------------+-----------+-------------+-----------+
| | (Dollars in thousands) |
+----------------------------+-------------------------------------+
| At January 1, 2008 | 531,652 | 91,715 | 623,367 |
+----------------------------+-----------+-------------+-----------+
| Customer deposits received | 802,348 | 42,743 | 845,091 |
+----------------------------+-----------+-------------+-----------+
| Recognized as revenue in | (665,915) | - | (665,915) |
| the period | | | |
+----------------------------+-----------+-------------+-----------+
| At January 1, 2009 | 668,085 | 134,458 | 802,543 |
+----------------------------+-----------+-------------+-----------+
| Customer deposits received | 321,029 | 16,031 | 337,060 |
+----------------------------+-----------+-------------+-----------+
| Recognized as revenue in | (672,867) | (32,823) | (705,690) |
| the period | | | |
+----------------------------+-----------+-------------+-----------+
| At December 31, 2009 | 316,247 | 117,666 | 433,913 |
+----------------------------+-----------+-------------+-----------+
Deferred revenue reflects consideration received from customers for manufacture
and delivery of wind turbines.
8. Provisions
+------------------+----------+-------------+------------+---------+------------+
| | | | Liquidated | | |
+------------------+----------+-------------+------------+---------+------------+
| | Warranty | Remediation | Damages | Other | Total |
+------------------+----------+-------------+------------+---------+------------+
| | (Dollars in thousands) |
+------------------+------------------------------------------------------------+
| Current | |
+------------------+------------------------------------------------------------+
| At January 1, | 367 | 3,677 | - | - | 4,044 |
| 2008 | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| Charged in the | 9,045 | 77,508 | 25,113 | 13,000 | 124,666 |
| year | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| | 2,773 | - | 10,595 | - | 13,368 |
| Reclassification | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| Utilization of | (3,352) | (19,409) | (1,500) | - | (24,261) |
| provision | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| At December | 8,833 | 61,776 | 34,208 | 13,000 | 117,817 |
| 31, 2008 | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| Non current | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| At January 1, | 12,863 | - | - | 478 | 13,341 |
| 2008 | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| Charged in the | 13,331 | - | - | - | 13,331 |
| year | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| | (2,773) | - | - | - | (2,773) |
| Reclassification | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| Unwinding of | - | - | - | 25 | 25 |
| discount | | | | | |
+------------------+----------+-------------+------------+---------+------------+
| At December | 23,421 | - | - | 503 | 23,924 |
| 31, 2008 | | | | | |
+------------------+----------+-------------+------------+---------+------------+
+------------------+----------+-------------+------------+----------+-----------+
| | | | Liquidated | | |
+------------------+----------+-------------+------------+----------+-----------+
| | Warranty | Remediation | Damages | Other | Total |
+------------------+----------+-------------+------------+----------+-----------+
| | (Dollars in thousands) |
+------------------+------------------------------------------------------------+
| Current | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| At January 1, | 8,833 | 61,776 | 34,208 | 13,000 | 117,817 |
| 2009 | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| Charged in the | 15,091 | 82,555 | 22,228 | 3,032 | 122,906 |
| year | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| | 9,681 | 14,298 | - | (2,000) | 21,979 |
| Reclassification | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| Utilization of | (14,758) | (117,702) | (19,020) | (11,000) | (162,480) |
| provision | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| At December | 18,847 | 40,927 | 37,416 | 3,032 | 100,222 |
| 31, 2009 | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| Non current | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| At January 1, | 23,421 | - | - | 503 | 23,924 |
| 2009 | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| Charged in the | 21,875 | - | - | - | 21,875 |
| year | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| | (9,681) | - | - | - | (9,681) |
| Reclassification | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| Unwinding of | - | - | - | 27 | 27 |
| discount | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
| At December 31, | 35,615 | - | - | 530 | 36,145 |
| 2009 | | | | | |
+------------------+----------+-------------+------------+----------+-----------+
The provision for warranty claims represents the present value of the Directors'
best estimate of the future cost that will be required under the Group's turbine
warranty agreements. Actual outflows may vary based on the result of new
materials, altered manufacturing processes or other events affecting product
quality. These amounts are expected to be utilized from 2010 through 2014.
Remediation represents provisions for costs to repair and replace gearboxes and
blades on completed turbines. Liquidated damages represent estimates of
contractual obligations to compensate customers for project delays or lost power
generation as a result of not meeting guaranteed turbine performance, power
curve or noise.
9. Contingencies
Contingent assets
The Group continues to hold 50% ownership in four project limited liability
companies ("LLCs"), three of which were part of joint venture agreements signed
with a customer in 2006 and 2008. In the event certain notice-to-proceed
conditions in the customer contracts are satisfied, the Group will receive
additional contingent purchase price consideration for the project companies up
to a maximum of $116.1 million (2008: $120.8 million) for the three project
companies. The Group realized $375,000 of these contingent payments in 2009
related to the sale of Silver Star I Power Partners, LLC.
Contingent liabilities
The Group is from time to time engaged in routine litigation. The Group
regularly reviews all pending litigation matters in which it is involved and
establishes reserves deemed appropriate by management for these litigation
matter when a probable loss estimate can be made. No amounts are expected to be
paid above those provided.
In August 2009, Clipper entered into arbitration with a former vendor. The
vendor is seeking payment for unpaid invoices, claiming breach of contract and
related damages in the amount of approximately $32.6 million. The Group does
not believe a loss is probable in excess of what the Group has provided for. The
Group asserts the vendor delivered products that required additional repairs and
is seeking counter-claims for damages for costs of remediation.
For one of the three projects related to the joint venture agreement with a
customer in 2006, the sale was completed on the basis that the project would
achieve certain development thresholds. If the project falls short of the
contractually-agreed commitments, the Group is required to transfer a new
project in its place or, failing that, to reimburse its joint venture partner
for any amounts paid plus interest at LIBOR plus 2%. The Directors consider it
remote that any payments will arise under this arrangement.
In September 2007, the Group entered into an industrial jobs training agreement
with the State of Iowa. Under the agreement, Clipper will receive reimbursement
of payroll taxes paid in exchange for hiring and training a defined number of
new employees through 2010. In the event the Group does not fulfill this quota,
the Group is liable to pay the State up to $1.7 million (2008: $2.6 million).
The Group does not believe that any such payments are probable and accordingly
has not recorded a liability related to this agreement.
10. Subsequent events
On December 10, 2009, Clipper entered into an agreement (the "Subscription
Agreement") with United Technologies Corporation "UTC" to conditionally
subscribe for approximately 84.3 million new ordinary shares at a subscription
price of GBP1.50 per share, equal to gross proceeds of $206.2 million,
representing approximately 39% of the Issued Share Capital of Clipper following
the transaction.
Additionally, UTC issued a cash offer (the "Tender Offer"), conditional (among
other matters) on the subscription, to purchase up to 21.8 million Clipper
ordinary shares from existing shareholders at a price of GBP1.80 per share.
In conjunction with the subscription, One Equity Partners and British Petroleum
agreed to terminate their respective options to purchase 2,914,850 and an
adjusted 13,014,122 Shares at GBP5.375 and GBP3.77 respectively for cash
consideration.
Both the Subscription Agreement and Tender Offer closed on January 11, 2010. As
a result of the aforementioned transactions, as of the end of March 8, 2010, UTC
owns 49.5% of Clipper.
Pursuant to the terms of the Subscription Agreement, and with effect from
admission of the new shares, Kenneth C. Brown, Joseph G. Michels and Finn M.
Hansen resigned from the Clipper Board. In addition, and also with effect from
admission, Ronald E. Bruehlman, Peter Christman, An-Ping Hsieh, Robert Leduc and
Dr. J. Michael McQuade (all of whom have been nominated by UTC) have been
appointed to the Board as non-executive Directors. The terms of the Subscription
Agreement permit UTC to hold a proportion of seats on the Board equal to the
percentage of shares they own rounded down. Currently, UTC holds 5 of the total
12 board seats.
In March 2010, Douglas Pertz resigned as President and CEO and Board Director.
Mauricio F. Quintano was subsequently appointed as new President and CEO and
Board Director. Also, in March 2010, Michael E. Keane, CFO, was appointed as
Board Director.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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