TIDMCWP
RNS Number : 5761T
Clipper Windpower Plc
30 September 2010
CLIPPER WINDPOWER PLC - ANNOUNCEMENT OF 2010 INTERIM RESULTS
London, (UK), Carpinteria, CA (USA) - September 30, 2010. Clipper Windpower Plc
("Clipper" or the "Company" or the "Group"), a wind turbine manufacturer and
wind project developer, announces its interim results for the six months ended
June 30, 2010.
· Revenue of $154.0 million (43 turbines) for the six months ended June 30,
2010 (2009: $357.3 million, 127 turbines).
· Gross margin increased to $6.4 million in first half of 2010 (2009:
($81.5 million)) driven by higher sales prices and lower net warranty and
remediation related costs. Net losses decrease to ($26.7 million) (2009:
($120.2 million)). Management expects results in the second half of 2010 to
show further improvement compared to both the first half of 2010 and the prior
year comparable period.
· United Technologies Corporation ("UTC") has recently submitted a new
non-binding indication of interest to purchase the remaining issued shares at a
significant premium to the September 23, 2010 market trading price; discussions
with UTC are ongoing and there is no assurance the parties will reach agreement
on a transaction that can be recommended to shareholders.
· Clipper expects to deliver against firm orders in the range of 140 to 150
turbines in 2010.
· Clipper turbine fleet availability is 95.7% year-to-date on an installed
base of 477 turbines and has exceeded 97% in the last three months. The blade
remediation program was completed in January 2010.
· Clipper shareholders approved the agreement for UTC to provide warranty
support for selected new orders of Liberty turbines. Clipper and UTC have also
signed an intellectual property and technical assistance licensing agreement for
the use and application of UTC intellectual property and technology resources.
· The Company has expanded its marketing effort, with increased emphasis
outside the U.S. Working with Pratt & Whitney Power Systems ("PWPS"), Clipper
has a current proposal pipeline of approximately 4.5 GW, including 1.75 GW of
active proposals.
· Unrestricted cash balance at June 30, 2010 was $140 million (currently
$85 million). The decrease since June 30, 2010 primarily reflects purchases of
components for ramp up of production in the second half of the year, combined
with lower deposits from new and existing orders.
Conference Call
Clipper's management will host a conference call to discuss the Group's
developments today at 1:00 pm (UK Time). To join this call, please dial +44
(0)20 7806 1955 for UK or +1 212 444 0413 for U.S. (Conference code: 6545648).
Replay telephone numbers: +44 (0)20 7111 1244 for UK or +1 347 366 9565 for U.S.
Replay access code: 6545648#. A copy of the presentation to accompany the call
will be available on Clipper's website
(http://www.clipperwind.com/investors.php) five minutes before the commencement
of the call.
About Clipper
Clipper Windpower Plc, www.clipperwind.com, is a company engaged in wind energy
technology, turbine manufacturing, and wind project development. The Company
designs advanced wind turbines, manufactures its 2.5 MW Liberty wind turbine,
and actively develops wind power generating projects in the Americas and Europe.
Clipper's headquarters are in Carpinteria, California, USA. The Company's
330,000 square foot manufacturing and assembly facility for land-based wind
turbines is located in Cedar Rapids, Iowa; its development center for offshore
wind turbine development is located in Blyth, UK. Clipper is a public company
listed on AIM of the London Stock Exchange. Clipper's ticker symbol is CWP.
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 of 1933, as
amended. 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 of 1933, unless such shares have been registered under the
Securities Act or there is an available exemption from registration.
For further information, please contact:
INVESTORS
Clipper Windpower Plc
Jenny Matthews
Investor Relations
Tel: +44 (0)7827 259495
J.P. Morgan Cazenove (Nominated Adviser and Corporate Broker to Clipper)
Patrick Magee / Jamie Riddell
Tel: +44 (0)20 7588 2828
Goldman Sachs International (Financial Adviser to Clipper)
Brian Bolster / Nick Harper
Tel: +1 212 902 2649 / +44 (0)20 7774 1000
FINANCIAL PRESS
M:Communications
Patrick d'Ancona / Charlotte Kirkham
Tel: +44 (0)20 7920 2347
BUSINESS AND TRADE
Clipper Global Communications
Mary Gates
Tel: +1 661 301 0400
This announcement 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, financing
arrangements, 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.
Goldman Sachs International, which is authorized and regulated by the United
Kingdom by the Financial Services Authority, is acting exclusively for Clipper
and no one else in connection with the possible offer and will not be
responsible to anyone other than Clipper for providing the protections afforded
to clients of Goldman Sachs International nor for providing advice in connection
with the possible or any other matters referred to in this announcement.
JP Morgan Cazenove, which is authorized and regulated by the United Kingdom by
the Financial Services Authority, is acting exclusively for Clipper and no one
else in connection with this announcement and will not be responsible to anyone
other than Clipper for providing the protections afforded to clients of JP
Morgan Cazenove nor for providing advice in connection with the matters referred
to in this announcement.
Joint Statement by the Chairman and the Chief Executive Officer
Clipper's operational improvements are becoming increasingly evident as
remediation programs have concluded, turbine availability levels continue rising
to levels at or above industry benchmarks, and financial losses have narrowed
significantly compared to prior periods. The strategic partnership between
Clipper and its largest shareholder, United Technologies Corporation ("UTC"), is
already yielding significant benefits in areas of technology access, global
market reach and warranty support for selected new orders of Liberty turbines.
The provision of turbine warranty support to customers will increase confidence
in Clipper's ability to perform and should greatly assist with customers' access
to wind project financing.
The Liberty turbine is delivering sound performance with fleet-wide availability
averaging 95.7% year to date and exceeding 97% over the past three months. The
fleet now totals over 1,190 MW of capacity installed and operating at 18
generating sites across the U.S. and Mexico. The 477 installed Liberty turbines
now have accumulated over 5.5 million operating hours.
Clipper continues to make progress in meeting its following long-term
objectives:
Position Clipper as a Tier One Turbine Supplier
Increased collaboration with UTC is a significant game changer for us in the
pursuit to position Clipper as a Tier One turbine supplier. UTC's assistance
and collaboration is supporting Clipper's opportunities for sales through
warranty support for certain new orders, access to intellectual property and
technological cooperation, coordinated global sales efforts using the world-wide
sales force of UTC's Pratt and Whitney Power Systems ("PWPS"), and project
management assistance for turnkey project construction. The UTC ownership stake,
support and collaboration helps to level the playing field with larger Tier One
competitors.
Strengthen the Group's Future Through Technology-leading Product Development
Together with Improved Operational and Commercial Processes
Clipper and UTC have signed a formal licensing agreement for the use and
application of UTC intellectual property and technology resources. The
agreement augments Clipper's proven technology and its Liberty turbine with
numerous UTC sources of technology expertise in rotating machinery, gearboxes
and blades. With UTC resources, the Group will be able to further exploit
Clipper's existing substantive wind power technology and intellectual property
for product innovation - scaling up of turbine size, increasing power yield,
improving ease of maintenance and increasing reliability in long-term
performance. Clipper continues to invest heavily in technology for our next
generation land based turbine and our first generation offshore turbine. Clipper
expects to complete the testing and certification of enhanced performance
features to the 2.5 MW Liberty turbine during late 2011 which are designed to
increase energy output by 4-8%. These features are expected to be ready for
implementation in new turbines delivered in early 2012 and beyond.
The Company continues to advance the design and development of its Britannia
offshore turbine to address the significant growth potential of the European and
global offshore windpower development. The Company's blade production facility
on the Tyne River in Newcastle, UK is scheduled to complete construction in the
fourth quarter of 2010, and Britannia design processes are yielding significant
new technology and patent filings.
Our patent filings continue to increase; as of June 30, 2010, Clipper has been
granted 22 patents with 72 in process. Clipper's investment in leading
technology is augmented by access and collaboration with UTC scientists and
engineers, who are highly complementary to Clipper's highly experienced
engineering staff.
Initiated Marketing and Sales Activities for the Liberty Turbine in Selected
Foreign Markets
Clipper has greatly expanded its marketing efforts into numerous countries and
emerging markets outside the U.S. These efforts have resulted in a sales
proposal pipeline of 4,500 MW, including active proposals for 1,750 MW of
turbines and an additional 2,750 MW of proposals in process. Approximately 54%
of Clipper's current proposal pipeline represents opportunities outside the U.S.
Clipper has particularly targeted emerging wind markets within Latin America
the UK, and Eastern Europe, as well as the continued leverage of Clipper's 8 GW
development asset portfolio in the U.S. to generate turbine orders. The Group is
currently in advanced negotiations for sales of approximately 250 MW of these
U.S. development assets, including related turbine sales agreements, for
delivery in 2011.
The broader marketing and sales efforts include a relationship with PWPS, a
manufacturer and distributor of gas turbine power plants, that enables Clipper
to leverage the PWPS global distribution network to sell and service the Liberty
turbine and to provide integrated turnkey project capabilities to turbine
purchasers. With the Liberty turbine's strengthened performance, the expanded
marketing resources and additional warranty support provided by UTC, the Company
is confident that a meaningful number of these proposals will soon materialize
into new orders and strengthen the Company's existing backlog.
Grow Revenue and Profit, Achieving Costs In-line with or Better Than Industry
Benchmarks
Revenue for the six months ended June 30, 2010 is $154.0 million, primarily from
the sale of 43 turbines, compared to revenue for the six months ended June 30,
2009 of $357.3 million, primarily from the sale of 127 turbines. In the current
period, turbines were delivered to three customer sites in the United States and
Mexico. Revenue for the first half of 2010 is in line with management
projections that anticipated lower volume in the first half of 2010 as compared
to the same period in 2009; higher delivery volumes and revenues are expected in
the second half of 2010.
The net loss for the six months ended June 30, 2010 is ($26.7 million) compared
to a net loss of ($120.2 million) for the six months ended June 30,
2009. Results include net remediation and warranty related costs for the six
months ended June 30, 2010 and 2009 of approximately $21.0 million and $74.2
million, respectively. Clipper's blade remediation program was completed in
January 2010.
Despite lower sales volumes, Clipper achieved a positive gross margin in the
first half 2010 of $6.4 million compared to a gross margin loss of ($81.5
million) in the first half 2009, an improvement of $88 million. The improvement
in gross margin was driven by lower net remediation and warranty related costs,
lower component costs and improved average turbine sales prices compared to the
same period in 2009. This trend has continued into the second half of 2010 and,
coupled with higher delivery volumes, has led to positive operating income
generation in recent months.
In line with recent guidance, Clipper expects to deliver against firm orders in
the range of 140 to 150 turbines (350 to 375 MW) to customers in 2010.
The Group's consolidated cash position of $140million (excluding $13 million
restricted cash) at June 30, 2010 has decreased to approximately $85million
(excluding $22 million restricted cash) currently. Cash usage is primarily due
to increased purchases of components for the manufacture of turbines scheduled
for delivery in the second half of the year, and other operating and capital
needs of the Company, along with lower deposits from new and existing orders.
Clipper continues to manage its working capital efficiently, maintaining lower
inventory balances and expanding its use of multiple suppliers for components
resulting in improved delivery schedules and terms. The significant improvement
in fleet performance has led to more timely collection of customer remittances
and lower account receivable balances.
Financing Proposals and UTC Indication of Interest to Purchase Clipper
The Group has been actively seeking additional sources of capital to fund
operations and to mitigate the timing volatility inherent in the Group's
projected cash flows. The Group has retained financial and legal advisors to
advise on various alternatives to raise capital including private and public
equity issuances, working capital credit lines, and any potential transaction
with UTC.
In early August, UTC submitted to Clipper a non-binding indication of interest
to acquire all of the ordinary shares of the Group. The indication of interest
was conditional on completion of confirmatory due diligence and other
substantive terms and conditions.
On September 23, 2010 (subsequent to the Company's first public disclosure of
the existence of the potential acquisition offer), UTC submitted a revised
indication of interest. The revised price is at a significant premium to the
September 23, 2010 market trading price of 35 pence per ordinary share.
The Company has facilitated the requested due diligence process and the Non-UTC
Directors have actively engaged in negotiations with UTC, with an aim of
reaching agreement on a price and other transaction terms that the Non-UTC
Directors could recommend to shareholders. The Company will also continue to
pursue alternative strategic and financing options for the Company.
The subscription agreement between Clipper and UTC entered into in January 2010
(under which UTC invested $206 million into Clipper) contains standstill
provisions that generally limit UTC to a 49.9% shareholding until January 2012.
In certain events, UTC is permitted to increase its shareholdings to 55%. In
mid-September, UTC provided notice to Clipper that based on cumulative cash
outflows since the date of investment, UTC and its affiliates are now allowed to
increase their combined shareholding in Clipper to 55%. The Company does not
know whether or when UTC might elect to increase its shareholdings.
Financing Landscape Improving for Both Industry and Clipper Turbines
Good progress has been made for financing large wind projects with Clipper
Liberty turbines despite recent difficult market conditions. Initial progress
on Liberty turbine financing took place in 2009 when Clipper turbines were a
significant component of a $191.0 million financing package completed by First
Wind, a Clipper customer since 2007. In July 2010, First Wind received from the
U.S. Department of Energy ("DOE") 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 due to its inclusion of the Liberty turbine
combined with energy storage. This loan guarantee was finalized in July 2010
and, as of August 31, 2010, Clipper has delivered all twelve turbines for the
Kahuku wind site.
In September 2010, First Wind also completed a commercial project financing of
their Cohocton wind site. Cohocton, a 125 MW wind project located in New York,
comprised entirely of fifty 2.5 MW Clipper Liberty turbines, was able to replace
its existing shorter term project financing with new longer dated term
facilities totaling $79 million. The facilities include participation from four
international banks.
In addition, the Export-Import Bank of the United States ("Ex-Im Bank") has
provided an $80.7 million direct loan for Clipper Liberty turbines for an EDF
Energies Nouvelles wind project in Mexico where the ultimate beneficiary of the
electricity generated is Wal-Mart de Mexico, S.A.B. de C.V. 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. manufactured wind turbine sale
in Latin America. The Ex-Im Bank is a strong financing partner for Clipper
turbines and the awareness of this financing has generated new sales
opportunities for Clipper in international markets.
The above transactions indicate growing acceptance and confidence in the Liberty
turbine by more financial institutions despite recent difficult credit market
conditions.
Wind Sector Overview
Signs of optimism and improvement are emerging, with several sizable financings
recently announced in the market. These new investments point to a building
recovery in the U.S. wind market. As expected, activity in 2010 has been
subdued for new wind installation in the U.S. This is in contrast to the record
year in 2009, which was primarily a "roll-forward" of projects which had been
booked for 2008 but delayed due to the lack of financing when the recession
started. The American Wind Energy Association ("AWEA") has recently published
new data regarding the U.S. wind industry indicating a surge in new starts, the
first positive indicator for the depressed market (29% of global demand in 2009)
since the third quarter of 2008. Projects under construction were at 5.7 GW, an
increase from the 3.2 GW last year, with most projects commencing in the second
quarter of 2009. Recovery of the sector is slowly emerging, and this boost is
likely partially due to a rush to start new projects before the expiry of the
U.S. Treasury cash-grant program on December 31, 2010.
However, there are several factors that continue to adversely affect the U.S.
wind market this year:
- Since January 2007, the recession resulted in a 6.9% drop in electrical
power demand in the U.S. On current estimates it will be 2011 before this
demand for electrical power returns to 2007 levels. During this period the
demand for new power generating equipment is likely to be muted.
- The issue is exacerbated within the wind power equipment market by the
current low price of natural gas, which has influenced the decision as to
installed power generating equipment in favor of fossil fuels.
- There is over capacity in the market, as heavy investment in the prior
years has left turbine manufacturers with underutilized plants and facilities.
Combined with an excess of turbines in inventory, this over capacity has
resulted in pricing pressure in 2010, where contracts are being negotiated off a
lower base than previous years.
- Concerns over new Asian competitors-although real, we believe this is not
a near term threat due to the number of established competitors in the U.S.
market today and the time it will take customers to gain confidence in the
quality and performance of the Asian turbines, including service and support
from the Asian suppliers.
The U.S. government has been slow to implement a comprehensive energy policy
which would support the wind industry. During 2009 and 2010, deferrals of
turbine orders were common practice, and most manufacturers have pushed prior
year orders out into future years. These orders need to be absorbed by projects
before customers are in a position to generate meaningful new orders; thus, the
U.S. wind sector will experience a reversal in its growth pattern during 2010.
Signs of improvement are evident in the sector with some new order announcements
in recent months. Market forecasts have been revised downward and most of the
negative news flow has been discounted already, according to consensus in the
market.
Certain international wind turbine markets have continued to show promise, with
South America (especially Brazil), Mexico, Eastern Europe, South America and
Australia presenting significant new sales opportunities. As mentioned
previously, Clipper has expanded its sales force and refocused its attention
towards these new regions with the help of PWPS, resulting in a majority of new
sales proposals being targeted to markets outside the U.S.
We are optimistic about the potential for robust growth in wind that with
sufficient level of catalysts-- such as legislative support and extension of
PTC-- should enable a rebound in the U.S. sector.
Clipper Outlook - Positive Momentum
The game changing partnership and collaboration with UTC and expanded market
coverage outside the U.S. provides substantiation to Clipper's view that it is
on the right path. Our financial results are consistently improving and are on
plan. Clipper turbines are proving ever more reliable at performance levels
that meet or exceed industry standards. UTC collaboration on sales, technology,
and warranty support for certain new turbine sales enable the Company to compete
on a level similar to other Tier One suppliers.
We would like to thank all of the Clipper employees for their dedication and
hard work for a successful first half 2010. We all have many reasons to be
positive about the future as we usher in a new phase of growth with the
potential of Clipper to rise to the highest levels of the wind industry.
James G.P. Dehlsen Mauricio
Quintana
Chairman of the Board of Directors President
and Chief Executive Officer
Financial Review
Results for the six month periods ended June 30, 2010 and June 30, 2009 are
un-audited. The results for the year ended December 31, 2009 have been
extracted from the statutory financial statements of Clipper Windpower Plc ("the
Company") and subsidiaries (together, the "Group", or "Clipper").
Financial Summary
Revenue for the six months ended June 30, 2010 was $154.0 million, primarily
from the sale of 43 turbines, compared to revenue for the six months ended June
30, 2009 of $357.3 million, primarily from the sale of 127 turbines. In the
current period, turbines were delivered to three separate customer sites in the
United States and Mexico. Revenue for the first half of 2010 met projections as
management anticipated lower volume in the first half of 2010 as compared to the
same period in 2009.
The net loss for the six months ended June 30, 2010 and 2009 was $26.7 million
and $120.2 million, respectively. Results include net remediation and warranty
costs, for the six months ended June 30, 2010 and 2009 of $21.0 million and
$74.2 million, respectively (Notes 5 and 14).
Results of Operations
Cost of sales were $147.6 million and $438.8 million, a decrease of $291.2
million for the period ended June 30, 2010 as compared to the period ended June
30, 2009. The decrease in cost of sales of $291.2 million is due to 84 fewer
turbines sold and $75.7 million lower remediation and related costs (Note 5).
Cost of sales includes net remediation and warranty costs for the six months
ended June 30, 2010 and 2009 of $21.0 million and $74.2 million, respectively.
Remediation and related costs, excluding warranty costs (Note 5), were $8.0
million of net cost recoveries for remediation and related costs for the period
ended June 30, 2010 versus $67.7 million of remediation and related costs for
the period ended June 30, 2009. Total cost of sales excluding remediation
recoveries and costs for the six months ended June 30, 2010 and 2009, was $155.6
million and $371.1 million, respectively. For the first half of 2010,
remediation and related expenses include a $2.8 million net cost recovery in
turbine and blade remediation costs, primarily from the settlement of quality
disputes with a key blade vendor, and a $5.2 million net cost recovery primarily
attributed to a reduction in previously provided liquidated damages due to
achievement of higher turbine availability levels than previously estimated.
For the first half of 2009, remediation and related costs included $41.2 million
primarily related to gearbox and blade skin remediation, $21.1 million in
liquidated damages under turbine sales contracts for turbine availability, and
$5.4 million for inventory write downs and other associated warranty costs (Note
5).
Gross margin was $6.4 million, or 4.2% of sales, for the period ended June 30,
2010 compared to negative gross margin of $81.5 million, or negative 23.0% of
sales, for the six months ended June 30, 2009. Excluding remediation and
related costs, gross margin contribution was a negative $1.6 million, or less
than 1.0% of sales, for the period ended June 30, 2010 as compared to negative
gross margins of $13.8 million, negative 3.9% of sales, for the period ended
June 30, 2009. The gross margin improvement, excluding remediation and related
costs over the comparable periods, is primarily due to better turbine pricing,
partially offset by higher plant costs, resulting from less overhead absorption
on lower production volume.
Project development costs include costs associated with identifying potential
turbine project sites, securing land rights, and pursuing various permits and
studies. Project development costs decreased from $6.3 million for the six
months ended June 30, 2009 to $5.8 million for the comparable current period in
2010 due to slightly lower overall development activities in the current period
versus the prior.
Product research and development costs were $10.2 million in the current period
compared to $12.1 million for the six months ended June 30, 2009. The $1.9
million decrease for the six months ended June 30, 2010 as compared to the prior
period is mostly timing and due in large part to phased annual spending for the
Company's 10 MW offshore, and the next generation onshore, wind turbine.
Administrative expenses were $22.4 million in the current period compared to
$18.2 million for the six month period ended June 30, 2009. The $4.2 million
increase from the prior period was primarily due to $4.5 million in employee
separation costs in the first half of 2010. At June 30, 2010, Clipper's
employee count was 770 as compared to 748 at June 30, 2009. The main reason for
the increase in headcount is less use of contracted labor in favor of additional
internal labor in the installation, commissioning, and field maintenance service
operations for the six months ended June 30, 2010 as compared to the six months
ended June 30, 2009.
Share of loss from joint ventures improved by $1.9 million from a loss of $2.4
million for the six months ended June 30, 2009, to a loss of $0.5 million for
the six months ended June 30, 2010, due primarily to the sale or divestiture of
several Clipper's joint ventures in the second half of 2009. The gain of $1.0
million on profit on sale of subsidiary undertakings for the six months ended
June 30, 2010, is due to the sale of Clipper's remaining interest in a wind
development project company for a potential 80 MW project in Mexico.
Foreign exchange gains were $5.1 million for the six months ended June 30, 2010,
versus nil in the prior period ended June 30, 2009. The foreign exchange gains
are primarily due to the strengthening of the U.S. dollar versus British Pound
Sterling associated with U.S. dollar denominated investments held in the United
Kingdom.
Balance Sheet
Inventories totaled $178.3 million at June 30, 2010, compared to $167.8 million
at December 31, 2009. The increase in inventory is not significant and
represents future order fulfillment timing differences. The $178.3 million
inventory balance at June 30, 2010 includes $4.4 million in development projects
compared to $5.1 million at December 31, 2009.
Prepaid inventory totaled $19.9 million at June 30, 2010, compared to $13.9
million as of December 31, 2009, an increase of $6.0 million. This increase is
primarily due to additional advance payments to certain long lead time suppliers
prior to the shipment of components, primarily for blades and towers.
Trade receivables were $28.9 million and $48.8 million for the periods ended
June 30, 2010, and December 31, 2009, respectively, and represent amounts due
from customers for turbines sold and project cost reimbursement. The decrease is
primarily driven by lower volume during the first six months of 2010 compared to
December 31, 2009 and the collection of customer retentions as Clipper completed
its remediation activities during the first half of 2010.
Unrestricted cash on hand at June 30, 2010, was $139.9 million compared to $49.9
million at December 31, 2009. The increase was primarily due to the $206
million cash received from UTC for its subscription for shares in the Company as
discussed in the 2009 annual report, offset by cash outflows from operating
activities for the first six months of 2010 of $100.5 million.
Deferred revenue represents turbine sale deposits received from customers. The
current portion of deferred revenue totaled $258.9 million at June 30, 2010,
compared to $316.2 million at December 31, 2009. Non-current deferred revenue
totaled $103.6 million at June 30, 2010, compared to $117.7 million as of
December 31, 2009. The $71.4 million combined decrease since December 31, 2009,
was due to turbines delivered and revenue recognized in excess of new deposits
received during the first six months of 2010.
Note 1 to the financial information sets out the Directors' consideration of the
risks and uncertainties that could affect the Group's forecast cash flows. The
Directors have concluded that a combination of those risks and uncertainties
represent a material uncertainty that casts significant doubt upon the Group's
ability to continue as a going concern. Nevertheless, after making enquiries,
reviewing forecast cash flows and considering those uncertainties, the Directors
have a reasonable expectation that the Group has adequate resources and
operating flexibilities to continue in operational existence for the foreseeable
future. For those reasons the Group continues to adopt the going concern basis
in preparing the interim financial information.
This announcement was approved by the Board of Directors on September 29, 2010.
The ordinary shares of Clipper Windpower Plc are traded on AIM, a market
operated by the London Stock Exchange, and are not registered under the U.S.
Securities Act of 1933, as amended. 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 the Regulation S
as promulgated under the Securities Act of 1993, unless such shares have been
registered under the Securities Act or there is an available exemption from
registration.
Clipper Windpower Plc
Condensed Consolidated Statement of Comprehensive Income
+----------------------------+--------+------------+-------------+--+-------------+----------+
| | | Unaudited | | Audited | |
+----------------------------+--------+--------------------------+--+-------------+----------+
| | | Six months | | Year | |
| | | ended | | ended | |
+----------------------------+--------+--------------------------+--+-------------+----------+
| | | June 30, | | December | |
| | | | | 31, | |
+----------------------------+--------+--------------------------+--+-------------+----------+
| | Notes | 2010 | 2009 | | 2009 | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| | | (Dollars in thousands, | |
| | | except per share amount) | |
+----------------------------+--------+-------------------------------------------+----------+
| Revenue | 4 | $153,994 | $ | | $ | |
| | | | 357,258 | | 743,499 | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Cost of sales | 5 | (147,561) | (438,804) | | (906,509) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Gross margin | | 6,433 | (81,546) | | (163,010) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Project development | | (5,844) | (6,302) | | (12,433) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Research and development | | (10,184) | (12,107) | | (24,461) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Administrative expense | | (22,392) | (18,213) | | (36,500) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Share of loss from joint | | (461) | (2,449) | | (3,071) | |
| ventures | | | | | | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Profit/(loss) on sale of Group | 1,000 | - | | (2,846) | |
| interests | | | | | |
+-------------------------------------+------------+-------------+--+-------------+----------+
| Operating loss | | (31,448) | (120,617) | | (242,321) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Foreign exchange | | 5,113 | (34) | | (150) | |
| gain/(loss) | | | | | | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Finance income | | 192 | 527 | | 1,124 | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Finance costs | | (330) | (77) | | (224) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Other income | | 240 | - | | - | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Loss before tax | | (26,233) | (120,201) | | (241,571) | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Income tax | | (489) | (3) | | 146 | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Loss and comprehensive | | $(26,722) | $(120,204) | | $(241,425) | |
| loss for the period | | | | | | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| | | | | | | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
| Loss per share ($/share) | 6 | $ | $(0.92) | | $(1.86) | |
| basic and diluted | | (0.13) | | | | |
+----------------------------+--------+------------+-------------+--+-------------+----------+
Clipper Windpower Plc
Condensed Consolidated Balance Sheet
+-----------------------+-------+--+----------+-----+-------+---+---------------------+
| | | | | | | | |
| | | | | | | | |
+-----------------------+-------+--+----------+-----+-------+---+---------------------+
| | | | Unaudited | Audited |
+-----------------------+-------+-------------+-------------+-------------------------+
| | | | As of | As of |
| | | | June 30, | December |
| | | | | 31, |
+-----------------------+-------+-------------+-------------+-------------------------+
| |Notes | | 2010 | | 2009 | | 2009 |
+-----------------------+-------+--+----------+-----+-------+---+---------------------+
| | | (Dollars in thousands) |
+-----------------------+-------+-----------------------------------------------------+
| Non-current assets | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Intangible assets, | | $ 2,359 | $ | | $ |
| net | | | 1,518 | | 1,912 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Property, plant and | | 37,213 | 39,599 | | 41,101 |
| equipment, net | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Other investments | | - | 15,515 | | - |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Investment in joint | | 1,014 | 2,372 | | 1,475 |
| ventures | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Other assets | | 10,437 | 16,596 | | 10,537 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Non-current assets | | 51,023 | 75,600 | | 55,025 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Current assets | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Inventories | 7 | 178,309 | 455,959 | | 167,750 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Trade and other | | 28,905 | 91,949 | | 48,789 |
| receivables, net | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Prepaid inventory | | 19,859 | 34,494 | | 13,867 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Other current assets | | 18,394 | 12,366 | | 19,096 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Cash | | 139,929 | 105,844 | | 49,910 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Current assets | | 385,396 | 700,612 | | 299,412 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Total assets | | 436,419 | 776,212 | | 354,437 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Current liabilities | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Deferred revenue | 8 | 258,857 | 538,804 | | 316,247 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Trade and other | | 113,617 | 131,143 | | 97,273 |
| payables | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Provisions | 14 | 71,772 | 122,897 | | 100,222 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Notes payable | 9 | | 20,000 | | - | | 20,000 |
+-----------------------+-------+--+----------+-----+-------+---+---------------------+
| Income tax payable | | 2,854 | 2,634 | | 2,544 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Obligations under | | 290 | 236 | | 309 |
| finance leases | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Total current | | 467,390 | 795,714 | | 536,595 |
| liabilities | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Non-current | | | | | |
| liabilities | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Deferred revenue | 8 | 103,607 | 154,029 | | 117,666 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Provisions | 14 | 32,446 | 23,927 | | 36,145 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Note payable | 9 | - | 20,000 | | - |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Obligations under | | 400 | 283 | | 543 |
| finance leases | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Other non-current | | 898 | 595 | | 627 |
| liabilities | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Total liabilities | | 604,741 | 994,548 | | 691,576 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Net liabilities | | $ | $ | | $ |
| | | (168,322) | (218,336) | | (337,139) |
+-----------------------+-------+-------------+-------------+---+---------------------+
| | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| (Deficit) / Equity | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Share capital | 10 | 37,716 | 24,078 | | 24,115 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Share premium | | 575,306 | 374,671 | | 374,890 |
| account | | | | | |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Reserves | | 47,726 | 64,032 | | 66,204 |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Retained loss | | (829,070) | (681,117) | | (802,348) |
+-----------------------+-------+-------------+-------------+---+---------------------+
| Total | | $ | $ | | $(337,139) |
| (deficit)/equity | | (168,322) | (218,336) | | |
+-----------------------+-------+--+----------+-----+-------+---+---------------------+
Clipper Windpower Plc
Condensed Consolidated Statement of Cash Flows
+------------------------------------------+---------------------------------+---------------------------------+
| | | Unaudited |
+------------------------------------------+---------------------------------+---------------------------------+
| | | Six months |
| | | ended |
+------------------------------------------+---------------------------------+---------------------------------+
| | | June 30, |
+------------------------------------------+---------------------------------+---------------------------------+
| | | |
+------------------------------------------+---------------------------------+---------------------------------+
| | 2010 | 2009 |
+------------------------------------------+---------------------------------+---------------------------------+
| | (Dollars in thousands) |
+------------------------------------------+-------------------------------------------------------------------+
| CASH FLOWS FROM OPERATING ACTIVITIES | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Loss After Tax | $ | $ |
| | (26,722) | (120,204) |
+------------------------------------------+---------------------------------+---------------------------------+
| Depreciation and amortization | 6,106 | 6,704 |
+------------------------------------------+---------------------------------+---------------------------------+
| Loss on disposal of assets | 106 | 180 |
+------------------------------------------+---------------------------------+---------------------------------+
| Non cash gain for vendor/customer | (6,923) | |
| settlements | | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Share-based compensation | 3,766 | 2,217 |
+------------------------------------------+---------------------------------+---------------------------------+
| (Gain)/loss from joint ventures | (539) | 2,449 |
+------------------------------------------+---------------------------------+---------------------------------+
| Changes in assets and liabilities | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Decrease in trade and other | 7,120 | 5,596 |
| receivables | | |
+------------------------------------------+---------------------------------+---------------------------------+
| (Increase)/decrease in inventory | (16,889) | 101,487 |
+------------------------------------------+---------------------------------+---------------------------------+
| Increase in other current assets | (2,541) | (1,039) |
+------------------------------------------+---------------------------------+---------------------------------+
| Increase in trade and other | 23,843 | 5,899 |
| payables | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Decrease in provisions | (17,055) | (8,932) |
+------------------------------------------+---------------------------------+---------------------------------+
| Decrease in deferred revenue | (71,448) | (109,705) |
+------------------------------------------+---------------------------------+---------------------------------+
| Increase in income taxes payable | 139 | 475 |
+------------------------------------------+---------------------------------+---------------------------------+
| Increase in other long-term assets | 100 | 23 |
+------------------------------------------+---------------------------------+---------------------------------+
| Increase/(decrease) in other | 271 | (985) |
| long-term liabilities | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Interest paid | (240) | (113) |
+------------------------------------------+---------------------------------+---------------------------------+
| Interest received | 243 | 361 |
+------------------------------------------+---------------------------------+---------------------------------+
| Income taxes paid | 170 | |
| | | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Net cash used by operating activities | (100,493) | (115,587) |
+------------------------------------------+---------------------------------+---------------------------------+
| | | |
+------------------------------------------+---------------------------------+---------------------------------+
| CASH FLOWS FROM INVESTING ACTIVITIES | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Proceeds from sale of group interests | 1,000 | |
| | | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Proceeds from sale of development assets | 2,512 | |
| held for sale | | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Purchase of wind assets under | (1,259) | (1,514) |
| development | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Purchase of intangible assets | (274) | (345) |
+------------------------------------------+---------------------------------+---------------------------------+
| Purchase of property, plant, and | (3,166) | (3,946) |
| equipment | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Net cash used by investing activities | (1,187) | (5,805) |
+------------------------------------------+---------------------------------+---------------------------------+
| | | |
+------------------------------------------+---------------------------------+---------------------------------+
| CASH FLOWS FROM FINANCING ACTIVITIES | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Proceeds from the issuance of shares | 206,205 | |
| | | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Costs of share issuance | (9,081) | |
| | | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Cost of warrants settled | (703) | |
| | | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Capital element of finance lease | (75) | (111) |
| payments | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Proceeds from note payable | | 20,000 |
| | - | |
+------------------------------------------+---------------------------------+---------------------------------+
| Proceeds from the exercise of share | 31 | 15 |
| options | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Net cash provided by financing | 196,377 | 19,904 |
| activities | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Net increase/(decrease) in cash and cash | 94,697 | (101,488) |
| equivalents | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Cash and cash equivalents, beginning of | 49,910 | 208,988 |
| period | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Impact of foreign exchange rates | (4,678) | (1,656) |
+------------------------------------------+---------------------------------+---------------------------------+
| Cash and cash equivalents, end of period | $ | $ |
| | 139,929 | 105,844 |
+------------------------------------------+---------------------------------+---------------------------------+
| | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Non cash transactions: | | |
+------------------------------------------+---------------------------------+---------------------------------+
| Liquidating damages and other | $ | $ |
| liabilities settlements | 15,094 | - |
+------------------------------------------+---------------------------------+---------------------------------+
| Accounts receivable and other assets | $ | $ |
| settlements | 15,094 | - |
+------------------------------------------+---------------------------------+---------------------------------+
Clipper Windpower Plc
Condensed Consolidated Statement of Equity
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| | Share | Share |Revaluation | Other | Foreign | Retained | Total |
| | capital | premium | reserve |reserves | currency | earnings | equity |
| | | | | (Note |translation | | |
| | | | | 11) | reserve | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| | (Dollars in thousands) |
+--------------------+----------------------------------------------------------------------------------------+
| Balance at January | $ | $ | $ | $ | $ | $ | $(99,360) |
| 1, 2009 | 24,076 | 374,655 | 265 | 61,693 | 874 | (560,923) | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Net loss for the | - | - | - | - | - | (120,204) | (120,204) |
| period | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Exchange | - | - | - | - | (703) | - | (703) |
| differences | | | | | | | |
| arising on | | | | | | | |
| translation of | | | | | | | |
| foreign currency | | | | | | | |
| recognized | | | | | | | |
| directly in equity | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Employee share | | | | | | | |
| option scheme: | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Exercise of | 2 | 16 | - | - | - | 10 | 28 |
| options | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Issuance of | - | - | - | 1,903 | - | - | 1,903 |
| options | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Balance at June | 24,078 | 374,671 | 265 | 63,596 | 171 | (681,117) | (218,336) |
| 30, 2009 | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Net loss for the | - | - | - | - | - | (121,221) | (121,221) |
| period | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Exchange | - | - | - | - | 219 | - | 219 |
| differences | | | | | | | |
| arising on | | | | | | | |
| translation of | | | | | | | |
| foreign currency | | | | | | | |
| recognized | | | | | | | |
| directly in equity | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Sale of joint | - | - | (265) | - | - | - | (265) |
| venture | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Employee share | | | | | | | - |
| option scheme: | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Exercise of | 37 | 219 | - | - | - | (10) | 246 |
| options | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Issuance of | - | - | - | 2,218 | - | - | 2,218 |
| options | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Balance at | 24,115 | 374,890 | - | 65,814 | 390 | (802,348) | (337,139) |
| December 31, 2009 | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Net loss for the | - | - | - | - | - | (26,722) | (26,722) |
| period | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Exchange | - | - | - | - | (4,678) | - | (4,678) |
| differences | | | | | | | |
| arising on | | | | | | | |
| translation of | | | | | | | |
| foreign currency | | | | | | | |
| recognized | | | | | | | |
| directly in equity | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Issuance of shares | 13,593 | 192,612 | - | - | - | - | 206,205 |
| from private | | | | | | | |
| placement | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Less: cost of | - | (9,081) | - | - | - | - | (9,081) |
| share issuance and | | | | | | | |
| warrants retired | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Warrants settled | - | 16,862 | - | (17,565) | - | - | (703) |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Employee share | | | | | | | |
| option scheme: | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Exercise of | 8 | 23 | - | - | - | - | 31 |
| options | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Issuance of | - | - | - | 3,765 | - | - | 3,765 |
| options | | | | | | | |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
| Balance at June | $ | $ | $ | $52,014 | $(4,288) | $ | $ |
| 30, 2010 | 37,716 | 575,306 | - | | | (829,070) | (168,322) |
+--------------------+----------+------------+-------------+----------+-------------+------------+------------+
1. Basis of Preparation
The consolidated results of Clipper Windpower Plc for the six months ended June
30, 2010 have been prepared in accordance with IAS 34 Interim Financial
Reporting, and using accounting policies consistent with International Financial
Reporting Standards (IFRS) adopted for use in the European Union.
The information for the year ended December 31, 2009 does not constitute
statutory accounts as defined in section 435 of the Companies Act 2006. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors' report on those accounts was not qualified, did not
draw attention to any matters by way of emphasis, and did not contain statements
under section 498(2) or (3) of the UK Companies Act of 2006.
This interim report was approved by the Board of Directors on September 29,
2010. The interim report is unaudited but has been reviewed by the auditors
whose report is set out at the end of this document.
Going Concern
The global economic and credit crisis has materially impacted the availability
of financing for wind projects, causing many of the Group's customers to reduce
capital expenditures, delay projects, and defer turbine deliveries under
existing contracts. Further, in the United States, project developers and
electric utilities dramatically reduced new orders for turbines, and the lower
prices for oil, natural gas, and coal have contributed to lower prices for power
purchase agreements. These conditions now appear to be stabilizing at reduced
levels from prior years.
The Group expects that it could face an adverse impact on its projected cash
flows due to timing and lower receipts of deposits and progress payments from
customers expected under new and existing orders, in comparison to the operating
cash needed to complete these orders and fund operations.
The Group has historically met its operating capital requirements with equity
capital provided by institutional and strategic investors and from deposits and
progress payments made by customers on contracts for future turbine deliveries.
The Group has only $20 million of funded debt, but has significant obligations
to (i) its customers under agreements for future deliveries and warranty and
performance obligations; and (ii) its vendors and suppliers for services
performed and for components purchased.
The Group's consolidated unrestricted cash position of $139.9 million at June
30, 2010 has decreased to approximately $85 million at the end of September 2010
due to cash spending to fund the operating and capital needs of the Group,
including increased purchases of components for the manufacture of turbines
scheduled for delivery in the current year combined with lower deposits from new
and existing orders.
In addition to broadening its marketing and sales reach to markets outside the
U.S., the Group has been actively seeking additional sources of capital. The
Group has explored numerous alternatives to raise capital including private and
public equity issuances and working capital credit lines with third party
financial institutions or with its largest shareholder, UTC. Discussions with
UTC have ranged from providing credit support for a working capital facility to
equity purchases. During these discussions, UTC submitted to Clipper a
non-binding indication of interest to acquire all of the ordinary shares of the
Group not currently owned by UTC. The indication of interest was conditional on
completion of confirmatory due diligence and other substantive terms and
conditions. The Board comprising the non-UTC appointed Directors ("Non-UTC
Directors") retained financial and legal advisors to advise the Non-UTC
Directors onstrategic and financing options for the Group, including any
potential transaction with UTC.
The Group and the Non-UTC Directors are continuing discussions with UTC
regarding their possible offer for the Group, however, there is no assurance
these discussions will result in a proposal that the Non-UTC Directors believe
is appropriate to recommend to the Group's shareholders. The Group is also
pursuing other strategic initiatives and financing options and believes that it
will be possible to reach agreement on the terms of a possible offer or new
financing arrangements.
Management has prepared operating plans and projections for the foreseeable
future which show that while the Group's resources and operating flexibilities
may be adequate, there are risks and uncertainties which mean that additional
funding could be necessary. The principal sources of projected cash inflows
are: contractual receipts from customers on existing turbine contracts (both for
delivered turbines and turbines planned for future delivery); receipts from
expected new orders not yet contracted; and sales of one or more development
sites. The Group maintains ongoing dialogue with existing customers to ensure
that contractual payments from customers are received in a timely manner and, in
situations where payments are dependent on other activities, that such
activities are tracking to plan. The Group is in advanced negotiations for
sales of one or more development assets, including related turbine sales
agreements. However, until such transactions are completed, there can be no
assurance as to the terms and timing of such transactions.
The Directors have concluded that, in the absence of an acceptable binding offer
for the remaining shares in the Company by UTC, or agreement on another
substantive new financing transaction at this time, the current business
circumstances create a material uncertainty that casts significant doubt on the
Group's ability to continue as a going concern. Therefore the Group may be
unable to realize its assets and discharge its liabilities in the normal course
of business. However, in light of the ongoing active discussions with UTC and
other institutional capital providers, and after making enquiries, reviewing
forecast cash flows and considering uncertainties described above, the Directors
have a reasonable expectation that the Group has adequate resources and
operating flexibilities to continue preparing its financial statements on a
going concern basis.
2. Accounting Policies
The accounting policies are consistent with those adopted in the preparation of
the Group's annual financial statements for the year ended December 31, 2009.
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 2010 and 2009
the Group's only material geographic segment was North America.
+--+------------------------+-------------+---------------+-----------+------------+
| | | Turbine | | |
| | Wind | technology | | |
| | project | and | | |
| | development | manufacturing | Corporate | Total |
+---------------------------+-------------+---------------+-----------+------------+
| | | (Dollars in thousands) |
+--+------------------------+------------------------------------------------------+
| Six months ended June 30, | | | | |
| 2010 | | | | |
+---------------------------+-------------+---------------+-----------+------------+
| | | | | |
| Income statement | | | | |
+---------------------------+-------------+---------------+-----------+------------+
| | - Revenue | 1,014 | 152,980 | - | 153,994 |
+--+------------------------+-------------+---------------+-----------+------------+
| | - Net loss after tax | (4,315) | (4,629) | (17,778) | (26,722) |
+--+------------------------+-------------+---------------+-----------+------------+
| | - Recovery of | - | 7,953 | - | 7,953 |
| | remediation and | | | | |
| | related expenses | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
| Non-cash items: | | | | |
+---------------------------+-------------+---------------+-----------+------------+
| | - Depreciation and | 353 | 5,200 | 715 | 6,268 |
| | amortization | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
| | - Share based | 182 | 190 | 3,393 | 3,765 |
| | payments | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
| | | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
| Six months ended June 30, | | | | |
| 2009 | | | | |
+---------------------------+-------------+---------------+-----------+------------+
| | | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
| Income statement | | | | |
+---------------------------+-------------+---------------+-----------+------------+
| | - Revenue | 661 | 355,748 | 849 | 357,258 |
+--+------------------------+-------------+---------------+-----------+------------+
| | - Net loss after tax | (8,208) | (94,121) | (17,875) | (120,204) |
+--+------------------------+-------------+---------------+-----------+------------+
| | - Provision for | - | (67,700) | - | (67,700) |
| | remediation and | | | | |
| | related expenses | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
| Non-cash items: | | | | |
+---------------------------+-------------+---------------+-----------+------------+
| | - Depreciation and | 511 | 5,526 | 667 | 6,704 |
| | amortization | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
| | - Share based | 254 | 354 | 1,295 | 1,903 |
| | payments | | | | |
+--+------------------------+-------------+---------------+-----------+------------+
The revenue recorded in the wind project development and turbine technology and
manufacturing segments was generated from external customers located in North
America.
4. Revenue and Income
The Group recorded the following categories of revenue:
+---------------------------------+---------+---------+--+----------+
| | Six months | | Year |
| | ended June 30, | | ended |
| | | | December |
| | | | 31, |
+---------------------------------+-------------------+--+----------+
| | 2010 | 2009 | | 2009 |
+---------------------------------+---------+---------+--+----------+
| | | (Dollars in |
| | | thousands) |
+---------------------------------+---------+-----------------------+
| Sale of turbines and | $ | $ | | $ |
| construction assets | 141,833 | 347,571 | | 721,102 |
+---------------------------------+---------+---------+--+----------+
| Warranty revenue | 1,252 | 6,068 | | 11,490 |
+---------------------------------+---------+---------+--+----------+
| Turbine service revenue | 9,349 | 2,155 | | 6,499 |
+---------------------------------+---------+---------+--+----------+
| Development revenue | 1,014 | 525 | | 980 |
+---------------------------------+---------+---------+--+----------+
| Other revenue | 546 | 939 | | 3,428 |
+---------------------------------+---------+---------+--+----------+
| Total revenue | $ | $ | | $ |
| | 153,994 | 357,258 | | 743,499 |
+---------------------------------+---------+---------+--+----------+
5. Remediation Related Provisions
During the six month period ended June 30, 2010, there were significant year
over year reductions in charges for remediation and related costs, primarily for
remediation of supplier quality issues. These costs are summarized below:
+-----------------------------+------------+-----------+-+-----------+
| | | | | |
+-----------------------------+------------+-----------+-+-----------+
| | | | Year |
| | Six months ended | | ended |
| | June 30, | | December |
| | | | 31, |
+-----------------------------+------------------------+-+-----------+
| | 2010 | 2009 | | 2009 |
+-----------------------------+------------+-----------+-+-----------+
| | (Dollars in thousands) |
+-----------------------------+--------------------------------------+
| | | | | |
+-----------------------------+------------+-----------+-+-----------+
| Inventory write down for | $ | $ | | $ |
| loss making contracts | - | 1,031 | | 11,856 |
+-----------------------------+------------+-----------+-+-----------+
| Provision for turbine and | (2,769) | 41,221 | | 82,555 |
| blade remediation | | | | |
+-----------------------------+------------+-----------+-+-----------+
| Provision for inventory | - | 4,328 | | 7,319 |
| obsolescence | | | | |
+-----------------------------+------------+-----------+-+-----------+
| Provision for liquidated | (5,184) | 21,120 | | 22,228 |
| damages | | | | |
+-----------------------------+------------+-----------+-+-----------+
| Total provisions for | $(7,953) | $ | | $123,958 |
| non-standard warranty | | 67,700 | | |
| expenses | | | | |
+-----------------------------+------------+-----------+-+-----------+
The provision for loss making contracts relates to wind projects for which costs
will exceed contractual economic benefit. The provision for turbine remediation
relates to costs to repair blades, towers, and gearboxes on wind turbines at
customer sites and held in inventories. The remediation for turbine amount for
the six months ended June 30, 2010 represents a net cost recovery resulting
primarily from a $7.6 million settlement with a key blade vendor. The provision
for inventory obsolescence pertains to the difference between inventory's
carrying value and net realizable value of certain un-certified products. The
accrual for liquidated damages is for contractual penalties arising from the
late delivery of turbines and related performance guaranties on certain
contracts, mostly attributable to turbine downtime caused by the remediation
programs described above. The liquidated damages provision recovery for the six
months ended June 30, 2010 is the result of the improving trend in turbine
availability resulting in recoveries against prior year provisions due to
favorable settlements with certain turbine customers.
6. Loss Per Share
+--------------------------+----------------+----------------+--+-------------------+
| | Six months ended | | Year |
| | June 30, | | Ended |
| | | | December |
| | | | 31, |
+--------------------------+---------------------------------+--+-------------------+
| | 2010 | 2009 | | 2009 |
+--------------------------+----------------+----------------+--+-------------------+
| Loss | | | | |
+--------------------------+----------------+----------------+--+-------------------+
| Loss for the purpose of | $ | $ | | $ |
| basic and diluted loss | (26,722) | (120,204) | | (241,425) |
| per share ($'000s) | | | | |
+--------------------------+----------------+----------------+--+-------------------+
| Number of shares | | | | |
+--------------------------+----------------+----------------+--+-------------------+
| Weighted average number | 209,038,753 | 130,052,252 | | 130,080,875 |
| of ordinary shares for | | | | |
| the purpose of basic and | | | | |
| diluted loss per share | | | | |
+--------------------------+----------------+----------------+--+-------------------+
| | | | | |
+--------------------------+----------------+----------------+--+-------------------+
| Basic and diluted loss | $ | $ | | $ |
| per share | (0.13) | (0.92) | | (1.86) |
+--------------------------+----------------+----------------+--+-------------------+
Unexercised share options and warrants to purchase 7,529,223 shares, 18,948,535
shares and 19,683,263 shares for the six months ended June 30, 2010 and June 30,
2009 and the year ended December 31, 2009, respectively, were not included in
the computation of basic and diluted EPS because the exercise of the options and
warrants would be anti-dilutive.
7. Inventories
+--------------------------+-----------+-----------+----------+--------------+
| | As of June 30, | | Year-end |
| | | | December 31, |
+--------------------------+-----------------------+----------+--------------+
| | 2010 | 2009 | | 2009 |
+--------------------------+-----------+-----------+----------+--------------+
| | | (Dollars in thousands) |
+--------------------------+-----------+-------------------------------------+
| Raw materials and | $90,419 | $ | | $ 98,135 |
| components | | 276,702 | | |
+--------------------------+-----------+-----------+----------+--------------+
| Less reserves | (16,018) | (29,917) | | (16,535) |
+--------------------------+-----------+-----------+----------+--------------+
| Net | 74,401 | 246,785 | | 81,600 |
+--------------------------+-----------+-----------+----------+--------------+
| | | | | |
+--------------------------+-----------+-----------+----------+--------------+
| Completed assembly | 20,327 | 61,178 | | 40,842 |
+--------------------------+-----------+-----------+----------+--------------+
| Less reserves | - | - | | - |
+--------------------------+-----------+-----------+----------+--------------+
| Net | 20,327 | 61,178 | | 40,842 |
+--------------------------+-----------+-----------+----------+--------------+
| | | | | |
+--------------------------+-----------+-----------+----------+--------------+
| Inventory at project | 83,581 | 149,616 | | 46,951 |
| sites | | | | |
+--------------------------+-----------+-----------+----------+--------------+
| Less reserves | - | (1,620) | | (1,643) |
+--------------------------+-----------+-----------+----------+--------------+
| Net | 83,581 | 147,996 | | 45,308 |
+--------------------------+-----------+-----------+----------+--------------+
| | | | | |
+--------------------------+-----------+-----------+----------+--------------+
| Total net inventory | $ | $ | | $ 167,750 |
| | 178,309 | 455,959 | | |
+--------------------------+-----------+-----------+----------+--------------+
There is no material difference between the balance sheet value of inventories
and its replacement cost.
8. Deferred Revenue
+------------------------------+------------+-------------+------------+
| | Current | Non-current | Total |
+------------------------------+------------+-------------+------------+
| | (Dollars in thousands) |
+------------------------------+---------------------------------------+
| December 31, 2008 | $ | $ | $ |
| | 668,085 | 134,458 | 802,543 |
+------------------------------+------------+-------------+------------+
| Customer deposits received | 179,750 | 19,571 | 199,321 |
+------------------------------+------------+-------------+------------+
| Recognized as revenue in the | (309,031) | - | (309,031) |
| period | | | |
+------------------------------+------------+-------------+------------+
| June 30, 2009 | 538,804 | 154,029 | 692,833 |
+------------------------------+------------+-------------+------------+
| Customer deposits received | 141,279 | (3,540) | 137,739 |
+------------------------------+------------+-------------+------------+
| Recognized as revenue in the | (363,836) | (32,823) | (396,659) |
| period | | | |
+------------------------------+------------+-------------+------------+
| December 31, 2009 | 316,247 | 117,666 | 433,913 |
+------------------------------+------------+-------------+------------+
| Customer deposits received | 83,783 | (14,059) | 69,724 |
+------------------------------+------------+-------------+------------+
| Recognized as revenue in the | (141,173) | - | (141,173) |
| period | | | |
+------------------------------+------------+-------------+------------+
| June 30, 2010 | $ | $ | $ |
| | 258,857 | 103,607 | 362,464 |
+------------------------------+------------+-------------+------------+
Customer deposits received reflect receipt of contractually-required advance
deposits to order turbines and milestone receipts for progress on delivery and
commissioning of turbines. The Group uses such receipts to order components and
fund operations to manufacture and deliver turbines ordered.
Negative additions represent a transfer of deferred revenue from non-current to
current.
9. Note Payable
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. In accordance with the agreement as
amended on June 30, 2010, Clipper expects to decrease the loan principal by an
amount equal to the remaining milestone payments due on certain wind turbines
expected to be delivered prior to December 31, 2010.
10. Share Capital
In January 2010, Clipper received $206.2 million gross cash proceeds in
consideration for approximately 84.3 million new ordinary equity shares issued
to UTC on January 12, 2010 at a subscription price of GBP1.50 per share,
representing a stake of approximately 39% of the issued and outstanding capital
of the Company. In addition, UTC purchased shares directly from public
shareholders resulting in total ownership of 49.9%. During the period ended June
30, 2010, the number of shares issued as a result of options exercised was
30,000 ordinary shares (six months ended June 30, 2009: 13,000 ordinary shares
and year ended December 31, 2009: 239,893 ordinary shares). The total
consideration received from the exercise of these options was $30,600 (six
months ended June 30, 2009: $28,000 and December 31, 2009: $0.3 million).
+---------------------------------+-------------+-------------+--+-------------+
| | As of June | | As of |
| | 30, | | December |
| | | | 31, |
+---------------------------------+---------------------------+--+-------------+
| | 2010 | 2009 | | 2009 |
+---------------------------------+-------------+-------------+--+-------------+
| Authorized | | | | |
+---------------------------------+-------------+-------------+--+-------------+
| Ordinary shares (10 pence each | 220,000,000 | 165,000,000 | | 220,000,000 |
| par value) | | | | |
+---------------------------------+-------------+-------------+--+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--+-------------+
| Allotted, called up and fully | | | | |
| paid | | | | |
+---------------------------------+-------------+-------------+--+-------------+
| 214,651,293 ordinary shares of | $ | $ | | $ |
| 10 pence each (June 30, | 37,716 | 24,078 | | 24,115 |
| 2009:130,061,276 ordinary | | | | |
| shares, December 31, 2009: | | | | |
| 130,288,169 ordinary | | | | |
| shares)(Dollars in thousands) | | | | |
+---------------------------------+-------------+-------------+--+-------------+
11. Other Reserves
+-------------------------+-----------+----------+------------+-----------+
| | Option | Merger | Capital | Total |
| | reserves | reserve |redemption | other |
| | | | reserve | reserves |
+-------------------------+-----------+----------+------------+-----------+
| | (Dollars in thousands) |
+-------------------------+-----------------------------------------------+
| Balance at January 1, | $26,495 | $35,107 | $ 91 | $61,693 |
| 2009 | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Employee share option | | | | |
| scheme: | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Exercise of options | - | - | - | - |
+-------------------------+-----------+----------+------------+-----------+
| Issuance of options | 1,903 | - | - | 1,903 |
+-------------------------+-----------+----------+------------+-----------+
| Balance at June 30, | 28,398 | 35,107 | 91 | 63,596 |
| 2009 | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Employee share option | | | | |
| scheme: | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Exercise of options | - | - | - | - |
+-------------------------+-----------+----------+------------+-----------+
| Issuance of options | 2,218 | - | - | 2,218 |
+-------------------------+-----------+----------+------------+-----------+
| Balance at December 31, | 30,616 | 35,107 | 91 | 65,814 |
| 2009 | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Shares and warrants | (17,565) | - | - | (17,565) |
| issued | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Tax payable on warrant | - | - | - | - |
| issued | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Employee share option | | | | |
| scheme: | | | | |
+-------------------------+-----------+----------+------------+-----------+
| Exercise of options | - | - | - | - |
+-------------------------+-----------+----------+------------+-----------+
| Issuance of options | 3,765 | - | - | 3,765 |
+-------------------------+-----------+----------+------------+-----------+
| Balance at June 30, | $16,816 | $35,107 | $ 91 | $52,014 |
| 2010 | | | | |
+-------------------------+-----------+----------+------------+-----------+
The decrease in the option reserve relating to shares and warrants issued is due
to the redemption of all outstanding warrants. As a condition of the UTC
investment in Clipper in January 2010, the Group repurchased and terminated
9,596,681 unexercised BP share options and 2,941,850 unexercised One Equity
Partners share options.
12. Contingent Liabilities
The Group is from time to time engaged in litigation. The Group regularly
reviews all pending litigation matters in which it is involved and establishes
reserves deemed appropriate by management for these litigation matters 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. The case is
currently in the investigative phase with arbitration scheduled for March 2011.
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 (2009: $1.7 million).
The Group does not believe that any such payments are probable and accordingly
has not recorded a liability related to this agreement.
13. Related Party Transactions
+------------+--------+---------+----------+--------+--------+----------+--------+--------+
| | Purchase of | | Amounts owed | | Amounts owed |
| | goods and | | by related | | to related |
| | services | | parties | | parties |
+------------+------------------+----------+-----------------+----------+-----------------+
| | 6 months | | As of June | | As of June |
| | ended, | | 30, | | 30, |
+------------+------------------+----------+-----------------+----------+-----------------+
| | 2010 | 2009 | | 2010 | 2009 | | 2010 | 2009 |
+------------+--------+---------+----------+--------+--------+----------+--------+--------+
| | (Dollars in thousands) |
+------------+----------------------------------------------------------------------------+
| Potencia | $3,830 | $13,960 | | $ | $ | | $3,606 | $ 400 |
| Industrial | | | | - | - | | | |
| S.A. | | | | | | | | |
+------------+--------+---------+----------+--------+--------+----------+--------+--------+
| Chairman | - | 41 | | - | - | | - | - |
| entities | | | | | | | | |
+------------+--------+---------+----------+--------+--------+----------+--------+--------+
| Northstar | - | - | | 1,000 | 1,000 | | - | 80 |
+------------+--------+---------+----------+--------+--------+----------+--------+--------+
Potencia Industrial S.A. is a Mexican company which owns 50% of Fuerza Eolica
S.A. de C.V., a Clipper joint venture, which was sold during the first half of
2010.
In February 2009, the Group made a loan of $1.0 million to Northstar Wind
Towers, LLC, which the Group holds a minority interest. This loan was provided
for in 2009 and was reflected in research and development expense in the
consolidated interim income statement because the tower company was a
development stage enterprise with insufficient financial capacity to repay the
loan. The son of one of the Group's former Directors is a principal of the
tower company. At the request of Clipper, two of the Groups other Directors
served as Clipper representatives on the board of directors of the tower
company.
14. Provisions
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | | Warranty | Loss |Remediation |Liquidated | Other | Totals |
| | | |Contracts | | Damages | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| Current | (Dollars in thousands) |
+--------------------+--------------------------------------------------------------------------+
| At January 1, | $ | $ | $ | $ | $ | $ |
| 2010 | 18,869 | (22) | 40,927 | 37,416 | 3,032 | 100,222 |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Charged in | 27,904 | - | (2,769) | (5,184) | - | 19,951 |
| | the year | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Reclassification | 3,579 | 4,220 | 10 | - | (3,032) | 4,777 |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Utilization | (19,134) | (1,048) | (12,515) | (20,481) | - | (53,178) |
| | of provision | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| At June 30, | $ | $ | $ | $ | $ | $ |
| 2010 | 31,218 | 3,150 | 25,653 | 11,751 | - | 71,772 |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| Non Current | | | | | | |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| At January 1, | $ | $19,643 | $ | $ | $ | $ |
| 2010 | 15,972 | | - | - | 530 | 36,145 |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Charged in | 1,055 | - | - | - | - | 1,055 |
| | the year | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Reclassification | (3,579) | (1,188) | - | - | - | (4,767) |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Unwinding of | - | - | - | - | 14 | 14 |
| | discount | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| At June 31, | $ | $18,455 | $ | $ | $ | $ |
| 2010 | 13,448 | | - | - | 544 | 32,447 |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | | Warranty | Loss | Remediation | Liquidated | Other | Totals |
| | | | Contracts | | Damages | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| Current | (Dollars in thousands) |
+--------------------+--------------------------------------------------------------------------+
| At January 1, | $ 8,833 | $ | $ | $ | $ | $ |
| 2009 | | - | 61,776 | 34,208 | 13,000 | 117,817 |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Charged in | 2,068 | - | 41,221 | 21,120 | - | 64,410 |
| | the year | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Reclassification | 4,435 | - | (14,298) | - | - | (9,864) |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Utilization | (6,792) | - | (25,327) | (4,347) | (13,000) | (49,466) |
| | of provision | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| At June 30, | $ 8,544 | $ | $ | $ | $ | $ |
| 2009 | | - | 63,372 | 50,981 | - | 122,897 |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| Non Current | | | | | | |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| At January 1, | $ | $11,911 | $ | $ | $ | $ |
| 2009 | 11,510 | | - | - | 503 | 23,923 |
+--------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Charged in | 4,425 | - | - | - | - | 4,425 |
| | the year | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Reclassification | (4,435) | - | - | - | - | (4,435) |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| | Unwinding of | - | - | - | - | 14 | 14 |
| | discount | | | | | | |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
| At June 30, | $ | $11,911 | $ | $ | $ | $ |
| 2009 | 11,500 | | - | - | 517 | 23,928 |
+-+------------------+-----------+-----------+-------------+------------+-----------+-----------+
The provision for warranty claims represents the Group's best estimate of the
present value of the future cost that will be required under the Group's
turbine warranty agreements. Actual outflows may vary based on the cost of
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 wind turbine
systemic defects 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 requirements.
15. Subsequent Events
The subscription agreement between Clipper and UTC entered into in January 2010
(under which UTC invested $206.2 million into Clipper) contains standstill
provisions that generally limit UTC to a 49.9% shareholding until January 2012.
In certain events, UTC is permitted to increase its shareholdings to 55%. In
mid-September, UTC provided notice to Clipper that based on cumulative cash
outflows since the date of the investment, UTC and its affiliates are now
allowed to increase their combined shareholding in Clipper to 55%. The Group
does not know whether UTC may elect to increase its shareholding.
INDEPENDENT REVIEW REPORT TO CLIPPER WINDPOWER PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended June 30,
2010 which comprises the condensed consolidated income statement, the condensed
consolidated balance sheet, the condensed consolidated cash flow statement, the
condensed consolidated statement of changes in shareholders' equity and related
Notes 1 to 15. We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the Company in accordance with the International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued
by the Auditing Practices Board. Our work has been undertaken so that we might
state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended June 30, 2010 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the AIM Rules of the London Stock Exchange.
Going Concern - Emphasis of a Matter
In forming our opinion on the financial information, which is not qualified, we
have considered the adequacy of the disclosure made in Note 1 to the financial
information concerning the Company's ability to continue as a going concern. The
Company has net liabilities of $168.3 million and reported a net loss of $26.7
million. The Company has experienced reduced orders for turbines and cash
outflows associated with remediation activities and is attempting to raise
additional capital. These conditions, along with other matters explained in Note
1 to the financial information, indicate the existence of a material uncertainty
which may cast significant doubt about the Company's ability to continue as a
going concern. The financial information does not include the adjustments that
would result if the Company was unable to continue as a going concern.
Deloitte LLP
Chartered Accountants and Statutory Auditors
London, UK
September 30, 2010
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FBLBXBKFLBBQ
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