Apr 28, 2011 01:26 PM

Ill Winds Blowing for Wind Turbine Industry

Shares in Nasdaq-listed American Superconductor Corp. (AMSC) plummeted 40 percent overnight after a customer on the other side of the planet suddenly adjusted to an unexpected change in weather for China's wind energy sector.

The U.S. energy equipment manufacturer announced April 5 that China's Sinovel Wind Co., its largest customer, had refused March 31 to accept US$ 56 million worth of electrical components.

Sinovel, the world's second-largest wind turbine manufacturer in term of market share, was supposed to take delivery of the parts in March. Jilted AMSC was forced to downgrade its annual revenue estimates, and investors sold the stock.

Sinovel's decision "underscored its deteriorated cash flow position, which could have been caused by postponed payments by wind farms," explained the authors of a report released by China International Capital Corp. in early April.

And it's just one sign of a weakening wind turbine market in China. The Chinese Wind Energy Association says newly installed wind power capacity rose 37.1 percent to 18,928 megawatts last year compared with 2009, but that was far below its growth rates topping 100 percent for the previous four years.

"Accounts receivable and inventory should be blamed for such a huge amount of Sinovel's negative cash flow," a wind energy analyst told Caixin.

Sinovel's cash flow storm hit quickly. Last year, Sinovel reported earning 3.17 billion yuan on 20.3 billion yuan in sales; each was figure up 48 percent from 2009. But the company also booked a negative net cash flow of 1 billion yuan in 2010, compared with a positive 1.38 billion yuan in 2009.

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