American Superconductor Corp, which makes electrical systems for wind farms, is buying a small Finnish rival for $266 million to trim its dependence on China, and it cut its outlook on a weaker view of China’s wind power market, sending its shares down more than 10 percent.
The acquisition of The Switch Engineering Oy, which sells power converter systems and permanent magnet generators to wind turbine makers in China, Europe, South Korea and the United States, will help diversify AMSC’s customer base, the company said in a statement.
AMSC said last month it was looking to be less reliant on Sinovel Wind, the world’s No.3 wind turbine maker which accounts for 73 percent of AMSC’s revenue. It had said it was looking for new wind turbine orders and emerging power grid opportunities to be less dependent on China.
AMSC said the Finnish acquisition would give it other wind turbine customers such as Goldwind, which accounts for more than 85 percent of power converter systems sales. Goldwind is China’s second-largest wind turbine maker.
AMSC said it would pay about $186 million in cash for The Switch, and the rest in stock, in a deal it said would immediately add to earnings.
The Switch, founded in 1996, combines three companies — Rotatek Finland, Verteco and Youtility. It makes electrical power conversion in renewable energy and energy conserving products. It had 2010 revenue of $179 million.
The Switch will also significantly strengthen AMSC’s presence in Western wind markets, with customers such as GE.
Cuts outlook
AMSC trimmed its fiscal 2011 adjusted earnings outlook to $1.31-$1.35 per share from $1.33-$1.38 a share, as it faces slowing Chinese growth.
“We would expect China’s wind market to be flat to down slightly in 2011, before moderate growth resumes in 2012,” AMSC CEO Greg Yurek said on a conference call with analysts.
“That would still be a huge market and could come close to equalling the amount of wind power installed everywhere else in the world in 2011.”
Yurek said Sinovel will decline as a percentage of AMSC’s revenues in 2011 as shipments of core components and full electrical control systems to non-Sinovel customers will nearly double from last year.
“Based on how rapidly China has installed wind turbines over the past 2-3 years, slowing growth has been inevitable,” said Ben Schuman, analyst at Pacific Crest Securities.
“Chinese wind turbine installations will be a stable source of business for AMSC and others for many years. But for rapid growth they will have to look at other parts of their business.”
AMSC shares, valued at around $1.2 billion, dropped 10.6 percent to $21.70, a near-20-month low on Nasdaq on Monday.
