AMSC To Significantly Expand Wind Business Through Proposed Acquisition of Power Technologies Company “The Switch” (USA)
American Superconductor Corporation (NASDAQ: AMSC), a global power technologies company, today announced that it has signed a definitive agreement to acquire The Switch Engineering Oy, a power technologies company headquartered in Finland. The 190-million-Euro acquisition (approximately US$265 million based on current exchange rates) is expected to be immediately accretive and support AMSC’s growth to US$1 billion in annual revenues. With sales of both power converter systems and permanent magnet generators to wind turbine manufacturers in China, Europe, Korea and the U.S., this acquisition will diversify AMSC’s customer base and channels to market.
“With highly complementary engineering capabilities and product offerings, the combination of The Switch and AMSC will provide significant additional value for our customers, partners and investors,” said Greg Yurek, founder and chief executive officer of AMSC. “Both AMSC and The Switch are well positioned in Asia, which is now the world’s largest and fastest growing wind power market. Our combined company is expected to be serving China’s three largest wind turbine manufacturers – Sinovel, Goldwind and Dongfang – in various capacities. The Switch will also significantly strengthen AMSC’s presence in Western wind markets with customers such as GE and create a new channel to market for AMSC in addition to our Windtec(TM) licensees. In short, this combination will create a global wind powerhouse.”
AMSC’s growth in recent years has primarily been driven by the sale of wind turbine core electrical components and full wind turbine electrical control systems (ECS) to Windtec licensees and strategic partners. The Switch provides a substantial existing channel for power electronics and control system sales to other global wind turbine manufacturers. The Switch focuses on the production of power converter systems (PCS), which are a subsystem of full wind turbine ECS. By joining forces with The Switch, AMSC also sees the opportunity to further enhance the performance and reduce the cost of its PCS and ECS offerings. The Switch today offers PCS’s with power ratings ranging from 1 megawatt (MW) to 6 MW.
The Switch also opens a new addressable market opportunity exceeding $1 billion annually with its portfolio of proprietary permanent magnet generators (PMG). PMG are a powerful new class of generators that are utilized inside an increasing number of both geared and direct drive wind turbines. The Switch today offers low-, medium- and high-speed PMG up to 6 MW in power rating. These PMG systems, which already are being utilized by several companies in Europe, the U.S. and Asia, will extend the technology portfolio currently available to Windtec customers and increase AMSC’s potential value per MW of wind power. AMSC also expects to leverage The Switch’s strong background in advanced synchronous generators to commercialize superconductor generators for direct drive SeaTitan(TM) wind turbines.
“In today’s market, there is a great demand for multi-megawatt turbines utilizing advanced power electronics and permanent magnet generators – a trend that AMSC and The Switch can take advantage of,” said Jukka-Pekka Mäkinen, President and Chief Executive Officer of The Switch. “From virtually all angles – culturally, commercially and strategically – the synergies of a combination of The Switch and AMSC were immediately evident to both of our organizations. After the closing, we will be able to exploit our combined engineering and manufacturing expertise to speed up our clients’ access to markets as well as to significantly increase the number of wind turbines ‘Powered by AMSC.'”
For calendar year 2010, The Switch generated approximately US$179 million in total revenue and approximately US$15 million in net income. The transaction is valued at approximately US$265 million, with approximately US$186 million to be paid in cash and the remainder to be paid in the form of AMSC stock based in part on the average closing price of AMSC’s stock prior to the closing. These figures are based on current exchange rates. AMSC plans to use its existing cash balance to finance the deal. Closing of the transaction, which has been approved by both companies’ Boards of Directors and is subject to customary closing conditions and regulatory approvals, is expected by August 31, 2011.
AMSC Financial Guidance Update
In conjunction with today’s announcement, AMSC is updating its guidance for fiscal year 2010 (ending March 31, 2011). The company expects that its revenues will be toward the lower end of its $430 million to $440 million forecast range. Due primarily to anticipated one-time costs related to the acquisition, AMSC is reducing its net income guidance from a range of $48.0 million to $50.0 million, or $0.99 to $1.04 per diluted share, to a range of $44.0 million to $46.0 million, or $0.91 to $0.95 per diluted share (see table at end of this press release for details). The company’s non-GAAP net income guidance is being reduced from a range of $64.5 million to $66.5 million, or $1.33 to $1.38 per diluted share, to a range of $63.5 million to $65.5 million, or $1.31 to $1.35 per diluted share. Please refer to the financial table included below for a reconciliation of GAAP to non-GAAP guidance.
“We expect to achieve another record year of revenues and earnings in fiscal 2010,” said Yurek. “However, AMSC’s organic revenues and earnings are expected to decline sequentially in the first quarter of fiscal 2011 from the fourth quarter of fiscal 2010 before growth resumes in subsequent quarters. For full fiscal 2011, we expect organic revenue growth to slow to about 5 to 10 percent year over year before increasing again in fiscal 2012. We also expect our organic non-GAAP earnings per share to decline by as much as 15 percent year over year due to a higher share count, somewhat lower gross margin related primarily to product mix, foreign exchange headwinds, and a full year of dilution from minority investments.
“Fiscal 2011 will be a transition year for AMSC – one in which we continue to develop and deploy new products, book new orders, and implement new strategies for growth while continuing to grow our top line and generate solid profits. We are now in the process of reengineering our company to build on the strong platform we have established over the past several years. As of April 1, 2011, we are reorganizing our business into Wind and Grid reporting segments. The Switch is expected to play a key role in our Wind business and serve as a catalyst for growth both in the near and long term. As a result, our combined company is expected to grow more rapidly and profitably beyond fiscal 2011 to achieve our target of US$1 billion in revenues and operating margins in excess of 20% by fiscal 2014,” Yurek concluded.
Assuming a closing date of August 31, 2011 for the acquisition of The Switch, AMSC currently anticipates that its combined revenues will grow by 30 percent to 35 percent for full fiscal year 2011 while combined non-GAAP earnings per share are expected to remain roughly flat year over year.
AMSC will be holding an Analysts’ Day on June 3, 2011 in New York City, at which time it expects to discuss in detail is Wind and Grid businesses and offerings, market outlook and growth strategies
About the Switch
The Switch is a leading supplier of megawatt-class permanent magnet generator and full-power converter packages that effectively capture power from highly variable new energy sources like wind and solar. The technology is designed to deliver reliable, future-proof grid compliance and maximized energy yields. Since starting operations in 2006, The Switch has reached annual net sales of EUR 134.6 million, with 5,000 MW of installed wind power capacity.
About American Superconductor (NASDAQ: AMSC)
AMSC offers an array of proprietary technologies and solutions spanning the electric power infrastructure – from generation to delivery to end use. The company is a leader in renewable energy, providing proven, megawatt-scale wind turbine designs and electrical control systems. The company also offers a host of Smart Grid technologies for power grid operators that enhance the reliability, efficiency and capacity of the grid, and seamlessly integrate renewable energy sources into the power infrastructure. These include superconductor power cable systems, grid-level surge protectors and power electronics-based voltage stabilization systems. AMSC’s technologies are protected by a broad and deep intellectual property portfolio consisting of hundreds of patents and licenses worldwide. More information is available at www.amsc.com
Source: amsc, March 15, 2011