AMSC Acquires 25% of Blade Dynamics - Analyst Blog

Power technology company American Superconductor Corporation (AMSC) acquired a 25% stake in Blade Dynamics Ltd. for $8 million in cash, and will have one seat on the Blade Dynamics Board of Directors.

Blade Dynamics Ltd. is a designer and manufacturer of advanced wind turbine blades based on proprietary materials and structural technologies. The company has developed Bladeskyn, a surface material that extends the lifetime and significantly lowers lifecycle costs for wind turbine blades. The company has also developed wind turbine blade technologies designed to increase the efficiency and performance of high power wind turbines while also reducing costs.

This acquisition will allow American Superconductor to expand the global reach of its products and provide its Windtec licensees with a differentiated blade offering. American Superconductor expects to leverage the Blade Dynamics technology for its 10 MW SeaTitan superconductor wind turbines.

Contextually, The Dow Chemical Company (DOW), through its Venture Capital group, has also made some minority equity investment in Blade Dynamics.

The equity participation of American Superconductor and Dow Chemical in Blade Dynamics will mutually benefit all the three companies. Blade Dynamics will be able to utilize American Superconductor’s unique wind turbine design capabilities and business model as well as Dow Chemical’s global reach and composite materials to further develop the wind turbine technology.

Additionally, Blade Dynamics was also provided an incentive package of $30 million by the Louisiana Economic Development (LED) to establish and operate a manufacturing facility in New Orleans. The package is contingent on meeting certain capital investment and job creation milestones.

American Superconductor performed well during the recently concluded fiscal first quarter 2010, ending on June 30, 2010, riding on the back of increased demand for its wind and power grid offerings. Adjusted earnings at the end of the fiscal first quarter 2010 were 28 cents a share, compared with 12 cents in the previous year. The Zacks Consensus Estimates for second quarter fiscal 2010, fiscal year 2010 and fiscal year 2011 are 22 cents per share, $1.01 per share and $1.41 per share, respectively.

We believe the decision to acquire an interest in Blade Dynamics will have a positive impact on the company. Moreover, the production of cost-efficient green energy through the joint development of wind turbine technology will further boost profitability at American Superconductor.

On a competitive landscape the operating margins of American Superconductor fared better than its peers - ABB Ltd. (ABB), Hitachi Ltd. (HIT) and Satcon Technology Corporation (SATC) - in the trailing twelve months. The 25% stake in Blade Dynamics will, in our opinion, widen the gap further.

We presently have a Zacks #2 Rank (short-term 'Buy' recommendation) on shares.

Based in Devens, Massachusetts, American Superconductor provides wind turbine designs and electrical control systems primarily in North America, Europe, and the Asia-Pacific.

 
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