Re companies that will benefit from the blackout, this was in today's Boston Globe. It would appear the horse is out of the barn on this particular firm, but it is an example of those who may benefit.
boston.com
The blackout's silver lining
By Steven Syre, Globe Columnist, 8/26/2003
Timing is everything. There is bad timing, like the kind I had writing about the dismal track record of alternative energy stocks. That column was published Aug. 14 and, hours later, millions of Americans experienced the Great Blackout of 2003. Ouch.
On the flip side of that coin you could find the story of American Superconductor Corp., a small Westborough company capitalizing on very good timing also tied to the failure of the power grid this month. The company's experience is so profound that chief executive Gregory Yurek talks about points in time as "PB" or "AB," short for pre-blackout and after-blackout.
"There's no doubt it was a watershed event," he says.
American Superconductor has spent nearly 12 years as a public company developing high-performance wire to generate and deliver power in better ways. It also compiled a long history of financial losses that had left the company with a dwindling supply of cash.
Eight weeks ago, American Superconductor announced plans to borrow $50 million in an arrangement that would make Rube Goldberg smile. There was a $30 million term loan with a finance company. Then there were $10 million in subordinated notes, which could be converted into a big slug of stock, that a few institutional investors agreed to buy. A commercial bank was on board for $10 million of working capital, in an arrangement described as "nonbinding."
Debt deals get patched together like that all the time, but it isn't the way you would choose to finance a business. This was an expensive but necessary arrangement, the "PB" plan.
Then everything changed. The day after the blackout, American Superconductor shares surged 42 percent to $13.20 and have held on to most of that gain since. The stock finished yesterday at $12.20.
Many stocks on the fringe of capital markets for the power industry got a boost right away. American Superconductor was a favorite because its wire can be used in transmission lines to relieve congestion on the power grid.
American Superconductor is still burdened by a cash problem but it has a new and appealing alternative solution. Now, the company believes it can raise the money it needs by selling stock that too few investors were interested in buying just a few weeks ago.
American Superconductor said yesterday that its board had ditched the debt plan and expected to file details of a stock offering within a couple of weeks. At current stock prices, the company would have to sell a 20 percent ownership interest to raise $50 million. Yurek said the debt plan involved stock rights that could have diluted existing shares by the same degree and the company would have still been in significant debt. Easy decision.
Like many small power-related companies, American Superconductor has been working for many years and making some progress. Revenue in its most recent fiscal year increased 80 percent to $21 million, and company guidance suggests that figure could climb to as high as $50 million in the current fiscal year.
Some business units are becoming profitable and key customers, particularly the US Navy, continue to write checks. A serious commitment to improve the power grid would be a big boost.
But American Superconductor has spent a pile of money along the way. The company raised more than $300 million in its initial public offering and subsequent stock sales. Now cash is in short supply again.
A handful of struggling companies on the power-grid fringe have better access to one more slug of stock market money today, as a direct result of the blackout. It may get one or two over the top.
Timing is everything.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com.
© Copyright 2003 Globe Newspaper Company. |
