I recently received the AMSC 2012 annual report and notice of their annual shareholders meeting on August 1. In keeping with rules for reporting finances and related corporate events, they are not overly enthusiastic about immediate prospects for improvements. Among other things, they note there is substantial competition in both wind and grid segments.
One company that makes inverters, for example, is PowerOne, based in California, and purchased recently by the multinational ABB. Other companies make superconducting wire similar to that made by AMSC, so it isn't certain that AMSC has the best, lowest cost products.
The litigation involving Sinovel being resolved in favor of AMSC looks more likely to affect the bottom line in the near future. The Europeans already are going after China for dumping solar panels and related equipment on the European market at prices below cost. If Sinovel or any other Chinese company attempts to use technology owned by AMSC and market the related products to overseas customers, China could face the prospect of countervailing tariffs on many of its export products. The U.S. already imposed a tariff on tires for similar reasons. Given that China's manufacturing growth has been slowing down, and the new leadership is looking for ways to maintain economic growth, I doubt that the Chinese leadership wants to see a company like Sinovel become a spoiler for Chinese exports in general.
My guess is that China will encourage Sinovel (and possibly provide financial help) to settle this case before any court has a chance to rule on the merits. That means courts in China as well as overseas. I would not be surprised if such a settlement occurred this year, especially because AMSC is burning cash fast enough to run into real trouble without some infusion like a settlement with Sinovel.
The recent gradual decline in the share price (except for the last few days of trading) is indicative of these cash flow problems. If the company had to file for bankruptcy or take other drastic action prior to obtaining relief from Sinovel, the ultimate costs to Sinovel and to AMSC shareholders could be much greater. In the interest of minimizing these costs, China, it seems to me, would be amenable to some mutually acceptable settlement.
Art |
