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AMSC accuses Sinovel of IP theft and breach of contracts

American Superconductor Corporation (AMSC) is taking a series of legal actions against its largest customer, Sinovel Wind Group Co. Ltd, accusing Sinovel of theft of intellectual property (IP) and breach of contract.

By Kari Williamson

In the latest of a string of bad news from AMSC, the company says it has filed criminal and civil complaints in China against Sinovel and other parties alleging the illegal use of AMSC's intellectual property, following an investigation conducted by AMSC and law enforcement.

AMSC believes that Sinovel illegally obtained and used AMSC's intellectual property to upgrade its 1.5 MW wind turbines in the field to meet proposed Chinese grid codes and to potentially allow for the use of core electrical components from other manufacturers.

AMSC wants Sinovel and the other parties to cease infringement of its IP, and is seeking monetary damages. AMSC has also filed a claim for arbitration to compel Sinovel to pay AMSC for past product shipments and to accept all contracted but not yet delivered core electrical components and spare parts under all existing contracts.

Reducing own workforce

The news follows an earlier announcement from AMSC that it is reducing its workforce by about 30%, to save US$30 million in annual costs as its revenue expectations have been lowered due to the issues with Sinovel.

AMSC expected to report a net loss on revenues of under US$10m for the fiscal quarter ended 30 June.

"These workforce reductions are necessary to maintain the health of the business in the wake of our business and contractual issues with Sinovel," says AMSC President and CEO Daniel McGahn.

"Expenses have been reduced in virtually all departments, levels and major geographies, but we have focused on limiting the impact on customer-facing and research and development functions, which are integral to our growth and diversification initiatives."

Amendments to The Switch acquisition

AMSC has also made amendments to its definitive purchase agreement to acquire The Switch Engineering Oy. Under the terms of this amended agreement, AMSC has paid the sellers €14.2m (~US$20.3m), or approximately 7.5% of the transaction's €190m purchase price, in cash as an advance payment.

The termination date of the agreement has been extended to 30 September, 2011, with the option for two additional 30-day extensions to allow AMSC time to secure additional financing.

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