Hyundai Heavy Industries enters wind business

Ulsan, South Korea-based Hyundai Heavy Industries, the world's largest shipbuilder, is moving into the wind power industry. Devens, Mass.-based American Superconductor (Nasdaq: AMSC) announced today that it has licensed two of its turbine designs to the South Korean company, which has plans to initially target the growing U.S. wind market.

Financial terms of the deal were not disclosed, but American Superconductor said it will receive upfront license fees for each design, as well as royalty payments for the first several hundred 1.65 megawatt and 2 MW wind turbines produced by Hyundai Heavy Industries. Under the terms of the agreement, American Superconductor will also provide Hyundai Heavy Industries with the core electronic components for the turbines.

This deal could bring significant exposure for American Superconductor's wind systems in the U.S., the company's home country and one of largest wind markets in the world.

"That's their first focus," Jason Fredette, spokesman for American Superconductor, told the Cleantech Group. "Although I'm sure they're going to be selling these wind turbines into many other countries as well."

"They want to put a big push on here in the U.S."

Bromont, Quebec's AAER also has a license for American Superconductor turbines, and already has some deals for projects in the U.S. (see Canada's AAER to build Windtec turbines). But Hyundai Heavy Industries has the potential to bring a very large manufacturing scale to the table.

The U.S. turbine market is currently dominated by Fairfield, Conn.-based General Electric (NYSE: GE).

Hyundai Heavy Industries, with $27 billion in sales for 2007 and 25,000 employees worldwide, has yet to announce how many turbines it plans to build, but has said it plans to invest $1 billion to expand its renewable energy business, which already includes solar cell production. The company is building its second solar manufacturing plant, with an expected capacity of 300 MW per year, inEumseong, south of Seoul.

Today's deal is the latest in a string of licensing agreements from American Superconductor. "The rest of our customers are in China, India, Turkey, Taiwan, and they're focused primarily on their domestic markets today," saidFredette.

"That doesn't stop them from, in time, going international."

Last week, the company signed a contract to license its WT2000df 2 MW turbine to China's XJ Group. XJ Group is expected to initially produce the turbines for the Chinese market, although it has the right to sell the system worldwide.

And in June, American Superconductor made a deal to license the design for its FC-2000 turbine, also a 2 MW system, to Taipei, Taiwan's Teco Electric & Machinery. Teco purchased the right to manufacture and sell the turbines in Taiwan and in mainland China (see American Superconductor, Teco in wind turbine deal).

American Superconductor is likely to see orders coming in for the core electrical components of the turbines under most these deals starting next year.

Hyundai Heavy Industries, which has marketing and sales rights for the two turbines for dozens of countries around the world, plans to start production of the 1.65 MW turbines by the end of 2009.

The South Korean company has a wide range of offerings in addition to its shipbuilding business and there could be the opportunity for other deals with American Superconductor, which specializes in programmable power electronic converters and high temperature superconductor wires.

"This is the first contract, and given their exposure to the electric utility industry, to the motor and generator industry, we think there's other synergies here that we can explore with Hyundai Heavy Industries," said Fredette.

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