Wind turbine maker AAER faces uncertain future with second round of layoffs

Dalton is betting on the wind industry with our tax dollars.

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By: Ross Marowits, Canadian Business

MONTREAL – AAER Inc., Canada’s lone manufacturer of large wind turbines, is facing growing headwinds as the alternative energy industry finds it increasingly difficult to finance new energy projects.

In a bid to preserve cash, the Bromont, Que.-based company said Wednesday it will temporarily lay off 28 employees, its second round of job cuts in five months. That follows 34 layoffs among operational and administrative employees announced the end of October.
AAER (TSXV:AAE) did not provide financial details on why it was necessary to lay off the workers, how long it expects them to be out of work, or whether these are new positions being put on layoff.

Company officials didn’t return calls seeking comment.

AAER said it will continue to service its existing customers and will go ahead with planning for the manufacture and erection of new wind turbines currently under contract.
Industry observers say the company is suffering a hangover from being passed over by developers for Hydro-Quebec’s massive 2,000-megawatt wind project in May 2008.
That decision prompted the company’s shares to plummet from a peak of $1.92. They were unchanged at three cents Wednesday on the Toronto Stock Exchange.

AAER has not been able to gain much sales traction since that defeat. On top of that, weak credit markets and falling energy prices have caused several developers to kibosh plans.

“They’re stuck between a rock and a hard place. I don’t know what’s going to happen to them but it doesn’t look all that great,” said an analyst who didn’t want to be named.

There has been a significant drop-off in interest among power utilities for wind turbines amid a decrease in North American energy prices over the past 18 months and a depressed outlook over the next two to three years.

Travis Miller, a Chicago-based utility analyst for Morningstar, said lower demand caused by the recession and energy efficiency initiatives have hurt power developers because utilities no longer need to sign as many power-purchase agreements.

The agreements provide fixed prices per unit of power produced that make projects attractive to investors and debt providers.

“In tight credit markets it puts a premium on the developers’ ability to sign power purchase agreements … and when the utilities aren’t as willing to sign those contracts, it’s tougher to get financing,” Miller said in an interview.

Lower energy prices have also forced many developers who were looking to build in the U.S. without fixed pricing to put their projects on the back burner.

MacMurray Whale of Cormark Securities said in January that AAER could still benefit from a series of opportunities. These include next fall’s awarding of contracts for two Quebec municipal wind projects totalling 250 megawatts of power, local content rules for Hydro-Quebec projects, and the possibility for more orders from the 100-megawatt Mont Louis Wind project in Quebec.

The industry is reliant on government initiatives, including minimum renewable energy production targets adopted by U.S. states like California and Nevada.

In Canada, the Nova Scotia government agreed earlier this month to participate in a joint venture with South Korean shipbuilder Daewoo to build wind turbines in the abandoned Trenton Works rail car plant.

AAER makes high-capacity power-generating wind turbines principally for the North American market.

In December, AAER said it plans to complete an equity offering of at least $5 million. That’s on top of a $5-million loan from Investissement Quebec, of which $1.25 million has been disbursed to date.

The company lost $5.5 million in the third quarter despite an increase in revenues to $5.4 million.

5 thoughts on “Wind turbine maker AAER faces uncertain future with second round of layoffs

  1. Aw GEE… poor baby, maybe you guy’s can get a real job! The word is out folks. You can’t fool us anymore! Oh by the way please don’t use your dryer until midnight, got it?

  2. When has Dalton ever been right about anything…Do the opposite…Green Energy Act and WindTurbines will be a bigger BOONDOGGLE that E-Health….Oooops, I have to raise your taxes….

  3. So we’re on the hook for 1/2 billion dollars to Samsung………into negotiations with Vestas to come here and just lost Siemens who were here for 50 years with 500 employees as Tennessee offers up a huge bribe to draw them there………

    McGuinty is going from bad to really really bad very quickly. AND we will have to cook meals at midnight and turn off electric heat util 3 A.M to pay for this “clown show!”………….what’s it going to take for the whole Province to turn on this guy?

  4. What happens when this company goes out of business, and there are no parts to fix the broken turbines, no one to keep up warranties, etc.

    Are you stuck? I hope that there is many in an account to take these monsters down/decomission.

  5. The investment sector, with no access to the subsidies and tax credits, is more aware of the losses associated to investing in industrial wind turbines anywhere. Industrial wind’s high development, operating and maintenance costs make it impossible to make money over the long term (making money mainly through initial subsidies and tax credits). The high returns per kWh are not high enough to cover proper operation and maintenance expenses.

    Limited partnership companies that ultimately take over industrial wind developments are set up to keep a parent company safe from the high risk venture while passing on the benefits. Eventually industrial wind developments will be sold and re-sold until they are either in such disrepair or when no one can be fooled into buying.

    Most likely no one, not even the government, will know at what time an industrial wind turbine is abandoned or when it is not producing. Just because the blades are turning does not mean production. There is no legal obligation for dismantling industrial wind turbines if they are unsafe, or if it has not produced power over several years.

    They will become as some have already huge, ugly and expensive lawn ornaments which will continue to suck free power off of the grid for lights and to keep components warm.

    Why would a business invest in industrial wind turbines? Industrial wind turbines can provide a business with access to subsidies and tax credits that can used in their other ventures or can be sold. The subsidies and associated tax reduction, at the beginning could be more than the industrial wind turbine losses so with creative book keeping some companies could make money.

    If industrial wind developments had no subsidies or tax credits no business would be interested as without subsidies and tax credits industrial wind developments are a money losing venture.

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