While looking through a few competitors, I found this press release from August 16th:Zenergy Power plc is pleased to announce the acquisition and consolidation of three leading providers of high-temperature superconductor materials and applications. The forces of Zenergy Power plc, Australian Superconductors Ltd., SC Power Systems Inc. and Trithor GmbH (“The Group”) will be combined to create a global player in the field of high temperature superconductivity.UK-based Zenergy and two of the other companies are not on the competitor list in the AMSC annual report (but Germany-based Trithor is). I find it interesting that companies are joining forces instead of remaining stand-alone operations. It says that there are a lot of superconducting want-to-be companies and that someone is gaining traction toward commercialization. The urge to merge is certainly a sign that the grass isn't greener at home...Just one person's observation...W.D.
hey, dduct - The urge to merge is certainly a sign that the grass isn't greener at home.....Weeeellll, I'm not sure about that, AMSC is an anomaly in this space, remember. They've not only thrown themselves into this and only this (I consider the non-superconducting part of the company doing the powre electronics as a good adjunct - and intro - for them into the whole market; not something unrelated). They've always considered their main competitor - by far - to be Sumitomo, a little company in Japan. Sumitomo so far, though, has only been doing first gen wire (e.g, the Albany power cable demo underpass with Mohawk); the second gen follow on demo on that cable - if it ever happens - will be by Intermagnetics (now Philips). But, as you know, HTS is far from IMGC's main focus; and will become less so (IMO) with the Philips buy fully incorporated. That's why the most likely thing to happen there, I think, is for Philipps to spin-off the HTS unit - publicly - into a separate company, to get value out of them (and making sure they aren't a continuing distraction to the 'main' business Philips is interested in IMGC in).I know the management treats the IMGC/HTS guys with respect, by the way. The interesting thing to see is how much funds they get when/if they go public.AMSC's CEO says he expects more competitors to jump into the market as the entire market realizes the subject of HTS is very real: "The potential market is too big". And that's just in the US. IF you imagine China and India convinced that HTS can be bought economically as they build out.........geez........kinda like them in telecom: instead of duplicating the last 100 years of the West stringing phone wires everywhere, they just jumped to cell phones/wireless et al. Infrastructure everywhere in the world - including the US - is underbuilt, or overstressed. Water and sewer probably worst; but then they leak before failing. The power grid in urban areas, even when replaced, as the CEO has pointed out, all they've done, year after year, is pull through a new same-sized copper cable to directly replaced a burnt-out one. Literally. Yet not only has our population continued to increase; but so has our personal energy usage density.I guess what i'm trying to tell you is that - in my personal opinion - this CEO doesn't 'hype'. Not all the times I've listened to him; and not when I've spent two hours with him, including toe to toe. He really believes this stuff. And since he's one of the founders - and he's been around a long time, and, in IMO, has proven (unlike some founders) that he's a good executive - he's allowed.But - let us now question a couple of things I know he believes.- he believes he can see through to break-even with the funds he has now.I think he is probably right. I also think that if the stock sees a sharp upward surge for a while, he'll take advantage of that - like he did before (in fact, you were the one who correctly predicted this) and pass out some more stock at the elevated price, rather than take on debt.IMHO, I do not believe he will sell more stock below $10 share price. He doesn't have to; they don't have a debt problem; one of their businesses is ops profitable now and increasing (ever faster, in fact). - he thinks that he'll successfully put the grid shock absorbers in Tennessee in place by March 31st; and that this will lead within a year to orders from other utilities. I agree that is as reasonable a scenario as any, based on how well they've handled things so far.- I think that he feels that: the current Phase one of the high-profile, 2000 ft. HTS cable in the spine of the Long Island Power grid will lead to a Phase II there, going at least a few miles. (If it does, by the way, he doesn't have that much first gen cable left; it would be second gen). If that is successful, he believes that will be the thing that frees up honest-to-god other operatoinal grid cable orders for urban centers from other utilities.I agree with that scenario as being the most reasonable one to shoot for.- He used to believe - as late as december of last year - he honestly believed that just because he had shown the commercial ship industry that using HTS motors and generators was life-cycle cost competitive, that he was about to get ordes - any day now.............. He believed that they would do so - even though the Navy hadn't ordered any operational equipment. He believed this because in the past, the ship industry had gone electric without waiting for the USN to do likewise.Well, he was wrong, turns out. They've been booked solid, didn't need to take the chance, and haven't. So I don't think he'll get any ship orders - at all - unless the Navy comes through with an operationally-related order. And there's the rub.- because, he believes the Navy WILL come through ---and I'm not so sure. They SHOULD come through, because it makes money for them (the Navy) in terms of long-term costs, performance, other savings....and he's believed that for the last 4 years. But things in the outside world have changed. The DDG-1000 program he's depending on has ballooned in costs - just as one technology program after another within DOD is being cancelled due to bleeding (literally) in other areas. He honestly believes they will come through; and that may be too optimistic.That's actually the worst 'news'; because the Navy might not be allowed to come through, for reasons not under his control, the commercial ship industry - the real shipbuilding prize - probably won't, either.Now, for the possible wildcard: The Japanese magleve. Seriously.I was pleasantly surprised that the program is continuing on in Japan; believe me, that was not a given, at all. But I've told the CEO directly - based on my own knowledge - that an operational maglev line, between Tokyo and Osaka, will not happen (IMHO) if the Japanese feel that they have to stick with low-temp superconductors, which is the base design. So either they don't go ahead with the final operational system at all - or they will go ahead with HTS. And at the moment, the only wire the've tested at JR is AMSC's. AMSC has all the incentive it needs in the utility business to keep going with its aggressive, 2g, cost-out program; in that sense, JR doesn't have to do a thing. In terms of numbers, they can afford to wait and see if HTS 2nd gen and affordability comes to them, before they make a final decision on the final Tokyo Osaka line. (This recent decision is just for a second test segment).So: here's my summary:- Ship industry business: unlike the CEO, I'm concerned we're looking at a series of events that may make this a no-go- both Navy and commercial. Factoring in ANY income from ships going forward - based on what we know now -- is too high risk to be justified.- Utility wire business: I think looking as good going forward as it ever has been. Delayed over 6 months from where they were projecting 3 years ago--but considering the subject, and the conservativeness of utilities - I'm shocked that's all the 'delay' has been. And, 2nd gen is farther along than anticipated back then.- Utility SuperVar/shock absorber business: slightly delayed - but looking good. Thing to look for next: When TVA will order the final three of their original five-unit order. Before, or after, installation of the current two being built??- non-superconducting power management: growing faster than anticipated. When the company turns profitable at first, will probably be do to this.Sorry for the length and no spell-checking. Gotta go.jp
jp:As always, a great post -- and a rec too.I am afraid you misunderstood my post. I didn't want to suggest the CEO was avoiding hype. In fact, I think this CEO has been different than most development companies in that he keeps the word pictures within the bounds of what the company is doing. One strength of this company is its management.My concern is that when the CEO has the opportunity to flesh out new opportunities he just uses a word like "staggering."Regarding Japan's mag-lev, I had not put two and two together regarding Japan versus Germany. You did that. AMSC doesn't have to be in every market but it is nice to see big markets being developed. What this company lacks today is meaningful sales growth -- but that is coming (although the stock, priced at 5.9-times sales, is hardly expensive). My only concern about the Japanese mag-lev is that when the order is made, it will probably be to a Japanese company (seeing that Japan is funding a national superconducting project) -- and there is more on that Japanese national effort later in this post.I tried to assess the technical threat of Sumitomo. The only roadmap I found is copyrighted 2005:https://www.sei.co.jp/super/hts_e/generation.htmlThe only problem is that it says 2G is "in development." Here is a technical paper, dated Jan. 2006, discussing their 2G product being developed:https://www.sei.co.jp/super/topics_e/index.htmlClick on "Development of Second-Generation High-Temperature Superconductor Wire" for the article.Then there is this press release that defines 2G as "200 A" and announces a product ready to ship that is at "196 A". So, according to Sumitomo, they are shipping an almost-2G product now:https://www.sei.co.jp/news_e/press/06/06_01.htmlIt is also worth reading Sumitomo's technical paper about the future of superconducting wire. At 77 Kelvin (well above the 55 Kelvin that AMSC has in its near-term target range) Sumitomo thinks that they can become competitive with copper wire:https://www.sei.co.jp/super/topics_e/index.htmlClick on "Development of Drastically Innovative BSCCO (DI-BSCCO) Wire" for the write-up.When you consider AMSC was at 30 Kevin two years ago, is at 38 Kelvin now, and thinks 55 Kelvin is well within its technical capability, you know that they are a technology leader and headed, quickly, to very meaningful temperatures and sales.Back to competition...Japan's national funding for superconductor research, besides aiding Sumitomo, also helps Fujikura. If anyone questions the funding here is a link that notes this help:http://www.prweb.com/releases/2006/4/prweb372292.htmA future 2G competitor is the European High Temperature Superconductor operation. It has 2007 targeted for a commercial product.Other than that, the other companies listed as competitors in the annual reports do not look to be as far along as AMSC, Sumitomo, and Fujikura.After looking at this company, I am now interested in buying. Now to find an entry point...W.D.
Good post; please keep digging. Would appreciate your sharing your final personal conclusion on a good entry point and what conditions you place on it.Vis a vis a JR maglev order: One of our known unknowns is, what does the majority of the 2003, AMSC/Sumitomo agreement on cross-licensing of 1g contain? I'm guessing that 2g is discussed in general; and 2g applications inside Japan in particular. Now, 2003 was a long time ago, and times have changed; the 1-g cross-licensing that is ostensibly the main part of the agreement was because 1-g was intended at that time to be the wire of production through 2010, even by AMSC's schedule. They intended on selling ship motors, SuperVars, etc. etc. with one-g wire for years. That all changed in 2005, when they made real breakthroughts in both 2-g producibility and, somewhat surprisingly, performance. They made the command decision to stop 1-g production years earlier than planned (last wire was May 31st of this year; still sitting on the floor in Massachusetts)). They burned their 1-g ships, and set sail into the unknown with 2-g alone. No backups.Right now, getting to wire production breakeven on 2-g will happen with 10-cm wide tape production, yielding 2 million meters per year of 2nd gen wire. I bring that up because they have already gotten requests to provide quotes from two utilities - and each of those requests is for 2 million. A production rate that, even at their own schedule, they won't get to till 2010 (practically). And several things have to happen between now and then.The Massachusetts factory - assuming 2nd gen really works, price and performance wise at all, can become fairly saturated fairly quickly just with utility orders. (That may be an overstatement on my part - but not by much). IF AMSC feels it can reach a cross-licensing/royalty agreement et al with Sumitomo to produce in Japan, I think they'd go for it, knowing they might not be able to fill the order, anyway.I know we're a couple of levels deep here; but it's not an unreasonable supposition. Also, knowing a little about how the Japanese business world sometimes work - or at least how JR sometimes works -- I'm curious about what verbal assurances AMSC gave about 'real' production of 2g, when they provided the 1-g samples for last years' maglev tests.Nothing is over till its over. But, between the secret parts of the 2003 1-g cross-licensing agreement - plus whatever side discussions happened with JR, what the 'understandings' are - I bet that's been discussed and we're not being told. Plus, AMSC is not without some leverage here: I mean, assuming AMSC stays ahead in the producible 2-g wire game.....if Sumitomo doesn't want to give a good agreement, AMSC could always say they'll set up their Asian production base in China or something. That would scare the $hit out of the Japanese. Not only for their own local reasons, either; because it would short-circuit Japanese competition for the China high speed rail market.Interesting times.jp
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