Message Font: Serif | Sans-Serif
 
No. of Recommendations: 9
I love dueling press releases!

Seriously...both of these portend positively for this area. And it's not inconsistent with what we've been discussing here lately. But I think there are some interesting nuances to be gleaned from the past two weeks' announcements by all three companies (AMSC, IMGC, Sumitomo/SEI).

AMSC's contract is for gen 1 wire. Previously we've discussed here how IMGC may be 'ceding' the first-gen wire market...which may, or may not, end up existing...to AMSC, and clearly emphasizing going directly to second gen wire; whereas AMSC has the 1st gen wire factory in place right now, producing kilometers per month, and increasing. IMGC's release today seems to validate that; let's look at the words in detail:
The sub-title headlines:

"* Scheduled To Be First Project To Include Commercially Viable Second-Generation Conductor"

Hey, it sounds like they've got government money to actually put in place commercially-viable second generation wire. But, upon consideration, I don't think so; and my rationale follows:

1. If the stated funding was itself inclusive of 2nd gen emplacement, I think--or at least I would have-- stated: "Will be the First Project to Include Commercially Viable Second-Generation Conductor".
But 'scheduled' kinda implies to me it isn't funded yet; it's just the planned--or, even intended-- 'next step' after this one.

2. Further, down in the body of the press release, the words change (the emphases are mine; how do you bold words on these darn boards, by the way?!):
"We also EXPECT this to be the first DEMONSTRATION of second-generation HTS TECHNOLOGY, which is EXPECTED to reduce production costs to a level that WOULD make HTS technology commercially feasible.""

Note, now the wire emplaced won't be 'commercial' wire (the clear impression they wanted the headline to leave); but rather they 'expect' it to be the first 2nd gen wire 'demo'; and 2nd gen technology is intended to really reduce costs to eventually (my word) make it commercial (which, by the way, AMSC clearly says also).

In short: the second phase of this IMGC announcement--the 2nd gen part--isn't funded yet; and isn't BY ITSELF a 'commercial' installation. At least, not yet.

3. "SuperPower (IMGC) will be the lead coordinator for all aspects of the project and will manufacture the second-generation conductor for the latter phase of the project".
In other words, IMGC is the overall integrator..but isn't making the 1st generation wire for this phase that actually got funded today. Who is making the wire for this funded phase, then? I'm going to go out on a limb here and surprise some of you:
I think the first phase wire that actually is getting funded in this IMGC announcement, is.......AMSC's 1st gen wire.

No, I'm serious; read on:

Here's my assessment (sounds so much more professional than 'my guess').
Consider what recently was announced by Sumitomo (SEI) and AMSC:

"AMSC... announced that it and Sumitomo Electric Industries Ltd. (SEI), ...have agreed to license to each other North American...patents for first-generation high temperature superconductor (HTS) wires... Separately, the two companies also signed a letter of intent to grow the superconductor cable market by..... by marketing SEI power cables that utilize AMSC's HTS wire....Under terms of the agreement, AMSC and SEI each pay royalties when selling first generation HTS wire involving the other's patents. Neither party disclosed additional details or financial terms of the agreement, citing "competition sensitive information."((I'll buy that!-JP)) The agreement and letter of intent announced today complement and do not supplant preexisting agreements the companies have with third parties((e.g.IMGC-JP))."

In short: the funded, first-gen wire being used for this Sumitomo/IMGC announcement...is either AMSC-made wire...or made by Sumitomo, using AMSC's patents; and AMSC will (quietly) get a royalty from Sumitomo for it. (And if I were IMGC, I wouldn't have pointed that out, either!). And that phase..using AMSC's wire...is the only one that got government funding today; the second phase...using IMGC's 2nd gen wire....is planned, is intended..but has not received government funding, contrary to the impression I think they wanted the headlines to leave.

I have one more reason for believing that one way or another, it's AMSC's wire being used here; it's something that I mentioned in a previous post: AMSC made clear in its last conference call that the Big Kahuna's they are working with (Sumitomo; GE, etc.) have absolutely insisted that 2nd gen wire be identical to first gen wire, in form-fit-function. AMSC--and now, IMGC, indirectly-- have both now said that 'performance' (i.e, electrical) will also be very similar between the two; but what WILL be radically different in going to second gen, will be cost of production, which is expected to be much lower, and thus, truly commercial.

Well, what are IMGC/Sumitomo doing here in this announcement? Building a cable with first-gen wire..which is NOT IMGC's first-gen wire...and then 2nd gen wire is able to later be slipped right into the design; ie., form, fit, function...just like AMSC said it would. Remember, AMSC and IMGC are basically making about the same 2nd gen wire; they are both licensing the very same patents from Oak Ridge (if I'm not mistaken). The difference between the two, AMSC said in their conference call, will be the exact production method: which of the two of them will be able to make about the same, identical 2nd gen wire...but at the lowest cost and highest volumes with the highest reliability. THAT'S where the real competition is here.
2nd generation wire design is basically the same, AMSC and IMGC; production is what will be different. But if this 2nd gen wire is form-fit-function the same as the first gen wire...and AMSC is clearly setting the 1st gen standard....it's probably AMSC's wire, via SEI (either actually manufactured by AMSC, or by SEI with AMSC's patents and AMSC gets a royalty).

Lots of speculation..but then again, that's what we're having to do, since AMSC, SEI, and IMGC, in these last two weeks' of press releases, have very intentionally gone out of their way to NOT make some things perfectly clear.

The end result is still positive for all three companies, and for the industry. I still tend to feel that AMSC is best-positioned; since it is leading not only in HTS contracts and production for power cables; but for other applications, including both ship motors and power converters. And the recent $50m funding is intended solely to convert the current 1st gen wire factory to 2nd gen production capability. I think both are quality companies; but at the moment, my long-term bet in this HTS power area, is still on AMSC.

JP
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.