At the outset of October, I told you to cool your jets on A-Power Energy Generation Systems
For some insight into the tumble, let's turn to the third-quarter results. Revenue came in at a meager $57.3 million, taking the year-to-date total to just less than $200 million. My prior concerns about A-Power blowing its revenue guidance have come to fruition in a big way: The company projects that its full-year top line will come in at just $310 million, versus $500 million previously.
A big part of A-Power's promise has hinged on its Texas wind farm project. So far, the proposed 600-megawatt project has failed to secure project financing. If no financing is arranged by Dec. 31 (e.g., four weeks from now), each partner has the right to dissolve the project. That's not to say the project is likely to be canceled -- securing U.S. government funding is a time-consuming affair and is likely one of the main hold-ups here -- but A-Power's partners will be free to pull the plug.
A-Power signed on to the Texas project through its majority-owned subsidiary Shenyang Power Group, but the company has recently reduced its interest from 62% to 19.5%. The stated goal is to facilitate revenue recognition. That's a pretty straightforward way to juice the top line in future quarters. A-Power will need to secure firm turbine orders first, however. The company mentioned on its conference call that it's looking to sign on to other U.S. wind projects as both a turbine supplier and as a joint venture investor, but so far has no firm commitments.
The revenue guidance and Texas news were obviously not well received, but there was yet another source of disappointment in the report. A-Power is seeking to sever ties with General Electric
The weak wind market has been tough for other players like Broadwind Energy
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.