Khurshid Jamali, Innovative Windpower
Release Date: 2009-07-21
What is the background of the Pakistani engineer who is today the CEO of a German wind turbine manufacturer that is owned by a Dubai based energy grou?I hold an undergraduate Degree in mechanical engineering, a Masters Degree in Industrial Engineering as well as an MBA in Finance. After graduation I started working for a US agency for international development, before shifting to a consultancy firm specialized in development projects in the Middle East focused on the power sector. After that I entered the wind industry. In 2006, a GE sales manager from Germany visited us in Karachi, Pakistan. I happened to know him and we developed a relationship. Some time later he told me he had resigned from GE and had started to develop his own wind turbine manufacturing company in Germany together with two technical partners who had previously been running a German engineering company. When he asked me if there was someone I knew who could invest in the company, I then proposed the idea to approach Innovative Energy Group in Dubai. Subsequently, Innovative Energy Group decided to invest in this company, and in January 2007 our current organization structure was formed. Last year, we made a step toward becoming a publicly held company with the issue of a pre-IPO convertible bond on the Frankfurt Stock Exchange. We were planning to issue a public offering within the year but due to the current financial situation it may not be the best time for such an action.
What sets Innovative Windpower’s turbines apart from the industry norm and what are its advantages?
Leading players such as Vestas, Enercon and GE are all focussed on multi-megawatt systems and heavy machines, while our main product is a 1.25 MW turbine that weights at least 20% less than its direct competitors. Also, unlike other manufacturers our turbine can fit in a 40-foot container, we use a unique integrated three stage planetary gear system, and our turbines include an integrated crane system that replaces the need for an external crane for maintenance. While a crane is still needed to install the system, the lower weight of our turbine allows the use of cranes with lower lifting capacity and therefore lower cost. The power curve of our turbine when performing in different wind regimes compares very favourably with other manufacturers, and as a new entrant we are offering a lower price per megawatt than our competitors.
Since some technological features are new to the market they have no performance track record. How long it will take before Innovative Windpower can offer a proven wind turbine to the market?
In September, 2009 we are going to install our first prototype at the same location where we are building our new production facility. However, we have two prototypes, one with an air cooled generator for cooler climates such as Germany or the Northwest provinces of China and one with a water cooled generator for the tropical climates of countries such as India, Pakistan, Middle East and North Africa . We are investing most of our money in developing intellectual property, which has led to 22 patents pending for new technologies invented by our experts. One of these patents is our water cooled design, which enables me to safely say that our machine is the only machine in the world that is designed for 50°C.
The rationale behind the creation of Innovative Windpower was the opportunity to capitalize on the market gap between supply and demand for wind turbines. In 2007 and early 2008 this gap was widening, but that in the past 6 to 9 months that gap has closed, will this lead to any changes in your business model?
No, neither last year nor this year did we produce any wind turbines yet, but we have managed to obtain three projects: two in Turkey and one in Scotland. People have been knocking on our doors because they have faith in our design and we have already received advanced payments. Unfortunately, because of the financial crises and the credit crunch our customers had to delay their projects. We have cooperated with them and returned their advanced payments in order to invest in building a strong foundation for long term relationships so that in the future, when they are ready, we will enter into the development phase again.
Our first target right now is to get our prototypes erected and enter our second round of raising capital. Frankly speaking we are not seeking new customers right now. Once we achieve these two objectives, most likely around September or October this year, we will turn our attention to projects in Turkey, where the government has already issued licenses for wind farms totalling 7500MW and there are plenty of companies that want to enter into a framework agreement with us. Our parent company, Innovative Energy Group, has a project in Pakistan of 150MW, so we already have our own project. We also have a joint venture with a Turkish company for the development of 200MW of wind turbines which will be produced by Innovative Windpower, so we have our hands full. We are not seeking customers, but we are seeking strategic partners. For example, we proposed taking on an equity stake in the first Turkish project from which we received an advanced payment in case they need us because we want to get a foothold there
Big players are not focused on projects that require 15 or 20 machines, but that is our bread and butter business: if we have five 20 machine projects we do not need any other customers to stay busy. We will concentrate on this niche market in emerging and developing markets. We know where the market is moving, and we understand that we cannot be another GE Wind in the next five years. We are not competing with GE Wind but instead with small producers in China and India. Also, we have the ambition to develop a 60hz machine by the end of this year for both the Canadian and US market, and we have already received two queries from US developers who are interested in some kind of strategic relationship with us.
It seems you are very much at ease that highly leveraged large wind turbine manufacturers, is this reality or are you facing equal financial challenges?
Actually, at this point in time our debt-equity ratio is not very favourable but we are trying to convert some of the debt into equity as well as raising further equity. We want to maintain at least 40% equity and 60% debt in order to cover the warrantee claims, for which we are setting aside a specific reserve, and other expenses. We have invested €1.2 million in a test facility in Switzerland for gearbox and drive train, which is the most critical component in a wind turbine, to simulate two years of wind changes and stress on the turbine over an eight week period. Additionally, in the same location there is an elaborate manufacturing centre for gearboxes so that they can all be tested there before ending up in our machines.
China has the world’s fastest growing wind power market and is on the radar of Innovative Windpower. How will you seek to enter this market?
Our goal is to begin a joint venture in China which will rely on our own design and innovative technology which is a little different from other manufacturers. Last month we hosted a state owned Chinese company which wants our license to manufacture in China. However, we don’t want to simply license our technology to a Chinese company, we want to participate as a joint venture partner.
If you enter into a successful joint venture that could mean that your business would grow very fast; is that the ambition or are you pursuing managed growth?
We are pursuing a managed growth strategy. For the end of 2010, our targeting is having two operating manufacturing facilities. One will definitely be located in Germany and the second one will be either in the US or China. The Chinese company we are currently talking with plans to manufacture its first machine by September 2010 which would fit very well in our plan so it is the focus of our discussion right now.
If Innovative Windpower enters into a joint venture with the Chinese state owned company you are currently negotiating with, then what will your next three to five years look like?
The facility we are building here has a manufacturing capacity of about 250 machines a year; which could be extended to 320 if we are able to introduce a 4th shift. We are trying to replicate this facility in China. Our first year plan is based on manufacturing about 100 1.25 MW wind turbines in China, after which we would most likely run at 80% capacity in 2011. The year after that, we are planning to start the manufacturing of turbines of 3 MW turbines or larger in both Germany and China. It is likely we will produce 60 machines in the next year in Germany and thereafter around 200 machines a year.
Many German government officials in Germany appear to believe that the share of wind power in the energy mix can best be increased though the upscaling of existing wind turbines, which would most likely limit the market of smaller models in Germany. Does this mean that the future of the small turbine is in the emerging markets?
I would not say that because Europe has introduced a lot of conditions for the development of wind farms, such as height limitations of 100 meters which allow for a hub height of around 65 meters and 35 meter blades to meet the threshold. This height requires lower megawatt machines; you cannot have a 3MW machine unless you have a hub height of 80 meters which is not possible most of the places in Germany. Therefore, we are trying to capture the small machine market.
We are trying to enter into a joint venture with a German University , which has dedicated a project site to an upcoming new turbine. Our competition is a very major company which has developed a 3MW machine with a total height of about 150 meters which doesn’t fit there due to height limitations. In such circumstances the only thing that can be done it putting up 1.5MW to 1.8MW machines.
So what will be on the top of your agenda during your upcoming trip to China?
Again, the joint venture, we are trying to pursue two companies. One has already visited us here and they are pretty convinced but a joint venture lasts a while so you have to be sure.
So what were their impressions when they came here?
They were very happy and are convinced of our technology and are trying to evaluate the conditions since the Chinese government is restrictive in bringing capital out of China. If our potential partner can convince the authorities to invest Chinese money in Germany, and we agree on providing the technology and design on a joint venture basis, then it is a done deal. We are trying to create a joint venture and attract capital to the German market while also facilitate employment here.
What is the final message you would like to send to the Chinese government and potential future partners?
At the moment, there are only two highly visible partnerships between Chinese and European wind turbine manufacturers, involving Goldwind and Sinovel. I would say that there are more private wind turbine manufacturers in Europe which can offer a reliable design and a proven competent sourcing which is something that can benefit both parties. This way the highly innovative technology can be steadily transferred to Chinese manufacturers of components, thus reducing the overall cost of the wind turbine.
| Company: | Innovative Windpower |
| Position: | CEO |
| Country: | Germany |