As executives negotiate a contract renewal with General Electric Co., wind turbine blade maker TPI Composites Inc. warned this week that 770 employees may soon be out of work.
Plant General Manager Josh Syhlman said the company does not have any business lined up for next year. He blamed the heightened cost of raw materials, as well as Congress’ debate about future tax credits for wind energy providers, which could motivate companies to slow down on building turbines.
“We are now in the very unfortunate position of needing to suspend manufacturing at our facility at the end of December 2021,” he said in a statement.
TPI has long supplied wind turbine blades to GE, said Newton Development Corp. Executive Director Frank Liebl. The TPI blades are distributed within a 600-mile radius of the Newton factory.
TPI and GE signed their latest contract in July 2020, with GE agreeing to buy blades through the end of this year. The agreement gives GE the option to renew the contract through the end of 2022. A GE spokesperson declined to comment Friday, and it wasn’t clear what role, if any, the contract played in TPI’s lack of orders.
TPI CEO Bill Siwek warned of a potential closure in Newton during a call with investors Aug. 5.
“As for Iowa,” he said, “we are still in discussions with our customer regarding future production and are, therefore, evaluating our options for this site.”
Syhlman and a TPI corporate spokesperson did not respond to requests for comment on the contract Friday. Newton Mayor Mike Hansen told the Des Moines Register in an email, “Yes, negotiations are ongoing and that’s about all I can say on the subject at this time.”
TPI has been a key employer for the city of 15,800 since it opened its factory in 2008, a year after the city’s longtime top employer, Maytag, was purchased by Whirlpool and shut down its Newton headquarters and factories. Liebl said the appliance maker’s exit paved the way for TPI, as the city had plenty of experienced manufacturing employees.
He said TPI planned to move into one of the Maytag plants, but the building was not long enough to hold TPI’s blades. TPI built its own factory, and Dallas-based Arcosa Wind Towers Inc. opened at the old Maytag site.
Arcosa, too, is cutting back staff. The company announced in August that it would lay off 82 workers on Oct. 19. In an email, spokesperson Jeff Eller blamed “current wind tower market demand.”
Piper Sandler research analyst Pearce Hammond said he was not shocked by TPI’s announcement that the Newton plant might suspend production. He said investors already believed that factory was “on the bubble,” in part because GE bought one of TPI’s rivals, LM Wind Power, in 2017. GE may still buy some blades, but Hammond said the company’s orders will decrease with its own manufacturing operation.
Other economic forces are weighing on companies like TPI. With prices for components like carbon up, the resin that the company uses in it manufacturing process is about 45% more expensive than it was a year ago. Under its contract, TPI can pass along about two-thirds of that increased cost to customers.
Hammond said he expects the manufacturing of turbines to slow down over the next couple years because of tax credit changes that Congress is negotiating.
Where companies have previously needed to build within a couple of years of receiving a production tax credit from the federal government, Hammond said members of Congress are advocating for extending the timeframe for six to 10 years as part of the Biden administration’s reconciliation package. He said many companies expect that element of the spending package to easily pass both chambers.
“Wind developers have slowed things down,” he said. “They’re not at the breakneck pace that they used to be.”
If GE does back out of the Newton plant, Raymond James & Associates equity analyst Pavel Molchanov said TPI will try to strike a deal with another wind turbine maker. While the company relied on GE for more than half of its revenue a decade ago, the company is now more diverse, making blades for Vestes, Nordex and Siemens Gamesa Renewable Energy.
If another buyer steps in, Molchanov said, TPI will still probably have to temporarily close the factory. Each company has its own blade designs, and TPI would need to alter some of its machines to make what a new buyer wants.
He said this is a routine element of the blade-making business.
“It could be weeks, probably a matter of months, where the plant will need to reduce operations or temporarily shut down,” he said.
James West, senior managing director of Evercore ISI, said TPI’s Newton plant should still be a secure source of jobs going forward. Companies will increase investments in wind energy over the next decade, even if current spending slows down for a couple of years.
“A lot of this is probably posturing and negotiating,” he said of the back and forth between TPI and GE. “But there is some potential that the utilities say, ‘Yeah, we’re going to take the year off.’”
This is the second time TPI has closed a plant in Newton in as many years. The company shuttered the factory where it made parts for electric buses in February 2020 after it invested $11.5 million on robots at a similar factory in Warren, Rhode Island.
TPI officials said that the Newton bus factory suffered from “startup delays” and “significant losses.” In a statement at the time, the company said that its wind blade factory could hire all of the bus body factory’s 150 employees.
In 2018, after a Des Moines Register investigation found hundreds of cases of skin injuries at the plant, the Iowa Occupational Safety and Health Administration sued TPI for fire hazards, airborne contaminants, faulty record keeping, falling hazards and a lack of adequate protective gear for workers.
The company settled the case for $100,000 and admitted no wrongdoing.
In its most recent quarterly report, TPI disclosed that its operations lost $5.2 million in the first six months of this year, compared to a loss of $28.7 million during the same period last year.
In 2019, before the pandemic began, the company reported that its operations earned $15.9 million, before taxes and debt payments.
|Wind Watch relies entirely
on User Funding