Clarification and Statement by Sinovel on Charges From American Superconductor

Sinovel Disputes American Superconductor Charges and Clarifies Facts

Oct 03, 2011, 09:00 ET from Sinovel

BEIJING, Oct. 3, 2011 /PRNewswire-Asia/ -- Former American Superconductor (AMSC) employee "was convicted of fraud and industrial espionage in Austria for criminal charges involving the corporate spying charges against Sinovel," according to a recent media report in Greentech Media. Greentech reported that Karabasevic was indicted "for passing to Sinovel an upgraded version of AMSC's C12 1.4.3 code which allowed Sinovel to add a Low Voltage Ride Through (LVRT) function to its 1.5-megawatt turbine crucial to meeting upgraded Chinese grid requirements." Sinovel is convinced that the defendant engineer made the upgrades to meet Chinese grid requirements for the supplier's obligations.

Sinovel claimed that during the cooperation, AMSC failed to keep the contract that requires AMSC to offer products featuring the LVRT function to meet the Chinese grid requirements and AMSC should be responsible for the follow-up upgrades. The AMSC engineer provided technical support in adding the LVRT function for Sinovel within the commercial contract and law frameworks, said Sinovel.

Sinovel has recently issued an official statement on the matter, saying that the company "has never purchased any business secrets or intellectual property rights from the AMSC employee." "Remarks of AMSC and its employee have seriously violated Sinovel's fame and business reputation. Sinovel reserves the right to legal actions against them."

The Sinovel statement also said that "more than five years of development and the dedication of over 800 engineers have put Sinovel technically far ahead of its industry counterparts, so the company would not and has no need to purchase AMSC's business secrets or intellectual property rights."

AMSC announced on September 15 that it would take a series of legal actions against Sinovel, including lawsuits over infringement of intellectual property rights as well as an arbitration claim filed with the Beijing Arbitration Commission over the execution of the contract with Sinovel. Sinovel has explicitly denied all the allegations. Commenting on the case included in AMSC's civil suits in which the former AMSC employee was convicted in Austria, Liu Mingjun, partner of Beijing Bastion Law Firm, said in an interview that the defendant in the case has nothing to do with neither a Chinese company nor enforcing judgment in China, so it would not have any influence on judicial decisions in China.

When commenting on the contract dispute with AMSC, Sinovel said according to a statement by AMSC, they greatly attributed the company's loss to "Sinovel's rejection of its shipments."

Seeking "excuse" for annual report delay

After long delay, AMSC finally reported its financial results for fiscal year 2010 and the first quarter of fiscal year 2011 on September 23. According to the report, the company recorded a net loss of US$186.3 million for fiscal 2010, and its revenues for the first quarter of fiscal 2011 were US$9.1 million, which compares with US$97.2 million for the first quarter of fiscal 2010. AMSC predicts that it will continue to post huge loss in the second quarter of 2011. In the two reports, AMSC both claimed that its loss is because it lost business from Chinese top customer Sinovel, which accounts for about 75 percent of its revenue. However, AMSC hasn't given any comment on the reason why Sinovel refused to accept its deliveries.

According to a report by Associated Press on September 23, AMSC had already said that it would not be counting on any revenue from its Chinese customers, which forced it to restate results for last year and delay reports for this calendar year. Early in April this year, AMSC announced that the reason why it delays annual report is because Sinovel refused to pay for certain shipments and failed to continue to fulfill the contract between them. In response to the announcement, Sinovel said it lacks objectivity.

According to Sinovel, since 2006, when AMSC began to provide core components for it, its transducers of products have been experiencing a higher failure rate and have not yet passed the LVRT test. In addition, the after-sales services provided by AMSC have not been so satisfying. Sinovel believes that AMSC has always been failing to perform its obligations under the terms of contracts and has not yet put forward any solution. Sinovel's LVRT technology and scheme were completed and led by the company's research and development team comprising nearly 800 engineers. Sinovel took the lead in passing the LVRT test for wind turbine series in China and will also take the lead in achieving technological upgrades and transformations of related products depending completely on its own technology power in the country.

Song Liang, an analyst at the Distribution Productivity Promotion Center of China Commerce, said in an interview that China has well outperformed certain developed countries including the US in terms of the pace of technology innovations across the wind power sector. Certain traditional product technologies imported are now already not able to meet the country's demands. Such enterprises as AMSC still provided us with the relatively backward technologies, which fundamentally resulted in this dispute. The Chinese wind power sector, represented by Sinovel, is expected to accelerate to shake off the reliance on the foreign industrial technologies in future.

SOURCE Sinovel