American Superconductor (AMSC) - 2023 Q4 - Annual Report

PART I Item 1. BUSINESS AMSC provides megawatt-scale power resiliency solutions for grid and U.S. Navy, leveraging smart materials and software for clean, reliable power - AMSC is a leading system provider of megawatt-scale power resiliency solutions for the grid and U.S. Navy, utilizing proprietary 'smart materials' and 'smart software and controls' to enhance power flow performance[10] - The company's solutions improve energy efficiency, alleviate power capacity constraints, enhance system resiliency, and increase renewable energy adoption, driven by modernized grids, U.S. Navy fleet electrification, and increased renewable energy sources[13] - AMSC estimates its total annual addressable global market for products and solutions to be nearly $9 billion, driven by investments in renewables, materials for electrification (EVs, semiconductors), and U.S. military ship systems[13][14] Overview AMSC, founded in 1987, delivers megawatt-scale power solutions for grid and U.S. Navy, harmonizing clean energy with reliable delivery - AMSC was founded on April 9, 1987, focusing on future-facing technologies to harmonize decarbonization and clean energy with reliable power delivery[10] - The company is a leading system provider of megawatt-scale power resiliency solutions for the grid and protection systems for the U.S. Navy fleet, utilizing proprietary 'smart materials' and 'smart software and controls'[10] - AMSC's products support the evolution of a reliable and resilient grid, integration of renewable energy, and power for energy-intensive factories (e.g., semiconductor manufacturing), while also providing advanced superconductor-based systems for U.S. Navy mine field protection[11][12] Market Opportunities AMSC's solutions address global demand for renewable energy, transportation electrification, semiconductors, and Naval fleet electrification - AMSC provides solutions addressing four key market drivers: global demand for renewable energy, materials for electric vehicles, semiconductors, and the electrification of the Naval fleet[15] - For renewables, AMSC designs wind turbines, provides electrical control systems, and offers grid interconnection solutions (dynamic/static voltage management, harmonic filters) for wind and solar farms[16][21][22] - For the Navy, AMSC provides advanced ship protection systems, including degaussing systems, and is developing power management and generation solutions[18][21] - The company's power system products serve transmission grids (congestion, power quality, interconnection), distribution grids (reliability, resiliency, industrial power), and urban grid infrastructure (reliability, security, capacity, instantaneous outage recovery)[18][19][20] Competitive Strengths AMSC's strengths include differentiated technologies, turnkey solutions, scalable manufacturing, a robust patent portfolio, and integrated expertise - AMSC leverages differentiated technologies, including proprietary Amperium® high-temperature superconductor (HTS) wire and PowerModule™ power converters, for enhanced power flow resiliency and performance[25] - The company offers turnkey system solutions, enabling direct sales to customers and leveraging application expertise beyond core products[26] - AMSC maintains a scalable, low-cost manufacturing platform for wind turbine electrical control systems and power electronics, with modular techniques for Amperium® superconductor wire[27] - The company holds a robust portfolio of awarded patents and applications globally, complemented by engineering expertise and unique integrated solutions for wind turbine manufacturers and power grid operators[28] Strategy AMSC's strategy focuses on revenue growth and improved operating results through best-in-class engineering, megawatt-scale offerings, and global market expansion - AMSC's strategy is to drive revenue growth and enhance operating results by providing best-in-class engineering, support, technologies, and solutions from power generation to delivery[29] - The company focuses on megawatt-scale power offerings, including power electronics for large wind turbines and systems for stabilizing power flows and integrating renewable energy[29] - Key product innovation efforts include the Resilient Electric Grid (REG) system, Ship Protection Systems (SPS) for the U.S. Navy, and D-VAR VVO® for distribution grids[30] - AMSC pursues emerging overseas markets and serves key markets locally with sales and field service personnel to understand market dynamics and anticipate customer needs[30] Grid Market Overview The global grid faces modernization challenges from renewables and EVs, with government acts driving demand for AMSC's solutions to improve performance - Global electricity grids require modernization due to challenges like severe weather, cyber-attacks, expanded renewable generation (wind and PV), and new loads like electric vehicles[31][32][33] - The Biden Administration's energy plan, Inflation Reduction Act of 2022, and CHIPS Act of 2022 are expected to positively impact demand for AMSC's new energy power systems solutions by spurring investment in clean energy, grid modernization, and domestic semiconductor manufacturing[34][35][36][37] - AMSC's grid solutions include D-VAR® Systems for power flow/voltage control and renewable integration, actiVAR® Systems for reactive compensation and voltage sag mitigation, armorVAR™ Systems for reactive compensation and power factor correction, custom Transformers and DC Rectifiers for industrial processes, D-VAR VVO® for distribution grid voltage control, and Resilient Electric Grid (REG) Systems for urban grid reliability and capacity[40][41] Marine Market Overview The U.S. Navy is electrifying its fleet, and AMSC provides advanced HTS-based ship protection and power solutions to address capacity and efficiency challenges - The U.S. Navy's 2022 shipbuilding plan calls for a larger, modernized, sustainable, and lethal Navy, with the fleet numbering 296 battle force ships as of April 17, 2023[43][44] - Navy fleets face challenges in power capacity for high-power density weapon systems, space and weight limitations for new power solutions, and efficiency for routine operations due to heavy copper-based cable systems[45][46] - AMSC's solutions for the marine market include HTS-based Ship Protection Systems (SPS) (degaussing) that reduce system weight by 50-80% and are designed into the San Antonio-class amphibious warfare ship platform[44][47] - The company is expanding HTS technology for in-board power delivery, power generation, and electric propulsion systems to enable high-density energy transfer, more power in the same machinery space, and increased fuel efficiency for the Navy's 'electrify the fleet' mission[48][49][50] Wind Market Overview The global wind power market is growing due to incentives and technology, with AMSC providing turbine designs, electrical control systems, and support - The global energy mix is transitioning to renewable energy, with wind power being a major pillar; approximately 85 GW of wind generation capacity was added worldwide in calendar 2022, with 88 GW anticipated in 2023[52] - Future growth in the wind power market is driven by government incentives, technological improvements, turbine cost reductions, offshore wind development, and increasing cost competitiveness[53] - AMSC provides Electrical Control Systems (ECS) to wind turbine manufacturers, regulating voltage, controlling power flows, and maximizing turbine efficiency, having shipped components for over 17,000 MW of wind power[54] - The company designs state-of-the-art onshore and offshore wind turbines (2 MW and higher) and offers extensive customer support services, including plant designs, supply chain localization, and employee training[55] Customers AMSC serves over 100 global grid customers and key wind manufacturers, with Fuji Bridex Pte Ltd being a significant revenue contributor - AMSC serves over 100 customers globally in the grid market, including Commonwealth Edison, YMC Incorporated, the U.S. Navy, SSE plc, and Ergon Energy[57] - Key wind turbine manufacturing customers include Inox Wind Limited (India) and Doosan Heavy Industries (South Korea)[57] Revenue Concentration by Customer | Customer | Fiscal 2022 Revenue Share | Fiscal 2021 Revenue Share | | :---------------- | :------------------------ | :------------------------ | | Fuji Bridex Pte Ltd | 15% | 14% | Facilities and Manufacturing AMSC's primary facilities are in Massachusetts for Grid manufacturing and Austria for Wind engineering, with global sales offices and diverse raw material sourcing - AMSC's corporate headquarters and Grid segment manufacturing are located in Ayer, Massachusetts, with additional Grid manufacturing in Westminster, MA, Queensbury, NY, and New Milford, CT[59][60] - The Wind segment's engineering, R&D, and customer support are based in Klagen