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Otter Tail sells wind turbine maker DMI [UPDATED]
Published 7:46am Tuesday, August 7, 2012 Updated 12:49pm Tuesday, August 7, 2012Continuing its recent pattern of shedding non-utility assets, Otter Tail Corporation on Monday announced it will be selling wind tower manufacturer DMI Industries.
The sale price of DMI’s property, plant and equipment was $20 million, according to a news release to coincide with the company’s second quarter earnings statement.
“Our decision to divest DMI is consistent with the course we’ve set to optimize our portfolio of companies, reduce risk, and create a more predictable earnings stream to support the dividend and future growth,” said Otter Tail Corporation President and CEO Jim McIntyre. “The decision to sell notwithstanding, we are pleased with recent productivity and quality control improvements at DMI that have had a positive impact on earnings over last year’s second quarter results and partially offset the impact of the noncash asset impairment charge taken by DMI.”
McIntyre said the market value for DMI’s assets has been significantly impacted by reduced demand for wind towers due to adverse market conditions affecting the industry, including uncertainty regarding renewal or extension of the Federal Production Tax Credit for investments in renewable energy resources, which is set to expire at the end of 2012.
Under the terms of the nonbinding letter of interest, DMI must complete its current backlog of towers ordered for delivery in 2012 before closing can occur. Should the transaction not be completed, the corporation plans to close DMI’s plants in West Fargo, North Dakota and Tulsa, Oklahoma and sell DMI’s fixed assets, after DMI finishes its backlog of orders for 2012.
The corporation will retain DMI’s net working capital—approximately $66 million as of June 30, 2012. The transaction is expected to close no later than January 3, 2013.
In other news:
• The company reported that the consolidated net loss from continuing operations totaled $16.9 million in the second quarter, and the consolidated net loss from continuing and discontinued operations totaled $17.4 million, compared with net income of $18.8 million for the second quarter of 2011. Consolidated revenues from continuing operations were $283.7 million compared with $283.3 million for the second quarter of 2011.
• McIntyre said earnings from the company’s electric segment were in line with expectations, despite increases in scheduled plant maintenance and postretirement benefit costs that contributed to a $2.2 million decrease in electric segment net income compared with the second quarter of 2011. Milder weather in the second quarter of 2012 also led to a reduction in kilowatt-hour (kwh) sales. “As we further optimize the size and composition of our portfolio of nonelectric businesses, we will continue to invest in additional electric transmission opportunities, such ashe CapX2020 transmission projects currently under way and planned Midwest Independent Transmission System Operator (MISO) transmission projects, to generate more growth from our electric segment,” he said.
• He said the corporation’s plastics segment continued to experience better-than-expected margins resulting in an increase in segment net income compared with last year’s second quarter. Metal parts fabricator BTD also continued to provide strong returns, and T.O. Plastics, manufacturer of thermoformed plastic parts and containers, improved earnings as well, due, in part, to more selective bidding practices. However, operating results at ShoreMaster were down mainly due to a decrease in commercial project activity and costs incurred to close its Camdenton, Missouri production facilities.
