Renewables:

TPI Composites' Lockard discusses impact of tax credit uncertainty on wind manufacturers

Will Congress include a production tax credit (PTC) extension for wind energy in the payroll tax deal? During today's OnPoint, Steve Lockard, CEO of TPI Composites and a board member of the American Wind Energy Association, weighs in on the politics of the PTC and explains how his company, a producer of wind blades, will be affected this year by the lack of certainty on the tax credit extension.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Steve Lockard, CEO of TPI Composites and a board member of the American Wind Energy Association. Steve, thanks for coming on the show.

Steve Lockard: Thank you, glad to be here.

Monica Trauzzi: Steve, the future of the production tax credit for wind energy is up in the air right now. The extension of the PTC has become another highly politicized issue here in Washington. Do you think that there is enough interest in getting the PTC extension into the payroll tax bill that we may see coming through at the end of February? What are you hearing on the Hill right now?

Steve Lockard: I do think so. There's tremendous growing support for what we're doing and I think as more people, more members on the Hill and their staff come to understand the opportunity to create and sustain U.S. manufacturing jobs with an extension of the production tax credit, that support is really growing.

Monica Trauzzi: And you sense that you have bipartisan support here?

Steve Lockard: We do have bipartisan growing support. There is a bill that's been introduced in the House with bipartisan support, 16 Republican sponsors, along with a total of 60 supporters of that bill. And the messages we're getting and receiving from Republican members as well, especially those that have been educated a bit about wind, they have wind in their district, wind manufacturing facilities in their state, is they come to understand the job creation and the economic -- positive economic impact in the U.S., they're becoming supporters.

Monica Trauzzi: There's pushback though. It's not all positive, not all supportive and the argument against the extension is if you can't make the business run without these tax credits, then perhaps maybe you don't have a viable business model. So what do you say to that when the critics do pose that question?

Steve Lockard: Yeah, all energy is subsidized to some degree. This is not really a deregulated industry in total. And, from our perspective, the production tax credit is an investment by the federal government. It actually returns net revenues in a positive sense back to the U.S. government over time and creates a number of U.S. manufacturing jobs. So, there's a very positive benefit from this and I think those that understand it are coming to see that. So, those that may not understand that impact, I think the initial pushback is one of why should we provide this incentive again? It's a tough budget environment, the whole pay for discussion that's going on and we've come back and said, yeah, we understand. But here's the economic positive impact that can be brought to bear through the wind energy production tax credit. It's an urgent issue for us as well right now. We have 75,000 U.S. manufacturing jobs. The credit expires at the end of this year. But for all intents and purposes, it's expired now in that there's lead time associated with building these products and the developers that buy turbines, that buy components from companies like ours are already starting to suffer layoffs. And so it's an urgent issue.

Monica Trauzzi: Do you have a percentage of layoffs that we could see over the next year or so if we continue to have this uncertainty on the extension?

Steve Lockard: Yeah, a recent Navigant study estimated 37,000 jobs could be lost, so roughly half of the 75,000 that we've created.

Monica Trauzzi: How do you account for this pushback that we've seen in Congress? Is it just about Solyndra or are there some other issues that are getting in the way of this extension?

Steve Lockard: Solyndra gets mentioned. I think, again, that the connection to the wind industry really isn't very relevant here. We're not talking about loan guarantees. This is a production tax credit that the benefit of which only is realized after wind turbines are spinning and wind farms are generating electricity. So there's some, I think, confusion or misunderstanding or a connection to solar and some of the issues that way. It's not really relevant to what wind is doing and, again, when we get a chance to explain that, I think our story is resonating.

Monica Trauzzi: So, tell us the story of Newton, Iowa, where you have some of your operations, a very interesting story.

Steve Lockard: Yeah, so Newton is a town of 16,000 just east of Des Moines and was the home of Maytag for over 100 years. And Whirlpool bought Maytag, shut it down, a loss of over 3000 manufacturing jobs in the community. So, TPI built a new factory there. We've hired 800 workers and so we're helping to regrow again or the rebirth of Newton.

Monica Trauzzi: So, your company also has operations in Mexico and China. You were telling me before the show that the Mexican operation does supply units to the United States. If this extension happens, is there any chance that some of those jobs from Mexico may move here to the United States?

Steve Lockard: I think we don't have any specific plans in terms of our Mexico operation in that way, but there's an opportunity for more U.S. manufacturing to be created. The opportunity of what we've accomplished in Newton, Iowa. We're looking for the chance to replicate that story, to do it again, our company and others like us, but it's going to take some long-term, stable policy and an environment of stability so that we all understand what the economics of this are. And investors are looking for certainty and pay back and so it's very important that we have a stable policy that helps support that and allows us to create more and more U.S. jobs. The good news about the parts we build, they're physically very, very large. The blades are 50 meters, they're half the length of a football field, so the trucking is very expensive. It makes sense to build these products close to where they're going to be used. So the Mexico plant might service the West Texas market, it's not going to service the Iowa market. And so we're in Iowa also for reasons of it's cost effective to build in Iowa, as long as the products are then used in close proximity.

Monica Trauzzi: So, for your business specifically, what are your projections for 2012 into 2013 with the uncertainty that's currently existing?

Steve Lockard: It's a challenging environment to make those projections right now. We're concerned about the fourth quarter of this year impacting our company and we're very concerned, deeply concerned about 2013 affecting our company and our industry. So, again, there's this lead time associated with the components. We'll be shipping lots of product this year, but there's a cliff that's coming unless there's a clear extension and clarity on the extension and urgently so. As I mentioned, it's really -- this is an issue that, for all intents and purposes, the PTC is expired today, even though technically it doesn't expire until the end of the year and we've been on the Hill and pushing for just an urgent extension of the PTC now.

Monica Trauzzi: All right, we'll end it there. Thank you for coming on the show.

Steve Lockard: Thank you very much.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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