Wind power hits a wall: West Fargo's DMI to be sold, fate of 216 jobs at wind tower plant uncertain
WEST FARGO - Otter Tail Corp. has entered into a nonbinding letter of interest to sell wind tower manufacturer DMI Industries Inc., of West Fargo, leaving the future of the plant and its workers uncertain.
"We are hopeful that potential new owners, who produce a variety of large metal manufacturing products, will see the value in our plants and skilled workforce going forward," the company said in a statement from Michael J. Olsen, senior vice president of corporate communications. "We would like to thank our DMI employees for their hard work and dedication over the past many years."
Otter Tail Corp. is still in negotiations and not at liberty to identify the potential buyer, according to the release. It expects to complete tower production in West Fargo in October and in Tulsa, Okla., in November, at which time the potential new owner will assume possession of the plants.
"We are sensitive to the impact this decision may have on our DMI employees, and are committed to providing career-transition support, including severance, as appropriate," the release stated.
DMI Industries employs 216 workers in West Fargo and 167 in Tulsa, Olsen said.
Otter Tail Corp. broke the news on its website late Monday with its second-quarter earnings announcement, saying it had entered into a nonbinding letter of interest to sell DMI's property, plant and equipment for $20 million.
"The wind industry's present economics, substantially driven by the absence of a Production Tax Credit renewal by the U.S. Congress, the lack of a predictable national energy policy, and by low natural gas prices, has contributed to a dramatic decline in the demand for wind towers," the news release from Olsen stated. "This market circumstance is untenable to Otter Tail Corporation."
The wind industry has struggled because of the uncertain fate of an incentive tax, now set to expire at the end of the year, as well as competition from low natural gas prices, an engineer for the American Wind Energy Association said.
"It's at prices that are difficult to beat with wind energy," in the short term, said John Dunlop of the wind association.
Still, natural gas prices are notoriously volatile, and the more predictable costs of wind can be a useful buffer, he said.
Recent action by a Senate committee to extend the incentive tax for wind energy is encouraging, but wind developers have been rushing to complete projects by the end of the year to be able to apply the credit before it expires, Dunlop said.
As a result, new wind development is poised to set a new record this year, but likely will fall off dramatically next year, a scenario that DMI's owners must have seen coming, he said.
"That cliff looks huge to people, especially in the supply chain," Dunlop said. "It's just been nasty for the manufacturing sector. You're seeing that at DMI."
DMI announced layoffs in 2009, during the recession, of 160 workers in two rounds, 60 of them from its West Fargo plant. As of 2010, DMI was forecasting "steady and gradual" hiring to occur as the economy began to recover.
Otter Tail expects the sale of DMI to close no later than Jan. 3, 2013.
Should the transaction not be completed, the company plans to close DMI's plants in West Fargo and Tulsa and sell DMI's fixed assets after DMI finishes its backlog of orders for 2012, the corporation said.
"It's kind of a sad day for West Fargo," Mayor Rich Mattern said. "They've been a prominent company in West Fargo for quite a number of years."
"It's sad to hear but I guess not entirely unexpected when you look at the price of natural gas, where that's gone in the last year or so," he said.
Mattern said DMI employs the types of skilled workers that other companies in West Fargo and the region are seeking.
"So I'm hopeful that, worst-case scenario, that it'll be easy for those employees to transition to another job in the region," he said.
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