UPDATE 1-Clipper says strikes US windfarm pact with BP

(Adds more details, CEO's comments, share price)

LONDON, July 30 (Reuters) - UK-listed wind turbine maker Clipper Windpower said on Wednesday it will team up with the alternative energy unit of BP (BP.L) to develop a windfarm in the US, the world's fastest growing market for such power.

Clipper (CWPR.L) and BP will be equal partners in the 5,050 MW project in South Dakota, where BP will acquire 1,750 MW of wind development assets from Clipper for $26.25 million.

The joint venture will also buy a further 2,020 Clipper turbines as the project progresses, making it one of the world's largest windfarms, Clipper said in a statement.

However, Clipper shares were down 3 percent at 400 pence at 0727 GMT on concerns that the near-doubling in the price of steel, a key raw material, will sap profits.

Operating profit margins next year could be "substantially lower" than the 9-12 percent previously expected if recent increases in steel costs do not abate, Clipper said.

Nevertheless production glitches have been resolved and the majority of its startup costs have been accounted for, Clipper said, adding that margins should improve in 2010, helped by higher sales volumes and improved pricing.

It currently has over $265 million in cash, with that balance improving slightly by year-end, Clipper said.

"The tough times are behind us," Chief Operating Officer Doug Pertz said in a telephone interview. "We've turned the corner and anticipate breaking even in the second half. We still anticipate being profitable next year."