A-Power Upgrades Its Acquired Fuhrlander Wind Turbine Technology from 2.5MW to 2.7MW and Secures Components for 2008 Production of 10 Units of 2.7MW Wind Turbines.
The 2.7MW wind turbine will supersede the license agreement for Fuhrlander's 2.5MW wind turbine technology that A-Power entered into in 2007. While other terms of the license agreement remain unchanged, the upgrade will enable A-Power to produce wind turbines with an output of 2.7MW, the largest land-based wind turbine in production today. All of the components will be delivered to A-Power's recently completed wind turbine production facility in Shenyang, which is the largest wind turbine production facility in China. Five of the ten assembled 2.7MW wind turbines will be re-exported to Fuhrlander AG and the remainder will be delivered to A-Power customers in China later in Q4 2008.
Mr. Jinxiang Lu, A-Power's Chairman and CEO commented, "A-Power's wind strategy is being executed as planned. We completed our wind production facility in June and now have the largest wind turbine production facility in China. Over the last nine months we worked very closely with Fuhrlander AG and Norwin A/S and invested a tremendous amount of time and effort identifying sources of key components for all of A-Power's wind turbines. I am very pleased to share today with investors the progress we have made on the 2.7MW wind turbine production for 2008.
1. By upgrading the 2.5MW wind turbine technology, Fuhrlander AG ensures that the new 2.7MW series wind turbines can now produce more output, realizing increased economic efficiency for its customers. The improved specification changes have no impact on the increased availability of components, but allow A-Power to be able to claim exemption from import duties for the 2.7MW wind turbine components, improving its overall cost structure and enhancing its competitive position both in China and internationally.
2. As an integral part of the license agreement between Fuhrlander and A-Power, Fuhrlander will provide intensive training for A-Power technicians at both Fuhrlander's facility in Germany and A-Power's facility in China. In order to ensure successful entry into the China market of the 2.7MW wind turbines, Fuhrlander's technical staff will also be assembling the first 100 units of 2.7MWs at A-Power's facility side by side with A-Power technical staff. A-Power's technicians are currently in Germany attending Fuhrlander's training program and will be ready to join their Fuhrlander counterparts in producing the first 10 units in Shenyang early in Q4."
Comments on A-Power business outlook for 2008 and 2009
1. Distributed Power Generation - in addition to the robust growth of its domestic distributed power generation (DG) business, A-Power has been, since the beginning of 2008, actively engaged in international DG projects. On top of the $150 million dollar contract that A-Power signed with its Thai customer in April 2008, the company recently announced the signing of a MOU for a potential contract valued at $300 million for the construction of 4 distributed power systems in Thailand over a period of three and half years. A-Power is in the final stages of negotiating contractual details and expects to convert the MOU into a firm contract within the next 60 days. As a result of the addition of international contracts in more tropical climates, A-Power will, beginning this quarter, experience a significant change in its historical DG revenue curve. Whereas historically, as a result of the deep freezing winter in North China, the first and fourth quarters typically experienced relatively lower revenue than the second and third quarters, A-Power now expects to achieve record third quarter revenue and yet a still larger revenue in the fourth quarter of 2008, thus helping the company achieve its full-year net income target of $35-45 million.
2. While the upcoming production of 10 units of 2.7MW and up to 50 units of 750kW wind turbines in 2008 will demonstrate A-Power's ability to focus on and execute its wind energy strategy, the company expects to produce at least 100 units of 2.7MW and 300 units of 750kW wind turbines in 2009. The Shenyang-based wind turbine facility is designed with annual maximum capacity of 300 units of 2.7MW (average of 25 units per month) and 420 units of 750KW (average of 35 units per month) wind turbines. In addition, A-Power plans to complete its second wind turbine production facility in Inner Mongolia in mid-2009 and expects to be running the Shenyang and Inner Mongolia facilities at full capacity in 2010, with a total output of 1.8GW having an estimated sales revenue of over $2 billion dollars.
3. On the component sourcing front, both Fuhrlander AG and Norwin A/S are fulfilling their contractual obligation by leveraging their existing supply chain to source key components for A-Power from their European suppliers and by helping A-Power develop its long-term domestic sourcing program from China-based component manufacturers. A-Power management is very pleased with the encouraging progress made and is confident that components will be available in a timely manner for its wind turbine production in Q4 2008 and beyond.
4. A-Power has a strong balance sheet and positive cash flow from operations, and plans to fund all of its ongoing and currently planned activities from existing funds.
A-Power Energy Generation Systems, Ltd., through its PRC operating subsidiary, Liaoning GaoKe Energy Group Co., Ltd., is the largest provider of distributed power generation systems in China and will enter into China's wind energy market in 2008. The Company is also focused on developing and commercializing additional renewable energy technologies and has strategic relationships with both Tsinghua University and the China Sciences Academy in Guangzhou.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, about A-Power. Forward-looking statements are statements that are not historical facts, including statements relating to expected future contracts, revenue trends and estimates, production goals, component availability and sources, and capital needs. Such forward-looking statements, based upon the current beliefs and expectations of A-Power's management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which A-Power is engaged; cessation or changes in government incentive programs; fluctuations in customer demand; production delays, component shortages, management of rapid growth and transitions to new markets; intensity of competition from or introduction of new and superior products by other providers of distributed power generation and other energy generation technology; timing, approval and market acceptance of new product introductions; general economic conditions; and geopolitical events, as well as other relevant risks detailed in A-Power's filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Neither A-Power nor GaoKe assumes any obligation to update the information contained in this press release.