Hanwei Completes Revised Memorandum of Understanding for the Acquisition of Daqing Deta Electric Co., Ltd. and Loan Agreement for up to $72.9 Million in Working Capital

Vancouver, BC, May 13, 2008. Hanwei Energy Services Corp. ("Hanwei" or the "Company") is pleased to announce that it has completed a revised Memorandum of Understanding ("Revised MOU") to acquire up to 100% of Daqing Deta Electric Co., Ltd. ("Deta"). The Revised MOU replaces the Memorandum of Understanding announced on January 24, 2008. The changes in the Revised MOU were made primarily to comply with Chinese laws regarding the ownership of wind power technology developed in China and to address certain tax, accounting and financing issues. To support the working capital requirements for the expanded manufacturing of wind power equipment pursuant to the Revised MOU, Hanwei has negotiated a RMB 500 million ($72.9 million) working capital facility through Defeng Investment Co., Ltd. ("Defeng"), a Daqing, China based finance company that invests in emerging companies. "We believe the Revised MOU and working capital facility creates conditions under which we can complete the acquisition of Deta and focus our efforts on delivering quality wind power equipment to our customers," said Fulai Lang, President and CEO of Hanwei. "Our wind power team in China is working hard to secure the turbine supply chain and commence production of wind blades using our licensed technology."

Revised MOU

Under the Revised MOU, Hanwei Wind Power Equipment (Daqing) Co., Ltd. ("Hanwei Wind"), a wholly owned subsidiary of Hanwei, will acquire 99% of Deta, for RMB 591 million ($86.2 million), of which RMB 431 million ($62.8 million) will be paid under an earn out provision from 2008 to 2012 based on the performance of Deta and RMB 160 million ($23.4 million) in initial cash payments. The earn out provision will be paid with RMB 300 million ($43.7 million) in Hanwei common shares (8,051,746 Hanwei common shares valued at $5.30 per shares, based on the Bank of Canada exchange rate of 7.03 as of January 18, 2008) and RMB 131 million ($19.1 million) in cash.

Hanwei Wind will have an option, to acquire the remaining 1% of Deta for RMB 6 million ($0.88 million) at any time, and the shareholders of Deta will have an option to require Hanwei Wind to purchase the remaining 1% of Deta for RMB 6 million ($0.88 million), 12 months after the close of the acquisition, subject to the approval of the Chinese government. Currently, Chinese law requires that wind power technology developed in China be partly owned by Chinese citizens.

Under the Revised MOU, prior to acquisition, Deta will have entered into a contract (the "Wind Power Equipment Contract") with Heilongjiang Ruihao Energy Technology Co., Ltd. ("Ruihao") for exclusive manufacturing rights for a total of 1,200 megawatts ("MW") of turbines, blades, and towers ("Wind Power Equipment"). The Revised MOU provides that the parties will enter a 200 MW manufacturing contract in 2008 and will thereafter negotiate an annual manufacturing contract for 250 MW of Wind Power Equipment during the period of 2009 to 2012 for a total of 1,200 MW with total value of approximately RMB 8.4 billion ($1.2 billion). For the first 200 MW manufacturing contract to be signed in 2008, the purchase price will be set at RMB 6.2 million ($0.9 million) per MW including turbines and blades. The purchase price for towers will be set separately with each purchase order, estimated at RMB 0.8 million ($0.12 million) per MW based on the price that Hanwei Wind was paid in 2007. For future annual manufacturing contracts contemplated to be signed from 2009 through 2012, the purchase price will be negotiated based on the market price of the same type of products. Under the initial MOU, Hanwei was to receive a guarantee of a 15% net profit after tax for supplying 1,200 MW of turbines, blades and towers valued at approximately RMB 7 million ($1 million) per MW. Under the Revised MOU, the 15% net profit guarantee has been replaced by a set price for the blades and turbines in order for Ruihao to satisfy certain banking requirements. For the initial 200 MW manufacturing contract for 2008, the price for the turbines and blades was set at a price where Hanwei believes it will earn a 15% or higher net after tax profit, based on costs from its initial deliveries and estimated costs from supply chain commitments. The prices for the Wind Power Equipment in future years will be negotiated with a 15% net after tax profit target based on costs and market prices for similar products.

The Revised MOU does not affect the current RMB 200 million ($29.2 million) wind power equipment manufacturing contract between Hanwei and Deta, but replaces the expression of intent from Deta to purchase from Hanwei an additional RMB 1.5 billion ($219 million) of wind power equipment in 2008 and 2009.

Under the Revised MOU, the shareholders of Deta will become employees of Hanwei Wind and the earn out provision will be tied to the successful execution of the Wind Power Equipment Contract with Ruihao to provide 1,200 MW of Wind Power Equipment and Hanwei’s ability to achieve a 15% net profit margin on the contract.

Upon completion and execution of a share purchase agreement between Hanwei and Deta, 8,051,746 shares at $5.30 per share will be issued and placed in escrow, to be released together with the cash payments, based on the successful achievement of the performance targets set out in the Revised MOU, under the following schedule:

  1. Initial payment of RMB 100 million ($14.6 million) in cash no later than May 31, 2008 subject to: a) the completion of due diligence by Hanwei; b) the signing by Ruihao and Deta of an agreement for the manufacture of 200 MW of Wind Power Equipment for delivery in 2008; c) the concurrent transfer of 99% of the shares of Deta to Hanwei Wind, and d) Hanwei receiving financing.
  2. A payment of RMB 60 million ($8.8 million) in cash within 30 days after Ruihao transfers title to the land and building used for the wind power equipment manufacturing to Deta, subject to Hanwei receiving financing.
  3. A payment of 1,610,350 Hanwei shares to be paid at the end of 2008 if the combined company after the acquisition can enter into wind power equipment sales contracts of 200 MW and achieve a net after tax profit margin of 15% on the contract.
  4. Four payments of 1,610,349 Hanwei shares to be paid annually at the end of each year of 2009 through 2012 if the combined company after the acquisition can enter into Wind Power Equipment sales contracts of 250 MW in each year and achieve a net after tax profit margin of 15% on the contract.
  5. Three payments of RMB 32.5 million ($4.7 million) and one payment of RMB 33.5 ($4.9 million) million in cash to be paid annually from 2009 through 2012 if the combined company after the acquisition can enter into Wind Power Equipment sales contracts of 250 MW in each year. This payment is to be made 30 days after the annual sales contracts are signed and Deta receives 5% prepayment on the contracts from Ruihao.

This proposed acquisition of Deta is subject to entry into a definitive agreement and related escrow and employment agreements, which are subject to board approval and satisfactory due diligence. Hanwei expects to complete its due diligence and share purchase agreement by May 31, 2008. However, as set out above, the initial payment is subject to Hanwei receiving funding and the concurrent transfer of 99% of the shares of Deta to Hanwei Wind. In addition, the share transfer will be subject to Chinese and Canadian regulatory approval, which may not be obtained before May 31, 2008.

Working Capital Facility

The RMB 500 million ($72.9 million) working capital facility from Defeng carries an annual interest rate of 8.83% with a 12-month term. Funds can be accessed in three advances and must be used for working capital to secure Hanwei’s supply chain requirements for the Wind Power Equipment Contract. The first advance of RMB 160 million has been committed. The second advance of RMB 190 million and the third advance of RMB 150 million will be on a best efforts basis by Defeng. In addition, on April 7, 2008, the Company received a bank loan of RMB 40 million ($5.8 million) from a Chinese bank. The loan is collateralized by certain buildings and production equipment, bears interest of 8.541% per annum and is due on October 7, 2008.

Wind Power Update

Hanwei is currently working on completing the initial wind power equipment order it received from Deta in June 2007, for twenty 1.5 MW turbines and blade sets and 30 towers for a total price of RMB 200 million ($29.2 million). The price of this initial order is subject to adjustment such that Hanwei is guaranteed to earn a 15% net after tax profit. To date, Hanwei has delivered 30 towers and 3 sets of blades in the fourth quarter of 2007 generating revenues of approximately $8.6 million and 4 turbines in the first quarter of 2008, generating revenues of more than $4 million. The remaining 16 turbines (24 MW) and 17 blade sets, which are part of the initial order with Deta, are scheduled to be delivered in 2008 under a revised schedule that has been mutually agreed upon by Hanwei, Deta and Ruihao. All of the wind power equipment manufactured by Hanwei has been produced using Chinese developed technologies licensed by Deta and Ruihao. Ruihao has installed two of the turbine and blade sets supplied by Hanwei, which are scheduled to be connected to the Heilongjiang provincial power grid in June 2008 for final testing.

Hanwei has successfully established relationships with new Chinese suppliers for key turbine components, including gearboxes and bearings, that are to be manufactured to the specifications of the Chinese turbine technology licensed by Deta and Ruihao. To date, Hanwei has confirmed delivery schedules from component suppliers for approximately 90 turbines (135 MW), representing more than 50% of its needs for 2008, and is working with its suppliers to secure additional components for the current year. Hanwei is expecting 224 MW in orders for wind power equipment for 2008, including 24 MW from the initial order with Deta from 2007, and 200 MW in additional orders, subject to the acquisition of Deta.

As previously announced, to enhance its wind turbine blade production capabilities and to accommodate the implementation of new manufacturing processes, Hanwei has entered into a licensing agreement with Aerodyn Energiesysteme GmbH ("Aerodyn"), a leading international wind power engineering firm, under which Hanwei has been granted a non-exclusive right to produce two versions of Aerodyn’s aeroBlade 1.5 in China. The licensing agreement provides Hanwei with the moulds, technical know-how, specifications and support to produce the 37.5-metre and 40.3-metre versions of the 1.5 MW blades and to market and sell them in China under the Hanwei brand. The delivery of the first Aerodyn production mould is expected in May, such that Hanwei expects to be able to commence blade production in late May 2008.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp. provides high value products and services for the energy sector in China and the Asia region. Hanwei serves its major energy customers through manufacturing facilities in China, producing products for the oil, coal power and wind power industries. Hanwei is focusing on providing products and services that address the growing need for improved energy efficiency and environmental protection in China and the Asia region.


For more information please contact:
Kim Oishi, Senior Vice President of Finance and Business Development
416-804-9228
koishi@hanweienergy.com

Or

Kevin O'Connor, Investor Relations
416-962-3300
koconnor@genoa.ca


FORWARD LOOKING INFORMATION

Certain information in this news release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. This forward-looking information includes information relating to the proposed acquisition of Deta outlined in the Revised MOU, the securing of orders for wind power equipment from Deta for the 2009 to 2012 period, the securing of loan advances from Defeng to provide the financing for the proposed acquisition of Deta, the establishment of relationships with new Chinese suppliers for key turbine components, and the ability to earn a 15% or higher net after tax profit. The forward-looking information in this news release describes Hanwei’s expectations as of the date of this news release. The results or events anticipated or predicted in such forward-looking information may differ materially from actual results or events. Material factors or risks which could cause actual results or events to differ materially from a conclusion in such forward-looking information include the risks that the acquisition of Deta may not be completed on the terms set out in the Revised MOU or at all, that a definitive agreement for the proposed acquisition of Deta and the related escrow and employment agreements may not be agreed upon, that the acquisition may not complete on terms acceptable to the parties, that required approvals may not be obtained or may be subject to conditions that are unacceptable to the parties, that due diligence undertaken by the parties may not be satisfactory or may not identify all possible risks of the transaction, that Hanwei may not be able to complete the working capital facility from Defeng Investment Co., Ltd. in its entirety or at each of its funding stages, that Hanwei may not be able to raise the capital it requires from time to time to complete the transaction, or to make cash payments required from time to time, on terms favourable or acceptable to it or at all, that Hanwei may be required to issue shares under the share purchase agreement between Hanwei and Deta before the wind power equipment manufacturing contracts are completed, that manufacturing agreements may not be entered into between Deta and Ruihao as contemplated in the Revised MOU or at all, that Ruihao may not secure funding and approvals necessary to establish or acquire additional wind farms and accordingly not require additional wind farm equipment, that profit margins may be impacted by price inflation, that Hanwei may not be able to effectively integrate or manage expansion of its operations, that Hanwei may not be able to negotiate favourable pricing terms for supplies beyond the first year of the Wind Power Equipment Contract, that supply chain issues or changes in technology or product requirements may cause delays in delivery of products under current or future manufacturing contracts, that a robust market for wind power products is still developing in China, that there is significant uncertainty surrounding wind power regulation in China, that Hanwei must meet Chinese governmental localization requirements, that there are uncertainties related to certain of Hanwei’s wind power agreements, that Hanwei depends on its intellectual property and the failure to protect that property may adversely affect future growth, that Hanwei faces significant competition and seasonal fluctuations in revenues, that there may be insufficient insurance for its operations, that changes in costs of raw materials or energy may adversely affect operating margins, that operations are subject to environmental risks and hazards, that there are specific risks associated with doing business in China (including those related to state ownership, government intervention, foreign investment, repatriation of profit, currency conversion, shareholders’ rights and enforcement of judgments, a developing legal system, recent regulations relating to cross-border mergers and acquisitions, protection of intellectual property, permits and business licenses, appropriation, tax, infrastructure and interest rate fluctuations), and that exchange rates fluctuate. When relying on Hanwei’s forward-looking information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Hanwei cautions that the foregoing list of material factors is not exhaustive and is subject to change. For additional information with respect to certain of these and other factors, refer to the risk factors section of Hanwei’s Annual Information Form dated April 3, 2008 filed with Canadian securities regulators, which is available on SEDAR at www.sedar.com.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE REPRESENTS THE EXPECTATIONS OF HANWEI AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE HANWEI MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME.