Hanwei Executes Binding Agreements to Complete Deta Acquisition
- Wind Power Business Up and Running
Vancouver, BC, August 14, 2008. Hanwei Energy Services Corp. ("Hanwei" or the "Company") announced today that it has entered into binding purchase and sale agreements for the acquisition of the 99 percent equity interest in Daqing Deta Electric Co. Ltd. ("Deta"). The agreements will now be filed with the Chinese authorities to process the transfer of the 99 percent equity interest in Deta to Hanwei's 100 percent owned subsidiary, Hanwei Wind Power Equipment (Daqing) Co., Ltd. ("Hanwei Wind"), which, subject to satisfaction of customary conditions precedents, is expected to be completed in less than one month.
Following the acquisition of Deta, Hanwei will own 1.5 MW turbine and blade technology licenses, and will have an agreement to provide 1,200 MW of wind power equipment (turbines, blades and towers) over a 5-year period (2008 to 2012), with 200-250 MW of wind power equipment manufactured and sold each year at a price fixed at the time of such annual contract. The Company estimates the total value of the annual contracts to be approximately RMB 8.4 billion ($1.2 billion) to be executed from 2008 and 2012. Pursuant to the 1,200 MW contract, Deta has signed a manufacturing agreement for the first 200 MW of wind power equipment for delivery in 2008 and 2009. 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. In addition, pursuant to the agreement, the land and buildings that now host Hanwei's wind power manufacturing facility in Daqing will be transferred to Hanwei Wind.
Under the purchase agreements, Hanwei will make a cash payment of RMB 100 million ($14.7 million) within 5 business days after closing and a cash payment of RMB 60 million ($8.8 million) after receiving title to the land and buildings, subject to Hanwei receiving funding, but no later than March 31, 2009, and payments of RMB 431 million ($63.2 million), subject to earn out provisions, to be paid over a five year period from 2008 to 2012. The earn out provisions will be comprised of cash payments of RMB 131 million ($19.2 million), subject to the execution of annual sales agreements of 250 MW contracts in 2009 to 2012 and share payments of RMB 300 million ($44.0 million), based on a share price of $5.30, subject to Deta achieving certain performance targets. The 1,200 MW agreement provides a right of first refusal for Deta to provide all future wind power equipment for wind farms that Deta's existing customer owns or controls. In return, Deta has granted its existing customer a right of first refusal to purchase, at market prices, all additional wind power equipment manufactured by Deta.
In connection with the completion of the acquisition the Company will prepare and file a business acquisition report containing customary financial disclosure. Hanwei has arranged debt facilities to fund the acquisition and support the working capital requirements of the wind power business.
Prior to the completion of the purchase and sale agreements, Hanwei Wind and Deta were engaged in integrating the management teams and making preparations to provide wind power equipment under Deta's 200 MW contract. The Company has improved its ability to produce wind power equipment by recruiting senior management with experience and expertise in the wind power business, building relationships and negotiating agreements with turbine component suppliers, and developing improved blade manufacturing processes and design using Deta's licensed technology. Hanwei plans to complete the remaining portion of its initial contract with Deta (signed in May 2007) to provide 30 MW of turbines and blades, and commence deliveries under Deta's 200 MW contract in the third and fourth quarters of 2008.
Hanwei also announced that the first two of five Aerodyn Energiesysteme GmbH ("Aerodyn") aeroBlade 1.5 wind blade moulds have been installed at the Company's wind power facility in Daqing, China. Commissioning is underway and the 37.5 meter blade moulds are expected to be operational in early September, 2008. Hanwei entered into a licensing agreement with Aerodyne in February 2008 whereby Hanwei was granted a non-exclusive right to produce two versions of Aerodyn's aeroBlade 1.5. The Agreement provides Hanwei with the moulds, technical know-how, specifications, and support to produce the 37.5 meter and 40.3 meter versions of the 1.5 MW blades and market them under the Hanwei brand.
In addition to the Aerodyne blade moulds, Hanwei has re-commissioned and put back into operation a 34meter blade mould, based on the technology licensed by Deta, which will be transferred to Hanwei after the Deta acquisition is completed.
"We have worked diligently during the acquisition process to recruit an experienced management team, integrate our business with Deta's, and address our supply chain and manufacturing needs in order to create an operational platform with the necessary scale to address the requirements of new wind power business," stated Fulai Lang, President and CEO of Hanwei. "The China market for wind power equipment was more than 3,000 MW or $ 3 billion in 2007 and has been growing at 100 percent per year for the last two years based on strong government support and increasing demand for energy in China. Hanwei is now well positioned to achieve its goal of becoming a leading wind power company in China. After starting the wind power business in 2007, we expect that wind power will be our largest source of revenues and profits in 2008 and for at least the next three years."
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. www.hanweienergy.com
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 completion of Deta acquisition, receipt of advances under the loan facility and completion of the initial contract to provide turbines and blades. The forward-looking information is based on certain assumptions, which could change materially in the future, including the assumption that the Deta acquisition will complete on time and without material amendment to its terms, that the second and third advances under the loan facility with Defeng will be available and will be funded when required by Hanwei, that the Company will secure acceptable additional purchase orders (beyond the first order of 200 MW of wind power equipment) and will be able to effectively complete contracts for delivery of turbines and blades on time and on budget. 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 set out in Hanwei's Annual Information Form and Management's Discussion and Analysis referred to below, as well as the risks that the acquisition of the equity interest in Deta may not complete, acceptable purchase orders may not be secured for product, the second and third advances under the loan facility with Defeng may not be available, and the Company may not be able to execute on its expectations to deliver products in accordance with purchase orders or at all. 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, and the risks discussed in Hanwei's Management's Discussion and Analysis dated May 14, 2008 for the three months ended March 31, 2008 , both of which are 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 EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE SECURITIES LEGISLATION.
