Hanwei provides business update and announces new letter of intent contemplating the supply of wind power equipment in Inner Mongolia



    TSX: HE

    VANCOUVER, June 24 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the
"Company") is pleased to announce that it has signed a non-binding letter of
intent ("LOI") with the Xilinguole Prefecture Administration Bureau, Inner
Mongolia Autonomous Region of China ("Xilinguole Bureau") contemplating the
supply of wind power turbines and blades for up to 3,000 MW of wind resources
located in the area administered by the Xilinguole Bureau. This is the second
LOI Hanwei has entered into to participate in the development of wind power
resources in the Inner Mongolia Autonomous Region (see press release dated
April 22, 2009). In addition, Hanwei is also pleased to provide an update on
Hanwei's business operations, which follows in the second part of this press
release.
    Under the non-binding LOI, it is contemplated that the parties will
cooperate to develop a 3,000 MW wind resource under certain terms and
conditions including the following:

    
    -   It is contemplated that Hanwei will establish a wind power subsidiary
        in Xilinguole and the subsidiary will build a manufacturing facility
        in the Xilinguole region with an initial capacity of at least 200
        turbines and blade sets per annum; and that Hanwei will use its best
        efforts to complete construction of the facility before the end of
        2010.

    -   It is provided that the Xilinguole Bureau will facilitate all
        government approvals for the wind farm and manufacturing facility;
        and that Xilinguole Bureau will exclusively promote the use of wind
        power equipment manufactured by Hanwei.

    -   It is further provided that Hanwei and Xilinguole Bureau will
        cooperate to identify investors and operators for the Xilinguole wind
        resource.
    

    Hanwei and the Xilinguole Bureau are currently engaged in discussions to
settle the terms for a binding agreement and the timeline for construction of
the wind power facility and delivery of the turbines and blade sets. Hanwei
does not expect the LOI or the binding agreement (if one is concluded) to have
a material impact on its funding needs for 2009 or its financial performance
for 2009 as presented with the release of its 2008 financial results. If
Hanwei and the Xilinguole Bureau settle the terms for a binding agreement,
Hanwei will need to secure significant working capital to support the
construction of the new facility and the production of turbines and blade
sets.
    "Xilinguole is being developed as an energy centre for China with its
large wind and coal resources. The Chinese government is investing in the
Xilinguole energy industry by expanding and improving the electric grid
infrastructure to support growing energy exports to other parts of China,"
said Mr. Fulai Lang, CEO of Hanwei. "This LOI, combined with the LOI we
recently signed for Boatou, represent our efforts to attempt to secure
additional customers for our wind power business. However, Hanwei faces
significant challenges to progress these LOI's to formal contracts and start
delivering wind power equipment."
    Hanwei is pleased to provide an update of its business operations as
follows.

    
    Wind Power Equipment
    --------------------
    

    Hanwei has secured the supply chain and funding to deliver 118 MW of wind
power equipment to Daqing Ruihao Energy Technology Co., Ltd. ("Ruihao") under
its agreement to supply 1,200 MW wind power equipment products. The wind power
equipment is to be supplied to three subsidiaries of Ruihao, including Daqing
Longjiang Wind Power Co. Ltd. ("Longjiang"), with the majority of deliveries
expected in the second half of 2009 and in early 2010. Longjiang owns and
operates the wind farm in Du Meng County, Heilongjiang Province, where it is
installing the initial 40 wind turbines supplied by Hanwei. Ruihao is
developing two other wind farms in Heilongjiang Province that will be supplied
under the agreement with Hanwei.
    Longjiang is currently installing the balance of the 40 turbines
delivered by Hanwei to date. The installed turbines are performing well and
Hanwei expects the mandated 500-hour testing process to start in July.
Hanwei's research and development team are working to improve the current 1.5
MW turbines, focusing on the quality and cost of the supply chain and
improving performance under regional weather conditions. In addition, Hanwei
is working on a development plan for 2.0 MW and 2.5 MW technologies, including
the consideration of licensing or joint development programs. Hanwei is
continuing to recruit appropriate technical expertise to strengthen its
internal research and development capability.
    In addition to the LOI's set out in the preceding section of the news
release, Hanwei is actively marketing its turbines and blades in China. Hanwei
sales and marketing efforts are primarily focused on orders for delivery in
2010 and beyond.

    
    FRP Pipe
    --------
    

    Hanwei expects sales to oil pipe customers to be flat or down in 2009
compared to 2008 due to delays in oil field development caused by lower oil
prices. However, FRP pipe sales are expected to grow in 2009 due to sales to
new industries in China, such as salt mining and water transport, and sales to
new international oil pipe customers. Hanwei has been successful in
diversifying its FRP pipe business and reducing its reliance on a few large
customers, by investing in product development of larger diameter pipe and new
joint methods and expanding its international sales and marketing team.
    With the economic downturn and after further analysis, Hanwei believes
that it can add FRP pipe capacity in China at lower cost and risk; therefore,
Hanwei has determined that the development of a plant in Kazakhstan be delayed
for the foreseeable future. In addition, gross margin in Kazakhstan has
improved significantly, decreasing the urgency to reduce shipping costs.
    Currently, Hanwei has sufficient FRP pipe capacity at Daqing for 2009;
however, the Company will need to add capacity to have the flexibility to grow
the business in 2010. Hanwei is planning to increase capacity in China by
adding production lines to the Tianjin facility. The Company expects that the
new lines could be added at a very low capital cost, and within the 2009
capital expenditure budget since the Tianjin infrastructure is already in
place.

    FGD

    The Hanwei Ershigs JV is progressing as well as expected with technology
transfer, production training and business development. However, China's big
five coal power companies have all delayed new coal plants in 2009 due to the
reduced demand for new capacity in China with the economic slow down. These
projects are delayed, but are expected to proceed, since in the medium and
long term, demand for new coal fired energy capacity in China is expected to
be very strong.
    Spray header sales are still expected to grow due to the continuation of
retrofitting FGD installations in 2009. The retrofit market includes the
opportunity for chimney liners, which are currently being protected from
corrosion by cheaper less reliable materials. In the USA, FRP dominates the
market for chimney liners because it delivers the best value. The Company
understands that in over 30 years Ershigs has not had one failure. In China,
some of the cheaper materials used for chimney liners are failing after one or
two years. The potential revenue from retrofitting chimneys is significant and
may be more than 10 times the size of the China market for spray headers.
    The Hanwei Ershigs JV is working with industry and government agencies to
promote the use of FRP, including a joint study with the technology division
of one of China's big five power companies.

    Outlook

    The Company's outlook is marginally lower with that disclosed in the 2008
year end press release due to flat sales in the oil pipe sector and the
potential for some wind power deliveries to be delayed to early 2010. As the
Company's customers primarily operate in the energy sector in China where
strong growth is still expected, the Company expects that the impact on the
demand for its products from the current economic downturn will be manageable.
Hanwei expects revenue growth of between 30 to 50 percent (reduced from the
Company's previous expectation of 40 and 60 percent) in 2009 compared to 2008.
The wind power and pipe businesses are expected to account for more than 90
percent of revenues in 2009, with an initial order for 100 MW of wind power
equipment for delivery in 2009 and early 2010. Net margins are expected to be
consistent with 2008 or will improve due to improved gross margin, economies
of scale and lower tax rates for the wind power equipment business. EPS is
expected to grow due to revenue growth, improved net margin, and Hanwei's
acquisition of China National Petroleum Corporation's 9 percent minority
interest in Harvest, which operates Hanwei's FRP pipe business. In addition,
the Company plans to fund its growth in 2009 with cash on hand, cash flow from
operations and debt, and limit shareholder dilution by controlling the
issuance of additional shares.

    
                         FORWARD-LOOKING INFORMATION
    

    Certain information in this press 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,
among other things, information with respect to the entering into a binding
agreement with Xilinguole Bureau, the establishment of a wind power subsidiary
in Xilinguole, the development of a manufacturing facility in Xilinguole and
the capacity of such a facility, the government approvals for the Xilinguole
manufacturing facility, the impact of the Xilinguole agreement on Hanwei's
funding needs, the need to secure required funding, the supply of wind power
equipment to the Ruihao subsidiaries and their delivery dates, the
installation of turbines and the timing of their testing process, the sales
forecast for FRP pipe, the additional FRP pipe capacity in China, the demand
for new coal fired energy capacity, the timing of new coal plants in 2009, the
growth of the FGD retrofit installations and the potential revenue from such
growth, and the Company's financial outlook. The forward-looking information
is based on certain assumptions, which could change materially in the future,
including the assumption that a binding agreement will be entered into between
Hanwei and Xilinguole, that a subsidiary in Xilinguole and a manufacturing
facility in the Xilinguole region will be established, that government
approvals for the Xilinguole manufacturing facility will be obtained, that the
Xilinguole transaction will not have a material impact on Hanwei's funding
needs for 2009, that any required working capital will be secured, that Hanwei
will be able to supply the wind power equipment to the Ruihao subsidiaries,
that the testing of the turbines will proceed as scheduled, that FRP pipe
sales will depend on the economy and the economy will perform as forecasted,
that additional capacity at the Tianjin FRP pipe facility will be increased,
that the new coal plants will proceed in the medium and long term and the
demand for new coal fired energy capacity in China will be very strong, that
the retrofitting FGD installations will continue to grow and the revenue from
such installations will be significant, and that the factors impacting sales,
revenues and earning growth are as set out in the Company's financial outlook.
The forward-looking information in this press release describes the Company's
expectations as of the date of this press 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 discussions
subsequent to the LOI may not result in a binding agreement, the Company may
not be able to execute on its expectations to deliver products in accordance
with the LOI or any resulting binding agreement, the Company is unable to
establish a subsidiary or manufacturing facility in Xilinguole, the Company
will be able to secure additional working capital to support such growth, the
necessary government approvals may be delayed or may not be obtained at all,
the Company may not be able to supply the wind power equipment to the Ruihao
subsidiaries, the Tianjin FRP pipe facility capacity may not be increased, the
demand for new coal fired energy capacity in China may not materialize and no
new coal plants may proceed in the medium and long term, retrofitting FGD
installations may not continue to grow and the revenues from such
installations may not be significant, and the economy may not recover or
worsen, as well as the risks set out in the risk factors section of the
Company's Annual Information Form dated March 31, 2009 for the year ended
December 31, 2008 as filed with Canadian securities regulators and available
on SEDAR at www.sedar.com.

    THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS
THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS 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 THE COMPANY MAY ELECT TO, THE COMPANY
DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT
AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.





For further information:

For further information: Kim Oishi, SVP of Finance and Business
Development, (416) 804-9228, koishi@hanweienergy.com; Kevin O'Connor, Investor
Relations, (416) 962-3300, ko@spinnakercmi.com

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HANWEI ENERGY SERVICES CORP.

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