Hanwei to expand its windpower business by entering into memorandum of understanding for the acquisition of Daqing Deta Electric Co., Ltd.



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    TSX: HE

    
    -   Proposed RMB 600 million ($85.3 million) acquisition includes a
        contract for 1,200 MW of wind power equipment valued at approximately
        RMB 8.4 billion ($1.2 billion), licenses for turbine and blade
        technology, and the land and building now being used by Hanwei for
        its wind power manufacturing plant

    -   Hanwei provides further updates on current wind power contract with
        Deta and Ruihao
    

    VANCOUVER, Jan. 24 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the
"Company") is pleased to announce that it has entered into a Memorandum of
Understanding ("MOU") to acquire 100 percent of Daqing Deta Electric Co., Ltd.
("Deta"), a company located in Daqing, Heilongjiang Province, China, for RMB
600 million ($85.3 million). The MOU contemplates that Hanwei will pay the
acquisition price as to 50 percent in cash and 50 percent in Hanwei common
shares at $5.30 per share in a series of payments based on annual wind power
equipment manufacturing contracts signed between Deta and Daqing Ruihao
Technology Co., Ltd. ("Ruihao"). Under the MOU, signed by Hanwei, Deta and
Ruihao, Deta will enter into a contract (the "Wind Power Equipment Contract")
with Ruihao to provide 1,200 megawatts (MW) of wind power turbines, blades,
towers and control systems (together the "Wind Power Equipment") valued at
approximately RMB 8.4 billion ($1.2 billion), and a right of first refusal to
provide all future Wind Power Equipment for wind farms that Ruihao owns or
controls. Under the Wind Power Equipment Contract, Deta is to be guaranteed a
15% net after tax profit. In return, Hanwei will grant Ruihao the right to
purchase, at market prices, all additional Wind Power Equipment manufactured
by Hanwei. Ruihao has also agreed to transfer to Deta all of its current wind
power equipment technology and its rights to the land and building now being
used by Hanwei to house its wind power equipment manufacturing plant.
    The MOU does not affect the current RMB 200 million ($28.4 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 ($213 million) of wind power equipment in 2008 and 2009. The
terms of the MOU call for Deta to sign the 1,200 MW Wind Power Equipment
Contract with Ruihao prior to the close of the acquisition with terms that
include an annual manufacturing contract for 200 MW to 250 MW of Wind Power
Equipment at a price that guarantees Deta a 15 percent net profit after tax.
The proposed contract would be over a five-year period with 200 MW for 2008
and 250 MW for each of the following four years. The contract has an option to
be accelerated if approved by all parties.
    Under the MOU, Hanwei will pay the shareholders of Deta a total of
RMB 300 million ($42.7 million) in cash and 8,051,746 common shares of Hanwei
valued at $5.30 per share. Upon completion and execution of a share purchase
agreement between Hanwei and Deta, the Hanwei common shares will be placed in
escrow and distributed, along with the following cash payments, under the
following schedule:

    
    1.  Initial payment of RMB 96 million ($13.7 million), as to
        RMB 48 million ($6.8 million) in cash and 1,288,279 Hanwei common
        shares no later than April 15, 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; and, c) the concurrent transfer of all of the
        shares of Deta to Hanwei.

    2.  Four payments of RMB 96 million ($13.7 million), as to RMB 48 million
        ($6.8 million) in cash and 1,288,279 Hanwei common shares to be paid
        within 30 days after the signing by Ruihao and Deta of agreements for
        the manufacture of 250 MW of Wind Power Equipment for delivery in
        each of 2009, 2010, 2011 and 2012. This payment schedule can be
        accelerated by mutual agreement if Ruihao increases the amount of
        equipment ordered in any one year above the minimum purchase amount.

    3.  A payment of RMB 120 million ($17.1 million) as to RMB 60 million
        ($8.5 million) in cash and 1,610,351 in Hanwei common shares within
        60 days after transfer of title to the land and building used for the
        wind power equipment manufacturing to Hanwei.
    

    In addition, the MOU provides that after Hanwei acquires Deta, Ruihao
will not establish, own or acquire other wind power equipment manufacturing
companies, which may constitute competition against Hanwei. Similarly, Hanwei
will agree not to establish, own or acquire a wind power farm, which may
constitute competition against Ruihao.
    The MOU is subject to satisfactory due diligence by all parties, and
board and regulatory approval. In addition, Hanwei expects that it will need
to raise additional capital to complete the acquisition, expand capacity and
fund working capital.
    "The Hanwei and Deta teams have been working closely together since early
2007 to secure the contract with Ruihao and to acquire and develop the
technology and manufacturing expertise needed to deliver quality wind power
equipment," stated Fulai Lang, President and CEO of Hanwei. "The Deta
acquisition will provide Hanwei with wind power equipment technology licenses
and an anchor customer that will complete our platform and will position us to
achieve our goal of being one of the top three providers of wind power
equipment in China by 2010. We will be focusing on strengthening our supply
chain management and scaling up manufacturing capacity so we can go after new
customers later in 2008."
    In June 2007, Hanwei announced that Daqing Harvest Longwall High Pressure
Pipe Co. Ltd. ("Harvest"), its 82.15 percent owned subsidiary, had signed a
cooperation agreement with Deta that included an initial order to manufacture
approximately RMB 200 million ($28.4 million) worth of wind power products,
including turbines, blades and towers, and an expression of intent to place
additional orders with Harvest for wind power products in the amount of RMB
600 million ($85.3 million) in 2008 and RMB 900 million ($128 million) in
2009, subject to satisfactory completion by Harvest of the 2007 order. The
cooperation agreement stipulated that Harvest is entitled to earn a net profit
after tax return of 15 percent on the RMB 1.7 billion ($242 million) worth of
wind power equipment orders intended to be placed over the three years. The
June 2007 press release also disclosed that Deta, a privately-owned Chinese
company, had signed an agreement with Ruihao, a privately-owned Chinese
company based in Daqing, Heilongjiang Province, China to provide wind power
equipment. Subsequent to the June release, Hanwei established a 100 percent
owned wind power equipment subsidiary in Daqing, China, and commenced the
production of wind power turbines, blades and towers. Ruihao has an exclusive
right to develop wind power in Durbert Mongolia Autonomous County in
Heilongjiang Province and plans to develop over 1,200 MW of wind power in that
region, and is in various stages of testing and development in other areas of
the Heilongjiang Province.

    Wind Power Operations Update

    As of December 31, 2007 Hanwei delivered three sets of blades, 30 towers
and various electrical accessories under its current wind power contract. Four
turbines have been completed and are being tested by Hanwei with a target
delivery of February 15, 2008. The previously announced revised delivery was
to be 10 sets of blades, 30 towers and 4 turbines by December 31, 2007,
however in cooperation with Deta and Ruihao, the companies have mutually
agreed to the following delivery schedule:

    
    -   Additional 16 turbines by March 31, 2007, completing the first order
        of 20 turbines.

    -   Field-testing of the three sets of wind power blades to be completed
        in early March 2008, with blade manufacturing re-commencing upon
        satisfactory field-testing. It is expected that delivery of the
        remaining 17 blade sets will be completed after March 31, 2007 and
        the final delivery schedule for the blades will be agreed upon after
        the field-testing.
    

    The delays were caused primarily by supply chain issues on the turbines
and by production delays on the blades. Hanwei has taken several steps to
address these issues including the hiring of additional technical personnel
with experience working for Chinese wind power companies in blade
manufacturing, turbine manufacturing, and control systems. Hanwei now has
170 employees in wind power, including 22 in engineering and quality control,
23 in administration and accounting and 125 in production (technicians,
skilled labor and production support). In addition, the Company is
investigating potential license agreements and joint ventures that would
further strengthen its technology and manufacturing capabilities.

    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.

    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 MOU
and the associated transfer of title to land and buildings, securing of
manufacturing contracts between Ruihao and Deta, and the possibility of
raising additional capital; as well as the ability to deliver products to
customers in accordance with delivery schedules, the ability to secure
licenses and joint venture arrangements and to achieve its goal of becoming a
top provider of wind power equipment in China. 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 MOU or at all, 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 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 manufacturing agreements may
not be entered into between Deta and Ruihao as contemplated in the 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 Hanwei may not be able to effectively integrate or manage
expansion of its operations, 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
July 10, 2007 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. HOWEVER, HANWEI EXPRESSLY
DISCLAIMS ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING
INFORMATION, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE, EXCEPT AS REQUIRED BY APPLICABLE LAW.





For further information:

For further information: Kim Oishi, Senior Vice President, Finance and
Business Development, Telephone: (416) 804-9228, koishi@hanweienergy.com;
Kevin O'Connor, Investor Relations, Telephone: (416) 962-3300,
koconnor@genoa.ca

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HANWEI ENERGY SERVICES CORP.

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