Knobias Clip Report (02-01-2008)
Submitted By Knobias ClipReport
APWR: Shares Find the Wind at Their Back; Gain 22% Following LOI Announcement
A-Power Energy Generation Systems, Ltd. (APWR), formerly Chardan South China Acquisition Corp., 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.
Earlier this week, APWR announced that Liaoning GaoKe Energy entered into an agreement with Norwin A/S of Denmark which gave GaoKe the exclusive right to produce and sell Norwin’s 750 kW and 225 kW wind turbines in China. It was noted that the 750 kW turbine would sell for $460 thousand to $510 thousand and have a gross margin between 8-12%. To secure the rights, GaoKe paid Norwin a $3.5 million licensing fee.
The 2.5 MW wind turbine rights were acquired from Germany-based Fuhrlander AG and, when combined, would create a wind turbine portfolio that would give GaoKe the ability to accommodate the varying wind conditions across China.
To secure these rights, GaoKe agreed to pay Fuhrlander approximately $13.9 million (which covers the license, training and a fixed royalty). Fuhrlander will also receive a minority percentage of the gross profit generated from the sale of the first 100 wind turbine units manufactured by GaoKe.
The sales price of the 2.5MW wind turbine was expected to be between $2.7 million and $3.2 million with 8 to 12% gross margins. GaoKe would have the capacity to produce a maximum of 300 of the 2.5MW wind turbines on an annual basis after the first phase of its wind production facility was completed later this year.
On Friday, the Company announced that GaoKe had received letters of intent for 380 2.5 MW wind turbines which was noted as utilizing all of the anticpated plant capacity through 2009. Along with the letter of intent for the 2.5 MW turbine, the Company noted that they had also received a number of letter of intent for the 750 kW variation.
Assuming the Company finalized all of the 380 LOI’s, they would recognize some $1.12 billion in sales and some $112 million in profits, using average prices and margins but disregarding the $17.4 million in license fees and the LOI’s for the smaller 750kW versions.
In comparison, the Company (formerly Head Dragon Holdings Limited) reported revenue of $38.76 million in the third quarter producing $4.19 million in income. Nine month results displayed revenue of $110.45 million and $11.85 million in income.
Following the announcement, shares gained some 22.78% on over 1.01 million in volume. With the incredible growth the Company expects over the coming months from the sale of these wind turbines in China, it easily becomes one to watch.
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