A-Power is to supply the wind turbines, the towers and the foundations, and oversee the construction, subcontracting and installation for this project. The estimated cost breakdown is as follows: equipment procurement $84.2 million; construction and installation $4.8 million; miscellaneous $1.5 million. The project is due to commence early October this year and the estimated completion time is June 2010.
The Saiwusu Wind Farm project, owned by Jihe Orient, has been approved by the National Resources Bureau of the Inner Mongolia Autonomous Region and the permit for transmission to the electricity power grid has been issued by the Inner Mongolia Power Co. Its feed-in tariff also has been approved by China’s National Development and Reform Commission.
"We are truly excited to embark on our first wind farm full-responsibility project," said Mr. Jinxiang Lu, Chairman and CEO of A-Power. "Inner Mongolia as we all know has the most promising wind energy potential among all of China’s provinces. Among the 787 GW estimated exploitable wind energy, only 1.6 GW in capacity had been developed and installed as of September 2008, according to the Chinese Renewable Energy Industry Association. A-Power is very proud to set its foot in a region with such vast resources. We look forward to leveraging our superior wind turbine technologies, our engineering and construction expertise and our excellent relations with local governments, and making headways as a participant in the robust growth of the wind power market of China."
The Wind Turbine Project of A-Power is listed as one of the major Industrial Projects of Liaoning Province and Shenyang City. In undertaking this milestone project, A-Power enjoys strong support from the State Ministry of Science and Technology, State Ministry of Commerce and local governments in both Liaoning Province and Shenyang City.
Located in the state-approved Economic and Technology Development Zone of Shenyang, A-Power’s wind turbine production facility boasts an area of over 300,000 square foot. It has two production lines: the 2.7MW wind turbine whose technology is licensed from Fuhrlander AG (Germany) and the 80/20 JV of 750KW (expandable to 1.5MW) with technology licensed from Norwin A/S (Denmark).
The facilities were completed in January 2009 and they are now the largest wind turbine production plant in China, enabling A-Power to supply both domestic and international customers with quality wind turbines based on commercially viable technology.
Assembly of the first two units of the 2.7MW-grade wind turbines began June 2009.
The wind turbine business of A-Power is headed by Mr. Yunbo Wang, a veteran in China energy generation business, together with his team of engineers who trained in Germany in 2008 and 2009.
APWR’s DG and wind power businesses are driven by overarching sector trends toward energy and environmental conservation. Its onsite DG plants provide improved power reliability, generation efficiency, and reduced emissions. We believe its prospective wind turbine business presents opportunities to benefit from the rapid growth of wind power within China. We believe China’s rapidly increasing energy consumption along with growing concerns about air pollution and energy security are increasing public awareness and driving demand for approaches to improve energy efficiency, decrease emissions, and reduce reliance on foreign-controlled fuels. We believe these trends form the basis of an attractive market opportunity for APWR.
China’s insatiable demand for energy
China’s strong economic growth has been fueled by a rapidly increasing demand for energy. China’s energy consumption has exceeded 10% annual growth for the past five years, according to China’s National Development and Reform Commission (NDRC). The International Energy Agency (IEA) estimates that China’s primary energy demand will increase 3.2% annually from 1,742 million tons of oil equivalent (MTOE) in 2005 to 3,819 MTOE in 2030. It projects more rapid growth in the near-term, projecting a 5.1% annual increase from 2005 to 2015, driven by China’s continued industrial expansion. Based on these growth rates, China will overtake the US as the world’s largest energy consumer shortly after 2010. To keep pace with this demand, the IEA estimates that China needs to add more than 1,300 GW to its electricity-generating capacity, more than the total current installed capacity in the US.
Environmental concerns continue to mount…
China’s environmental issues are well documented. The country’s rapid economic growth has come at the price of a deteriorating environment. The air in many Chinese cities is polluted with sulfur dioxide, ozone, and particulate matter, byproducts of the combustion of fossil fuels used in power generation and industrial processes. The World Bank and China State Environmental Protection Administration (SEPA) estimate that only 1% of the 560 million urban Chinese breathe air that meets European Union quality standards. Contributing approximately 70% of China’s current electricity generation, coal-fired power plants are the primary contributor to emissions of pollutants. Coal is expected to remain China’s dominant energy source through 2030. The DOE EIA projects that China’s energy-related carbon dioxide emissions will increase 3.4% annually from 4,707 million metric tons in 2004 to 11,239 million metric tons in 2030, reflecting the largest worldwide increase during that period. Furthermore, China’s energy-related emissions are expected to exceed US emissions by approximately 5% in 2010 and by 41% in 2030.
…as do concerns about power reliability and energy security
China’s electricity infrastructure (power generation, transmission and distribution grid) has expanded rapidly, but continues to struggle to keep pace with the rapidly increasing demand. Since 2003, China has faced electricity shortages and frequent blackouts in many provinces, according to Worldwatch Institute. China’s National Renewable Energy Laboratory estimates that China had power shortages in 24 of 31 provinces in 2004. Consistent availability of electric power remains an issue throughout the country. In addition, China’s increasing reliance on imported oil and gas, has increased the Government’s awareness of energy security. While the country has abundant coal resources, its increasing dependence on foreign resources, namely oil, exposes it to volatility associated with pricing and availability. China is addressing its energy security requirements by securing foreign resources as well as by increasing efficiency and the use of renewable energy.
China’s energy policies focused on fostering energy and environmental conservation
China has established a basic regulatory foundation for its energy sector. Highlighting the emphasis on sustainable growth, China’s energy legislation features energy conservation and renewable energy as prominent themes. We note that cogeneration and wind power are consistently identified as preferred implementation options within these plans and policies. The table below provides highlights of the key plans and policies governing China’s energy sector. We believe this underlying regulatory foundation continues to evolve and improve. In December 2007, China’s State Council Information Office published a white paper entitled China’s Energy Conditions and Policies. It acknowledges China’s increasingly important role in maintaining global energy security. It also identifies resource conservation and environmental protection as two basic State policies. It targets industries with high energy consumption (steel, nonferrous metals, petroleum, petrochemical, etc.) for improved energy efficiency. Cogeneration is specifically identified as one of ten key energy efficiency programs by the NDRC. Additionally, wind energy is highlighted throughout China’s policies as a key renewable energy technology.
A-Power Energy Generation Systems Ltd. is a Nasdaq-listed (ticker: APWR) alternative energy company based in Shenyang, an industrial hub in Northeast China. With 17 projects completed since 2003 and more than 10 currently in-process, we are the largest provider of distributed power generation systems, focusing on energy-efficient and environmentally friendly projects of 25MW to 400MW both in China and overseas.
In 2008, we entered the wind energy market and have built China’s largest wind turbine manufacturing facility, located in Shenyang, with technologies licensed from German Fuhrländer AG and Denmark-based Norwin, and a total annual production capacity of 1,125MW. In March 2009, We entered into an agreement to establish a Joint Venture partnership with GE Drivetrain Technologies to produce wind turbine gearboxes in Shenyang.
March 2003: Mr. Jinxiang Lu forms Liaoning GaoKe Energy Group Co., Ltd.
May 2003: Liaonig GaoKe invests to own the majority shares of Liaoning GaoKe Energy Saving and Thermoelectricity Research Institute, the first contracting group in China electric construction market integrating electirc design and electric construction
May 2003: Liaoning GaoKe signs the first self-supply of electricity and heat contract operated by distributed power supply and micro-power network
June 2003: Liaoning GaoKe signs the first public supply of electricity and heat contract operated by distributed power supply and micro-power network
May 2004: Liaoning GaoKe completes the first self-supply of electricity and heat contract operated by distributed power supply and micro-power network and delivers to the owner
October 2004: the group passes the ISO9001 Quality System Certification, ISO14001 Environment Mangagement System Certification and OHM18000 Vocation Health and Safety Manangement Certification
December 2004: Liaoning Hi-Tech completed the first public supply of electricity and heat contract operated by distributed power supply and micro-power network and delivers to the owner
June 2005: the group signs cooperation research agreement with Chinese Academy of Science Guangzhou Institute of Energy Conversion, which emblematizes the further development into the renewable energy field
August 2005: the group acquires China’s Foreign Contracting Project Management Qualification Certification
September 2005: the group signs cooperation research agreement with Tsinghua University, which establishes the leadership of the group in the distributed power supply and micro-power network field.
December 2005: the design institute acquire the B grade certification of electirc project design
December 2005: the group completes the project of supply of electricity and heat operated by the distributed power supply and micro-power network cement industry self-supply power station in Zhejiang Province and delivered to the owner, which emblematizes the extension of business scope of the group to Southern Area of China
December 2006: the group signs the contract of public supply of electricity and heat power station with the capacity up to 150MW
August 2007: the group signs exclusive licensing agreements with Germany’s Fuhrlander and Denmark’s Norwin to assemble the 2.7MW and the 750KW-grade wind turbines, respectively, in Northeast China
January 2008: A-Power lists on the NASDAQ Capital Market and its stock begins trading on NASDAQ
January 2009: A-Power completes construction of its wind turbine assembly facilities in Shenyang, with annual capacity of 1.1GW
March 2009: A-Power signs JV contract with GE Drivetrain to produce wind turbine gearboxes in China
May 2009: A-Power leads local power industry conglomerates to establish Shenyang Power Group, a DG industry alliance that aggregates financing, construction and engineering resources in Northeast China and supported by the Shenyang municipal government in forms of subsidies and loan guarantees
June 2009: A-Power begins assembly of its first 2 units of the 2.7MW-grade wind turbines