New Energy Systems Group to Acquire Shenzhen NewPower Technology Co., Ltd.

New Energy Systems Group (OTC Bulletin Board: NEWN), a manufacturer and distributor of battery components in China, today announced that it has entered into an agreement to acquire Shenzhen NewPower Technology Co., Ltd. ("NewPower"), a China-based manufacturer of lithium ion batteries. The cost of the acquisition will be $14.7 million, comprised of $3.0 million in cash and 1.8 million shares of New Energy’s common stock with a value of $11.7 million at $6.42 per share. The transaction is expected to be completed by year-end 2009.

Shenzhen NewPower Technology Co., Ltd. was founded in 2004 and is a rapidly growing manufacturer of lithium ion batteries for cell phones and other portable devices. The company’s products range from low end cell phone batteries, to state-of-the art, high capacity batteries. The company has a longstanding reputation for its advanced technology and high quality manufacturing capabilities.

NewPower expects to generate revenue of approximately $20.1 million in 2009 and $27.4 million in 2010. NewPower expects to generate net income of $1.5 million in 2009 and at least $2.5 million in 2010.

Mr. Fushun Li, New Energy’s Chief Executive Officer, commented, "We have known NewPower’s management for many years and are excited to have them join our organization in what we expect to be a seamless integration. We are also pleased by NewPower’s desire to take most of their consideration in the form of New Energy common stock, which reflects their confidence in New Energy’s future prospects."

Mr. Li continued, "The NewPower acquisition is strategically important in enabling us to further vertically integrate our business, which is a key differentiator for New Energy Systems within the industry. One example of the benefits of this vertical integration is that since we will now be manufacturing lithium-ion batteries from start to finish, the NewPower acquisition will enable us to capture additional margin in our own finished battery distribution business. As a result of the acquisition synergies, we expect NewPower will contribute more than the $2.5 million of net income projected for 2010 on a standalone basis."

Mr. Li continued "We are also excited about the opportunity to expand NewPower through cross-selling and leveraging our strong distribution networks. As a result of NewPower’s excess capacity, we can rapidly increase production with minimal capital expenditures. Finally, we believe this acquisition illustrates our ability to identify and acquire strategic businesses that leverage our core strengths and further enhance our position in the rapidly growing lithium ion battery industry."

New Energy Systems Group is a leading manufacturer and distributor of lithium ion batteries. The company assembles and distributes finished batteries through its sales network and channel partners. The company also sells high-quality lithium-ion battery shell and cap products to major lithium-ion battery cell manufacturers in China. The company’s products are used to power mobile phones, MP3 players, laptops, digital cameras, PDAs, camera recorders and other consumer electronic digital devices.

Lithium-ion batteries (sometimes abbreviated Li-ion batteries) are a type of rechargeable battery in which the cathode (positive electrode) contains lithium, and the anode (negative electrode)is made of a type of porous carbon. The three primary functional components of a lithium-ion battery are the anode, cathode, and electrolyte, for which a variety of materials may be used. Commercially, the most popular material for the anode is graphite.

Lithium-ion batteries are common in portable consumer electronics because of their high energy-to-weight ratios, lack of memory effect, and slow self-discharge when not in use. In addition to consumer electronics, lithium-ion batteries are increasingly used in defense, automotive (electric vehicles), and aerospace applications due to their high energy density. .