China Wind Power International Corp. (“China Wind Power” or the “Company”) previously announced on July 27, 2012 that the Company would not file its audited annual financial statements and related management discussion and analysis (“MD&A”) for the year ended March 31, 2012 within the prescribed time period as required by the Canadian securities laws. The Company expects to record an allowance for doubtful account of up to $13.6 million in the Company’s annual financial statements for its financial year ended March 31, 2012 in relation to pre-payments for equipment made to a supplier of wind turbines in prior years. This supplier has not delivered the related equipment nor have they refunded the pre-payments received. The total outstanding amount owed to the Company as at March 31, 2012 is $13.6 million.
The Audit Committee, and an Independent Committee established by the Board of Directors consisting of two Canadian independent directors, has requested additional information for the above noted transaction from management and has requested to review transactions with related parties to ensure proper accounting treatment and disclosure. As a result, the Company was unable to file its annual financial statements and related documents on time due to the cumulative effect of the following factors:
-- Management of the Company is responding to information requests from the Audit Committee and the Independent Committee. Management expects to provide all requested documentation, a detailed description of the transactions noted above and an explanation of the business reasons for the transactions in the coming days; -- Management of the Company is in discussions with this supplier with the intent of seeking a resolution to this matter. The Company intends to pursue all avenues to collect the outstanding amount; and -- Management of the Company and the Audit Committee must meet to discuss the proper accounting treatment and disclosure for the doubtful account and the annual financial statements must be approved by the Board of Directors.
The Company is diligently working with its Audit Committee to resolve this issue and anticipates that the duration of its default will be approximately two to four weeks.
The Company has made an application to the Ontario Securities Commission and other relevant securities regulatory authorities under applicable securities legislation for the issuance of a management and insider cease trade order (“MCTO”) in connection with the anticipated filing delay. If an MCTO is granted, it would result in a formal and temporary order that prohibits certain current and former directors, officers and other insiders of the Company from trading in the Company’s securities, for as long as the required filings have not been completed. An MCTO would generally not affect the ability of persons who are not, or who have not been, directors, officers or other insiders of the Company to trade in the Company’s securities.
Pending the filing of the Company’s annual financial statements and MD&A, and under the guidelines pursuant to which the MCTO may be issued, the Company intends to satisfy the Alternate Information Guidelines pursuant to National Policy 12-203 – Cease Trade Orders for Continuous Disclosure Defaults (“NP 12-203”), including the filing of bi-weekly Default Status Reports, as long as it is in default of the filing requirements. If an issuer cease trade order were imposed in lieu of an MCTO, it would prevent all trading in the securities of the Company within the applicable jurisdiction. This news release constitutes a “default announcement” made pursuant to section 4.3 under NP 12-203.
China Wind Power International Corp. is an Ontario company that is uniquely positioned to capitalize on the growing demand for wind power in China. The Company indirectly holds the exclusive rights for wind energy development in Du Mon County, Heilongjiang Province, which has a demonstrated potential installed capacity of 1,150 MW of wind energy developable over an area of 612 square km. While 1,150 MW represents the Company’s long-term potential for wind power in the area, its current plans are for building out approximately 800 MW over five development phases. The Company’s common shares are listed on the TSX Venture Exchange under the symbol “CNW”.