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Hanwei Energy Services in negotiations to build Chinese factory

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by Richard Gilbert

A Vancouver-based company is currently in negotiations to build a factory in China to supply equipment for a 400 megawatt wind farm.
Hanwei Energy Services in negotiations to build Chinese factory

A Vancouver-based company is currently in negotiations to build a factory in China to supply equipment for a 400 megawatt wind farm.

“We currently have one big anchor tenant in China and have produced about 60 MW of wind power generation equipment to date,” said Kim Oishi, Hanwei’s senior VP of finance and business development.

“This year we will produce another 100 MW. Our goal is to go out and get new clients.”

Hanwei Energy Services Corp. signed a letter of intent (LOI) with the Baotou Development and Reform Commission (BDRC) and Beijing Kunding Xunlei New Energy Technology Ltd. to provide wind power turbines and blades for a large wind farm.

“With this LOI, Hanwei is at the early stages of securing its second major customer in the wind power business,” said Fulai Lang, the company’s CEO and president.

“Hanwei faces significant challenges to move the LOI to formal contracts and start delivering wind power equipment. For example, the BDRC and Beijing Kunding have requested that Hanwei deliver two MW to three MW turbines.”

The move represents Hanwei’s second major wind power initiative in China, after already working with Ruihao Energy Technology Co.

According to Oishi, the cost for one MW of power generation is about $1 million, so the contract to supply turbines for this project is worth about $400 million.

“We are the exclusive supplier for the first 400 MW and we must also build a new manufacturing facility,” he said.

Under the non-binding letter of intent, the parties are planning to co-operate to develop a 400 MW wind farm located about 100 kilometres from Baotou, Inner Mongolia Autonomous Region, China.

Hanwei is planning to establish a wind power subsidiary in Baotou and the subsidiary will build a manufacturing facility with an initial capacity of at least 200 turbines.

“There is still quite a lot of work to get everything approved and get the deal solidified,” explained Oishi.

“The plant itself would cost between $15-$20 million to build. Hopefully, they (BDRC) will help us get a good deal on land in terms of payment structure and taxation.

Once Beijing Kunding is granted the rights to develop and operate the 400 MW wind farm, Hanwei will enter into a contract to supply 400 MW of turbines and blades.

The terms of the contract, including pricing and delivery schedules, are subject to negotiation.

BDRC will facilitate government approvals for the wind farm and manufacturing facility, and will assist Hanwei to win additional orders for its Baotou facility.

Construction is scheduled for completion before the end of 2010. Hanwei hopes to expand the capacity of its wind power facility to 500 turbines and blade sets a year before the end of 2012.

The company is one of the largest manufacturers of high pressure Fiberglass Reinforced Plastic pipes for the oil industry in China.

From a facility in Daqing, the company supplies pipe to the Daqing oil field, which is the largest producing oil field in China.

Wind power blades, which are made from the same material as the pipe, are manufactured under a design and technology license from German-based Aerodyn.

The turbines are made under license from a research institute attached to Shenyang University.

The company also has a temporary manufacturing facility located in Beijing, the capital of China, for the production of pollution control products for the coal industry.

In all three parts of the business, Hanwei has more than 1,000 employees.

The new facility will employ about 200-250 workers.

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