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Investor Presentation
February 2009
Safe HarborThis presentation may contain forward-looking statements within the meaning ofthe Private Securities Litigation Reform Act of 1995, about A-Power EnergyG ti S t (“A P ”) H d D H ldi (“HDH”) d Li iGeneration Systems (“A-Power”), Head Dragon Holdings (“HDH”), and LiaoningGaoKe Energy Group (“GaoKe”). Forward looking statements are statementsthat are not historical facts. Such forward-looking statements, based upon thecurrent beliefs and expectations of A-Power management, are subject to risks
d t i ti hi h ld t l lt t diff f th f dand uncertainties, which could cause actual results to differ from the forwardlooking statements. The following factors, among others, could cause actualresults to differ from those set forth in the forward-looking statements: businessconditions in China, changing interpretations of generally accepted accounting
i i l t f t i ti d li ithprinciples; outcomes of government reviews; continued compliance withgovernment regulations; legislation or regulatory environments, requirements orchanges adversely affecting the businesses in which A-Power, HDH, and GaoKeare engaged; fluctuations in customer demand; management of rapid growth;
titi f th id f ti d id d l tcompetition from other providers of power generation and grid development;timing approval and market acceptance of new products introduction; generaleconomic conditions; geopolitical events and regulatory changes, as well asother relevant risks will be detailed in future filings with the Securities andE h C i i Th i f ti t f th h i h ld b d i li ht
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Exchange Commission. The information set forth herein should be read in lightof such risks. Neither A-Power, HDH, nor GaoKe assume any obligation toupdate the information contained in this presentation.
Investment Highlights
Leading provider of Distributed Generation (DG) power systems in China
Fast growing manufacturer of Wind Turbine Generators (WTG) in ChinaFast-growing manufacturer of Wind Turbine Generators (WTG) in China
Superior engineering experience; proven management team
Partnerships with leading European wind technology developers
Proven rev $185M in first 9 mth; Solid balance sheet
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Renewable Energy Market FactsRenewable sources contributed approximately 9.5% to US total electric generation in 2006,
ti 385 GW f l t i itgenerating 385 GW of electricity.
China plans to develop 120GW's of renewable energy by the year 2020; this would account for 12% of China's total installed energy producing capacity.
A landmark Chinese renewable energy law, enacted in 2005, supports continued expansion of renewables as a national priority.
Chinese government announced in Feb. 2009 to invest $88B in wind, solar & nuclear capacities.
Distributed generation (DG) technologies are small-scale electricity production facilities that provide power to meet local demand. Most common DG power system in China is to convert industrial waste gas and heat to electricity by using steam turbine.
120GW of wind power capacity were installed worldwide, providing more than 1.5 % of the global electricity consumption.
In 2007, wind power accounts for approximately 19% of electricity production in Denmark, 9% in
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Spain and Portugal, and 6% in Germany and Ireland but less than 1% in China
China’s growing demand for energyEnergy consumption has consistently exceeded supply
China DG Market Opportunity
2,2112 0592,032
2,2472,500
Annual energy consumption growth has exceeded 10% over past five years
transmission losses can be as high as 30% of the power produced, compared with roughly 10% in developed countries, making DG particularly attractive
China’s Energy Consumption(Million Ton Coal Equivalent)
2463
1,2431,3741,259 1,290
1,438
1,638
1,8732,059
1,322 1,338 1,386 1,432 1,518
1,750
,
1,000
1,500
2,000making DG particularly attractive.
Severe electricity shortages still occur in China, especially in rural areas:
30M people in 28000 villages in China do not have electricity
Power shortages occur in approximately 60% of China
0
500
1998 1999 2000 2001 2002 2003 2004 2005 2006
Production
Environmental concernsChina’s energy-related emissions are expected to exceed U.S. emissions by approximately 5% in 2010 and 41% in 2030China’s industrial companies are not only the largest energy Source: National Bureau of Statistics of China
ConsumptionChina s industrial companies are not only the largest energy consumer but also the largest heat and gas emitter in China
Focus on energy conservation and renewable energyChina’s energy legislation features energy conservation and renewable energy as prominent themes
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Cogeneration a top key energy efficiency program by the NDRCMarket share of centralized heating facilities in urban areas to increase from 27% in 2002 to 40% in 201040GW of cogeneration facilities to be built from 2006 to 2010
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China is world’s 4th largest wind power country*
China Wind Market Opportunity
GChina is world s 4 largest wind power countryRich in wind resources – technically exploitable 1000 GWHigh seasons – Spring, Fall and WinterMost abundant region is Northern china across Xinjiang, Inner Mongolia Gansu Hexi Corridor Northeast provinces
Great
Good
Average
PInner Mongolia, Gansu Hexi Corridor, Northeast provinces with 200W/sqm-300W/sqm and even 500W/sqm China doubled its wind capacity every year from ‘05 to ’08With 12.2 GW installed, China ranks 4th in the world2nd-fastest growing wind country in 2008 after U S
Wind Power Capacity in China
Poor(offshore & coastal potential not shown)
5,999
5,000
6,000
7,000(MW)
2 fastest growing wind country in 2008, after U.S.Expected to be No.1 wind power country by 2015Gov’t mandate: 30GW by 2010; 100GW by 2020
2020 target requires $267B investment in windNumber of state grid connected wind farms in China grew
197 5021,333
3,400
7641,266
2,599
11,000
2,000
3,000
4,000Number of state-grid connected wind farms in China grew from 40 in 2003 to 100 in 2007The largest off-grid market in the world, particularly for rural electrification VAT reduced by half to 8 5% for wind power projects
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02004 2005 2006 2007
Newly Installed Capacity Accumulated Installed Capacity
VAT reduced by half to 8.5% for wind power projects
* Sources: World Wind Energy Association (WWEA), China Renewable Energy Industry Association (CREIA)
Distributed Generation (DG)Wi d T bi G t (WTG)
A-Power Overview
Largest provider of DG systems in China
Only private company with
Distributed Generation (DG)
Licensed technologies from leading European wind turbine generator developers
Wind Turbines Generator (WTG)
Only private company with Class-A license in China
Proven records in serving domestic & int’l clients
Recently completed 3.2 sq. feet general assembly facility in Shenyang (30%expandable)
Full services include design, engineering, procurement construction, and testing
Annual production capacity total 1.1GW (300 units 2.7 MW and 400 units 750KW)
Focus on domestic market Growing alternative energy h l f li
R&D
Solid pipeline for new projectsFocus on domestic market with plan to expand overseas
g gytechnology portfolio
Partnership with top Chinese research institutions
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A Fast-growing Alternative Energy Company in China
Acquires Liaoning International
Construction & Engineering Group
Corporate History
2009E 2009E -- 2010E2010ERTO and lists on the Nasdaq GS
Partners with
30-yr industry veteran Mr.
20082008
20072007
Partners with the Chinese Academy of Science on alt. energy
Expects to start WTG shipment and add more DG projects
20032003
Lu founds co.
2004200420052005
20062006 Completes 300 sq. ft. WTG facility in ShenyangLicensing
agreements with German
Fuhrlander and Danish Norwin
Signs first int’l contract: $150M
DG project in Thailand
Partners with Tsinghua University
Completes first DG project
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Largest provider of “local” DG power systems and micro grids in ChinaFocuses on designing and constructing distributed power (cogeneration) systems
DG Business Overview
Focuses on designing and constructing distributed power (cogeneration) systemsTarget industries: steel, chemical, cement, food processing, etc. 17 plants completed since company inception in 2003 with 10 currently in-processAverage size range from 5MW to 24MW
Significant international experienceSoutheast Asia, Middle East, Africa and Eastern EuropeOnly private company to hold the Class-A power system construction license in China
Steel Framing / G t & T bi Steam Boiler Power / Heat gDesign Phase Generator & Turbine Control Room Control Room
A-Power Provides All Aspects of System Development
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Installation Testing & Monitoring
System Design & Proposal
Equipment ProcurementConstruction Installation Testing &
MonitoringSystem Design
& ProposalEquipment
ProcurementConstruction
Traditional Central Power Generation
A-Power’s Distributed Power Generation
DG Advantages
Power Source burning coal produced two-third of total energy consumed in China
Factory by-products (excess steam) that are otherwise unutilized
Pollution Level Hi h l l f ll ti Reduces greenhouse gas emissions
Generation Generation
Pollution Level High levels of pollution g gper unit of useful energy produced
Efficiency ~20% to ~40% loss due to transmission inefficiencies ~80% due to local structure
Economics 3x to 5x more expensive than DG System payback: 2 to 5 years
Reliability Some areas have frequent blackouts and interruptions
Very high due to less dependence on national grid
Byproduct More pollution as heat needs to be purchased from other suppliers No pollution; recycled heat and water
Maintenance Frequent and time-consuming repairs Localized system makes it easy to maintain
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Maintenance q g p maintain
Lower operating costs, reduced emissions and less exposure to grid power
Leading company with successful distributed power generation experience in China
Core Competences
ChinaProvides all aspects of distributed power generation system development (design, construct, install & test)Deep understanding of regulations and approval processes in ChinaLong established relationships with industrial customers in China
Extensive Experience and Strong
Brand Name Long established relationships with industrial customers in ChinaStrong government relationship in Inner Mongolia, Jilin, Liaoning, Heilongjiang, etc
Highly-skilled engineering team customizes solutions to meet specific needs of each customer
Best Engineering
P i t k l d i i t ffi i
each customerAttractive compensation and benefits offered to team membersPresently employs more than 150 qualified engineers
Engineering Talent in
China
Proprietary knowledge maximizes system efficiencyExperienced team oversees all construction and installation activities to ensure timely completionSpecial customer design for every project in each industryEmploys own programming for automated control software to remotely and
Know-How and
Proprietary Processes
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Employs own programming for automated control software to remotely and continuously monitor system performance
Processes
Advanced European wind technology Largest Wind Turbine P d ti F ilit i Chi
Wind Business Overview
License agreements with Fuhrlander AG of Germany and Norwin AS of DenmarkPartners will assist with selection of suppliers, training, design and operation of assembly facility, i t ll ti f t bi d f ll i t
Production Facility in China
installation of turbines and follow-up maintenance
Strategic location in Shenyang, ChinaMajor industrial center with thousands of component suppliersClose proximity to planned large wind farmsEasy access to highways and local ports
Strong relationships with gov’tExtensive experience with governments and
Licensed Wind Turbine Technology
Extensive experience with governments and state-owned power companies in North China
Capitalize on 2nd Mover advantageMany rushed into wind business and underestimated the highly technical nature of
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underestimated the highly technical nature of wind turbine production We have learned from early entrants’ mistakes
Competitive Landscape – Wind Turbine Maker
D ti PlDomestic Players Sinovel WindtecXinjiang GoldwindDongfeng Electrical MachineryShanghai Electric GroupShanghai Electric Group
MultinationalsGEGamesa (Spain)Vestas (Denmark)Suzlon (India)
JV PlayersNantong CASCNantong CASCWanyuan WindAcciona WindREpower NorthNordex Yinchuan
Range from 200KW to 1.5MW turbineAll Domestically Consumed No Exports
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Hunan Hara XEMC Windpower
Source: China Environmental Science, Greenpeace
All Domestically Consumed, No Exports
Completed: 3.2 million sq. ft. Shenyang facility with total annual capacity of 1GW (300
2.7MW Wind TurbinesA-Power Advanced Wind Turbine Products
facility with total annual capacity of 1GW (300 units 2.7MW & 400 units 750KW turbines)
Potential to expand by over 30%
License agreements to produce and sell 2.7MW, 750KW and 225KW WTG’s in China
Advanced, proven technologyL ti t k d dLeverages expertise, track-record and proprietary technologies of Fuhrlander and NorwinExclusive license for China market on
750kW and 225kW Wind Turbines
2.7MW from FuhrlanderAvoids pitfalls of earlier Chinese firms
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Joint Venture with the China Science AcademyR t d h i tit ti i A i ith t k Researching Green Energies
Deep Focus on Green Energy
Respected research institution in Asia with track record of developing new energy technologiesExpertise in wind, solar, magnetic, geothermal, tidal and biomass
Researching Green Energies
Biomass
Wind
A-Power will own 70% rights to new technologies
R&D Center at Tsinghua University in BeijingDistinguished university for scientific research
Geothermal
Biomass
R&D Center focused on developing new technologies and processes for distributed generation systemsExpertise in wind turbine technology
Solar
Otherp gy
Wind technology R&D Center currently being developed in Shenyang with Norwin
Combines expertise of Norwin and A-Power
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In constant search for additional green energy tech to be commercialized
Name Age Experience
Experienced and Proven Management
Mr. Jinxiang Lu Chairman and CEO 55
• Founded A-Power in 2003; owns approximately 10.4 million shares of the Company• Over 30 years experience developing power generation systems and power grids in China • Pioneered China’s distributed power generation industry – refined over the past 20 years• Masters degree from Harbin Science and Technology University; studied power plants and grid network design
Mr. John S. LinDirector and CSO
Acting CFO46
• Joined A-Power as a Director in January 2008 and became Chief Strategy Officer (CSO) in April 2008• Focused on overall global business strategy, M&A strategy and channel development• Acting CFO Since Oct. 2008• Executive MBA, California State University Los Angeles
Mr Yunbo Wang • Joined A-Power in 2005 as Vice President of Wind EnergyMr. Yunbo WangVP for Wind Energy 45
gy• Served managerial positions in both state owned and privately-owned energy companies• Over 25 years of experience in the power industry
Mr. En Gang WangVP for Distributed Power Generation
40• Joined A-Power in 2003 as Deputy Vice President of Gaoke Design Institute• Over 10 years of power industry experience• Manages over 100 engineers solely focused on design and engineering of distributed power generation systems
Mr. Simon ShumFinancial Controller 40
• Oversee all subsidiary accounts, consolidate financial statements for quarterly, interim and yearly results • HK CPA and ACCA• MSc in Financial Management from University of London
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Financial Summary
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Rapid, Strong GrowthProven financial and operational track recordp
Robust top line growth Consistent bottom line profitabilityCash-flow positive
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Income StatementSummary Income Statement(1) Highlights
($ in Millions) 2006 2007 9 Mth 2007
9 Mth 2008
Summary Income Statement
Revenue grew YoY 66% and 57% in the first 9 month of 2008
g g
Revenue $98.7 $152.5 $110.5 $183.4
Gross Profits $12.8 $20.6 $15.8 $22.4
respectively
Tax exemption
Gross Margin 13.0% 13.5% 14.3% 12.2%
Operating Income $10.9 $17.1 $13.4 $17.4
Net margin 10 % in first 9 Month of 2008
Revised 2008 Q4 Ope a i g I co e $ 0.9 $ . $ 3. $ .
Operating Margin 11.0% 11.2% 12.1% 9.5%
guidance Rev $76M and Net income $5M
No revenue from i d b i f
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Net Income $7.5 $15.2 $11.8 $18.5 wind business as of December 2008
1 Translations between RMB and U.S. dollars were made at the average exchange rate for the year
Balance SheetSummary Balance Sheet(1) Highlights
($ in Millions) Dec 31, 2007
Sept 30, 2008
Summary Balance Sheet
Cash balance of $59.7 million as of
g g
Cash & Equivalents $35.8 $59.7
Account Receivable $22.8 $20.4
Sep 30, 2008
$95.8 million in cash received from the exercise of
Prepayment, Deposit, Inventory $3.1 $67.1
Bank Loan $0.96 ‐
the exercise of warrants in Q1 2008
Debt free - Sept 30$
Accounts and Notes Payable $33.0 $45.9
p
33.7 million shares outstanding as of Sept. 30, 2008
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Net Income $31.3 $143.9
1 Translations between RMB and U.S. dollars were made at the exchange rate in effect at the balance sheet date
Investment Highlights
Leading provider of Distributed Generation (DG) power systems in China
Fast growing manufacturer of Wind Turbine Generators (WTG) in ChinaFast-growing manufacturer of Wind Turbine Generators (WTG) in China
Superior engineering experience; proven management team
Partnerships with leading European wind technology developers
Proven rev $185M in first 9 mth; Solid balance sheet
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Thank You!
Company Contact: Investor Relations:
A-Power Energy Generation, Ltd. Grayling
John S. Lin Valentine Ding
Chief Strategy Officer Phone: 646 284 9412Chief Strategy Officer Phone: 646-284-9412
Email: [email protected] Email: [email protected]
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