April 23, 2009

China Wind Systems, Inc. operates out of Wuxi City, Jiangsu Province, China.

CWSI is located in the world's most populated country. China has the world's fastest growing economy and has huge energy needs. It must combat its environmental pollution with alternative energy sources. Wind is seen as the most commercially viable clean energy source in China. CWSI has turned its attention to the manufacture of wind turbine components and thus could unfold as a rags to riches story.

The Company is not listed on any China stock exchange but is listed on the US OTC Bulletin Board. CWSI management is fully aware of the need to obtain a NASDAQ listing and would probably have that listing now if the economic slump and market turmoil had not depressed the stock price. A $4 stock price is required for listing.

CWSI is a SEC reporting company; does not yet have an analyst following and thus is not reported on by First Call. It does not pay a dividend; has about 160 employees; has about 1154 stock holders; has no long term debt; has about $1 million in short term loans payable; has cash and cash equivalents of about .3 million but accounts receivable are $4.5 million and working capital totals $3.2 million; has no material legal proceedings pending against it; reports quarterly and holds quarterly conference calls.

The stock hit its' high in the second quarter of 2008 at $6 per share.

CWSI is a holding company and was formed in 2007 using the "reverse merger" process.

As of March 20, 2009, officers and directors and members of their families beneficially owned approximately 64% of the outstanding shares of stock that is entitled to vote on all corporate actions.

BUSINESS

Through the dyeing and finishing segment, CWSI designs, manufactures and distributes a line of proprietary high and low temperature dye and finishing machinery. The products are widely used in dyeing yarns such as pure cotton, cotton-polyester, terylene, polyester wool, poly-acrylic fiber, nylon, cotton ramie, and wool yarn. This segment generated about 53% of the 2008 revenue but will be less in 2009.

On the wind energy side of the business, CWSI devotes approximately 108,000 square feet at their Wuxi facilities for their rolled ring manufacturing operation. Their new equipment is state-of-the-art, and includes a 4,500-ton oil press, to manufacture forged rolled rings. CWSI can also manufacture shafts used in 1MW to 3MW wind turbine units, using the cross wedge rolling technique. Shafts are used by wind turbine makers to connect the wind turbine rotor to the gear box (a main shaft), and the gear box to the power generator (a small shaft). Additionally, they can also manufacture gear rims for use in gear boxes, and flanges for wind towers."

Demand is high for these products.

"The revenue from the sale of forged rings to the wind power industry is attributable to the demand for our forged rolled rings that will be used in the production of wind turbine components such as gear boxes and yaw bearings. The wind power industry is experiencing such tremendous growth that the industry is facing a serious shortage of various components, principally gearboxes and bearings."

Sales of forged rolled rings to the wind power and other industries represented approximately 41% of total net revenues in 2008. (Rolled rings for wind power industry was 15% and for other industries 26%). The electrical power equipment segment (equipment to reduce pollution in traditional power plants) was about 6% of 2008 revenues. (As mentioned above, dyeing/finishing was 53% of 2008 revenue.)

The Company is deemphasizing the dye and finishing business. In their words: "Due to current global economic downturn and the gradual shifting of textile manufacturing away from China to other lower-cost countries, we expect revenue from the dyeing and finishing equipment segment of our business to continue to decline. We believe that our forging business, as it relates to the wind power industry, could benefit from the announced position of the government of China to promote an increase the use of wind power."

China Wind is focusing on the wind power component business going forward so here is more on the turbine components manufactured by CWSI.

"We are manufacturing rolled rings designed to be used for wind power generation as well as other uses. Our rolled rings are essentially hollow cylindrical sections forged from a stainless steel stock piece with varying thickness and height. The rings are called rolled rings in reference to our forging process. Forging is a manufacturing process where metal is pressed, pounded or squeezed under great pressure into high strength parts known as forging. Rolled ring forging turns a hollow round piece of metal under extreme pressure against a rotating roller, thereby squeezing out a single-piece ring without any welding required."

"Yaw bearings, which are found in every wind turbine, are made from rolled rings. Essentially, a yaw bearing is a large ring with teeth, all of which are either pointing outward or inward. The teeth allow the yaw bearing to engage with a smaller wheel attached to the yaw motor. The yaw motor turns the wind turbine so that the rotor (to which blades are attached) faces the wind in order to optimize electricity generation. The yaw bearing is used by the yaw motor to turn the wind turbine."

"For the second phase of our expansion in our rolled rings operations, we plan to acquire the equipment necessary to produce yaw bearings and gear boxes using our rolled rings. This phase is in the planning stage." Rating :

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The Company has completed its' Phase 1 effort with the start up of the new plant which is now producing components. Expansion Phase 2 which will provide for the manufacture of Gearboxes and Yaw Bearings is scheduled for production start up in 2011 with a design capacity of 400 Gearbox units and 200 Yaw Bearing units annually. The 5.1 acres of land the company has leased will facilitate this expansion.

As far as revenue and earnings go, for the fourth Q ended December 2008, CWSI had revenues of $10.9 million generating earnings of $1.5 million or $.02 per share on fully diluted shares of 62.6 million. Book is $.73 per share. For the full FY 2008, revenue was $42.3 million (versus $24.4 in FY 2007) and EPS, excluding non recurring costs, was $.09 per share.

The Company did not provide any guidance for FY 2009 but they do expect to deliver 20000 tons of components from the new plant alone (half the capacity of the plant). The current price per ton is running about $1600 for a revenue total of $32 million. If the dye/refinishing business can do $30 million or so, China Wind could have a another good year with revenues in the $62 million range (versus $42 million in 2008). They had capital expenditures of $13.8 million in 2008 (for the new plant) which they will not incur in 2009.

The biggest concern is the number of F/D shares outstanding. The last quarter EPS was calculated on 62.58 million F/D shares but that could grow to 75.58 million in time. The Company knows that it must get off of the OTC BB and it would also like to get the share count down. The game plan might go something like this. First, continue to grow the revenue and earnings and get the stock price to $2 per share or higher, and then second, do a reverse stock split (if needed), say 1 share for 2, which will get the price up over $4. Third, obtain a NASDAQ listing which itself should give the stock price a good lift. Then the Company hopes to attract an analyst following, institutional buying, and increased retail buying. With wind turbine components already being shipped from the new plant coupled with an impressive line up of customers, the price movement to $2 could happen in two or three quarters. And by the way a price movement from $.50 to $2 equates to a 300% gain. A NASDAQ listing would be a big plus. On April 2nd, the average trailing PE of China stocks listed on the OTC BB was 4.47, while Chinese stocks listed on NASDAQ carried an average trailing PE of 14.93. BWEN, an energy company with a strong focus on wind business, just listed on the NASDAQ Global exchange from the OTC BB. Following their new listing announcement on April 7th, the stock promptly doubled in price from $4 to $8 per share. And here are a couple of interesting points. BWEN is trading over $8 per share while it is losing money. CWSI is trading at $.50 per share while making money. Also BWEN has more shares outstanding then does CWSI.

Some of the current customers are Luoyang Shengjia Bearing Co., Ltd., Luoyang Heavy Bearing Co., Ltd., Luoyang Huizhou Bearing Co., Ltd., Luoyang Chengbang Bearing Co., Ltd., Luoyang UBT Bearing and Machinery Co., Ltd., and Luoyang Zhuxin Bearing Co., Ltd., Wuxi Lida Gear Manufacturing Co., Gansu Keyad Electric Power Co., and Hangzhou Advanced Gear Box Group.

New wind power customers (those that have just signed up for test parts) include Dong Fang Electric, Co., Ltd., Zhejiang Yunda Co., Ltd., Shanghai Electric Co., Ltd., and Mingyang Wind Power Technology Co., Ltd.

CWSI will also be supplying industrial shafts to Shenyang Heavy Machinery Co., Ltd. and flanges to Shandong Ping Cheng Heavy Machinery Co., Ltd.

Some of the customer names above are significant players in the China wind turbine business. For example, in 2008, Shanghai Electric installed 179mw of turbine power in China. Mingyang installed 174mw and Dong Fang installed 1053mw. Hangzhou Advanced is one of the largest gearbox manufacturers in China and its' initial order from CWSI was for 150 tons of gear rings.

Target wind customers include Sinovel Wind, Gamesa, Suzlon, and several other Chinese turbine manufacturers.

Also, China Wind has initiated preliminary talks with Vestas, the world's largest turbine manufacturer, about supplying forged components for them. Vestas has several manufacturing plants in China.

The second largest world wind turbine manufacturer is GE. GE engineers are scheduled to visit China Wind Systems this month (April). GE also builds turbines in China right now, and we know that GE and APWR have contracted to build a new gearbox plant which will need gearbox components such as rolled rings.

For APWR investors it might be helpful to do some comparisons of APWR with CWSI.

Both companies are China based, both are U.S. listed, and both file with the SEC. Both were formed via the reverse merger route and both are moving strongly into the wind power business. Both have current core businesses which provide cash flows for current operations and future expansion. Neither has any long term debt. Both are profitable and both are growing revenues.

Considering the differences, APWR is the bigger of the two with 2008 revenues of about $260 million versus CWSIs $42 million. APWRs incremental revenue growth in dollars will be more rapid since it sells the more expensive products as will earnings growth, in dollars. The fewer F/D shares outstanding at APWR will enhance EPS growth relative to CWSI. (APWR has about half the F/D shares outstanding as does CWSI). APWR has an analyst following and institutional owners. CWSI does not (primarily due to their BB listing).

On the other hand, CWSIs stock price is about one fifteenth the price of APWRs. If APWR returned to its mid 2008 high of about $30, the increase from the recent $7 stock price would be 329%. If CWSI returned to its mid 2008 high of $6, from its current $.50, the gain would be 1100%. CWSI is the master of its' own fate as it does its' own in plant manufacturing of its products and is not dependent on components from outside sources.

As I mentioned earlier, CWSI is committed to come off of the BB listing (they need a $4 stock price to do so) which could then generate analyst followings, inclusion in alternative energy indexes and ETFs, and big money investments in the stock.

The customer list of CWSI is impressive and contracts are in hand and growing. Competition is minimal and the new, state of the art plant at Wuxi will keep CWSI at the head of the pack. The Wuxi plant is adding 5 times the tonnage capacity of current operations. Here is what CWSI says about its competition in the area of wind components:

"Despite the short period of time since we started producing rolled rings, we are not aware of any significant number of domestic competitors that are capable of producing large rolled rings (with diameters up to 6.3 meters and cross sections up to 700 mm). Our precision forging techniques combined with our advanced manufacturing facilities and equipment enable us to produce large rolled rings. We are currently aware that Wuxi Dachang Group is capable of producing rolled rings with diameters comparable to ours, but they do not supply main shafts. Shandong Yucheng produces main shafts that are comparable to ours, but they do not supply large rolled rings."

So in summary, this is an idea for aggressive investors but the timing may be right. The stock of this emerging China Company has been in a bottoming process. So if one is looking for a companion company to APWR in the wind power business, in the world's fastest growing economy, CWSI may be a place to look.

Jan

P.S. China Wind will be presenting at the China Rising Investment Conference on May 18th in New York.

http://www.chinarisingconference.com/

PP.SS. Here is a CWSI news release dated today.

http://finance.yahoo.com/news/China-Wind...

May 19, 2009

Hi All.

Well, the CWSI Q1 is now in the books and we are one quarter closer to where we want to be.

As trumangovt pointed out in his summary of the Q1 numbers, it was really an OK quarter as the Company switches course from textile machines to wind energy components. CWSI, with its' wind energy focus, is heading in the right direction.

During the CC, Leo Wang provided a good statistical review of where the PRC is and where it is going relative to the utilization of wind power in China. Those numbers are impressive and for you who have not been following the growth of wind energy:

"13 March 2009, Brussels/Marseille. The 2009 industry forecast predicts that the world's wind energy capacity will nearly triple in the next five years, following a decade of spectacular growth. This development will be led by tremendous growth in China, and steady expansion in Europe and North America."

http://www.gwec.net/index.php?id=30&no_c...[tt_news]=189&tx_ttnews[backPid]=4&cHash=acbd5fcd72

And:

http://www.gwec.net/fileadmin/documents/...

I will touch on some of the highlights of the earnings press release, the CC, and the China Rising presentation, as I interpreted them. My conclusions may be slightly different from those of some of the previous posters.

CWSI continues to focus on and grow its forged products, most of which are aimed at the wind energy industry. In the last five quarters, revenues from forged products as a percentage of total revenue were 37.9%, 36.5%, 44.7%, 45.5%, and 55.1% respectively. Revenue from forged products for just wind power applications grew from $ .961 million in Q1 of 2008 (11% of total revenue) to $2.724 million in Q1 of 2009 (35% of total revenue).

The new plant has a 40,000 ton output capacity and at $1650 per ton, that amounts to $66 million in revenue. The phase 2 expansion should get underway late this year or early next. Phase 2 production, which will include the manufacture of gearboxes and yaw bearings, is schedule to commence in 2011.

In Q2, CWSI says they could do $9 to $12 million in revenues in forged rolled ring business. If we annualize that $9 to $12 million figure, we approach or exceed the entire revenue number of FY2008 ($42 million), and whatever the textile business adds going forward (it did $3.5 million in Q1), will be icing on the cake. So yes, CWSI is taking us to a hot business sector and they are doing it quickly. Note that the $9 to $12 million will come only from rolled rings. But in March the Company has also begun supplying shafts for wind turbines as well as industrial shafts.

On the CC, when talking about new customers, CWSI said it just met with GE engineers and GE will be sending blueprints to China Wind in the next couple of days. CWSI will make sample parts for GE and then the two will negotiate future contracts. This is no small item if it all pans out. As pointed out earlier, GE and APWR will build a plant in Shenyang to build gearboxes with 900 of those gearboxes to go to APWR. The components for those gearboxes will be made in China and gearboxes contain a lot of bearings.

http://www.goerie.com/apps/pbcs.dll/arti...

Even without that, GE is a big producer of wind turbines in China and worldwide. In 2008, in China, GE installed 145,500KW of wind power and was the third largest foreign supplier (behind Vestas and Gamesa). World wide, GE is now the second largest wind turbine supplier (behind Vestas). For GEs position in the U.S., see:

http://news.thomasnet.com/companystory/8...

Staying on the subject of GE, Nanjing Highspeed (located one hour from CWSI) is the largest gearbox manufacturer in China. It supplies 80% of the market in China and 50% of their product goes to GE.

I should note here that in 2008, the demand for gearboxes in China was 10,000 MW while the supply was less than half that at 4,000 MW.

So any kind of a sales agreement between CWSI and GE will draw a lot of attention.

Also on the CC, the Company talked about two other potential customers to which CWSI will provide special forged products. These two companies (which have nothing to do with GE) could each bring 100RMB ($14.65 million) per year in contracts to CWSI.

Additionally, China Wind is in active conversations with Mingyang Wind Power Technology and Snanghai Electric toward increasing sales to these two companies.

The customer list of CSWI is impressive and growing. For example, the Luoyang Group, with its subsidiaries, is the largest bearing producer in China and exports its products all over the world. The Luoyang Group was CWSIs first customer and is now CWSIs biggest customer. I covered some of CWSIs other customers in a previous post.

As mentioned at the China Rising conference, CWSI is an up stream parts supplier in the wind industry. It is at the very beginning of the component manufacturing stream which means much higher gross profit margins than many down stream manufacturers. CWSI has been able to generate 22% gross margins even as they outsourced some of their component manufacturing. They expect those margins to increase with their new plant. Last year the gross margins for Chinese turbine manufacturers (the down streamers) averaged 6 to 7%.

Here is another interesting point. Gearboxes, towers, yaw systems, and main shafts make up one third of the total cost of a wind turbine. With its rings, gear rims, small and large shafts, and flanges, CWSI supplies those parts themselves (like main shafts) or parts for all of those components. In the next year or two, CWSI expects to make yaw bearings and complete gearboxes from its own manufactured components.

And finally, here is a brief review of the incentives the PRC provides to the wind industry. First, 70% of turbine components will have to be produced in China and all of CWSIs business is in China. Second, China provides a "per KW subsidy". For every KW of installed capacity, the government offers a direct subsidy of about $90. And third, once a wind farm development plan is approved by government, the developer can get free land from the PRC.

Some will say this is just another penny stock to be wary of. It is a low priced stock and certainly carries more risk than other more established companies. But it is also the stock of a company about to fill a special need (wind power) in a huge market (China) at a time when alternative energy is a necessity, not a luxury. CWSI is off to an impressive start and its' business plan is aggressive. This Company will grow its' revenue and earnings from its impressive wind power customer base. It intends to list on NASDAQ (even if it takes a reverse split to do so, as mentioned on the CC). In a few quarters the stock price will hopefully move over that magic $5 level which will attract the attention of more retail buyers, institutions, mutual funds, ETF funds, and analysts.

Investors always reiterate the old adage "buy low and sell high". Unfortunately, few ever do that. We always choose to wait for a company to totally prove itself, and that is usually too late.

Just one opinion.

Jan

June 18, 2009

Good morning to all.

I thought it might be time to recap the CWSI story.

CWSI is, and will be perceived as a high growth company in the world's most populous country (China) with a huge need for both clean energy and wind turbines. It intends to be a leading supplier of wind turbine components and not only is it off to a good start, but the government of China is now projecting 100,000mw of installed wind power capacity by 2020 which is 88,000mw more than China had at 2008 year end (had 12.2mw / 11600 turbines). Utilizing a 1.5mw turbine size, that amounts to nearly 59,000 new turbine installations. If China achieves its' target of 30,000mw by the end of 2010, that would amount to 12,000 new turbines by year end 2010 (2010 isn't that far away). And because CWSI is at the beginning of the turbine component manufacturing chain, and it has installed leading technology machinery to forge these components, many of the world's manufacturers of turbines and turbine components (like gear boxes) could become CWSI customers or partners.

The technology that CWSI has installed in its' new manufacturing facility also tends to reduce competition (CWSI actually made their new forging machine in-house). For example, there is only one other manufacturer in China that can build large diameter rolled rings, and that is important as wind farms are demanding larger turbines both for on-land farms and especially for off shore wind farms.

CWSI operates in the country that leads all others in population. China has the worlds fastest growing economy, has the third largest economy (behind the U.S and Japan), and is the world's second largest energy consumer (behind the U.S). China has the fourth largest amount of wind power installed (behind the U.S., Spain, and Germany) and is expected to surpass Germany in 2009. China was second to the U.S. in new wind power installations in 2008. China now hosts the largest turbine manufacturing industry in the world and this is the industry CWSI will serve. Additionally, at the end of 2008, China had 11600 turbines installed and is likely to become the world's largest wind power market. By the end of 2020, china wants the electricity generated by wind power to exceed the electricity generated by nuclear power. Also by 2020, China wants the electricity generated by wind power to total 20% of all electricity generated in the whole of China.

But being in the right place at the right time with the right product still requires any company to successfully execute the business plan.

CWSI management has proven itself capable of becoming a major player in the wind power industry. They have 12 years of experience manufacturing high precision industrial equipment and have built a state of the art plant in Wuxi City which includes precision forging technology. They have grown revenues by 73% in 2008 to $42.2 million even while de-emphasizing their major product line (textile machinery), and have built strong relationships with wind turbine and gear box manufacturers which has resulted in an impressive list of customers. Q1 total revenue was down about 7% to $10.9 million as textile revenue dropped 24%. Q1 net was $1.5 million. It was very encouraging to see rolled ring revenue up 35% to $4.3 million. Q2 rolled ring revenue is projected to be more than double that at $9 to $12 million.

Any developing company, to assure its' growth, must have a sound customer base for their product. So, let's look at the CWSI customer base as we know it today.

Per a recent count, there are 70 turbine manufacturers in China and another 50 companies that make gear boxes, generators, blades, etc. That is a lot of potential customers in China itself, and there are many foreign manufacturers of turbines and turbine components who will have to buy a large amount of turbine parts in China.

Here is a rundown of the CWSI customer base to date to the extent I have been able to compile the list. I hope I got all this right.

The Luoyang Group of companies is China's largest yaw bearing manufacturer. It was CWSIs first customer and is the largest customer. CWSI provides rolled rings to six subsidiaries of the Luoyang Group.

Wuxi Lida Gear Manufacturing Co, Ltd., a gear manufacturer, has purchased 1350 tons of rolled rings ($2.9 million).

Gansu Keyao Electrical Power Co., Ltd., an electric power company, has purchased 3300 tons of wind tower flanges ($20 million).

Hangzhou Advance Gearbox Group Ltd. is one of the largest gearbox manufacturers in China. This company has purchased 150 tons of gear rims from CWSI. The current demand for gear boxes in China is two times the current supply.

The last three companies above ordered their parts in late 2008 and CWSI began shipment of those parts in this year.

The newer customers include the following.

Dong Fang Electric, Co., Ltd. is a major state owned electric company in China and is the third largest wind power equipment company in China. In 2008, of domestic companies, Dong Fang installed the third highest amount of wind power mega-watts (behind Sinovel and Goldwind). CWSI began supplying turbine shafts to Dong Fang this year.

Shanghai Electric Co., Ltd. is China's top power equipment maker. In 2008, of domestic companies, it installed the fifth highest amount of wind power MW in China. CWSI began supplying shafts this year.

Mingyang Wind Power Technology Co., Ltd. is China's largest PRIVATE wind turbine manufacturer. In 2008, of domestic companies, it installed the sixth largest amount of wind power MW in China. CWSI is supplying turbine shafts to Mingyang.

Additionally, CWSI began delivering shafts to Znejiang Yunda Co., Ltd. this year.

Each of these last four companies bought initial batches of about 100 to 300 tons for evaluation and testing. Larger orders and major contracts will hopefully follow.

CWSI has also delivered initial test batches of industrial shafts to Shenyang Heavy Machinery Co., Ltd and has delivered initial flanges to Shandong Ping Cheng Heavy Machinery Co., Ltd. It is interesting to note that Shenyang Heavy Machinery is one of the companies in the Shenyang Power Group which is majority owned by A-Power.

CWSI will also supply sample products to Wuhan Co., and Luoyang Zhong Xin Co., Ltd. which could result in $14.65 million contracts with each of those companies.

And we should not forget that GE visited CWSI in May and is supplying blue prints to CWSI for sample products.

Finally, in a February 2009 presentation, CWSI listed the following as target companies.

1) Sinovel Wind, the number one domestic installer of wind turbines in China in 2008.

2) Gamesa, the world's third largest wind turbine manufacturer.

3) Suzlon, the large turbine manufacturer from India.

4) And in China, Nanjing Highspeed & Accurate gear Group Co. Ltd. and Chongqing Gearbox Co., Ltd.

There were three other target companies listed, but they have since become customers.

When it comes to establishing a customer base, CWSI seems to be off and running in an impressive manner.

So can CWSI deliver in its' quest to become a leader in the manufacture of wind turbine components?

Well, we need a couple of more quarters of improving sales and income. But that is what the new turbine component program is designed to do.

We need a higher stock price to get a NASDAQ listing. But that is what the sales and income growth will achieve.

We need more retail buying of the stock, more institutional buying, more mutual fund and ETF buying, and more analyst coverage. But that is what the NASDAQ listing and the fulfillment of the listing requirements will get us.

I was amused by a post on one of the other boards by a poster who decided he would not buy CWSI because it "had not yet turned the corner". That is, of course, his choice, and we all respect it. But by the time this stock "turns the corner" and everyone is totally comfortable with it, it will be a $9 stock. The easy part of the CWSI wealth creation endeavor will have been missed. I do not mean to be harsh with anyone. But in this investment game, reward requires both work and risk. And the greatest pay often comes from the early play.

As always, just one opinion.

Jan

CWSI Interview posted by Jan 7/1/09

China Wind Systems to Get Half of Revenue From Renewable Energy

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By Veronica Navarro Espinosa

July 1 (Bloomberg) -- China Wind Systems Inc., which makes wind turbines and textile machinery, will get half of its revenue from the renewable-energy business by yearend, Chief Financial Officer Leo Wang said.

"We expect and hope that our wind-related revenue will comprise more than 50 percent of total revenue," Wang said in an interview from New York. "Wind is the number-one renewable energy choice in China because it's the most cost competitive."

China, the world's second-biggest energy consumer, will increase its capacity to produce power from wind fivefold by 2020 to help fight climate change, Zhang Guobao, head of the National Energy Administration, said in Beijing May 26. The country's wind-power capacity will rise to 100,000 megawatts by 2020 from at least 20,000 megawatts next year, Guobao said.

China Wind Systems began selling turbine components for the wind-power industry in 2007 after 12 years as a maker of heavy machinery used for the production of textiles. The renewable- energy business accounted for 35 percent of first-quarter revenue, the company said in a statement May 15.

"Textile manufacturing is shifting from China to other lower cost countries," Wang said. "We're fully aware that this is a declining industry. At some point the price pressure is going to be too strong and it won't make any sense for us."

The value of textile and garment exports from China in May fell 14.7 percent from a year ago to $12.3 billion, according to the country's National Development and Reform Commission.

China Wind Systems fell 2.1 percent to 0.94 cents on the over-the-counter Bulletin Board. The stock has risen 71 percent this year.

To contact the reporter on this story: Veronica Espinosa in New York at vespinosa@bloomberg.net.

Last Updated: June 30, 2009 16:42 EDT

July 24, 2009

Bloomberg Article on Wind being priced at 7.5 cents in China

Part 1

Bty and all.

So you want to do some guess work on the Q2 revenue and income numbers!

That might be a tall order since it will be difficult to guess what the net income will be because CWSI is slowing down its textile machinery business while ramping up the wind turbine component side.

For the wind turbine business, we have a couple of problems trying to figure the net margins. The early turbine components were "test" parts and we have no idea what kind of margins these sample parts return. The margins are also hampered by the lower production volumes of these first production runs as well as the fixed costs associated with operating a new facility.

Having said that, I would guess that your $9.5 million revenue number for Q2 is a bit low since CWSI itself has said it expects Q2 revenue just from the forged rolled ring business to be $9 to $12 million. Textile machinery could add a couple of million (probably more than that) since the dyeing and finishing equipment business is still on-going and did $3.5 million in Q1.

If we are to do any guessing, it might be better to project the full year numbers because the last six months could very well make up all of the low production run costs, and the start up costs, and then some, of the first six months.

It is kind of fun to make these kinds of guesstimates, but the Q2, and full year numbers, are not the real story here. CWSI is (as trumangovt has pointed out) in a transition year to a new business. I noted that another poster said he/she would like to get some "meaty" news from CWSI. But this is a $1, bulletin board stock so our current meat dishes of news will be of the hamburger variety, not the steak cuts. On the down side, the share count is higher than we would like and we may have to endure a financing of undetermined terms. But what we are trying to do, as we return to a bullish stock market, is find an early stage company, with an early stage stock price, in a big country, with a huge need for this company's product. CWSI could very well emerge as that company as China has a huge need for alternative energy. The China wind power market is vast and CWSI is lining up an impressive list of customers. Its customers already include China's largest yaw bearing manufacturer, a large gear manufacturer, a large electric power company, one of the largest gearbox manufacturers in China, the third largest wind power equipment company in China, the largest power equipment maker in China, the largest private wind turbine manufacturer in China, along with a bunch of other smaller Chinese companies. And we should not forget that CWSI is talking with GE, who with APWR will build the largest gearbox manufacturing plant in China, and gearboxes need bearing rings and gears. GE is the largest U.S. turbine manufacturer and does have turbine manufacturing facilities in China.

Part 2

For those of you who may be new to the wind power needs of China, I will put up a series of very recent articles that will give you the flavor of what's going on in China relative to wind development.

So what we are looking for with CWSI is the transition to a wind turbine component company; the receipt of more certifications***; the announcements of more and bigger contracts; increasing revenues and income; and a NASDAQ listing which will bring additional publicity, a higher level of respectability, and a further bump up in the stock price. Remember this stock traded around $4 for a period of time (touched $6) when CWSI had a lot less potential than it has today.

It can be very difficult for investors like us to find such an early stage company with all the right ingredients for success. Some patience is needed. World economies are improving. Stock markets are becoming friendlier. The CWSI management team is experienced with a record of proven performance. China is the place to be. Alternative energy is our future. There are risks with this smaller company but the price is right and they have the product, and thus the potential for wealth creation is compelling.

We can only do our homework and hope to find that real winner. There are no guarantees. We shall see.

As always, all of the above is just one opinion.

*** CWSI has recently received the ISO certification for its new Wuxi facility. It should soon receive its Level A Pressure Vessel certificate followed by the Germanischer Lloyd certificate. GL is the leading certification organization in wind energy.

Part 3

If anyone doubts the commitment to wind power in China, here are a few very recent articles all dated this month.

State Grid Xinyuan Company Limited plans to invest RMB 10 billion in a wind project in Hebei province's Zhangbei county, reports Shanghai Securities News. The project is expected to reach production capacity of 500MW of wind power, 100MW of solar power and 75MW of chemical energy storage, said the report. The project also includes a photovoltaic testing center that will be complete in 2010 and receive investment of RMB 240 million, the report said.

Guangdong-based Mingyang Electric's subsidiary Mingyang Wind Power Industry Group has signed with Nantong municipal government to build a wind power equipment project in Rudong county, Nantong, in Jiangsu province , in-en.com reports July 18. Mingyang Wind Power plans to invest a total of RMB 800 million in the first phase of the project, which will be completed and begin trial production in March 2010, the report said. The two parties also signed an agreement to develop Rudong's wind resources, the report siad.

China WindPower Group (182.HK) announced July 14 that it has signed a memorandum of understanding with Baicheng Wind Power Development Steering Committee to develop wind power projects in Baicheng, Jilin province with a total capacity of 1.5GW.

Prior to this, the company's total wind capacity, including projects yet to be constructed, stood at more than 8gw nationwide.

China Datang Corporation subsidiary Datang New Energy has received government approval and begun construction on the initial phase of its second gigawatt-level wind power project, reports chinapower.com.cn. Established in March 2009, Datang New Energy has recorded total wind power capacity of 930MW.

China Huaneng Group subsidiary Huaneng Renewable Energy has signed an agreement to invest RMB 1.5 billion to establish a 750KW wind power station in Weishan County, Yunnan province, reports chinanews.com.cn. The project is scheduled to be complete in three years and generate 160 million kWh per year.

China aims to invest a total of RMB 1 trillion to establish seven wind power bases with combined capacity of 120GW before 2020, reports bhi.com.cn. The bases will have capacity of 10GW or more each and be located in Jiuquan, Gansu province; Hami, Xinjiang Uygur Autonomous Region; Inner Mongolia Autonomous Region, and Jilin, Hebei, and Jiangsu provinces.

Part 4

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China WindPower Group Limited (182.HK) announced July 8 that it signed an exclusive agreement with Fuxin, Liaoning Province on June 30 to develop wind power projects with combined capacity of 500MW, following two other projects in Fuxin's Fumeng and Zhangwu counties.

The new agreement will increase China WindPower Group's total wind capacity to 850MW in Fuxin and more than 8GW nationwide.

Sany Group subsidiary Sany Electronics and Tongyu State-owned Assets Management broke ground on the first phase of a RMB 10 billion wind power industry park project in Tongyu, Jilin province on July 7, reports in-en.com. According to the report, the project will generate RMB 2.8 billion in sales revenue this year, expanding to RMB 4.2 billion in 2010 with an installed capacity of 600MW. By 2013, the project will make annual sales of RMB 10 billion, the report said.

Previous reports said that the Sany Electronics will hold 80% of the project.

China Longyuan Electric Power Group, a wholly owned subsidiary of state-owned power giant China Guodian Corporation, has began producing power in a wind project in Rudong, Jiangsu that has been expanded to capacity of 3GW, reports People's Daily.

In the first half of 2009, the group began producing electricity in nine wind projects with total installed capacity of 3GW; the projects produced 3.2 billion kWh by June 28, company employees said.

Zhejiang-based Huayi Electric (600290.SH) announced Tuesday that its wholly-owned subsidiary Zhejiang Huayi Wind Energy Development (HeWind) signed an agreement July 10 to invest roughly RMB 1 billion over three years to build a wind turbine manufacturing base in Dongying, Shandong province. The base will target annual production capacity of more than 800MW, annual production value of more than RMB 4 billion, and produce three turbine models: 1.5MW, 2.5MW and 3MW.

The Dongying government has agreed to secure HeWind a 2009 contract for 50MW of wind turbines, as well as 500MW of turbines over the next three years, and will not bring in a directly competing turbine manufacturer for the next three years.

Part 5

Xinjiang is rated as having the second largest wind power potential in China. The regional government plans to install hundreds of megawatts of generating capacity, and turning the often-troublesome winds into real income.

Investing in wind power is not only about making money. Both investors and the government expect to harness more of this green energy to achieve fast, yet sustainable, development."

Large Companies invest in Xinjiang

Part 6

"The proceeds will be mainly used to expand wind power farms, sources said earlier during an interview with China Daily."

China Longyuan plans IPO in HK

Part 7

The output of power generators dropped 23.2 percent year on year, 2.3 percent lower than that of the first quarter. But output of wind-power generators soared more than five times from a year ago.

Equipment Industry