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Chinese firm eyes exports to Europe -- Two turbine licence deals

Yet another major Chinese firm is breaking into the wind turbine manufacturing business. A-Power Energy Generation Systems, formerly Chardan South China Acquisition Corporation, has signed licence deals with two European turbine producers, Germany's Fuhrländer and Denmark's Norwin, both relatively small players though with long-established engineering pedigrees in the wind industry.

A-Power intends to produce three turbines, the largest being Fuhrländer's 2.5 MW turbine, followed by Norwin's 750 kW and the relatively small Norwin 225 kW machine. The larger machines are destined for the Chinese market, where as a developer A-Power holds exclusive rights to sites for wind stations in seven different areas in the provinces of Inner Mongolia and Liaoning with a combined capacity of about 2 GW.

Exports to Europe

"There is no demand for the 225 kW turbine in China. Turbines of this size produced in China will be exported to Europe where, it seems, there are potential customers," says Edward Meng, who is A-Power's chief financial officer.

Production of the 2.5 MW and 750 kW machines is due to start in the second half of this year at a factory currently being built in Shenyang. A-Power says its subsidiary, Liaoning Gaoke Energy, the largest provider of distributed power generation systems in China, will pay $13.9 million to Fuhrländer for assistance in developing a near clone of the German production line. The factory will be able to turn out 300 machines a year. Under the licence agreement, any improvements to the machine made by Fuhrländer must be passed through to Gaoke.

The deal provides Fuhrländer with a minority percentage of gross profit from the sale of the first 100 machines. The turbine is expected to sell for between $2.7 million and $3.2 million. Meng says A-Power has letters of intent for the purchase of 380 of the 2.5 MW machine, representing its entire production capacity through 2009.

"In order to meet this demand as quickly as possible, we are making arrangements to import many of the sub-assemblies from suppliers around the world that presently supply Fuhrländer and Norwin," adds Meng. "Over time we are confident that we will be able to identify second-source qualified suppliers for many of these sub-assemblies in China to further improve the gross margins."

As part of the agreement with Norwin, a joint venture company is being established in Shenyang, with the Chinese firm holding an 80% stake. The two companies will also establish a joint research and development facility in Shenyang to develop new wind turbine technology for both the Chinese and international markets, adds A-Power.

In America too

A-Power is far from the only customer seeking a licence to the Fuhrländer technology. Fuhrländer's Walter Lutz acknowledges the company is considering potential partners in the US, adding that preliminary talks have started in Montana. These are confirmed by Evan Barrett, the state of Montana's chief business development officer.

Meantime, a Kansas company, Sunflower, has made a strong pitch to land Fuhrländer by offering to refurbish a former Cessna airplane factory in the central Kansas town of Hutchinson. "We have several people with heavy equipment manufacturing experience and a few individuals with wind turbine experience," says Sunflower's Dan Rasure. He notes the German company has been scouting further locations in Texas as well as on both coasts. Fuhrländer has also long been in the process of setting up turbine assembly in Brazil to serve that market.

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