On August 17, 2011, the SEC served the Company with a subpoena for documents in connection with its investigation. The Company is committed to cooperating with the SEC. The Company cannot predict the timing or outcome of the investigation.
A-Power Energy Generation Systems today announced that its independent auditor, MSCM LLP, has resigned. In its letter to the Company dated June 26, 2011, MSCM stated that it had resigned because the Company had not retained a qualified independent forensic accounting firm to evaluate certain business transactions that MSCM stated was necessary for MSCM to complete its audit of the Company's financial statements for the year ended December 31, 2010 on a timely basis.
In light of MSCM's withdrawal, A-Power and members of the Audit Committee of the Board of Directors will be meeting with other qualified independent auditing firms. The Company will announce its new independent auditor after the Audit Committee has selected a firm and an audit engagement contract has been entered into between the Company and that firm. As a result of MSCM's resignation, the Company's annual report on Form 20-F for the year 2010 will be delayed beyond June 30, 2011, the date the filing is due at the Securities and Exchange Commission. A-Power greatly regrets this delay and will work as rapidly as possible with a new independent auditor to complete the audit of its financial statements for the year 2010 and to then file its annual report on Form 20-F.
A-Power Energy Generation Systems today announced that on April 13, 2011, it signed a Memorandum of Understanding with Liaoyuan Zhongneng Electrical Equipment Ltd., for an engineering, procurement, and construction contract to develop a combined heat and power generation plant consisting of two 25 megawatt power generation units. The plant, to be located in the city of Huinan in the Jilin province of China, will provide both heat and electricity to the local economic and technology development district. The total cost of the project is currently estimated to be US$75 million, according to the Memorandum.
A-Power Energy Generation Systems today announced that it has postponed its year 2010 earnings conference call previously scheduled for March 29, 2011 to a later day in 2011 to be determined. The postponement was not due to any accounting irregularities and will allow the Company and its independent auditors to complete their work on the financial statements and audit. The Company regrets any inconvenience that the postponement may have created.
A-Power Energy Generation Systems today announced that on March 8, 2011 it signed a definitive contract with a total value of approximately US$ 30.5 million to develop a biomass power plant consisting of two 15 megawatt power generation units for the Xin County Guangchao Biomass Power Generation LCC. The project is expected to begin shortly and be completed by mid 2012.
A-Power Energy today announced that on March 7, 2011, a subsidiary of GE Transportation served notice on A-Power that GE Transportation has issued a demand for arbitration against A-Power for alleged unresolved breaches of certain terms of the gearbox purchase and sale contract between them. A-Power is presently considering its response to this notice from GE Transportation. If this matter proceeds to arbitration, A-Power cannot reliably determine the outcome or the potential financial consequences that an adverse outcome in any such proceeding may have on the Company.
A-Power Energy Generation Systems announced that it has signed an engineering, procurement, and construction contract with Inner Mongolia Huolinhe Coal Trade Group for a 4x200 megawatt coal-based power generating plant. The total investment for the project is expected to be RMB 4 billion (approximately US$597 million). The project includes four 1048 t/h circulating fluidized bed boilers with four 200 megawatt turbine power generators. With engineering scheduled to start in March 2011, the project is expected to be fully operational by December 31, 2015. The construction period for each of the four turbines is expected to be 18 months.
"This award further indicates that customers in our distributed power generation business believe that we deliver quality and performance at a competitive price. We are pleased to support Huolinhe Coal in creating this new power generation facility. With a project horizon of about five years, we believe this project will create additional value for shareholders."
A-Power Energy today announced the signing of a RMB 218 million (approximately US $32.5 million) engineering, procurement and construction contract with Hainan Century Light Investment Co. for a straw-based biomass power plant in Baisha. "We are pleased to announce this new contract which will generate additional revenues and profits over a relatively short period of time."
In light of the general softness in the wind energy business and, in particular, the lack of turbines purchases from Spinning Star and the consequent impact of these factors on the near-term demand for A-Power's wind turbines, the Company has reduced its guidance for the full year 2010. It now expects revenues of $310 million (reduced from $500 million) and net income of $50 million (reduced from $60 million).
A-Power Energy Generation Systems today announced the signing of a three-phase, six-year USD$ 279 million engineering, procurement and construction contract with Baishan Long Run Water Conservancy. "We are very excited about this new win at our Liaoning (Gao Ke) Hi-Tech Energy Group subsidiary and the continuing success in our core distributed generation business. Building upon our current pipeline in our DG division, this multi-year EPC project provides us with improved sales visibility heading into the second half of our fiscal year and beyond."
"While our DG business generated EPC work for wind projects, we did not recognize revenue from wind turbine sales in the second quarter due to delays obtaining final permits for our 2.7 MW turbines scheduled for delivery to our Inner Mongolia and Shandong wind projects. We believe wind turbine sales will pick up in the second half of the year." The Company reiterates its guidance for its full year 2010 outlook of revenues of $500 million and net income of $60 million. This guidance is based upon the on-going DG projects and revenues from the expected sale of wind turbines to be generated during the remainder of 2010.
"Our geographic diversification into southern China and international projects are contributing more DG revenues. Our wind turbine business continues to gain traction and we remain confident in the market outlook, as our larger turbines are receiving favorable consideration in China, and the outlook for future turbine exports also appears promising. With more components arriving and our production expanding, we are continuing to move forward on all facets of our wind turbine business, both domestically and internationally. On the financial side, we continued to work to strengthen our balance sheet and manage our cash flow to prepare ourselves for further expansion during 2010." Management raised its view that revenues for 2010 will reach $500 million and net income will reach $60 million, from previously announced annual guidance of $380 million in revenues and $45 million in net income, respectively.
For fiscal year 2010, the management is expecting net sales to be approximately $380 million and net income to be approximately $45 million. "As our DG solution continues to extend its growth track record and win customers in China and aboard, our wind business is picking up speed. While Chinese domestic customers remain interested in large wind turbines with proven records, our involvement in the Texas wind farm development paved the way for our foray into the much larger US wind energy market. We see an exciting 2010 ahead of us."