A-Power Energy Generation Systems, Ltd.(fka APWR)

[spec machine]

A-Power Energy Generation Systems Ltd. Reports Unaudited Financial Results for Third Quarter of 2009

- Teleconference to Be Held today, at 8:00 a.m. EST -

SHENYANG, China, Dec. 3 /PRNewswire-Asia-FirstCall/ -- A-Power Energy Generation Systems, Ltd. (Nasdaq: APWR; "A-Power" or "the Company"), a leading provider of distributed power generation systems in China and a fast-growing manufacturer of wind turbines, today reported its unaudited financial results for the third quarter ended September 30, 2009.

3Q09 Financial Highlights -- Revenues were $96.7 million on a 13% year-over-year increase -- Gross margin was 13.1% vs. 12.4% in 3Q08 -- Cash, Cash equivalent and restricted cash were $97.6 million -- Excluding share-based compensation, and the expenses and non-cash losses related to the convertible bond, non-GAAP Net Income for Q3 was $9.8 million or non-GAAP EPS $0.28 -- The Company reaffirmed the year 2009 guidance of $320 million for revenues and $32 million for non-GAAP net income

Operation Highlights -- Formed two Joint Venture partnerships with Jiangsu Miracle to produce and sell key wind turbine components in China -- Acquired Shenyang Huaren's proprietary technology for 1.5MW-grade wind turbines and took over its backlog to produce and sell 10 units of the 1.5MW wind turbines -- Won a $90.5 million "full-responsibility" contract to develop a 49.5MW wind farm in Inner Mongolia -- Won a $36.2 million "full-responsibility" contract to develop a 19.5MW wind farm in the Shandong Province -- Designated to supply wind turbines to a 600MW wind farm in West Texas


"We continue to make key strategic advancement in our wind turbine business, as we see the Chinese wind energy market is moving towards bigger turbines with proven track records. Our partnerships with GE and Fuhrlander demonstrated their strong endorsement on A-Power's engineering capability and production capacity, which also started to gain traction from wind farms in both China and other geographic markets," said Mr. Jinxiang Lu, A-Power's Chairman and CEO. "On the DG side of our business, together with government backed Shenyang Power Group, we are well positioned to win high-profile contracts for DG systems and micro power grids both in China and overseas."

Mr. Lu continued, "Our DG business progressed well during the third quarter. Fourteen out of our total 17 projects were under construction according to their respective schedules. As the Chinese government continues to emphasize energy conservation and encourages green technology applications, our DG business remains strong and our track records continue to extend. We also started our DG project in Thailand in December."

Third Quarter 2009 Financial Results

For the three months ended September 30, 2009, total revenues amounted to $96.7 million, an increase of $11.3 million or 13.2%, from $85.4 million for the three months ended September 30, 2008. The increase was primarily due to the higher revenues from more on-going DG projects during the three months ended September 30, 2009 compared with the same period of 2008. All revenues in the third quarter of 2009 and 2008 were from the Company's DG operations.

Gross profit was $12.6 million, compared with $10.5 million in the same period of 2008, reflecting a 20% year over year growth. Gross margin was 13.1%, a slight increase over 12.4% in the same period of 2008. The improvement in gross margin was mainly attributable to higher efficiency derived from cost- saving in labor as the Company undertook larger, 30MW-plus DG projects.

Selling, general and administrative expenses amounted to approximately $3.3 million for the three months ended September 30, 2009, an increase of approximately $1.3 million, or 66.7%, compared to approximately $2.0 million for the three months ended September 30, 2008. As a percentage of revenues, these expenses increased from 2.3% in the third quarter of 2008 to 3.4% for the third quarter of 2009. The increase in selling, general and administrative expenses in both absolute terms and as a percentage of revenues was mainly attributable to higher travel expenses associated with wind turbine business, compensation for the new management team, additional consulting fees and related expenses of being a public company listed on the NASDAQ. The year-over-year incremental share-based compensation was approximately $183,000.

Operating income was $9.4 million, compared with $8.6 million in the same period of 2008, reflecting a 9% year over year increase.

Non-GAAP net income was $9.8 million compared with $9.6 million in the third quarter of 2008. Non-GAAP diluted EPS was $0.28, compared with $0.28 in the third quarter of 2008, based on a greater number of diluted shares outstanding. GAAP net loss for the third quarter was $0.6 million, compared with a net income of $9.4 million in the same period of 2008. Diluted loss per share (EPS) was $0.02, compared with $0.28 in the same period of 2008.

For the third quarter of 2009, the weighted average number of shares on a fully diluted basis was 34.9 million as compared to 33.9 million in the same period of 2008.

Summary of Financial Results (Thousand US dollars except earnings per share) For the Three Months Ended September 30, 2009 2008 Total revenue $96,647 $85,371 GAAP Net income (Loss) (623) 9,406 Stock-based compensation 341 158 Accretion expenses on convertible debt 1,034 -- Loss on change in fair value of warrants 2,958 -- Loss on change in fair value of embedded derivative - related to convertible notes 6,028 -- Deferred Financing Cost 115 -- Adjustments to the Net Income 10,476 158 Non-GAAP Net Income 9,853 9,564 GAAP Earnings (loss) per share (0.02) 0.28 Adjustment to diluted EPS 0.30 -- Non-GAAP diluted EPS 0.28 0.28 Diluted avg. number of common shares 34,925,228 33,881,785


As of September 30, 2009, the Company had cash and cash equivalents and restricted cash totaling $97.6 million, compared with $47.1 million as of December 2008.

Total shareholders' equity rose to $168.4 million at September 30, 2009, from $156.0 million at December 31, 2008.

Outlook for the Full Year 2009

A-Power today reaffirmed its revenue and non-GAAP net income guidance for 2009 of $320 million and $32 million, respectively. These targets are based on the Company's current DG contracts, which are subject to change when the Company signs new DG contracts and/or recognizes revenues from wind turbine sales during 2009. A-Power expects that it will from time to time provide periodic updates when additional major DG contracts and wind turbine sales are confirmed.

Mr. Lu concluded, "Most of 14 ongoing DG projects progressed well in the third quarter and would likely to continue in the fourth quarter as well. Going into fourth quarter, we anticipate the payments will gradually funnel in, as many construction projects are advanced and some are near the completion. As our wind turbine facility is gathering speed on production, we remain cautiously optimistic on wind turbine shipment in the fourth quarter."

Conference Call

The Company will host a conference call, to be simultaneously webcast, today, December 3, 2009, at 8:00 a.m. Eastern Standard Time or 9:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing [phone] (North America) or [phone] (International), passcode: 20150963, approximately 10 minutes before the call start time. A live webcast of the conference call will be available on the Company's Website at http://www.apowerenergy.com/ .

A replay of the call will be available starting on Thursday, December 3, 2009, at 11:00 a.m. Eastern Standard Time or 12:00 a.m. Beijing Time December 4, 2009 through January 3, 2010. An archived webcast of the conference call will be available on the Company's Website at http://www.apowerenergy.com/ . Interested parties may access the replay by dialing [phone] (North America) or [phone] (International) and entering passcode 93289876.

About A-Power

A-Power Energy Generation Systems Ltd. ("A-Power"), through its China-based operating subsidiaries, is the largest provider of distributed power generation systems in China, focusing on energy-efficient and environmentally friendly projects of 25MW to 400MW. In 2008, A-Power entered the wind energy market and has built China's largest wind turbine manufacturing facility, located in Shenyang, Liaoning Province, with technologies licensed from German FUHRLANDER AG and Denmark-based Norwin, and a total annual production capacity of 1,125MW. In March 2009, A-Power entered into an agreement to establish a Joint Venture partnership with GE Drivetrain Technologies to produce wind turbine gearboxes in Shenyang. A-Power also has strategic relationships with Tsinghua University in Beijing and the China Academy of Sciences in Guangzhou to develop and commercialize other renewable energy technologies. For more information, please visit http://www.apowerenergy.com/ .

Use of Non-GAAP Financial Measures

We have provided third quarter 2008 and 2009 net income and earnings (or loss) per share on a non-GAAP basis, which is the GAAP net income adjusted by adding back share-based compensation, accretion expenses on convertible debt, loss on change in fair value of warrants, loss on change in fair value of embedded derivative related to convertible notes, and deferred financing cost. We believe both management and investors benefit from referring to these non-GAAP measures in assessing our business operation and financial performance. These non-GAAP operating measures are useful for understanding and assessing underlying business performance and operating trends. We expect to continue providing net income on a non-GAAP basis using a consistent method on a quarterly basis.