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A-Power Energy Generation Systems, Ltd.
NASDAQ: APWR
May 2008
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Safe Harbor
This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, about A-Power Energy Generation Systems (“A-Power”), Head Dragon Holdings (“HDH”),
and Liaoning GaoKe Energy Group (“GaoKe”). Forward looking statements are statements that are not historical
facts. Such forward-looking statements, based upon the current beliefs and expectations of A-Power
management, are subject to risks and uncertainties, which could cause actual results to differ from the forward
looking statements. The following factors, among others, could cause actual results to differ from those set forth
in the forward-looking statements: business conditions in China, changing interpretations of generally accepted
accounting principles; outcomes of government reviews; continued compliance with government regulations;
legislation or regulatory environments, requirements or changes adversely affecting the businesses in which A-
Power, HDH, and GaoKe are engaged; fluctuations in customer demand; management of rapid growth;
competition from other providers of power generation and grid development; timing approval and market
acceptance of new products introduction; general economic conditions; geopolitical events and regulatory
changes, as well as other relevant risks will be detailed in future filings with the Securities and Exchange
Commission. The information set forth herein should be read in light of such risks. Neither A-Power, HDH, nor
GaoKe assume any obligation to update the information contained in this presentation.
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A-Power Energy Generation Systems, Ltd
Overview
A-Power Energy Generation Systems began trading on
NASDAQ on January 22, 2008
Cash balance as of December 31, 2007 of $36M
Does not include paid-in-capital of ~$34M and another ~$58M from
warrant conversion in Q1 2008
$15M Bridge Loan paid off in January 2008 - now debt-free
Currently ~32.7M common shares outstanding, market cap of
~$660M
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Ownership Structure
A-Power Energy Generation Systems, Ltd.
BVI company listed on NASDAQ
Head Dragon Holdings, Ltd.
Hong Kong company 100% owned by A-Power
Liaoning GaoKe Energy Group (“GaoKe”)
PRC company 100% owned by Head Dragon
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Liaoning GaoKe Energy Group
Formed in 2003 to become the Leading Alternative Power
Company in China
Established to capitalize on the substantial inefficiencies and
drawbacks of China’s and SE Asia’s central power systems
Currently the leading provider of “local” distributed power generation
and micro power networks in China
Has a large clean energy technology portfolio
Includes wind, solar, hydro, ground source heat pumps, biomass, etc.
Has formed JV’s with top Chinese research institutions (Tsinghua University and China
Sciences Academy)
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Basis for Forming GaoKe
Inefficient, “Dirty” Power Generation
Frequent Blackouts
Power Loss Due to
Transporting Over Long
Distances
Frequent & Time
Consuming Repairs
High Cost Power
(Demand > Supply)
Heat Purchased
from Local
Suppliers
Pollution
Cost
MAJOR PROBLEMS with Traditional Central Power
Generation in China / SE Asia
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GaoKe’s Solution = Local, Distributed
Power Generation
EFFICIENT, “GREEN” POWER
Use factory byproducts (excess steam) to create cheap, on-site power & free heat
> 80% efficiency, vs. 20-40% for traditional power
Excess power generated
can be sold to local users
via a micro grid or to the
national grid
RELIABLE
Eliminates reliance on national grid with its frequent blackouts
System localization makes it easier to maintain and less vulnerable to disruptions
ECONOMICAL
Power is 1/3-1/5 the cost of
national grid power
No need to buy heat from a
3rd party
System pay-back 2-5 years
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GaoKe’s Distributed Power
Generation System (DG)
Steel Framing / Design Phase
Turbine Installation
Generator & Turbine
Steam Boiler Control Room
Power / Heat Control Room
Completed DG Factory
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Distributed Power Generation
Market - China
HUGE market potential
Recent 5-Year Plan promotes distributed power generation to
help alleviate the national power supply shortage
Historically, facilities in China did not install distributed power generation
systems due to state-owned power company resistance
Government policy support changes dynamics of PRC’s entire power
industry
Dramatically increased interest in distributed power generation
PRC government estimates that spending on new power
generation in China will be at least $65-$78 billion per year for the
next 4 years
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GaoKe’s Competitive Advantages in the
Distributed Power Generation Business
ONLY private company permitted to provide all aspects of distributed
power generation system development in China (design, construct, install & test)
Large state-owned (SOE’s) power companies are “allowed” to develop distributed
power generation and micro power grids, but do not
1.
SOE’s have enough trouble keeping up with China’s growing power needs
2.
SOE’s focus on developing large power plants for the national grid
3.
SOE’s lack the know-how to successfully develop efficient distributed systems
ONLY company with successful distributed generation experience in
China
GaoKe’s systems have ranged from 6MW to 300MW in size
1. 75% of customers are factories (steel, chemical, pharmaceutical, food processing,
ethanol, paper, cement, etc.)
2. 25% of customers are stand-alone facilities providing power and heat to new
development zones in rural or urban areas
3. > 80% of customers are privately-owned companies
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Government Restrictions
China’s power industry is highly regulated, which limits competition
Experience in China’s Market
GaoKe’s systems can be installed quickly and operate efficiently
Thorough understanding of regulations and approval processes in China
Know-How and Proprietary Processes
Proprietary know-how balances input of steam, air and water to maximize
system efficiency
Scalable platform that can be implemented with minimal adjustments
80% of the design of a second system in any industry can be adapted from previously system
60% of the design of a first system in a new industry can be adapted from the platform
Employs its own programming for automated control software to remotely
and continuously monitor system performance
GaoKe’s Competitive Advantages in the
Distributed Power Generation Business
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Distributed Power Generation
Market – SE Asia
Inefficient and insufficient power generation throughout SE Asia
Local engineering companies lack experience and expertise to
develop efficient distributed power generation and micro power grids
Substantial interest in “green” energy
Governments do not want to ignore the environment during their rapid
industrial expansion
GaoKe has been approached to implement systems in India,
Thailand, Malaysia and Indonesia
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Accelerated Entry into International Markets
Recently Signed an Agreement to Acquire Liaoning International
Construction & Engineering Group
One of a limited number of Class-A construction license holders in China
-Authorized to construct energy and infrastructure projects of any size
Significant domestic and international experience in constructing power plants
and infrastructure projects
-Track record in Africa, Eastern Europe and the Asia-Pacific region
Significant financial growth
-$70m revenue, $2.3 Million net income in 2006 (audited)
-$93m revenue, $3.0 Million net income in 2007 (unaudited)
Benefits from the Acquisition
Will accelerate A-Power’s entry into international markets
Expansion of A-Power’s existing technical and project management capability
Accretive acquisition with profit margins that are expected to increase to
A-Power’s level over time
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More About GaoKe
Attracts and retains the best engineering talent in China
Company provides higher pay, more benefits to retain the best engineering talent available
Presently employs >150 qualified engineers who cost only ~1/5 of Western engineers
Substantial growth since inception expected to accelerate
After-tax earnings have grown from ~US$0.6 million in 2003 to ~US$16.8 million in 2007
Additional “green” energy technologies are also being commercialized
Includes wind, biomass, heat pump and hydro power
Engineering services company led by CEO Mr. Jinxiang Lu
A leader in China’s power industry for over 30 years
Pioneered China’s distributed power generation industry
Began developing distributed generation in the 1980s after becoming
frustrated with the inefficiencies of the central grid system
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New Energy Technology Development
JV with the China Science Academy in Guangzhou
Most renowned research institution in Asia for developing new energy
technologies
Substantial expertise in wind, solar, magnetic, geothermal, tidal, and biomass
All new technology will be owned 70% by Gaoke and 30% by the Science
Academy
R&D Center at Tsinghua University in Beijing
The most distinguished university of scientific research in China
R & D Center focused on developing new technology and processes for
Gaoke’s distributed generation systems
Also has substantial expertise in wind turbine technology
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Wind Energy Business
Upside: GaoKe has recently entered into agreements to license
leading state-of-the-art European wind turbine technology
License agreement with Fuhrlander AG of Germany to produce and sell
its 2.5MW wind turbine in China
Fuhrlander’s 2.5MW turbine is the largest commercialized land-based turbine
in the world
Over 160 meters tall (comparable to a 45 story building)
Blades are ~40 meters long with diameter of ~80 meters
Each turbine produces > 6 million kWh of clean power each year
Sales price in China anticipated to be RMB 20-24 million ($2.7 - $3.2 million)
GaoKe has already received LOIs for 380 of these 2.5MW wind turbines
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Wind Energy Business
License agreement with Norwin A/S of Denmark to produce and sell its 750 kW
and 225 kW wind turbines
Norwin is a leading European developer of wind turbines and recently served as a lead
contractor in the construction of the Bahrain World Trade Center
750kW turbine Includes proprietary technology not currently being
used in China that allows for a more efficient connection to the grid
Ideal for wind farms with low-level wind conditions
Sales price in China for a 750 kW system anticipated to be ~US$500,000
Setting up a new wind technology R&D center with Norwin in Shenyang
Will combine expertise of Norwin and GaoKe
Bahrain WTC
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China’s Wind Energy Market
Substantial growth in energy from wind
2.2 GW, or less than 1%, of China’s total energy production in 2006 was from wind
China’s government plans 100 GW of wind energy production by 2020 (15% of
China’s projected energy output at that time), or 120GW if with state subsidy incentives
Equals 100 nuclear plants or more than total generation capacity in France
World total wind capacity of 94 GW by 2007 (Germany 20, USA 12)
Substantial PRC government promotion occurring to reach goal
Requires state-owned power companies to purchase 100% of energy produced from
wind farms under long-term (20-30 year) contracts
Requires all wind turbines installed in China to be assembled in China and 70% of
components to be assembled/produced domestically (up from 10-20% of components
historically)
Mandates major domestic energy companies, including the five largest power generating
groups, to invest a growing proportion of their earnings in developing new wind farms
China’s wind turbine production market is still in its infancy
Limited wind technology base and only a few capable domestic producers
The largest wind turbine produced domestically is 1.5 MW
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GaoKe’s Wind Energy Business
GaoKe’s New Wind Turbine Production Facility
Expected to complete 1st phase of construction and begin producing wind turbines in mid-2008
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Why GaoKe Will Succeed in the Wind Business
Shenyang
Beijing
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Why GaoKe Will Succeed in the Wind Business
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Has licensed advanced European wind technology
Capitalize on second-mover advantage
Learned from mistakes of Chinese companies that rushed into wind business &
underestimated the highly technical nature of wind turbine production
Partnered with licensors to assist with the entire process
Includes selection of component suppliers, design and operation of assembly facility, installation of
turbines, follow up maintenance, etc.
Strategic location
Shenyang is a major industrial center with many component and steel suppliers
Close proximity to many projected large wind farms
Good access to highways and local ports
Strong relationships in China’s main wind farm provinces
Extensive experience with governments and state-owned power companies in windy N. China
Has rights to 7 future wind farm sites in Inner Mongolia and Liaoning Province
Combined capacity of the 7 areas is over 2 GW
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In USD Millions
GaoKe’s Historical
U.S. GAAP Financials
2003
2004
2005
2006
2007
Revenue
17.7
40.5
75.5
98.7
152.5
YOY % Increase
129%
86%
31%
55%
Income
0.6
2.5
4.7
7.7
16.8
YOY % Increase
56%
88%
62%
119%
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Backlog
Dec 31
2004
Dec 31
2005
Dec 31
2006
Dec 31
2007
Apr 16
2008
Contract
Backlog
65.2
61.2
269.0
398.2
700.0
In USD Millions
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Owners of GaoKe, on an all-or-none-basis each year, will be issued 1.0
million shares of common stock if they achieve after-tax profits in the
following amounts for 2007, 2008, and 2009, and 2.0 million shares of
common stock each year if they receive after-tax profits in the following
amounts for 2010, 2011, and 2012:
Incentive Based Compensation
Year Ending 12/31
After-Tax Profit (USD)
Shares O/S
2007
$ 14,000,000
32.7M
2008
$ 19,000,000
33.7M
2009
$ 29,000,000
34.7M
2010
$ 44,000,000
35.7M
2011
$ 63,000,000
37.7M
2012
$ 87,000,000
39.7M
2013
41.7M
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Cap Table
As of March 31, 2008
32,706,938
Total
19,706,938
Public
13,000,000
Management
Common Shares
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Tax Holiday and 2008 Guidance
Applicable
Tax Rate
25%
15%
0%
2012 -
2009-2011
2007-2008
Management 2008 Forecast: $35-45 million Net Income,
or approx. $1.20 EPS
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Summary
Experienced Management Team
Profitable & Cash Flow Positive
Leading Company in China’s Distributed Power Generation Market
Recently began receiving Central Government support
Potential market size estimated at $6.5-$7.8 billion per year
High barriers to entry
Substantial existing contracts
Entering China’s Surging Wind Market
Licensed wind turbine technology from leading European wind companies
A-Power’s wind production facility expected to be completed in mid-2008
Already received LOIs for 380 2.5MW wind turbines
Significant Other Upside
International expansion
China’s other alternative energy markets
