Corporate Presentation
2009
1
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation Reform
Act of 1995: Any statements set forth in this presentation that are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
those in the forward-looking statements, which may include, but are not
limited to, such factors as unanticipated changes in product demand,
increased competition, downturns in the economy, failure to comply with
specific regulations pertaining to government projects, fluctuation of
revenue due to the nature of project lifecycles, and other information
detailed from time to time in the Company filings and future filings with
the United States Securities and Exchange Commission. The forward-
looking statements contained in this presentation are made only of this
date, and the Company is under no obligation to revise or update these
forward-looking statements.
2
Wind Power Propels Our Business Model
“The Chinese government recently
revised the wind [energy] target from 30
gigawatts to 150 gigawatts of generating
capacity by 2020.”
Forbes, July 2009
“The [Chinese] government has set on-
grid tariffs at between 0.51 yuan ($0.075)
and 0.61 yuan ($0.090) per kilowatt-hour
… about 20 percent higher than rates
determined in 2006.”
Bloomberg News, July 2009
“This year China is on track to pass the
United States as the world’s largest
market for wind turbines — after doubling
wind power capacity in each of the last
four years.”
New York Times, July 2009
5MW wind turbine by REpower
3
Wind Industry Dynamics In China
China is expected to surpass the United States as the world’s largest market for wind
turbines in 2009
The Chinese government recently announced the $17.6 billion, 20 GW “Three Gorges
Wind Power” project in Northwest China
The Chinese government has substantially increased its goal for installed wind
energy capacity by 2020, during the past year. Since 2008, the goal has increased
from 20 GW to 30 GW to 120 GW and, most recently in July 2009, to 150 GW
China’s wind power industry is expected to reach 30 GW of capacity by 2010
There is the potential for China to invest $200 billion in wind turbine components and
projects through 2020
China’s current renewable energy usage rate is 16% and the Chinese government
recently increased its goal for 2020 to 23%, which is similar to European targets
The Chinese government will offer bank loans with subsidized interest rates to wind
farm operators
4
Forged Steel
Components
Where We Fit in Wind Power
Wind power is a promising, growing industry with strong potential
China is a world leader in the advancement of wind power
Wind turbines contain highly technical components that are creating a supply
bottleneck
China Wind has market advantages in making large forged wind-power components
China Wind has demonstrated solid execution of its business plan by becoming a key
supplier of many wind-power components, in which end users are international wind
power players
Fabrication
Assembly
Yaw Bearings, Blades,
Gearbox and Other Parts
Wind Turbine
Grid Connection
End User
Wind Farm
5
Interior of Wind Turbine Unit
Source: U.S. Department of Energy
% Cost Breakdown of A Windmill
Component
Percent
Blade
19%
Electrical Control System
16%
Gearbox
15%
Tower (flanges)
9%
Generator
8%
Hub
7%
Yaw System
5%
Spare Parts
5%
Nacelle
4%
Main Shaft
4%
Central Monitoring/Control System
3%
General Assembly
3%
Hydraulic System
2%
Source: Morgan Stanley Research
*We supply forged products for wind power components
6
Industry Bottleneck Secures Our Opportunity
The Chinese government mandates that 70% of wind
turbine components be manufactured locally, encouraging
domestic suppliers
Increases in wind turbine size will prolong this supply
constraint
Limited supply of large-sized forged products wind
turbines at least 2 MW
China Wind Systems’ primary strategic focus is to solve
the bottleneck by providing forged components, including
forged rolled rings, gear rims, and shafts used in
gearboxes and yaw bearings
Sources: Renewable Energy World Magazine
Unfinished shaft
7
Moving into the Wind Power Industry
22%
8,500 tons of rolled rings
April 2007
None
Rolled rings up to 3 meters
diameter
Original Facility
6,000 tons
40,000 tons of rolled rings,
flanges, shafts and gear rims
Design Capacity
Forged Products Facility
Upgrades to Forged
Product Facility
Products
Rolled rings up to 6.3 meters
diameter rolled rings, flanges,
shafts, and gear rims
Electro-slag Re-
melted forged
products
Equipment Installation
Jan 08 - Feb 09
Oct 2009- Apr 2010
Production Start
March 2009
April 2010
Expected Gross Margins
28%-30%
35%-40%
9,751,098
8,235,294
17,569,546
Gross Profit (in USD)
37%
28%
30%
Average Gross Margin %
26,354,319
29,411,765
58,823,529
Revenue (in USD)
6.8
6.8
6.8
Exchange Rate
180,000,000
200,000,000
400,000,000
Revenue (RMB)
30,000
10,000
10,000
Average Price/Tonnage (2008 RMB)
6,000
20,000
40,000
Total Tonnage Output
ESR forged products 100%
50%
100%
45,000
Design Capacity (Annual in tons) *
Actual Capacity @
CWSI
*ESR technology is used to increase the durability and quality of steel material used particularly for components in yaw bearings and gear
boxes.
8
Mature industrial equipment business manufacturing textile & electrical power
equipment
Quality metal fabricator of components for heavy machinery industries
Time-tested innovative engineers and skilled technicians
Growth strategy is to participate in the fast growing $200 billion China wind-
power equipment market
Supply forged rolled rings used in yaw bearings and gearboxes since April 2007
Rings = 3 meters in diameter, for use in wind turbine units up to 3 MW
Recently completed State-of-the-art (108,000 SF) forging facility focused on wind
industry, commencing operations in March 2009
Began in house manufacturing of shafts, flanges, shafts and forged rolled rings
for gear rims and other applications in March 2009
Rings =6.3 meters in diameter, for use in wind turbines up to 5 MW
Shafts used in 1MW-3MW wind turbine units
Gear rims for use in gearbox
Flanges for tower
Added to the First Trust Global Wind Energy ETF, “FAN,” joining wind industry
leaders, such as Nordex and Vestas Wind Systems
Company Overview
Gear Rim
Rolled rings
9
First Mover Advantage Keeps Us Ahead of the Curve
Competitive Advantages:
Scalable production capability to meet varied market
needs
Critical QAQC certification and capability to ensure
quality and safety, resulting in CWSI’s product being
accepted by a top wind power industry player
Received ISO9001 in July 2009, covering machining and
related service of shaft-shaped forging, ring forging,
tubular forging and component assembly
Internal innovation capability to lead new product
development
Track record of dealing with major SOE customers
Prime location in Jiangsu Province near major
transportation routes enables cost-savings
Strong management capability to accelerate company’s
leadership role in the industry
Majority of Chinese competitors rely on less effective
technology to produce forged rolled rings
10
Forging Process at Wuxi Facility
11
Leveraging Existing Wind Customer Base
Flanges
Power
plants
Wind tower
Power
plants
Flanges for
wind tower
Gearbox
Yaw
bearing
End
Product
Gear rim, shaft,
Flanges
2009 New Customer
Shenyang Heavy Machinery
Flanges
2009 New Customer
Chengxi Shipyard Co., Ltd
Shafts
2009 New Customer
Dong Fang Electric Co., Ltd
Flanges
2009 New Customer
Gansu Keyao Electrical Manufacturing Co., Ltd
Gear rims
2009 New Customer
Hangzhou Advance Gearbox Group Co., Ltd
Rolled rings
Rolled Rings
Product
2009 New Customer
Zhongxin Heavy Machinery Group
2009 New Customer
Wuxi Lida Gear Manufacturing Co., Ltd
Name of Company
7 New Wind Customers Year-To-Date In 2009
12
Strong Annual Growth
Notes: $ figures in millions
Income tax rate: 33%, 2005-2007; 25%, 2008
2007 net income before and after-tax exclude, $6.7 MM in one-time tax benefit, Q3, 2007
2008 net income before and after tax net income exclude non-cash charges of ($2.3M) related to amortization of debt discount to interest expense and
one-time non-cash charge of ($2.9) MM, related to deemed preferred dividend related to issuance of stock warrants upon conversion of convertible debt
to series A preferred stock in Q1 08.
13
Revenue Breakdown
14
Experienced Executive Team
Mr. Jianhua Wu, Chairman / CEO
Mr. Wu is the Founder and CEO of the Huayang Companies and has more than 20 years of machinery manufacturing experience. He holds a certificate in Mechanical engineering and
is a founding member of the China Wind Association.
Mr. Leo Wang, CFO
Mr Wang is the Founder and Principal of Cambridge Invest, an investment advisory firm. Previously, he was CFO of Renhuang Pharmaceuticals, Inc. and held senior positions at Global
Guardian Group (hedge fund), Fleet Boston Financial Corp (now merged with Bank of America) and Norwegian Ministry of Finance; Mr. Wang was a NSF scholar at Harvard University
and earned a MBA in finance from Massachusetts Institute of Technology and a PhD in Economics from the University of Oslo.
Mr. Adam Wasserman, CPA, Vice President of Financial Reporting
Mr. Wasserman is the CEO of CFO Oncall, Inc., an accounting consulting firm. Mr. Wasserman holds CFO titles for Transax International Ltd, since May 2005, Lotus Pharmaceuticals,
Inc. since October 2006 and Gold Horse Intl. Inc. since July 2007. He earned a B.S. in Accounting from the State University of New York, Albany.
Mr. Ryan Hua, VP / Operations
Prior to joining China Wind Systems Mr. Hua was a Partner at Wuxi Zhong Qiang Heavy Machinery, Inc. Previously, he was a General Manager at Zhong Qiang Heavy Machinery Inc.
and Assistant Electrical Engineer at Huayang Companies. Mr Hua holds a B.S. from Nanjing University of Science and Technology.
Mr. Chen Yao Hong, Chief Engineer
Mr Hong has previous experience in optical Instrument design and radar design and holds a certificate of Mechanical Engineering and a BS in Mechanical Design.
Mr. Bo Xiong Shen, Director / Business Development
Mr. Shen has 28 years experience with progressive responsibilities including Technician Technology Innovation Manager, Director of External Economic Affairs, and General Manager
of Import and Export at Nanjing Machine Tools Corp. He has in-depth experience in manufacturing large size mechanical bearings and gearbox; Mr. Shen holds a certificate as a Sr.
Mechanical Engineer and received a B.S. from Beijing University in Mechanical Technology.
Drew Bernstein, Independent Director
Mr Bernstein serves as Chairman of the Audit Committee of China Wind Systems. He co-founded Bernstein & Pinchuk LLP (B&P) in 1983. His early recognition of the global
marketplace and his extensive travel in the People's Republic of China (“PRC”) resulted in the aggressive expansion of the firm’s services to the PRC. Mr. Bernstein received his BS
degree from the University of Maryland Business School, is licensed in the State of New York, Connecticut, California, Texas and Maryland and is a member of the AICPA, the
NYSSCPA and the NSA.
Megan Penick, Independent Director
Ms. Penick serves on the Company’s audit and compensation committees. Ms. Penick is an attorney, licensed to practice in New York State, and the owner of Penick & Associates
LLC, which provides corporate governance consulting. She focuses on working with United States and China-based companies and their boards to develop corporate governance best
practices. She received her J.D. from New York Law School and is fluent in both Mandarin and English.
15
One of the few Chinese wind industry players publicly
traded in the U.S.
Potential to capitalize on China’s projected $200 billion
wind industry components market
Excellent industry dynamics where installed wind power is
targeted by the Chinese government to grow from 20 GW in
2009 to 150GW by 2020
Transforming into a leading supplier of wind power
components to address the rapidly growing wind industry
in China and the world.
State-of-the-art manufacturing facility focuses on
manufacturing forged products for wind power industry
Experienced management team with successful track
record to build CWSI into a world-class organization
Investment Highlights
Hydraulic press
wind turbine
16
Contact
Company Contact:
China Wind Systems, Inc
Leo Wang, Chief Financial Officer
No. 9 Yanyu Middle Road
Quinzhou Village, Huishan District,
Wuxi City, Jiangsu Province, PRC
Tel: (877)-224-6696 ext 705
E-mail: leo.wang@chinawindsystems.com
Investor Relations:
CCG Investor Relations, Inc
Crocker Coulson, President
1325 Avenue of Americas
Suite 2800
New York, NY 10019
Tel: (646) 213-1915
E-mail: crocker.coulson@ccgir.com
Legal Contact:
Asher S. Levitsky P.C.
Sichenzia Ross Friedman Ference LLP
61 Broadway
New York, NY 10006
Telephone: (212) 981-6767
E-mail: ALevitsky@srff.com
External Auditors:
Sherb & Company, LLP
1900 NW Corporate Boulevard
Suite E210
Boca Raton, FL 33431
Tel: (561) 886-4200
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Appendix I: Equity Snapshot
Ticker (OTC BB): CWSI
Price (08/14/09): $1.47
Market Cap: $93.8 mil
Revenues (ttm): $44.1 mil
Net Income (ttm): $5.8 mil
Diluted Shares Outstanding: 63.8* mil
EPS (ttm): $0.09
P/E (ttm): 16.3x
P/S (ttm): 2.1x
*63,768,462 weighted average diluted shares outstanding, June 30, 2009
18
Appendix II: Corporate Structure
CWSI.OB
Fulland Ltd.
Green Power Environmental
Technologies Co., Ltd
(“Green Power”)
Wuxi Fulland Wind Energy
Equipment Co., Ltd
(“Wind Power”)
100%
100%
100%
Wuxi Huayang Dye
Machine Co., Ltd.
(“Huayang Dye
Machine”)
Contractual
Arrangement
WFOE
WFOE
Wuxi Huayang
Electrical Power
Equipment Co., Ltd
(Huayang Electrical
Power Equipment)
Contractual
Arrangement
19
14,028,189
Common shares issuable upon conversion of series A
preferred stock
Share Type
Number of Shares
Common shares issued and outstanding*
44,895,546
Shares issuable upon exercise of warrants at $0.40**
6,501,077
Shares issuable upon exercise of warrants at $0.50**
400,000
Shares issuable upon exercise of warrants at $0.567**
9,232,424
Total, fully diluted shares:
75,057,236
*As of March 25, 2009
**As of December 31, 2008
Appendix III: Capitalization Structure
20
Appendix IV: Summary Balance Sheet
($ in thousands) 6/30/09 �� 12/31/08
(Unaudited) (Audited)
Cash and Cash Equivalents $721 $329
Current Assets 10,341 7,586
Total Assets 42,236 37,332
Current Debt 1,169 1,021
Total Liabilities 6,262 4,406
Total Stockholders’ Equity 35,974 32,925
21
Appendix V: Summary Income Statement
Source: Company’s SEC filings
* Net income, EPS exclude $2.3 million in non-cash interest expenses, amortization of debt issuance cost and $2.9 million deemed
preferred dividend
** Net income, EPS exclude one-time income net of $6.7 million related to forgiveness of VAT and income taxes, Q3, 2007
($ in thousands, except per share data)
Q2 09 Q2 08 YoY% 2008 2007 YoY%
Revenues $13,584 $11,183 21.5% $42,285 $24,418 73.2%
Gross Profit 3,105 2,763 12.3% 10,545 7,052 49.5%
Operating Income 2,512 2,032 23.6% 8,063 5,662 42.4%
Net Income 1,781 1,411 26.2% 5,829 * 3,603** 61.8
Diluted EPS $0.03 $0.02 $0.09* $0.09^*
Gross Margin 22.9% 24.7% 24.9% 28.9%
Operating Margin 18.5% 18.2% 19.1% 23.2%
22
Appendix 6: Non-GAAP Reconciliation Data
23
Net Income
Diluted EPS
Net Income
Diluted EPS
Adjusted Amount of Net Income available to Common Shareholders
2,426,593
$
0.04
$
2,424,984
$
$0.06
Adjustment
Interest expenses related to amortization of convertion of
convertible debt to common stock (1)
2,263,661
0.06
Deemed preferred stock dividend (2)
2,884,062
0.08
Amount per consolidated statement of operations
2,426,593
$
$0.04
(2,722,739)
$
(0.07)
$
(1) One-time, non-cash interest expenses related to amortization of
debt discount to interest expense, Q1 2008
(2) Deemed preferred stock dividend, Q12008
weighted average diluted shares, 60,623,310 for six months ended June 30,
2009 and 37,760,355 for six months ended June 30, 2008
For the Six Months ended June 30,
2009
2008