Hanwei provides operational update and revised guidance

TSX: HE

VANCOUVER , Oct. 5 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the "Company") today provided an operational update for its three operating segments: FRP Pipe, Wind Power Equipment, and FGD Products. In addition, it provided updated guidance for the 12 month period ending December 31, 2009 .

FRP Pipe

Domestic Chinese demand for FRP pipe products continues to grow year over year, both in Hanwei's core oil and gas markets, as well as new markets such as water transmission and salt mining. However, in some international markets, most notably Kazakhstan and the southeastern Asia, the Company has experienced a slow down in orders due primarily to project delays and the impact of the global financial crisis. Despite the lower growth in international sales, Hanwei expects overall sales of FRP pipe to grow by 20 percent or better for the 12 month period ending December 31, 2009 compared to the same period in 2008. The Company did not previously provide guidance by sector; however, management had expected FRP pipe revenues to grow by 30 percent or better in 2009 compared to 2008. Since FRP pipe margins are higher for China sales, Hanwei expects gross and net margins to improve in 2009 compared to 2008.

Hanwei was successful in diversifying its customer base in 2009 by industry and geography due to investments made in product development and marketing. In China , Hanwei introduced FRP pipe products used in the salt mining industry for water injection into salt deposits and transportation of salt water to processing plants, replacing steel pipe because of the longer life of FRP pipe under corrosive conditions. Hanwei has obtained sales orders and expressions of interests of approximately $5 million from the China salt mining industry for delivery in the fourth quarter of 2009 and early 2010. After a successful launch of its FRP pipe for salt mining in 2009, Hanwei expects growth opportunities from this industry going forward.

In the FRP oil pipe sector, Hanwei has received expressions of interest from the Middle Eastern oil market, adding a new market for FRP oil pipe, to diversify its customer base now concentrated in China and Kazakhstan . The Company expects to start to supply to this market starting in late 2009 from its Daqing facility. Also, Hanwei is setting up production lines in its new manufacturing facility in Tianjin to add capacity and reduce shipping cost to its new Middle Eastern market, with deliveries expected to commence in the second quarter of 2010. It is expected that in 2010 most of the FRP pipe orders for the Middle Eastern market will be supplied from the Tianjin manufacturing facility.

Wind Power Equipment

Deliveries of wind turbines to Daqing Ruihao Energy Technology Co., Ltd. ("Ruihao") and its affiliated companies have been partially delayed to the first half of 2010 due to the later than expected government approval of some of their wind farm projects. As previously disclosed, Hanwei has secured the supply chain and funding to deliver 118 MW of wind power equipment to Ruihao under its agreement to supply 1,200 MW of wind power equipment products. Hanwei previously disclosed that it expected the majority of deliveries to be made in the second half of 2009 and in early 2010, but Ruihao and its affiliated companies that operate the wind farms will be unable to take delivery and install most of the products that were to be delivered during the winter season. However, Hanwei does nevertheless expects to deliver nineteen HV1500-70 1.5-megawatt ("MW") double-fed, variable speed turbines before calendar year end 2009 for installation in the Du Meng County wind farm located in Heilongjiang Province and operated by Ruihao's Daqing Longjiang Wind Power Co. Ltd. ("Longjiang") subsidiary, which is now beneficially controlled by China Wind Power International Corp., a company listed on the TSX Venture Exchange.

The wind power equipment is to be supplied to three subsidiaries of Ruihao, including Longjiang, which owns and operates the wind farm in Du Meng County, Heilongjiang Province. At the Du Meng County wind farm, Longjiang is installing the initial 40 wind turbines supplied and delivered by Hanwei in fiscal 2008. Ruihao is developing two other wind farms in Heilongjiang Province that will be supplied with Hanwei wind power equipment products under the agreement between Ruihao and Hanwei, with deliveries having been delayed until 2010 as set out above.

Longjiang has advised Hanwei that 14 of the 34 previously installed 1.5 MW turbines at Du Meng have successfully completed the mandatory 500-hour operation testing. All components met or exceeded the required technical and performance specifications. Currently 20 of the 34 installed turbines are connected to the grid and generating power.

Hanwei also announced that it has signed a Letter of Intent ("LOI") with Tianjin Dongqi Wind Turbine Blade Engineering Co. Ltd ("Dongqi"), to supply 40.3-metre wind turbine blades. Dongqi is a subsidiary of Dongfang Electric Corporation, one of the big three wind turbine manufacturers in China . The LOI requires Hanwei to deliver 30 blade sets by December 31, 2009 , and 150 sets in 2010. The new blade order with Dongqi establishes the Company as a supplier of wind power blades to turbine manufacturers and diversifies Hanwei's wind power customer base.

The revenues from new blade deliveries in 2009 are not expected to offset the rescheduled deliveries of wind power equipment from 2009 to 2010 as set out above. The impact of these revisions is expected to result in a reduction of revenues in 2009 for the wind power segment compared to 2008. The Company did not previously provide guidance by sector, however management had expected wind power equipment revenues to grow by 30 percent or better in 2009 compared to 2008.

FGD Products

The Hanwei Ershigs JV (the "JV") is progressing as expected with technology transfer, production training and business development. The JV is now in a position to bid for large diameter chimney liners and duct projects for new coal power plant construction in 2010. Spray header sales are expected to grow in 2010 compared to 2008, due to the continuation of retrofitting FGD installations in 2009. However, as Hanwei is operating in this segment under a 50% owned joint venture, Hanwei's share of revenues from this segment is expected to be flat in 2009 compared to its revenues in 2008 when Hanwei owned 100% of the business. As previously disclosed, Hanwei expects revenues from FGD products to account for less than 10 percent of total revenues in 2010.

The retrofit market includes an opportunity for chimney liners, in that most coal fired power plant chimneys are currently being protected from corrosion by cheaper, less reliable materials. The Hanwei Ershigs JV is working with industry and government agencies to promote the use of FRP for FGD installations in new coal fired power plants and retrofit FGD installations in existing coal fired plants, including a joint study with the technology division of one of China's big five power companies. Hanwei expects to experience growth in this segment in the future years.

Outlook

Due to rescheduling of wind power equipment deliveries to 2010, Hanwei expects its sales revenues for the 12 months ending December 31, 2009 to be flat compared to the same period of 2008. Previously, Hanwei disclosed that it expected revenue growth of between 30 percent and 50 percent in 2009 compared with 2008. Hanwei expects earnings per share for the 12 months ending December 31, 2009 to be lower compared to the same period of 2008 due to flat revenues and increased overhead expenses to support anticipated growth. Previously, Hanwei disclosed that it expected EPS to grow in 2009 compared to 2008 due to revenue growth, improved net margin, and the completion of Hanwei's acquisition of China National Petroleum Corporation's 8.925 percent minority interest in Harvest (Hanwei's FRP pipe business) in November 2008 .

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp. provides high value products and services for the energy sector in China and the Asia region. Hanwei serves its major energy customers through manufacturing facilities in China , producing products for the oil, coal power and wind power industries. Hanwei is focusing on providing products and services that address the growing need for improved energy efficiency and environmental protection in China and the Asia region. www.hanweienergy.com

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

Certain information in this news release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. This forward-looking information includes, among other things, information with respect to the growth in sales, gross margins and net margins of FRP pipe, the growth opportunities in the FRP pipe segment, the supply of FRP pipe to the Middle Eastern market, the manufacturing facilities that will supply the FRP pipe orders for the Middle Eastern market, the development of the supply chain and production capacity to produce wind power equipment, the delivery of wind power equipment to the Du Meng County wind farm, the supply of wind power equipment to Ruihao's wind farms, the blade order from Dongqi and its effect on the Company, the offset of rescheduled deliveries of wind power equipment based on revenues from new blade deliveries, the growth in FGD products, and the sales revenues and earnings per share for the 2009 year, as well as information with respect to the Company's beliefs, plans, expectations, anticipations, estimates and intentions. The words "may", "could", "should", "would", "suspect", "outlook", "believe", "anticipate", "estimate", "expect", "intend", "plan", "target" and similar words and expressions are used to identify forward-looking information. The forward-looking information in this news release describes the Company's expectations as of the date of this news release. Material factors or risks which could cause actual results or events to differ materially from a conclusion in such forward-looking information include the risks that the FRP pipe business segment does not perform as expected, the Company cannot or is unable or decides not to supply FRP pipe to the Middle Eastern market, certain or all of the Company's manufacturing facilities cannot or is unable to supply the orders for the Middle Eastern market, the Company is unable to further develop the supply chain and production capacity to produce wind power equipment, the Company is unable or cannot delivery wind power equipment to the Du Meng County wind farm, the Company is unable or cannot deliver wind power equipment to Ruihao's wind farms, the LOI with Dongqi does not become a firm purchase order, the Company is unable or cannot deliver on the Dongqi blade order, the FGD product segment does not grow, the sales revenues and earnings per share for the 2009 year is less than expected, as well as the risks set out in the risk factors section of Hanwei's Annual Information Form dated March 31, 2009 , and the Company's news releases filed subsequent thereto, all filed with Canadian securities regulators and available on SEDAR at www.sedar.com.

The Company has included in this news release figures based on orders received and expressions of interest, which are non-GAAP measures. Readers are cautioned that such measures are not recognized under Canadian GAAP and should not be construed to be an indicator of performance or liquidity or cash flows. The Company's method of calculating this measure may differ from the method used by other entities and accordingly the Company's measure may not be comparable to the measure used by other entities.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS NEWS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

For further information: Kim Oishi, Senior Vice President, Finance and Business Development, Telephone: [phone], [email protected]; Yucai (Rick) Huang, Chief Financial Officer, Telephone: [phone], [email protected]; Kevin O'Connor, Investor Relations, Telephone: [phone], [email protected]