The Company entered the hydropower industry in 2002.  After two years exploring the available opportunities in the industry, it successfully acquired its first hydropower asset, Hunan Sanjiang Hydropower Station with an installed capacity of 62.5MW, from a state-owned company in 2003.

 

In April 2008, the Company completed the construction of the Hunan Zhaoheng Hydropower Station, which provides an additional 50MW capacity. In June 2008, the Company acquired the Guizhou Yongfu Hydropower station. Currently, the Company’s portfolio consists of three hydropower stations with an aggregate installed capacity of 120MW:   

 

The Company's senior management has extensive industry and technical experience.The Management team consists mainly of industry experts who gained professional experience from the Water Resources Bureau in China or reputable design institutes. Due in large part to the strength of the Management team, the Company has been able to:

1)     Successfully merged and integrated a state-owned hydropower station, Hunan Sanjiang, which has been expanded into Hunan Zhaoheng

2)     Increased EBITDA of Hunan Sanjiang by nearly 3 times from 2003 through 2007

3)     Constructed Hunan Zhaoheng, a high quality and efficient hydropower plant with 50MW of installed capacity which commenced operations in May 2008

4)     Recently signed a number of MOUs with prospective sellers of small-to-medium-sized hydropower stations fitting the Company’s acquisition criteria

 

 

 

 

The Company’s business consists primarily of the following three activities:

(i) identify and invest in small and medium hydropower stations in China; and

(ii) secure annual sales contracts with the State Grid Corporation of China and the China Southern Power Grid Corporation.

(i) operate hydropower stations; and

(ii)generate hydropower and supply electricity to power grid companies

 

(i) construct quality power stations with high economic value and substantial return on investment.

 

Zhaoheng’s current operations are in Hunan and Guizhou Provinces. The Hunan Sanjiang Hydropower Station, Hunan Zhaoheng Hydropower Station and Guizhou Yongfu Hydropower Station primarily service the Changde Branch of State Grid Corporation of China and China Southern Power Grid Corporation, two state-owned power grid companies.

 

 

 

The Company’s mission is to become the leading privately owned small to medium sized hydropower producer and supplier in China.  The Company plans to achieve this by growing through strategic acquisitions and new construction and implementing managerial and technical expertise in the acquired hydropower plants.

 

 

 

Zhaoheng’s current expansion strategy is to:

 

acquire small and medium hydro companies which are operational and can immediately contribute to its earnings and cashflow generation capability.

 

On March 20, 2008, the Chinese government issued a new regulation prohibiting national grid companies, and their employees from, investing or holding any share interest in power generating companies. This is to avoid potential conflict of interest arising from the natural monopoly status enjoyed by the state grid companies in purchasing electricity from the power stations.

 

Local liquidity has tightened since mid 2007. Many small to medium hydropower companies which are highly leveraged are having difficulty servicing their existing debt and are unable to source additional funding from local sources. Companies that are currently in the construction process are suffering from rising construction costs. 

 

Based on this current market environment, Zhaoheng recognized the potential for acquisition opportunities within the hydro sector.  Zhaoheng is currently negotiating with a number of small to medium hydro power companies.

 

The Company’s primary targets are:

1. Located in environmentally-friendly locations

2. Hydropower assets with high development potentials, especially those with hydropower resources that are expandable in terms of installed capacity so as to maximize profitability from power generation and CMD/VER revenue

3. Rich in water resources with development potential

4. With potential for technical and management improvement thereby improving investment returns,

5. Chosen to enhance the geographical diversification of the Company’s portfolio assets.

 

The Company currently operates mainly in Hunan Province and will generate 90% of its revenue in the province. After the acquisition of additional hydro companies, Zhaoheng will be able to diversify its revenue to sources outside Hunan.