Total Revenues up 62%, Net Income up 86% over Q3 2007

Shenzhen, China (PRWEB) November 19, 2008 -- Zhaoheng Hydropower (OTC Bulletin Board: ZHYP) ("Zhaoheng Hydropower" or the "Company"), a leader in small to medium sized hydropower generation in Midwest China, today announced its unaudited financial results for the third quarter ended September 30, 2008.

Second Quarter Financial and Operating Highlights

* Revenues were $5.16 million, an increase of 62% from $3.19 million in the third quarter of 2007
* Gross profit was $4.43 million, an increase of 60% from $2.77 million in the third quarter of 2007
* Net income was $3.34 million, an increase of 86% from $1.79 million in the third quarter of 2007

"We are very pleased to report strong results in the third quarter, which came in line with our expectations," commented Mr. Xu Guosheng, Chairman and Chief Executive Officer of Zhaoheng Hydropower. "We continue to drive strong growth quarter over quarter and year over year as we focus on increasing our installed capacity and power output. Revenues increased in the third quarter primarily because we improved our operational efficiencies and noticed a higher than average electricity tariff. We remain fully committed to expanding our operations and capacity through strategic acquisitions to deepen our position as a leading small to medium hydropower player in China."   

Third Quarter 2008 Financial Results

Revenue

Revenues were $5,156,207, an increase of 62% from $3,191,260 in the three months ended June 30, 2007. This growth was due primarily to an increase in installed capacity and power output. The average electricity tariff for our Hunan facilities was RMB 0.2773/KWH for the three months ended September 30, 2008.

Cost of Sales

Cost of sales was $722,820 or 14% of our net sales, compared to $424,892 or 13% of our net sales in the three months ended September 30, 2007. The increase in cost of sales during the third quarter was primarily due to an increase in depreciation expenses from our Hunan Zhaoheng Hydropower Station expansion project.

Operating Expenses

Total operating expenses, which include selling and administrative expenses, increased to $400,003 from $317,658 for the three months ended September 30, 2007. The increase in operating expense was mainly due to the fees we paid to third parties such as management consulting firm, IR firm, lawyer firm, auditing firm etc to help us improve our management, review our business risk and maintain our public company status.

Investment Income

Total investment income for the three months ended September 30, 2008 was $29,893, compared to $0 for the three months ended September 30, 2007. The investment income was generated from the long-term investment at Zhaoheng Weile Tungsten (Shimen), Ltd. ("Weile").

Interest Income

Starting from January 1, 2008, our subsidiaries Hunan Sanjiang Power Co., Ltd. and Hunan Zhaoheng Hydropower Co., Ltd. started charging interest on the loans to our related party Shenzhen Zhaoheng Industrial Co., Ltd. We realized interest income of $677,264 in the third quarter of 2008, compared with an interest income of $2,845 in the third quarter of 2007. Interest rates charged on these loans are 120% of the benchmark rate set by People's Bank of China.

Interest Expense

Interest expense was $1,223,717 in the third quarter compared to $257,405 in the third quarter of 2007. This increase was due to 1) the capitalization of interest expense incurred during the construction period of the new hydropower plant established by one of our subsidiaries, Hunan Zhaoheng and 2) incurring a new loan in the amount of RMB 43 million from China Construction Bank in July 2007.

Net Income

Net income increased to $3,337,273 in the second quarter from $1,791,884 in the same quarter one year ago. Net income as a percentage of revenue increased to 64.7% mainly as a result of reduced operating expenses and increased interest income.

About Zhaoheng Hydropower

Zhaoheng Hydropower Company, through its wholly-owned subsidiaries in mainland China, is a leading professional small and medium-sized hydropower station investment, development, and management company focused on hydropower stations with an installed capacity between 5-100 MW. Currently, the company owns three facilities in China with a total installed capacity of approximately 120 MW. Zhaoheng Hydropower treats the cascade development of river basins as a priority and is committed to push forward the development of clean and renewable energy industry in China. The Company listed on the OTCBB since May 14, 2008 and has offices in Hong Kong and Shenzhen, China

Safe Harbor Statement

This press release contains forward-looking statements. Forward-looking statements include statements that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate," "project," "intend," "forecast," "anticipate," "plan," "planning," "expect," "believe," "will," "will likely," "should," "could," "would," "may" or words or expressions of similar meaning. All forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those projected. Factors that could cause such a difference include, without limitation, vulnerability of our business to general economic downturn, operating in the People's Republic of China generally and the potential for changes in the laws of the People's Republic of China that affect our operations, our ability to obtain all necessary government certifications and/or licenses to conduct our business, the cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations, as well as other risks set forth in the Company's filings with the Securities and Exchange Commission. The forward-looking statements contained herein speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based. 

Contacts for investors and media    

Lily Zhou, Director of Investor Relations

+852 2787.3355 in Hong Kong

Alan Peng, Corporate Secretary

+86-755-82070966 in Shenzhen, China

Kathy Li, Christensen Investor Relations

+1 212.618.1978 in New York

kli @ christensenir.com

Roger Hu, Christensen Investor Relations

+852 2232.3918 in Hong Kong

rhu @ christensenir.com