TSX: HE

VANCOUVER, Aug. 14 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the

"Company") today announced its financial results for the three and six months

ended June 30, 2009. All currency amounts referred to in this news release are

in Canadian dollars unless stated otherwise.

<<

Summary of Financial Highlights:

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In thousands of Canadian For the three months For the six months

dollars except per share ended ended

data and number of shares

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June 30, June 30, June 30, June 30,

2009 2008 2009 2008

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Sales $12,910 $18,858 $15,495 $24,799

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Gross profit 5,177 7,983 5,786 9,903

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Operating income (loss) 811 4,131 (2,372) 3,483

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Net Income (loss) 158 2,911 (3,324) 2,198

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Income per share - basic and

fully diluted 0.00 0.05 (0.05) 0.04

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>>

Revenues were $12.9 million for the three months ended June 30, 2009, a

decrease of $5.9 million or 32 percent compared to the same period in 2008.

Revenues were $15.5 million for the six months ended June 30, 2009, a decrease

of $9 million or 38 percent compared to the same period in 2008. The decreases

in the three and six month periods were caused primarily by reduced revenues

from the wind power business and offset by increased sales in the pipe

business. Net income for the three months ended June 30, 2009 was $0.2 million

compared to a net income of $2.9 million for the same period in 2008. Net loss

was $3.3 million for the six months ended June 30, 2009 compared to net income

of $2.2 million for the same period in 2008. The decrease in net income for

the three and six month periods were primarily driven by the timing of wind

power deliveries.

The Company had basic and diluted earnings per share of nil for the three

months ended June 30, 2009 versus basic and diluted earnings per share of

$0.05 for same period in 2008. For the six month period, the Company had basic

and diluted loss per share of $0.05 versus basic and diluted earnings per

share of $0.04 for the comparable period in 2008. As at June 30, 2009, the

Company had approximately 60.8 million common shares outstanding, which

excludes the 8,051,746 shares issued under the earn-out provisions for the

acquisition of Daqing Deta Electric Co., Ltd. ("Deta").

Working capital was $51.8 million as at June 30, 2009, a decrease of $6.3

million from $58.1 million as of December 31, 2008, primarily due to an

increase in accounts payable and short-term loans. Cash totalled $14.4 million

as at June 30, 2009, representing an increase of $2.5 million from December

31, 2008.

Segmented Results

FRP Pipe

The pipe business grew by 15 percent and 18 percent respectively for the

three and six months ended June 30, 2009. Revenues from the pipe business were

$11.2 million for the three months ended June 30, 2009 and $13.2 million for

the six months ended June 30, 2009. The growth of the pipe business was

impacted by the economic downturn as oil fields delayed their projects. While

economic conditions and energy demand continue to improve in China, the

Company continues to anticipate that certain oil field development projects

will be delayed in 2009, which could lead to a decrease in the demand for its

FRP pipe products. As part of its FRP pipe business strategy, Hanwei has been

developing products and customers in other industries and expects to make

further progress in the second-half of 2009, partially offsetting the lower

demand for FRP oil pipe. Hanwei has been successful in diversifying its FRP

pipe business and reducing its reliance on a few large customers, by investing

in product development of larger diameter pipe and new joint methods and

expanding its international sales and marketing team.

Currently, Hanwei has sufficient FRP pipe capacity at Daqing for 2009;

however, the Company will need to add capacity to have the flexibility to grow

the business in 2010. Hanwei is planning to increase capacity in China by

adding FRP pipe production lines to its new Tianjin facility. The Company

expects that the new lines could be added at a very low capital cost, and

within the 2009 capital expenditure budget since the infrastructure is already

in place.

Wind Power

Revenues from the wind power business were $1.4 million for the three

months ended June 30, 2009, a decrease of $6.7 million compared to the same

period in 2008, and $1.9 million for the six months ended June 30, 2009, a

decrease of $10.6 million compared to the same period in 2008. Hanwei

delivered 18 blades for the three months ended June 30, 2009 compared to eight

turbines for the same period in 2008. For the six month period, Hanwei

delivered 24 blades compared to 12 turbines for the same period in 2008. This

decrease of wind power revenues is due to a timing difference in deliveries as

well as the lower dollar value of blades versus turbines. Deliveries for the

wind power business are driven by the customer's wind farm development

schedules and are expected to increase in the second half of 2009 based on the

customer's development schedule.

Hanwei has secured the supply chain and funding to deliver 118 MW of wind

power equipment to Daqing Ruihao Energy Technology Co., Ltd. ("Ruihao") under

its agreement to supply 1,200 MW of wind power equipment products. The wind

power equipment is to be supplied to three subsidiaries of Ruihao, including

Daqing Longjiang Wind Power Co. Ltd. ("Longjiang"), with the majority of

deliveries expected in the second half of 2009 and in early 2010. Longjiang

owns and operates the wind farm in Du Meng County, Heilongjiang Province,

where it 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 under the agreement with Hanwei.

On April 22, 2009, Hanwei announced that it had signed a non-binding

letter of intent ("LOI") with the Baotou Development and Reform Commission and

with Beijing Kunding Xunlei New Energy Technology Ltd. to provide wind power

turbines and blades for a 400 MW wind farm located approximately 100

kilometers from Baotou, Inner Mongolia Autonomous Region of China. With this

LOI, Hanwei is in the early stages of securing its second major customer in

the wind power business; however, the Company has identified a number of

challenges to move the LOI to formal contracts and start delivering wind power

equipment, including the requirement for Hanwei to deliver 2 MW to 3 MW

turbines, a technology the Company currently does not have.

On June 24, 2009, Hanwei announced that it had signed a second wind power

LOI in the Inner Mongolia Autonomous Region with the Xilinguole Prefecture

Administration Bureau, Inner Mongolia Autonomous Region of China ("Xilinguole

Bureau") contemplating the supply of wind power turbines and blades for up to

3,000 MW of wind resources located in the area administered by the Xilinguole

Bureau. Under the non-binding LOI, it is contemplated that the parties will

cooperate to develop a 3,000 MW wind resource under certain terms and

conditions including Hanwei establishing, on a best efforts basis, a wind

power subsidiary in Xilinguole to build a manufacturing facility in the region

with an initial capacity of at least 200 turbines and blade sets per annum

before the end of 2010. Under the terms of the agreement, Xilinguole Bureau

will facilitate all government approvals for the wind farm and manufacturing

facility and exclusively promote the use of wind power equipment manufactured

by Hanwei. Hanwei and the Xilinguole Bureau are currently engaged in

discussions to settle the terms for a binding agreement and the timeline for

construction of the wind power facility and delivery of the turbines and blade

sets. Hanwei does not expect the LOI or the binding agreement (if one is

concluded) to have a material impact on its funding needs for 2009 or its

financial performance for 2009. If Hanwei and the Xilinguole Bureau settle the

terms for a binding agreement, Hanwei will need to secure significant working

capital to support the construction of the new facility and the production of

turbines and blade sets.

In addition to the LOI's, Hanwei is actively marketing its turbines and

blades in China. Hanwei sales and marketing efforts are primarily focused on

orders for delivery in 2010 and beyond. Hanwei's research and development team

are working to improve the current 1.5 MW turbines, focusing on the quality

and cost of the supply chain and improving performance under regional weather

conditions. Hanwei is working on a development plan for 2.0 MW and 2.5 MW

technologies, including the consideration of licensing or joint development

programs. The Company continues to recruit appropriate technical expertise to

strengthen its internal research and development capability.

FGD

The FGD business decreased by 72 percent and 66 percent respectively for

the three and six months ended June 30, 2009. Revenues from the FGD business

were $0.3 million and $0.4 million for the three and six months ended June 30,

2009 respectively. The FGD business is dependent on regulations in China that

require coal power companies to install sulphur dioxide scrubbers, but it is

expected that China's big five coal power companies will delay most new coal

plant construction in 2009 due to the reduced demand for new capacity in China

with the economic slow-down. These projects are expected to proceed in the

medium term and in the long-term as demand for new coal fired energy capacity

in China is expected to be very strong.

The Company also expects orders for FGD products to increase in the

second half of the year as spray header sales are still expected to grow due

to the continuation of retrofitting FGD installations in 2009. The Company's

joint venture Hanwei Ershigs started its operations during the first quarter

of 2009 and is expected to expand its revenues in the third and fourth

quarters of 2009. The retrofit market includes the opportunity for chimney

liners, which are currently being protected from corrosion by cheaper less

reliable materials. In the USA, FRP dominates the market for chimney liners

because it delivers the best value. The Company understands that in over 30

years Ershigs has not had one failure. In China, some of the cheaper materials

used for chimney liners are failing after one or two years. The potential

revenue from retrofitting chimneys is significant and may be more than ten

times the size of the China market for spray headers. The Hanwei Ershigs JV is

working with industry and government agencies to promote the use of FRP,

including a joint study with the technology division of one of China's big

five power companies.

"While seasonality has historically affected performance in the first and

second quarters, the first half of 2009 has been a particularly challenging

period for Hanwei," said Mr. Fulai Lang, President and CEO of Hanwei. "The

combination of economic conditions, project delays, and lower energy demand

has negatively impacted our operations and pushed a significant amount of

production and deliveries into the second half of the year. We have the

installed capacity to meet our growth targets and expect that the product and

customer diversification initiatives undertaken over the past months will

begin to gain traction in late 2009 and 2010 as the economic recovery

continues to take hold in China."

Results from Operations

For the three and six months ended June 30, 2009 and 2008, revenues from

each business segment as a percentage of total revenues were as follows:

<<

Segment revenues as % of Total

Three months ended Six months ended

------------------ ----------------

June 30, June 30,

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2009 2008 2009 2008

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Pipe 87% 52% 85% 45%

Wind Power Equipment 11% 43% 13% 51%

FGD 2% 5% 2% 4%

>>

Gross Profit

Gross profit was $5.2 million for the three months ended June 30, 2009

and $5.8 million for the six months ended June 30, 2009, representing a

decrease of 35 percent and 42 percent respectively compared to the same

periods in 2008. The decrease in gross profit was driven by reduced revenues

from the wind power business. Gross profit as a percentage of revenues was 40

percent for the three months ended June 30, 2009 and 37 percent for the six

months ended June 30, 2009 compared to 42 percent and 40 percent for the same

periods in 2008. Gross margin as a percentage of revenues remains relatively

consistent for all three business segments for the three and six months ended

June 30, 2009 compared to the same periods in 2008. This trend is expected to

continue for the remainder of the year.

Expenses

Sales and marketing expenses were $1.0 million or 8 percent of revenues

for the three months ended June 30, 2009 compared to $1.4 million or 7 percent

of revenues for the same period in 2008. Sales and marketing expenses were

$2.1 million or 13 percent of revenues for the six months ended June 30, 2009

compared to $2.1 million or 8 percent of revenues for the same period in 2008.

Sales and marketing expenses remained flat for the six month period ended June

30, 2009, compared to last year. However, sales and marketing expenses as a

percentage of revenues increased due to reduced level of revenues. For the 12

months ending December 31, 2009, sales and marketing expenses as a percentage

of revenues are expected to be lower or in line with that of 2008.

Research and development ("R&D") expenses were $0.3 million or 2 percent

of revenues for the three months ended June 30, 2009 compared to $0.1 million

or 2 percent of revenues for the same period in 2008. Research and development

expenses were $0.5 million or 3 percent of revenues for the six months ended

June 30, 2009 compared to $0.3 million or 1 percent of revenues for the same

period in 2008. The increase in R&D expenses was driven by increased

activities in the pipe business for new large diameter products and the

application of wind power technologies. For the 12 months ending December 31,

2009, the Company will increase its investments in R&D to further expand its

product portfolio for large diameter pipes and to develop new technologies for

wind power turbines.

General and administrative ("G&A") expenses were $3.0 million or 23

percent of revenues for the three months ended June 30, 2009 compared to $2.3

million or 12 percent of revenues for the same period in 2008. G&A expenses

were $5.6 million or 36 percent of revenues for the three months ended June

30, 2009 compared to $4.1 million or 17 percent of revenues for the same

period in 2008. The increase in G&A expenses compared to 2008 was mainly due

to new offices in Beijing and the growth in the wind power business. For the

twelve months ending December 31, 2009, management expects G&A expenses as a

percentage of revenues to decrease as the Company expands revenues across its

three business segments.

<<

Operating Income (Earnings before Interest, Taxes, and

Non-Controlling-Interest)

>>

The Company had an operating income of $0.8 million for the three months

ended June 30, 2009, representing a decrease of $3.3 million compared to an

operating income of $4.1 million for the three months ended June 30, 2008. The

Company had an operating loss of $2.4 million for the six months ended June

30, 2009 compared to an operating income of $3.5 million for the six months

ended June 30, 2008. The decrease in operating income was due to lower

revenues from the wind power business driven by the wind farm installation

schedules of the Company's wind power customer.

Interest Expense

Interest expense was $0.9 million and $1.7 million for the three and six

months ended June 30, 2009 compared to $0.3 million for the three and six

months ended June 30, 2008. The increase in interest expenses was due to an

increased utilization of debt facilities in 2009 which is consistent with the

Company's funding strategies. The Company expects interest costs to increase

for the twelve months ending December 31, 2009.

Income Tax Recovery

Income tax recovery was $0.02 million for the three months ended June 30,

2009 and $0.4 million for the six months ended June 30, 2009 compared to

income tax expenses of $0.8 million and $1.0 million respectively for the

three and six months ended June 30, 2008. The income tax recovery was driven

by the net income or loss of each operating subsidiary.

Non-controlling Interest

The non-controlling interest of 1 percent for Deta, arising from Hanwei's

acquisition of 99 percent of the equity interest of Deta in November 2008,

resulted in an immaterial amount for the three and six months ended June 30,

2009 compared to $0.2 million for the three and six months ended June 30, 2008

which resulted from a 9 percent minority interest of China National Petroleum

Corporation ("CNPC") in Harvest. Hanwei acquired the 9 percent minority

interest in Harvest from CNPC in November 2008.

Cash Position

As at June 30, 2009, the Company has cash and short-term investments of

$14.4 million. As of July 31, 2009, the Company has cash and short-term

investments of approximately $11.4 million. The Company's 2009 growth plan

requires working capital and investments totalling approximately RMB500

million ($85 million). This includes working capital to support the growth in

the pipe and wind power businesses, the development of wind power technology,

remaining payment for the acquisition of Deta, and the payment for the

acquisition of CNPC's 8.925 percent minority interest in Harvest. Management

plans to finance these working capital and investment needs with cash on hand,

cash from operations and debt facilities which have been arranged and are to

be arranged with Chinese banks and third parties. Management also believes

that it has the ability to access additional equity financing if needed even

though the cost of such financing could be very expensive with the current

financial market situation. However, if such debt facilities are not available

or such equity issuances are not available on the terms that are acceptable to

the Company, the Company may be required to curtail its intended initiatives

and transactions, which may result in incurring certain costs associated

therewith.

Outlook

As the Company's customers primarily operate in the energy sector in

China where growth is still anticipated, the Company continues to expect that

the impact on the demand for its products from the current economic downturn

will be manageable. Hanwei expects revenue growth of between 30 percent and 50

percent in 2009 compared with 2008. The wind power and pipe businesses are

expected to account for more than 90 percent of revenues in 2009, and net

margins are expected to improve due to improved gross margin, economies of

scale and lower tax rate for wind power, and EPS is expected to grow 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. Hanwei

plans to fund its working capital requirements for the balance of 2009 with

cash on hand, cash flow from operations, and debt and limit shareholder

dilution by limiting the issuance of additional shares.

On May 25, 2009, the Company announced that it has changed its fiscal

year-end from December 31 to March 31. For the transition year, the Company

will be required to provide audited financial statements for the fifteen-month

period from January 1, 2009 to March 31, 2010. A notice of change in year-end,

which sets out the length and ending dates of periods, including the

comparative periods, of the interim and annual financial statements required

for Hanwei's transaction year and its new financial year, has been filed on

SEDAR and is accessible at www.sedar.com.

Hanwei will hold a conference call to discuss its financial results for

the three and six months ended June 30, 2009. Mr. Kim Oishi, Senior Vice

President of Finance and Business Development, and Mr. Yucai (Rick) Huang,

Chief Financial Officer, will host the call.

<<

Date: Friday, August 14, 2009

Time: 10:00 a.m., Eastern Time

Dial in number: 1-877-627-6585 or 1-719-325-4746

Taped Replay: 1-888-203-1112 or 1-719-457-0820 (available

for 14 days)

Taped Replay Pass Code: 8078409

Live Webcast Link: http://viavid.net/dce.aspx?sid=000068F1

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

>>

Certain information in this press 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 increase in the wind power

business deliveries and customer development schedules for the third and

fourth quarters of this year, the increase in capacity of pipe production

lines at the Tianjin facility and the capital cost of such new lines, the

recovery of the FGD business segment during the second half of this year, the

recovery of the Chinese economy, the trend in the gross margin as a percentage

of revenues for the remainder of this year, bank approval for draw-downs under

the Company's line of credit, management's estimates of capital requirements,

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 press release describes the Company's

expectations as of the date of this press 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 risk that the wind

power business deliveries do not increase and customer development schedules

continue to be delayed for the third and fourth quarters of this year, the

risk that the FGD business segment does not recover during the second half of

this year, the risk that the Chinese economy does not recover as expected, the

risk that the trend of the gross margin as a percentage of revenues for the

remainder of this year does not continue as expected, the risk that revenues

does not grow, the risk that the Company may not receive bank approval for

draw-downs under its arrangements with the Chinese bank, 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 press releases filed subsequent thereto, all

filed with Canadian securities regulators and available on SEDAR at

www.sedar.com.

The Company has included in this press release figures based on, gross

profit, gross margin, working capital and orders received, 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 PRESS RELEASE PRESENTS

THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS 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.

-30-

/For further information: Kim Oishi, Senior Vice President, Finance and

Business Development, Telephone: (416) 804-9228, koishi@hanweienergy.com;

Yucai (Rick) Huang, Chief Financial Officer, Telephone: (604) 685-2239,

yhuang@hanweienergy.com; Kevin O'Connor, Investor Relations, Telephone: (416)

962-3300, ko@spinnakercmi.com/