(EnergyAsia, September 1 2010, Wednesday) — Far East Wind Power Corp (FEWP) said it plans to invest US$20 million in a proposed 49.5MW wind farm in China’s Yunnan province after signing a Letter of Intent (LOI) to acquire a 49% stake in it from Taitong Energy Limited.
FEWP said it will be paid back by Taitong, which will own the remaining 51% stake, once the wind farm receives financing from a local Chinese bank.
According to the LOI, Taitong will commit to executing a business plan and will work to obtain all remaining permitting and authorisations for the wind farm, and to secure low interest rate bank debt financing of up to $80 million.
FEWP said the agreement states that it will consolidate the joint venture’s assets, liabilities and operations according to accounting principles reflected in the LOI. A monthly dividend distribution plan was also agreed to where the maximum allowable dividend is distributed to FEWP and Taitong based on ownership percentages.
FEWP said the wind farm is expected to generate generate US$11.8 million in revenues on an annualised basis if fully utilised. It will have right of first refusal on the project’s subsequent 99MW of additional capacity.
If all 148.5 MW are developed, the project could generate US$34.4 million of revenue on an annualised basis if fully utilised.
FEWP’s CFO, James Crane, said: “We came to terms with the representatives from Taitong and will move forward with them immediately. Taitong’s wind farm development is at a later stage than our previously announced wind farm development in Ningxia. Our business model is scalable and could potentially be profitable due to unique market conditions in China.
“We are taking advantage of a niche marketplace in this country. Chinese state-owned enterprises are developing wind farms but there is insufficient development to meet the country’s stated renewable energy goals. Many entrepreneurs in China are now aware of the value a wind farm can create and are attempting to enter the marketplace.
“The issues they face invariably revolve around start-up financing, of which these entrepreneurs generally do not have access to unless wind farm assets are already in place. We are working with these entrepreneurs to provide them with capital and to help refine their business plans so that as partners we can develop wind farms that will generate substantial cashflow for both parties for many years to come.”