China Gear Maker May Cut Orders from GE

HONG KONG, Feb 19, 2009 (SinoCast Daily Business Beat via COMTEX) -- GE | Quote | Chart | News | PowerRating -- China High Speed Transmission Equipment Group Co. Ltd. (SEHK: 0658), a leading producer of gears for wind power transmission in Mainland China, is said to be in order reduction talks with General Electric Company (NYSE: GE).
It is ascribed to the meltdown of the global wind power generation market, analysts said. It is the Chinese company that offered to reduce orders, confirmed a source at its securities division. Both sides are discussing about the reduction but have not decided how much the orders will be cut.

China High Speed Transmission Equipment Group has captured more than 90 percent of the domestic wind power generation equipment market. It is capable of supplying not-more-than-2MW gears for wind power transmission and is developing 2.5MW and 3MW products.

The Chinese company has teamed up with GE for years. Since 2004, it has started the provision of products for the energy division of the US company. In 2005, it became part of GE's global chain.

In 2006, China High Speed Transmission Equipment Group sold more than CNY 70 million products to the energy operations of GE. It went public in 2007 and GE Capital under the wing of GE obtained a 3.61 percent stake in the Chinese company.

In the first half of 2008, the Chinese company, focusing on high-speed heavy-duty gear production, gained sales income of CNY 573.7 million from its wind power transmission equipment operations, accounting for 42.4 percent of its total.

Due to the financial crisis and dropping oil prices, investors will possibly have less interest in the global wind power generation market. Accordingly, the expectation of GE's orders will possibly be pulled down, and the orders of gearboxes for wind power generators will be cut back, said a researcher with a domestic securities house.

An earlier report said that GE Transportation System Group would kick off the construction of a wind power equipment gearbox factory in Hunnan District, Shenyang, capital of the northeastern Chinese province of Liaoning.

The company under the aegis of GE fixed the site for the project in January 2009, and planned to pour USD 40 million into the first-phase construction. Another investor in the factory is US-based A-Power Energy Generation Systems, Limited.

The factory will mark the sixth investment by GE and its arms in Hunnan District. As Asia's biggest wind power equipment gearbox production base, it will provide a variety of gearboxes and generate a yearly output value of more than CNY 6 billion, the report told.

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