Ludlow China Updates Research Opinion on Welwind Energy International Corp.
Last Updated: Nov. 04, 2008 - 7:18am EST

NEW YORK-- Ludlow China Ventures, Inc. maintains its research opinion on Welwind Energy International Corp. (OTC BB:WWEI), a producer and operator of wind farms in China and Canada, with a 'speculative' B+ rating, and price target of $0.60 per share.

SUMMARY

As Americans head to the election polls, and all accounts point to an Obama victory, we are once again recommending clean tech investments such as wind and solar as potential benefactors of an Obama win. 

Aside form the Company's Zhanjiang wind farm project in China, investors should turn their focus more on the Ningxia Tianjing Helanshan and A La Shan Zuo Qi' wind farm projects. Unlike the Zhanjiang, these two projects are much further along and currently hold power purchase agreements (PPA) with the Chinese government. With $90 million value per 49 MW, and currently four 49 MW projects ongoing in different stages, the company seems primed to benefit from real 'green energy' initiatives from the US, and global powers. The Company currently holds plans for a total of 2,000 MW for their wind farm projects.

Power Purchase Agreement Status

Approval of applications by the Military and the Guangdong Provincial Oceans and Fisheries Bureau should open the door for the company to finalize a power purchase agreement (PPA) with the Chinese government. The company is currently meeting with government officials in Zhanjiang to finalize a power purchase agreement (PPA), but no indication has been giving on a date for a final signed agreement.

Ludlow China has learned the first PPA could be valued at $90 million, and with just under 170 million shares outstanding, this would give WWEI a valuation of $0.60 per share, or a market cap of $96 million.

Ludlow China Ventures is maintaining its 'speculative' B+ rating and near-term price target of $0.60-$0.70 per share."

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What to Look for Next

This section gives investors a general idea on what next to watch for to indicate the company is moving forward on their business plan.

For Welwind Energy, it's all about their first PPA. Any news of a signed PPA agreement out of China will indicate the company is moving ahead, and taking the next step in its business model.


Cash Flow

As at June 30, 2008, the Company had $84,891 in cash on hand. The Company may require additional capital investments or borrowed funds to meet cash flow projections and carry forward our future business objectives.  There can be no assurance that the Company will be able to raise capital from outside sources in sufficient amounts to fund the business. During the period ended June 30, 2008, the Company used $203,939 of net cash flows in operating activities. However, the Company was able to fund operations by receiving cash proceeds of $357,269 from common stock subscriptions. The Company believes that will be able to borrow additional funds if needed. 

Although cash on hand may be low, it is in Ludlow's opinion that there is no indication that the company would have a problem obtaining small operational capital to financing day-to-day operations, and there is no indication of major dilution as of the date of this filing.


Technical Analysis

The stock has drift back below the stocks 200 day moving average, which is around $0.09 a share. Any move and hold above this long term trend line would indicate a bullish signal, where as any move back below this line could be considered bearish as market awaits news from the company. A break above previous high of $0.22 would indicate a break out in the stock price. 


WIND FARM PROJECTS

The Zhanjiang Project will see the instillation of a six hundred (600) MW wind farm on the subject property.  Through a cooperative agreement with Guangzhou Engga Wind Energy Co. Ltd (“Engga”), the first turbine produced by Engga for the Company rolled-off the production line in February 2007. During this Phase 1, the Company expects to build forty-nine (49) MWs.

A Project Feasibility Study Report and Grid Connection Report were finalized in November 2007 by the Guandong Electric Power Design Institute, and subsequently submitted to the Guangdong Power Grid Corporation for review in anticipation of finalizing a Power Purchase Agreement (“PPA”).

However, certain unexpected issues arose late in 2007 related to the Zhanjiang Windfarm.  During the due diligence period for the PPA, an issue with the local Port Authority arose requiring meetings with various levels of the Zhanjiang Government and the Port Authority. In a meeting during January 2008 between Welwind representatives and high ranking officials of the Port Authority and Government, all outstanding issues were resolved. It is anticipated that the PPA due diligence process should be completed soon.

As announced in the June 27, 2006 company release, Potential Value of the Zhanjiang Wind Farm Project (based on 49 megawatt) are as follows:

 -----------------------------------------------------
   Yearly Cash Flows
 -----------------------------------------------------
   Year        Pre-tax      After-tax      Cumulative
    #             $             $              $
 -----------------------------------------------------
    1          6,169,545     6,169,545    -13,133,613
 -----------------------------------------------------
    3          7,077,269     7,077,269        558,792
 -----------------------------------------------------
    5          8,053,922     8,053,922     16,169,340
 -----------------------------------------------------
    10         9,582,330     9,582,330     63,325,937
 -----------------------------------------------------
    15         4,220,843     4,220,843     87,019,525
 -----------------------------------------------------
    20        13,072,147    13,072,147    155,309,896
 -----------------------------------------------------
    25        16,606,800    16,606,800    234,391,049
 -----------------------------------------------------

Summary -- The above yearly projection is based on the historical wind speed for the area of Zhanjiang. The figures reflect projected financials on a 49 megawatt install only.

The funds will be used to finance the phase one development activities of Zhanjiang Wind farm which is a five phase development totaling 600 Megawatts.

The company now has crossed the threshold to complete a 50 year Power Purchase Agreement and will have all the tools required to completely finance this first 49 Megawatts of development.


The Yangxi Wind Farm Project

The base of the Yangxi Wind Farm Project was completed, along with the installation of the 100 meter meteorological tower, in June of 2006. At that time, we began to collect data necessary to provide the information required to build out the wind farm. Phase 1 of the Yangxi wind farm will consist of a 49 MW project.  We anticipate that the Yangxi project will consist of a total of 400 MWs once fully completed.

In January 2008, after 16 months of collecting date from the tower at the Yangxi location, a formal Project Proposal was submitted to the Yangxi Government. All data collected to date shows promising results for the future build out of this wind farm.


Peace River Wind Farm Project (Canada)

On August 11, 2008, the company announced it had visited the site near Dawson Creek British Columbia and met with the landowners of the 4680 acre Peace Region project. The majority of the project will be situated on private cultivated land. Currently the properties are being used primarily for hay farming and cattle ranching. Welwind Director, Shannon de Delley reports that the company intends to install 2 to 4 meteorological towers on the property this fall.


Valuation

With just around 160 million shares issued and outstanding, WWEI would have a market cap of only around $96 million at $0.60 per share. With the new PPA valued at $90 million, this would put WWEI into the range of $.60 to $0.70 per share. Compared to other wind and Chinese alternative energy companies this is still a relatively conservative valuation. Although dilution is a constant concern when dealing with small cap stocks, and the company will still need to develop capital for additional wind farms in China, they may be able to get around this situation through the issuance of bonds to financing further wind farm projects, and thus avoid any heavy dilution to the common shares outstanding. This will be an issue to keep on the radar going forward.


Wind Energy Growth in China

At the end of 2007, China's installed base of wind power totaled just over 6 gigawatts (GW), making China the fifth largest producer of wind power, after Germany, the U.S., Spain and India. As a consequence of the rapid build-out of wind power projects in China, in April 2008 the National Development and Reform Commission revised its 11th Five Year Plan Period plan for wind power development from 5 GW to 10 GW by 2010. More impressively, wind power industry statistics show that by the end of 2008 China's total installed base of wind power production will have already reached 10 GW, two years ahead of the revised plan. Some experts are estimating that by 2010, the total installed capacity for wind power generation in China will reach 20 GW and that by 2020 China's installed base of wind power will total 100 GW.

Risk Factors

Some risk factors that may effect the valuation calculations in this report are the companies inability to meet fiscal 2008/2009 revenue projections, an increase in shares issued and outstanding, decrease in interest or price/sales ratios of wind power stocks, industry competition, government regulations in China, technological advances, patent and copyright litigation, decrease in energy prices, geopolitical events, accounting changes and restatements, and legal issues. The failure to secure adequate outside funding would have an adverse affect on our expansion plan of operation and results therefrom and a corresponding negative impact on shareholder liquidity.

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Contact:

Ludlow Energy Ventures, Inc.
Sarah Kapchinske
Phone: (917) 670-0843
Email: sarah@ludlowcapital.com 

Disclaimer:

This is NOT a solicitation to Buy or Sell any security, but rather is for research purposes only. Content contained herein includes facts, views, opinions and recommendations of individuals and organizations deemed of interest. Ludlow China Ventures does not guarantee the accuracy, completeness or timeliness of, or otherwise endorse these views, opinions or recommendations, or give investment advice. Ludlow China Ventures, its affiliates, or directors, may or may not hold a position in the above security from time to time, and investors are encourage to consider this as a possible conflict of interest when reviewing this information. In Compliance with SEC Rule 17B Ludlow China Ventures was compensated two hundred thousand restricted shares for the distribution of this research material, inclusion into the Ludlow China Index, and may be a holding in the Ludlow China Fund, and should thus be considered a possible conflict of interest when reviewing this report and information. 

Safe Harbor Statements:

This research report includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

(NOTE: Ludlow China Ventures is NOT a broker-dealer, and does not offer buy or sell recommendations. Ludlow Capital's reports are strictly independent investment opinions, and does not hold any positions in the companies we cover unless otherwise clearly stated in our report. Rather, we offer our subscribers a perspective on each investment from our years of experience in dealing with small and micro-cap companies. We update our investment opinions and commentaries throughout the year, and encourage any interested investors to subscribe to our yearly membership to receive regular updates on these companies.)