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Hanwei Energy Services has closed a private placement of shares to raise $2,250,000, to be used for FRP plant expansion, marketing and working capital.
Hanwei is positioning itself to become a leading provider of FRP pipes and related products and services to the oil and gas industry in China and Asia. The proceeds of the private placement will be used as follows: $1,050,000 for Plant Expansion and Research & Development, as set out below; $200,000 to expand sales & marketing in China, $600,000 for Canadian office and public company expenses and $400,000 of additional working capital.
In 2006, the Company estimates that it sold more than 1,600 kms of Fibreglass Reinforced Plastic (“”FRP””) pipe generating over $23 million in sales revenue, a 45% increase compared with 2005 sales revenue. In 2007, the Company plans to increase annual capacity at its Daqing FRP pipe plant from 2,000 km to 2,400 km at cost of approximately $600,000.
Its research and development team has developed new products and improved the quality of existing products through design and material innovations. The Company, through subsidiary Daqing Harvest Longwall High Pressure FRP Pipe Co. Ltd. (Harvest), expects to expand Harvest’s Research & Development department and budget to approximately $450,000 during the next 12 months in order to develop new products to complement its existing FRP pipe products, enhance its product offering and create additional revenue potential from new and existing customers.
The research and development is focused on three main projects: FRP down-well pipe for water transmission, fibreglass-insulated steel pipe for down-well and ground applications and FRP pipe for ship building applications. Harvest expects that it will be able to produce commercial products for FRP down-well water transmission and fibreglass-insulated steel pipe within 12 months. The ship building pipe is expected to be at the product design, prototyping and certification stage within 12 months.
The Company plans to grow its business by diversifying its customer base with a goal of increasing revenues and reducing its reliance on key customers. To this end, it has commenced marketing activities to attract prospective customers in other regions of China and is studying regional markets in Asia such as Russia and Kazakhstan. In addition, the Company plans to grow revenues by expanding its product offering to include new pipe products and related oil & gas products and services.
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