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Upbeat energy storage market in China lures ZBB Energy

Posted: 02 Sep 2011 ?? ?Print Version ?Bookmark and Share

Keywords:China market? joint venture? power management industry?

ZBB Energy Corp. has inked an agreement that will form a joint venture company with ZBB PowerSav Holdings Ltd, AnHui Xinlong Electrical Co. and WuHu Huarui Power Transmission & Transformation Engineering Co. Designated as China JV Co., the joint venture will initially assemble and eventually manufacture ZBB products for sale in the power management industry on an exclusive basis in mainland China and on a non-exclusive basis in Hong Kong and Taiwan.

ZBB and PowerSav have been working together since November 2010 to identify an optimal path and partnerships to enter the China market. More than 75 potential joint venture partners and 25 cities and governments were diligently screened to determine the ideal joint venture partners and a city and government supportive of providing a location for 'new energy' technology. Xinlong Electrical and WuHu Huarui met every criteria and the city and government of WuHu demonstrated their strong support by way of providing a host of incentives.

"The opportunity and demand in China for our products is tremendous. Our joint venture with these three partners will enable the penetration of both our flow battery and power electronics products by giving us channel access to China's grid companies," said Eric Apfelbach, CEO of ZBB Energy.

Key terms of the joint venture include cash and technology capital investments of approximately $13.4 million. ZBB's capital contributions to the joint venture will be a contribution of technology to the China JV via a license agreement valued at approximately $4.0 million. ZBB's indirect equity interest in the company will equal approximately 33 percent. ZBB will maintain control over the joint venture through its positions in the board of directors.

The China JV will have an exclusive, royalty-free license to manufacture and sell ZBB's ZESS Zinc Bromide flow battery, version three battery (50kW) and ZESS POWR PECC (up to 250kW) in mainland China and a non-exclusive royalty-free license to manufacture and distribute the products in Hong Kong and Taiwan in the power management industry.

Additionally, ZBB and the China JV will enter into supply agreements under which China JV will purchase certain manufactured products from ZBB and ZBB may purchase certain manufactured products from the China JV.

Pursuant to a management services agreement, ZBB PowerSav Holdings will provide certain management services to the China JV in exchange for a management services fee equal to five percent of net sales for the first five years and three percent of net sales for the subsequent three years.

Pursuant to a research and development agreement, China JV may request ZBB to provide R&D services upon commercially reasonable terms and conditions and would pay ZBB's fully-loaded costs and expenses incurred in providing such services.

The new company will build a manufacturing center in WuHu City, Anhui Province that will begin operations in early 2012. The joint venture will be established upon governmental approvals from China, anticipated to be received in November this year.





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