FOR IMMEDIATE RELEASE:

New York, NY  – April 19, 2011 –

China Financial News Provider, Sina Finance, Interviews Barron Partners Chairman on China and Clean Energy.

China Financial News Provider, Sina Finance interviewed Barron Partners Chairman, Andrew Barron Worden, during his most recent visit to China. Sina Finance sought insight from Mr. Worden on topics ranging from profitable cleantech models to the impact of China’s Twelfth Five-Year Plan on new energy development in China.  You can view the video here: http://www.barronpartners.com/Homepage.

What follows is a transcript of the interview.

Sina Finance- March 11, 2011 - Clean energy technology has become mainstream now. The possibility of turning such technologies into new profitable models is widely discussed by industry professionals. Sina Finance had an opportunity to discuss this and other topics with Mr. Andrew Barron Worden, Chairman of Barron Partners.

Barron Partners is an international, private investment fund based in New York, New York with a focus on investing in profitable cleantech companies. Since its foundation in 2002, Barron Partners has invested over 3 billion RMB in companies across several industries. It’s worth mentioning that Barron Partners has made almost half of these investments in China. Since 2004, Barron has invested 1.3 billion RMB in Chinese companies and has also helped Chinese companies go public. We wondered what kind of investment opportunities can we expect to see in cleantech.  Sina Finance had an exclusive dialogue with Mr. Worden. The following is a transcript of the interview.

Quan Jing (Host): Hello, Mr. Worden. You’ve made half of your investments in China. We are eager to know why you are so bullish on the future of China's clean energy.

Mr. Worden:  We feel that the Chinese government is very progressive in the new energy area- both in helping China to build its own new energy market, both in wind and nuclear short-term and also solar eventually and also helping companies in China to grow their businesses to serve the export markets, mostly in wind and solar right now.

Quan Jing: Countries around the world are in the beginning stages of the cleantech industry. Lots of professionals are discussing this topic. Does China have second-mover advantages or not in that they can learn from those countries who went into the space before them? What’s your opinion?

Mr. Worden: The United States was deploying wind thirty years ago. [In] Europe Vestas, Gamesa and GE were all dominate players for a long time. China was very late starting in the wind power game. Even just the last few years really, Goldwind, Minyang, Sinoval.  So absolutely, that’s true. China is very late in the game compared to other competitors. However, in the nuclear business it’s even more extreme. In… France 75% of their electricity comes from nuclear. 20% in the United States. So the difference, however, is that frankly the Chinese government is so progressive in helping Chinese companies to push very rapidly in this area, in the new energy area in general, wind, solar and nuclear. That’s a huge, huge part of it. The Chinese also have significant advantages, I think which they are able to leverage which [are] basically manufacturing innovation and also economies of scale in manufacturing which give China a huge edge, and have already caused China to take 90% of the PV market (polysilicon and monosilicon) in the solar business. In wind as well, they have already displaced the Europeans and Americans.  About 90% of the windmills going into China are Chinese made. The SOEs are most likely going to be building the nuclear power plants here; and China is planning to spend a couple trillion USD in the next twenty years building a couple hundred nuclear power plants which is just a massive scale build.  Their technology of choice is most likely going to be Westinghouse AP1000 reactor-Generation III+, which is 1.1 GW. This is an awesome reactor [which is 100 times safer than current generation reactors according to Westinghouse].

The strategy we see the Chinese companies employing is to manufacture [almost] all the metal… here and [we think] essentially pay Westinghouse a royalty [and/or enter into a joint venture agreement] for the technology.  Although knowing Chinese innovation, what China has done for example with high-speed rail,  I imagine at one point… Chinese technology will be in this field as well.  Basically the nuclear reactor business is so complicated,  however, I imagine that for quite a while there will be a good cooperation between Westinghouse and Chinese manufactures of nuclear power plants. Actually… just to be totally fair to the French, there’s a French player in the game as well. The Chinese announced a relationship with [the] French [to utilize their] nuclear reactor technology as well. 

Quan Jing: You just shared your thoughts with us on wind, solar and nuclear development in China. We would like to know, as a professional investor, in which industries will Barron invest in China in the future?

Mr.Worden: Currently our heaviest focus is on wind and solar. We also have one investment in the nuclear space which is actually an American company. Which we own almost half of and they have been in the nuclear business for 30 or 40 years. They are one of four [machine and fabrication companies in the] nuclear [sector]…it has “N Stamp Approval”, “N” stands for nuclear, that are authorized to be independent metal fabricators and machinists. They make the big parts that go inside the nuclear reactors, for Westinghourse and GE for example. They are customers of theirs for a long time. They actually made some of the parts when Westinghouse AP 1000  came to China. Coincidentally the CEO of that company is actually in China now, looking around to partner with and help companies that make the large metal parts that will be feeding up to the SOEs that are building the reactors. So this is a long-term project obviously and really, really big scale. But I believe that Chinese companies are very interested in partnering with U.S. companies that have the technological and manufacturing experience from a long legacy of making advanced nuclear reactors and especially for Westinghouse AP 1000 Series.

Quan Jing: We know that since 2004, Barron has invested over 1.3 billion RMB in China. We are also wondering  if,  since you don’t have an RMB fund, you have any plans to set one up in the future?

Mr. Worden: Very good question! Actually Sunday, I sat down with legal counsel at one of the top Chinese law firms to discuss this. I think we are underway in that department. In the past year, two years we have definitely run into a lot of Chinese companies that want to go public in China, not outside China. So I think that’s definitely a direction we have to go and are going in. Absolutely, yes.

Quan Jing: Regarding the relationship between investment funds and the companies in which they invest, there is a criticism from some professionals that aside from money, what else beneficial does a fund really provide for these companies? We have noticed that in Barron’s investment history, you have helped quite a few companies to become publically traded. Could you tell us more about other assistance that Barron has offered aside from capital?

Mr. Worden: That’s a very good question. Basically we also feel, not just from the perspective of  helping the company, but also from the perspective of-  if we are going to invest in a company and risk our reputation we have to make sure that the company develops in a way which is most optimum for all the shareholders, and for the market and for our friends that are going to follow us and buy the shares in the market. And also if we are going to introduce the company to channel partners, international customers, and we are going to essentially be recommending the company, endorsing the company to the world so to speak, we need to make sure that the company is going to live up to that.

So, we add value in many ways. One is the “Eight Secrets of Capital Markets” which we wrote [with] over 25 years of  experience from myself. We put together this book in English and Chinese which gives the Chinese entrepreneur, often for the first time, a real guidebook to capital markets and how they work so that he can grow his business, maximize the value of public markets, raise money along the way in the best manner so he still ends up owning a lot of the company, so the company doesn’t get taken away through financings along the way . So that’s the first value add.

Another value add is… that typically we get involved with companies that may be a somewhat…of a good, innovative  manufacturer but their concentration of revenue in cleantech isn’t very high. With our capital they are able to move into higher, value-add maufacturing. Take China Wind for example, they went from a machine shop, to a forger, then to an ESR forger which are very advanced, relatively speaking, metallurgy technologies. Also the revenues went from 1% to 50% cleantech.  Their products are now selling to some of the top Chinese wind turbine companies typically through companies that they sell products to that then make bearings or other things that go to the turbine makers.  They also sell some to the turbine makers directly. And now through an introduction that we made as well, they are entering the international market in cleantech…which is a really big development for them,  which gets them into providing furnaces for [one of] the biggest solar equipment maker[s] in the world.  They are just ramping that up. So hopefully they can execute on that. That’s the second value add. The third value add is marketing/branding which is a whole other level of value add and conversation.

Quan Jing: Regarding clean energy, people often think of it as non-profitable enterprise, but a necessity because of environmental issues. In terms of how the business can actually make profit and implement a sustainable profit model, what do you think? Perhaps you can give us an investment example which demonstrates the feasibility of making a profit in cleantech?

Mr. Worden: That’s a very good point. I think people understand at this point there’s no question that cleantech has to happen somehow, because of pollution, global warming and scarcity issues. And world leaders like Premier Wen, President Hu, and President Obama…wouldn’t be saying these things if it weren’t the case. It’s absolutely critical that in order for cleantech to really scale, it has to be affordable. That’s why we have this saying “making affordable cleantech happen.” I think the best example today, would be wind power. By slow improvements in the technology, initially driven by European and American makers [it has become viable].  More recently the Chinese have joined the game with technology and manufacturing innovations as well. But it has really been, frankly, Chinese manufacturing innovation and scale which have driven the cost of making wind turbines down to the point where wind is now for the first time really in line with coal, which is phenomenal. And that allows wind to scale to a level that I don’t think most people understand right now. So that’s a big change in the cleantech industry and we are very involved in that by investing in companies like China Wind Systems which are consistently driving down the cost by improving manufacturing processes and quality, and also adopting more and more advanced technologies in both the windmills themselves; also the [manufacturing] technology used to make them decreases their cost to the point where now they are really cost effective.

Quan Jing: We are very interested in your personal experiences and interests. You studied finance and are a professional investor. Especially on Wall Street, people often invest in stocks in areas other than cleantech which they believe will yield higher returns than clean energy. Why do you select clean energy as an invest focus, instead of other higher return industries?

Mr. Worden: It’s always difficult to navigate because running a fund, you have to look out for the interest of the investors. Although I am by far the largest investor in the fund personally, I couldn’t sacrifice returns by doing something just because I feel like it, even though it’s altruistic. Investing in cleantech because I thought it was really cool because it helps the world, but it’s not going to make any money…wouldn’t be fair to the other investors. If I was doing it just for my own money that would be fine but not for their money. That wouldn’t be right. We make sure that our cleantech investments not only are driven by the passion of cleantech, but also they have to be good investments… and we marry them together. The only way that cleantech can become really huge is if people have that same mentality. Making overpriced cleantech and then hoping that people will give subsidies, that’s really not going to work long term. That’s why our “making affordable cleantech happen” slogan is very important.

In terms of my family background, from a very young age, I have been involved in cleantech things. My brother and I actually designed a windmill out of a big garbage can. You cut it in half and make it into an S-Shape and the wind blows it around, when we were little kids. And we wanted to put a much bigger one on top of the water tower in the town, but my Dad didn’t think that was the best idea (laughs).   My brother went to MIT and I was at Harvard and MIT. Actually, before he was at MIT he built a solar car when he was a kid, and that was a big part of him getting into MIT. At MIT, two of the four years there, he got the top engineering award. He made a lot of technology breakthroughs in electric cars and solar cars. Now with his wife they own and run one of the biggest solar invertor companies in the U.S. which are used in solar, transforming solar energy into the energy in the grid from D/C to A/C. And then my sister is a professor, and she works very heavily in research related to global warming. So you are absolutely right, it has been a big family thing.  

I have been waiting to get into the cleantech business although frankly it’s only when it became affordable to the point where it can work economically when we jumped into it. So that is a good coincidence with us [already] being in China because that’s a good way to really make it happen on a large scale due to Chinese manufacturing innovation and scale. We did actually invest in TechPrecision Corporation slightly before we invested in other cleantech companies in China. Techprecision is a U.S. company so I guess we started in…late 2004, was our first investment in cleantech.   

Quan Jing: We would like to take this opportunity to hear your thoughts on China’s prospects for development in the cleantech industry. Right now, The National People’s Congress (NPC) and National Committee of the Chinese People's Political Consultative Conference (CPPCC) are taking place and the Twelfth Five-Year Plan has been issued for China’s development over the next five years. What are your thoughts on the investment opportunities, especially in clean technology? 

Mr. Worden: I read the entire plan and it covers an awful lot of ideas. … Chinese Premier Wen’s goals. Bascially… there are so many in there that we are really going to focus on areas that we understand and that we think we can make a difference in. For us it’s new energy, energy efficiency or energy savings, and the general idea of social welfare. A big part of that is labor rate increases over time. So our whole idea of having higher technology value add, higher manufacuturing innovation value add leading ultimately to a higher return on capital in those businesses…means higher pay for workers. So it’s all good all-around. Another area, not as specifically stated, but just the general concept of technology innovation and advancing to higher levels of manufacturing expertise and technology value add…a good example of that is China Techfaith Wireless Communication Technology Ltd, which is a company we have invested in, which has transformed from being a manufacuturer of phones to being a very high value-add manufacturer of smart phones and also has become a leader in technology and motion gaming at the same time which is a pretty amazing transition as an example of aligning with the general idea of China going to the next level and really being a technology innovator.  

The full story can be viewed at: http://finance.sina.com.cn/roll/20110311/11189512896.shtml

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