Welwind Energy Making Moves

Welwind Energy has issued a flurry of promising news releases over the past few weeks. Most significantly, they were given a green light from the Chinese government and military to move forward with building their wind farm on the South China Sea. You can read the full press release here.

But Welwind is not solely focused on their wind farm project in China. On June 23, they announced their intent to double their land lease in the Peace River region of British Columbia from 2,300 to 4,680 acres. The Peace Region is known to have the best wind speeds in BC and their are a number of companies currently pursuing lease agreements in this area to build wind farms. Welwind has not finalized the deal, but commented that they are highly confident things will move forward and the lease contract will be finalized in short order.

Revenues from the South China wind farm are projected to be between $6-$7 million per year over the first few years. Not bad for a company with a market cap of under $25 million. But let’s not put the cart in front of the horse quite yet. Wind turbines are in high demand and the waiting period can be quite long in the industry. Welwind is addressing this issue by entering a joint partnership with Yatu Wind Energy Manufacturing. They have signed a turbine supply agreement which guarantees delivery in October of 2009 and presumably locks in advantageous pricing for Welwind. Welwind will receive 22 turbines per quarter for three quarters.

On June 12, venture capital and research firm Ludlow China upgraded their research opinion on Welwind and issued a target price of $0.60 – $0.70. If they are correct, that would represent a 300%+ increase from the current share price.

As you can see from the chart above, Welwind’s share price has shot dramatically higher after news that the company received all government approvals to move forward with the wind farm project. However, you will also notice that the stock price has shot higher on positive news a few other times in the past, only to fall back to previous levels in the following weeks. The stock is undoubtedly speculative at this point and still trades over the counter. However, with China’s commitment to green energy, the wind sector’s growth over the past few years and a determined and resourceful (if not seasoned) management team, I like their prospects for success. If you want to get a better feel for the company’s management, current projects and future plans, you can listen to a recent conference call.

I first wrote about Welwind in October of 2006 and have been in and out of positions since then. I currently own shares of Welwind and intend to hold my position through any future volatility. If the company’s stock mirrors the growth of similar wind companies during their initial years, the return could be huge.