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Doing Business With China: CTC Experience

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Doing Business With China: CTC Experience

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    1. Doing Business With China: CTC Experience 2009 California – China Trade and Investment Conference Presented By Marvin Sepe COO Composite Technology Corporation

    2. Business Units

    3. 3

    4. ACCC™ Conductor ACCC™ technology is based on replacing the heavy steel core of traditional electrical transmission conductor with high strength, light weight carbon fiber composite core Can be used on existing lines without replacing or modifying structures Excellent reliability and performance under ice load and heavy wind conditions ACCC™ conductor has now achieved widespread international adoption and has been proven by rigorous testing in independent laboratories and over 100 successful installations ACCC™ conductor is the most efficient electrical transmission conductor for utility use

    5. Cost-Effective Greenhouse Gas Emission Reduction Solution

    6. Chinese Market Pursuit CTC Cable Corporation Chinese electrical infrastructure is growing rapidly Large number of line upgrades and capacity expansion Benefits of product fit the needs of Chinese grid No other high performance bare overhead conductor has a market presence Composite core conductor was not made by any Chinese manufacturer China is spending over $1.6B for electrical infrastructure projects and upgrades from current Stimulus Funds Funds are targeted for Chinese businesses – the structure of the CTC relationships works – Chinese businesses benefit

    7. Grid Friendly Wind Turbines 7

    9. Why we chose to pursue Chinese market: DeWind Inc - China is huge growth market

    10. Chinese interest in CTC Companies CTC companies offer unique patented technologies not available in China CTC Cable – ACCC™ conductor is patented, or patent pending in 70 countries, including patents issued in China Special carbon fiber component not available in China Product attributes are needed by the electrical grid operators Long term solution for grid problems Chance to get a dominant market position DeWind Inc. – Unique patent synchronous power generation technology, plus experience Long history of delivering high performance wind turbines Access to European supply chain Access to experienced engineering team for technology transfer

    11. Choice of Potential Chinese Partners This was a mix of research and good fortune CTC Cable – Inquiries were made to find partners – manufacturers / distributors Possible candidates were explored - Jiangsu New Far East was recommended Initial meetings – goals explored Very long negotiation process – over 18 months from introduction to execution of agreement DeWind Inc. DeWind personnel were approached by Chinese licensees at wind trade show Investigation of potential partners was completed Goals of both parties explored Two licensees chosen out of many that requested agreements

    12. Structure of Transaction Far East Composite Technology

    13. License Agreement with Sewind, a component of Shanghai Electric Corporation (SEC) License covers D6 1.25 MW turbine configuration License was granted in 2006 covering 320 turbines, after which Licensee retains rights to the licensed technology provided all royalty payments are complete Primary market to be Asia, specifically China SEC has applied latest factory assembly line techniques to optimize plant productivity License Agreement – China - SEC

    14. License Agreement with Beijing Beizhong Steam Turbine Generator Co, Ltd. (BZD) License covers D8 2.0 MW turbine configuration License was granted in 2006 covering fixed number of turbines, after which Licensee retains rights to the licensed technology provided all royalty payments are complete Primary market to be Asia, specifically China License Agreement – China - BZD

    15. What it takes to manage these relationships For success in China it is important to have a local presence; Local office registered in China Representative organization to manage interface and deal locally CTC Cable Representative route chosen Transworld Capital Group – Jack Chen Chairman/CEO Headquarters in Arcadia, CA USA Offices in Shanghai and Beijing Handle all translation and customer interface Able to meet with Chinese partners at any time DeWind Inc. No representative – German operations deal directly with license partners; favorable time zone overlap Training phase and technical transfer complete License partners provided translation Very few day to day transactions Would have benefitted from a representative firm for local coordination

    16. Intellectual Property Protection Protection of intellectual property is an issue in China After three years of selling into China and growing acceptance of the product, at least six companies are trying to introduce products that are in direct violation of CTC Cable patents This problem also exists in the US and suits have been filed Evidence is being gathered in China and CTC will defend its patents in China in coordination with the Chinese distributor Chinese law firms engaged in coordination with US law team While we will prevail in infringement litigation, the possibility of an alternate source for ACCC™ conductor puts pressure on prices

    17. Net Result of Deals CTC Cable Accumulated revenues from China under the agreement now total over $47M Over 7500 km of ACCC™ product in China ACCC™ conductor is established as a high value solution to electrical grid capacity and performance issues Far East Composite is the recognized source for ACCC™ in China and a technology leader Far East acts a manufacturing partner for CTC Cable to serve other geographic markets where there is no regional source DeWind Inc. DeWind has created a licensed manufacturer it can use to serve other geographic regions for D6 1.25MW turbines License revenue from China total over $10M – more royalty revenue expected Chinese market becomes outlet for European sourced components allowing DeWind to keep suppliers in line Chinese licensees get access to proven, working wind turbine technology Chinese licensees are now viable producers to supply growing wind market

    18. Conclusion CTC remains committed to a long term presence in the Chinese market Both business units of CTC have received benefits from penetration of the Chinese market, but we have just scratched the surface – the utility and infrastructure market space in China is huge and growing Stimulus Funds provided by the Central Government are flowing into this space at a high rate We have partnered with solid Chinese firms who will benefit from this Stimulus CTC Cable’s advanced ACCC™ conductor is highly valued and is being designed at the highest levels and for the most important transmission lines Increased efforts on marketing and demand creation underway DeWind Inc offers proven wind turbine technology and unique implementation that improves reliability China’s appetite for wind power will fuel continuing demand for proven technology Future business combinations, including joint venture companies or wholly owned entity, will be explored

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