$1.1m China order for Advanced Engine

Malaga-based Advanced Engine Components Ltd has received an order for over 300 natural gas vehicle system kits from Weifang Weichai Peterson Gas Co Ltd in China.

The gas or NGVS kits, with a sale value exceeding $1.1 million, are due for delivery over a three month period commencing 30 June 2008. Due to lead times to acquire the necessary components and requirements to fill existing orders it is likely delivery will occur in August/September 2008.

The current order will bring to 671 the total number of ACE NGVS kits delivered to Weichai since 1 July 2007. The current order exceeds the total number of NGVS kits purchased by Weichai for the whole FY2008. This growth reflects the increasing demand for natural gas ("NG") engines throughout the Chinese market.

The Weichai group, one of China's five largest heavy duty engine manufacturers, produces and sells over 300,000 engines, mainly diesel, each year.

As well as Weichai, ACE has production arrangements with two of China's other four major heavy duty engine manufacturers. ACE has additional arrangements with two smaller Chinese NG engine builders that acquire the base engine and all components, including the NGVS from ACE, from third parties.

China's use of NG is expected to increase by over 300 per cent in the next 15 years. This growth is being driven by price and stability considerations of NG compared to diesel and environmental considerations.

The Chinese Government recently stated in the draft "China Medium and Long Term Energy Conservation Plan" that one of the 10 most important energy conservation projects is "to promote NG use for buses and taxis". The use of NG will leverage China's existing reserves, reduce reliance on imported oil and improve air quality in cities.

To further encourage the use of NG, the Chinese Government has proposed a Fuel Tax Regulation by which NG vehicles are expected to be taxed on a "half-tax" bracket compared to vehicles powered by gasoline or diesel.

Internationally, industry projections show that at a conservative growth rate of 18%pa there will be 65 million NG vehicles by 2020. This represents 9% of the world's vehicle population and reduces oil demand by 7 million barrels per day.

ACE said it is still on target to increase FY2007 revenues by more than 50% in FY2008.