Advanced Engine Components Ltd has entered into a potential 10-year purchase deal with India's Tata Motors Ltd that is estimated to generate over $30 million in revenue over three years for the Malaga-based company.
Both companies have signed a letter of intent whereby ACE will design, develop, test and certify the natural gas versions of Tata's four and six cylinder engines.
Below is the announcement:
Advanced Engine Components Limited ("ACE") has agreed a Letter of Intent ("LOI") to enter into a ten year Purchase Agreement with Tata Motors Limited ("TML") of India.
The arrangement will generate over $30 million sales revenue in the first three years of commercial production. This estimate is based on agreed minimum quantities and agreed sale prices for the ACE natural gas vehicle systems ("NGVS"), related components and spares.
Pursuant to the LOI ACE will design, develop, test and certify naturally aspirated and turbo charged natural gas ("NG") versions of TML's four and six cylinder engines.
The engine developments, including certification to Euro 4, must be completed by November 2009. TML's production and marketing will commence in the December 2009 quarter ensuring full commercial production by the March 2010 quarter. This timeline is planned to coincide with India's regulatory requirement that all new trucks and buses, in eleven major centres, be Euro 4 emission compliant by 1 April 2010.
TML will pay ACE for the development costs upon successful validation of the NG engines to Euro 4 standard.
India is ranked third, by number of NG vehicles, in the Asian region. TML, as India's largest automotive manufacturer, is the fourth largest truck and second largest bus manufacturer in the world. TML has manufactured and sold NG buses since 2000.
ACE is already well advanced in India with NG engine development programmes for two original equipment manufacturers, Escort Motors and Force Motors. To further benefit, from the many opportunities in India, ACE is negotiating a formal joint venture arrangement with its Indian business partner Vialle Alternative Fuel Systems Private Limited (refer ASX announcement 22 February 2006).
India, and TML in particular, is a significant addition to ACE's existing development and sales arrangements in China, France, Thailand, Indonesia, Korea and Australia.
The TML agreement is further confirmation of ACE as a leading supplier of alternative fuel systems and components to the Asia Pacific Region through innovation and quality.
