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ZBB Energy Forms Joint Venture Company to Enter Energy Storage Market in China

August 29, 2011 by Jeff Shepard

ZBB Energy Corp. announced that it has entered into agreements for establishment of a joint venture company that will initially assemble and ultimately manufacture ZBB products for sale in the power management industry on an exclusive basis in mainland China and on a non-exclusive basis in Hong Kong and Taiwan. The new company will build a new state-of-the-art manufacturing center in WuHu City, Anhui Province that will begin operations in early 2012.

The joint venture partners comprising the China JV Company (Chinese name registration pending) include, ZBB PowerSav Holdings Limited, AnHui Xinlong Electrical Company (Xinlong Electrical) and WuHu Huarui Power Transmission & Transformation Engineering Company (WuHu Huarui).

ZBB and PowerSav have been working together since November 2010 to identify an optimal path and partnerships to enter the China market. More than 75 potential joint venture partners and 25 cities and governments were diligently screened to determine the ideal joint venture partners and a city and government very supportive of providing a location for "new energy" technology. Xinlong Electrical and WuHu Huarui met every criteria established for the joint venture partners, and the city and government of WuHu demonstrated their strong support by way of providing a host of incentives to locate in their city.

ZBB states that this joint venture enables it to take its products into China’s high growth market with exceptionally strong partners, and represents a core component of ZBB’s global partnership strategy to offer the lowest cost, intelligent power management storage products available in emerging markets that offer significant growth opportunities.

Said Eric Apfelbach, CEO of ZBB Energy, "The opportunity and demand in China for our products is tremendous. Our joint venture with these three partners will enable the penetration of both our flow battery and power electronics products by giving us channel access to China’s grid companies."

Key terms of the joint venture include cash and technology capital investments of approximately $13.4 million. ZBB’s capital contributions to the joint venture will be a contribution of technology to the China JV Company via a license agreement valued at approximately $4.0 million. ZBB’s indirect equity interest in the China JV Company will equal approximately 33%. ZBB will maintain control over the joint venture through its Board of Directors positions.

The China JV Company will have an exclusive, royalty-free license to manufacture and sell ZBB’s ZESS Zinc Bromide flow battery, version three (V3) battery (50kW) and ZESS POWR PECC (up to 250kW) in mainland China and a non-exclusive royalty-free license to manufacture and distribute the products in Hong Kong and Taiwan in the power management industry.

Additionally, ZBB and the China JV Company will enter into supply agreements under which the China JV Company will purchase certain manufactured products from ZBB and ZBB may purchase certain manufactured products from the China JV Company. Pursuant to a Management Services Agreement, ZBB PowerSav Holdings will provide certain management services to the China JV Company in exchange for a management services fee equal to five percent of net sales for the first five years and three percent of net sales for the subsequent three years.

Pursuant to a Research and Development Agreement, the China JV Company may request ZBB to provide research and development services upon commercially reasonable terms and conditions. The China JV Company would pay ZBB’s fully-loaded costs and expenses incurred in providing such services.

The joint venture will be established upon governmental approvals from China, anticipated to be received in November 2011.

More news and information regarding the latest developments in Smart Grid electronics can be found at Darnell’s SmartGridElectronics.Net.