XI'AN, China, Nov. 17 /PRNewswire-Asia-FirstCall/ -- China Power Equipment, Inc. ("China Power Equipment," OTC Bulletin Board: CPQQ), the manufacturer of a new generation of energy saving electric transformers and transformer cores in the People's Republic of China, reported dramatically higher revenues and net income for the three months ended September 30, 2009.

    Third Quarter 2009 Highlights
    -- Net revenues increased 252% to $7.89 million in the third quarter 2009
       from $2.24 million in the third quarter 2008.
    -- Gross profit increased 280% to $1.96 million in the third quarter 2009
       from $0.52 million in the third quarter 2008.
    -- Net income increased 516% to $1.41 million in the third quarter 2009
       from $0.23 million in the third quarter 2008.
    -- Diluted earnings per share increased 350% to $ 0.09 per share in the
       third quarter 2009 from $ 0.02 per share in the third quarter 2008.

Net revenues were $7.89 million in the third quarter 2009, up 252% from $2.24 million in the third quarter 2008. Net income was $1.41 million in the third quarter 2009, up 516% from $0.23 million in the third quarter 2008. Diluted earnings per share were $0.09 per share in the third quarter 2009, up 350% from $0.02 per share in third quarter 2008.

Net revenues were $16.48 million in the nine months ended September 30, 2009, up 142% from $6.81 million in the nine months ended September 30, 2008. Net income was $3.05 million in the nine months ended September 30, 2009, up 175% from $1.11 million in the nine months ended September 30, 2008. Diluted earnings per share were $0.20 per share in the nine months ended September 30, 2009, up 186% from $0.07 per share in nine months ended September 30, 2008.

Mr. Yong Xing Song, Chairman of the Board of China Power Equipment, said, "The third quarter 2009 was a dramatic improvement in our financial performance over the third quarter 2008, led by amorphous alloy transformer cores that were up 322 percent in revenues and up 354 percent in gross profit from the third quarter 2008. Amorphous alloy transformers in the third quarter were up 159 percent in revenues and up 169 percent in gross profit from the third quarter 2008. To help fulfill the large increase in our customers' orders, we contracted out some production to a manufacturer for whom we provide technical support.

"Our revenues from silicon steel cores and transformer declined because we have exited that product line to focus on amorphous alloy products as our major product lines and are no longer actively marketing steel core products.

"In addition to higher revenues, our expenses remained under good control and our interest expense was lower, so our net income increased 516 percent to $1.41 million in the third quarter compared with the third quarter 2008.

"We have funded our recent operations mainly through cash generated from operations. We believe our existing cash and cash equivalents will be sufficient to maintain our operations at the present level for at least the next 12 months."

The Chinese government has mandated that in the next few years, China's traditional steel core electric transformers will be gradually replaced by amorphous alloy transformers, because they are far more energy efficient.

For example, a typical amorphous alloy core transformer consumes 150 watts to operate, which is 77.6 percent less electricity than a comparable silicon steel core transformer, which requires 670 watts to operate.

Since an amorphous alloy transformer consumes less electricity, it reduces the need to generate electricity. In turn, less coal is burned to provide the same net electricity to the consumers. The result is lower air pollution. To illustrate the pollution reduction, it is estimated that compared to a silicon steel core transformer with the same capacity, each amorphous alloy core transformer reduces pollutants from coal combustion each year by 3,972 kilograms of carbon dioxide, 120 kilograms of sulfur dioxide, and 60 kilograms of nitrous oxide each year. Both transformers in this comparison are assumed to be operating at 315 kilovolt-amperes while stepping down 10,000 volts to 220 volts, which is the consumer voltage in China.

    Mr. Song continued, "China is upgrading to amorphous alloy electric
transformers in urban areas, as well as selecting them as it extends and
improves electric service in rural regions. As a result, the demand for China
Power Equipment's amorphous alloy products is expected to continue to
increase."



                           China Power Equipment, Inc.
                      Consolidated Statements of Operations
                                   (Unaudited)

                               Three Months Ended       Nine Months Ended
                                  September 30,            September 30,
                                 2009        2008        2009         2008

    Revenues, net             $7,893,399  $2,239,265  $16,484,070  $6,805,514
    Cost of goods sold        (5,931,174) (1,722,363) (12,594,625) (5,034,438)
    Gross profit               1,962,225     516,902    3,889,445   1,771,076

    Operating expenses:
    Selling, general and
     administrative expenses     318,471     191,336      743,688     527,129
    Stock-based compensation      10,887          --       10,887          --
    Total operating expenses     329,358     191,336      754,575     527,129
    Net income (loss) from
     operations                1,632,867     325,566    3,134,870   1,243,947

    Other income (expenses):
    Gain on investment             8,827       9,356       60,200      71,609
    Other income                  20,465      69,754      371,346      83,690
    Interest income                   31         999        5,846       3,231
    Interest expense                  --     (42,577)        (117)    (65,879)
    Foreign exchange loss             --          --           --      (2,712)
    Total other income            29,323      37,532      437,275      89,939
    Net income before income
     taxes                     1,662,190     363,098    3,572,145   1,333,886
    Income taxes                 250,864     133,953      526,436     226,621
    Net income                $1,411,326    $229,145   $3,045,709  $1,107,265

    Earnings per share-
     basic                         $0.09       $0.02        $0.20       $0.10
    Earnings per share-
     diluted                       $0.09       $0.02        $0.20       $0.07

    Weighted average common
     shares outstanding:
    Basic                     14,908,313  10,886,413   14,908,313  10,881,652
    Diluted                   14,908,313  14,908,313   14,908,313  14,903,552

    The accompanying notes are an integral part of these financial statements.



                           China Power Equipment, Inc.
                           Consolidated Balance Sheets

                                               September 30,      December 31,
                                                    2009              2008
                                                 (Unaudited)
    Assets
    Current assets
    Cash                                         $1,754,576        $1,071,038
    Accounts receivable, net                      3,107,758         2,013,305
    Advances to suppliers                           115,925           771,407
    Inventory, net                                  627,574           461,634
    Prepaid expenses and other
     receivables                                    321,105           257,700
    Total current assets                          5,926,938         4,575,084

    Related party receivables                        22,879            97,248
    Property, plant, and equipment, net           3,868,178         3,116,422
    Intangible assets, net                          409,941           220,742
    Long-term investment                            253,334           236,384
    Deposit on contract rights                    1,316,251         1,313,064
    Deposit for purchase of equipment               767,813                --
    Prepaid capital lease                           112,851           116,694
    Total assets                                $12,678,185        $9,675,638

    Liabilities and Shareholders' Equity
    Current liabilities
    Accounts payable                               $545,483          $710,480
    Accrued liabilities and other
     payables                                       409,529           409,040
    Advances from customers                          32,758           142,156
    Lease payable--  current portion                  1,949             1,944
    Note payable                                     58,500            58,358
    Value-added tax payable                         118,916            64,686
    Income taxes payable                            379,613           235,262
    Related party payable                             1,170             1,167
    Total current liabilities                     1,547,918         1,623,093

    Long-term liabilities
    Lease payable- noncurrent portion               117,612           117,327
    Total long-term liabilities                     117,612           117,327

    Shareholders' equity
    Preferred stock: par value $0.001 per
     share, 10,000,000 shares authorized;
     none issued and outstanding at
     September 30, 2009 and December 31,
     2008                                                --                --

    Common stock: par value $0.001 per
     share, 100,000,000 shares
     authorized; 14,908,313 shares issued
     and outstanding at September 30,
     2009 and December 31, 2008                      14,908            14,908
    Additional paid-in capital                    7,186,928         7,176,041
    Statutory surplus reserve fund                  202,665           202,665
    Retained earnings (Accumulated
     deficit)                                     2,582,738          (462,971)
    Accumulated other comprehensive
     income                                       1,025,416         1,004,575
    Total shareholders' equity                   11,012,655         7,935,218
    Total liabilities and shareholders'
     equity                                     $12,678,185        $9,675,638

    The accompanying notes are an integral part of these financial statements.



                           China Power Equipment, Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                     Nine Months Ended
                                                       September 30,
                                                  2009              2008
    Cash Flows from Operating Activities
    Net income                                  $3,045,709        $1,107,265
    Adjustments to reconcile net income
     to net cash:
    Depreciation expense                           150,202           152,912
    Amortization expense                            30,692            24,654
    Stock-based compensation                        10,887                --
    Provision of bad debts                              --            51,778
    Gain on investment                             (60,200)          (71,609)
    Changes in operating assets and
     liabilities:
    Accounts receivable                         (1,089,566)          298,076
    Advances to suppliers                          657,035            80,416
    Inventory                                     (164,502)         (397,721)
    Prepaid expenses and other
     receivables                                   (62,763)           15,952
    Accounts payable                              (166,641)         (179,271)
    Accrued expenses and other payables               (567)         (289,664)
    Value added tax payable                         54,115          (114,327)
    Income taxes payable                           143,776            62,790
    Advances from customers                       (109,599)          140,440
    Net cash provided by (used in)
     operating activities                        2,438,578           881,691

    Cash Flows from Investing Activities
    Acquisitions of property, plant, and
     equipment                                     (17,681)          (49,214)
    Addition in construction in progress          (872,341)               --
    Acquisitions of intangible assets             (219,301)               --
    Deposit for purchase of equipment             (767,420)               --
    Repayment from related parties                  74,582           119,612
    Dividend from equity interest
     subsidiary                                     43,860                --
    Net cash provided by (used in)
     investing activities                       (1,758,301)           70,398

    Cash Flows from Financing Activities
    Repayment to related parties                        --          (217,942)
    Repayment to short-term loans                       --        (1,116,312)
    Net cash provided by (used in)
     financing activities                               --        (1,334,254)

    Effect of exchange rate changes on
     cash and cash equivalents:                      3,261            98,199
    Increase (decrease) in cash and cash
     equivalents                                   683,538          (283,966)
    Cash and cash equivalents, beginning
     of period                                   1,071,038         1,073,895
    Cash and cash equivalents, end of
     period                                     $1,754,576          $789,929

    Supplemental disclosure of cash flow
     information
    Interest paid in cash                             $117          $112,051
    Income taxes paid in cash                     $382,660          $166,386

    Non-cash investing and financing
     activities:
    Issuance of stocks for advance from
     investor                                           --          $100,000
    Dividend receivable from equity
     interest subsidiary                                --           $72,962
    Reclass long-term investment to
     advance to suppliers                               --          $718,100

    The accompanying notes are an integral part of these financial statements.

About China Power Equipment, Inc.

China Power Equipment, Inc., through its wholly-owned subsidiary, Xi'an Amorphous Zhongxi Co., Ltd., has developed a proprietary patented technology to produce a new generation of energy saving transformers and transformer cores. The company currently manufactures 59 different products, primarily amorphous transformers in four product series that are sold throughout China. The company was formed in 2006 as a U.S. corporation, and in November 2006, created a Chinese subsidiary that was granted a license as a privately held wholly owned foreign enterprise by the Chinese government.

Safe harbor

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements.

The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of our investments, risks and uncertainties regarding fluctuations in earnings, our ability to sustain our previous levels of profitability including on account of our ability to manage growth, intense competition, wage increases in China, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, our ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts and legal restrictions on raising capital or acquiring companies outside China.

Additional risks that could affect our future operating results are more fully described in our filings with United States Securities and Exchange Commission. These filings are available at http://www.sec.gov .

We may, from time to time, make additional written and oral forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and our reports to shareholders. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

For more information on China Power Equipment please visit our website at http://www.chinapower-equipment.com .

    For more information, please contact:

    China Power Equipment, Inc.
     Tel:   +1-866-374-1957 (in the USA)
     Email: xa-fj@xa-fj.com

    Christensen
     Mr. Yuanyuan Chen (English and Chinese)
     Mobile: +86-139-2337-7882 (in Beijing)
     Email:  ychen@christensenir.com

     Mr. Tom Myers (English)
     Mobile: +86-139-1141-3520 (in Beijing)
     Email:  tmyers@christensenir.com

     Ms. Kathy Li (English and Chinese)
     Tel:   +1-212-618-1978 (in the USA)
     Email: kli@christensenir.com

SOURCE China Power Equipment, Inc.

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