Joint Venture Provides Full Access to China Nuclear and Conventional Power Market
– By April Murelio –
GSE Systems, Inc. (GSE), a leading global provider of real-time simulation and training solutions to the power, process, manufacturing and Government sectors, announced the formation of GSE-UNIS, a limited liability company formed by GSE and Beijing based UNIS. GSE-UNIS will be headquartered in Beijing, China. GSE-UNIS will initially be comprised of over 70 simulation engineers creating the largest simulation company in China. In addition to Beijing, GSE-UNIS will have a production office in Zhuhai, Guangdong Province near the city of Macao.
The Joint Venture, which has been submitted to the Chinese government for formal registration, will be 51% owned by UNIS and 49% owned by GSE. Upon receipt of Chinese government approval, UNIS will contribute projects, technology, simulation engineers, and approximately $1.5 million in working capital. GSE will contribute projects, technology, simulation engineers, facilities and approximately $1.4 million in working capital. Because GSE is a minority owner, the joint venture will be accounted for on the equity method of accounting as a single line entry on the Company’s Income Statement indicating its share of GSE-UNIS’s profit or loss. GSE-UNIS has received its Certificate of Approval from the China Commission of Commerce and expects its formal Business License to be issued on or around July 15, 2010 at which time GSE-UNIS will be empowered to enter into formal contracts with its customers and begin to recognize revenue.
The largest shareholder of UNIS is Tsinghua University, a prestigious technology university in China. Established in 1988, UNIS has been acting as an incubator company transferring new technologies from the University’s research laboratory to the commercial sector. The origin of its simulation platform can be traced back to 1984, a national award-winning technology developed by Tsinghua University. Over the past 20 years, hundreds of simulators have been built based upon this technology for approximately 200 customers in the fossil fueled electric power industry, accounting for about 50% of the total Chinese fossil fueled power market. Its solid customer base and strong relationships with the academic and government sector will help GSE-UNIS service contracts in both the fossil fueled as well as nuclear power markets – the fastest growing power market in the world.
John V. Moran, GSE’s CEO commented, “The formation of GSE-UNIS allows full access to what is arguably the fastest growing energy market in the world. As I have noted in my past communications, in order to effectively compete for nuclear and conventional power plant contracts, it is important that non-Chinese companies like GSE form Joint Ventures with Chinese companies. The Joint Venture’s primary targets are the Chinese designed CPR and CNP series of nuclear power plants, of which 24 are in the planning or construction phase, and the conventional power plant market where UNIS is contributing contracts covering nearly 40 conventional power plants. Over the next 20 years, China expects to build over 90 nuclear power plants and over 340 conventional power plants. In addition, GSE-UNIS will provide a source of lower cost engineering resources which can be utilized on other GSE projects thereby improving our competitiveness and profit margins.”
Mr. Zhao, Weiguo, President of UNIS, commented, “As the major bridge connecting Tsinghua’s technology and the market, UNIS has been playing an important role in China’s hi-tech sector in the past two decades. We see the Joint Venture as an important step to internationalize our technical sources. The age of nuclear power is coming in China even faster than expected because of the huge demand of electric power and the increasing environmental pressure. This will necessarily bring a rapid-growing demand for simulation systems. On the other hand, there are two major barriers to enter this market, proven technology and trusting relationships with key customers. The combination of GSE’s world-leading technology and UNIS’ deep roots in the local market will give the Joint Venture a unique competitive advantage. I am very confident that this partnership will bring significant returns to both parties in the near term and long term future.”
GSE Systems, Inc. provides training simulators and educational solutions. The Company has over three decades of experience, over 362 installations, and 100 customers in more than 40 countries. Our software, hardware and integrated training solutions leverage proven technologies to deliver real-world business advantages to the energy, process, manufacturing and government sectors worldwide. GSE Systems is headquartered in Sykesville, Maryland located in the western suburbs of Baltimore, Maryland. Our global locations include offices in St. Marys and Augusta, Georgia; Tarrytown, New York; Nyköping, Sweden; Stockton-on-Tees, UK; and Beijing, China.