The joint venture company, to be named Shanghai Umeco Composites Co Ltd, will be 51% owned by Umeco Composites Ltd, with Leadgo having a 49% stake. The joint venture facility in Shanghai is expected to be fully operational by the end of 2011.
Umeco estimates its total investment in the China joint venture will be RMB28 million (approx. US$4.1 million), comprising a cash investment of $2.4 million for its equity stake in the company and a $1.7 million shareholder loan facility. Leadgo will make a similar investment and provide a similar loan.
Umeco currently manufactures the vacuum bagging films supplied to Leadgo for China at its facility in Italy (IPM). Umeco expects that the global growth in the wind energy market will allow IPM to back-fill its production capacity once production for the Chinese market moves to the joint venture. IPM will receive a technology royalty from the joint venture once production starts.
Vacuum bagging films are used in the manufacture of composite products for the for the defence, aerospace, wind energy, marine, motorsport and industrial sectors.
Umeco believes the China joint venture will be profitable shortly after production commences, and in the start-up period costs are expected to be modest.
The joint venture agreement is subject to approval from authorities in China. Umeco anticipates this will be granted within the next two months.
"The continued growth of the global wind energy market, despite the economic downturn, reflects the on-going transition to generating power from renewable sources," says Clive Snowdon, CEO of Umeco, a UK headquartered provider of supply chain services and advanced composite materials. "This joint venture represents another important step in building Umeco's capability in the world's largest wind energy market. "