China Architectural Engineering, Inc. ("CAE" or the "Company") (Nasdaq:
Recently, the Nine Dragon Project successfully passed evaluation and assessment by China's national experts, which should pave the way for new, large projects to commence construction by the end of this year and the beginning of next year. The Nine Dragon Resort ("Resort"), which was mentioned in the Company's press release dated June 24, 2009, covers 10 square kilometers (10 million sq. m.) and aims to become a preeminent tourist destination in China. To date, the Resort has already completed construction of horse race tracks, polo grounds, a yacht basin, golf courses, and other high-end leisure facilities. Projects under construction include a marine theme park, movie theatres, premium retail outlets, five-star hotels, and luxurious residential apartments.
Ken Yi Luo, Chairman and Chief Executive Officer of China Architectural Engineering, commented, "Since the Chinese economy has recovered quickly from the global financial crisis, we continue to strategically shift our focus back to the stronger Chinese domestic construction market. I'm optimistic that a number of large Nine Dragon projects will launch by the end of this year, which should provide substantial new revenue sources for CAE in the next several years. We also hope that we will grow our Nine Dragon land assets and improve their corresponding market value, aided by China's steady economic expansion and Shanghai's unquestioned position as its financial center."
Separately, on September 9, 2009, the Red Line, or first phase, of the Dubai Metro was officially opened. As previously announced, CAE, through its subsidiary Techwell Engineering Limited, had been working towards completion of its unique external envelopes for stations along the Red Line of the Dubai Metro System. According to the Company's original construction blueprint, the majority of the Company's construction work was completed at the end of June 2009, and final construction milestones were scheduled for completion in the third quarter of 2009. Techwell has generated approximately $92.8 million in total revenue for the Company since construction began in 2008.
With less than 5% of the Company's contract remaining to be completed, Techwell was removed by the master contractor of the project, who also called for and received payment of $2.1 million in performance bonds and $7.3 million in advance payment bonds that were issued on Techwell's behalf for the project. The calling of the advance payment bonds was based on the master contractor's belief that it had paid in excess of the construction work performed. Techwell and the Company, as a guarantor of the bonds, do not believe that the master contractor had a proper basis for calling the bonds and have engaged Hill International, a global leader in managing construction risk and construction claims, to facilitate resolution of this dispute.
Mr. Luo continued, "We are satisfied with Techwell's successful completion of the Red Line of the Dubai Metro, and we hope to resolve our dispute with the contractor. Our unique design, technology, and craftsmanship continue to highlight our value proposition and capabilities. We believe that we have fulfilled the duties and requirements of our contract. We will continue our diligent efforts to create greater long-term value for our customers, partners, suppliers, employees, and shareholders."
