China's Hot New Growth Companies

Sector: ENERGY
Revenue 2006: $3.85 BILLION
Profit 2006: $429 MILLION
Average Rev. Growth 2004-2006: 79%

Harbin Power Equipment had to wait a long time for the lights to come on. The company, which builds turbines, boilers and electric generators for power plants, traces its origins to the early 1950s, shortly after Mao established the People's Republic. Before economic reforms took hold, China's power-supply needs grew modestly, and for most of its first half-century so did Harbin Power. "The requirements of the market weren't very vigorous," says Harbin Power's Chairman Gong Jingkun.

The situation changed after 2000, when China's rapid industrialization began pushing demand for electricity beyond what the country's creaky infrastructure could supply. The government ordered a massive push to modernize and expand power production — China's generating capacity climbed 61% from 2000 to 2005 — and Harbin Power's business took off. Since 2004 the company's annual revenue growth has averaged an impressive 79%, mostly due to sales of coal-fired generators, but also because the company has been a supplier to China's most ambitious electrification schemes such as the massive Three Gorges Dam hydroelectric project on the Yangtze River.

Gong understands that his company's good fortune can't last forever. Production growth in China's power-equipment industry is expected to slow from an annual average of 55% from 2002 to 2005 to just 3.5% from 2006 to 2010, according to a Citibank report. So Harbin Power is developing new products while looking overseas for new customers. One promising initiative: ramping up capacity to build nuclear power generators, which plays into China's efforts to diversify energy sources and reduce dependence on dirty coal-fired plants. The government says it will build more than 30 nuclear reactors in the next 15 years.

Nearly 90% of Harbin Power's revenues are produced at home, but the company is increasingly trying to move into Asia and Africa, and has eyes on business in the U.S. and South America. "The international market will be more and more important for us," Gong says. In 2005 a subsidiary started work on a power station in Sudan that is part of one of Africa's largest hydropower projects. (The company's involvement in Sudan, which has been accused of genocide in Darfur, has made its stock the target for divestment by U.S. university endowments and public pension funds.) Harbin Power has also won contracts for work in Vietnam, Indonesia, Pakistan, the Philippines and Bangladesh. Now if the rest of the world can grow like China, perhaps Gong can keep the juice flowing.