Chardan South China Acquisition Corporation says it plans to merge with Head Dragon Holdings Limited, which owns 100% of Liaoning Gaoke Energy Group, one of the largest private Chinese engineering company providing design, construction, installation, and operating expertise for distributed power generation and micro power networks in China.

Micronetworks are local energy generation systems that create cost-effective and continuous electricity and heat supply at or near the site where they are installed. In China, these micro grids usually involve "co-generation," using waste steam from a factory boiler to generate electricity and provide space heating. In addition to meeting the electrical and heating needs of the factory, any excess supply can be sold locally or, in the case of electricity, can be sold for distribution over China's national power grid.

Kerry Propper, CSCA's CEO, commented, "We believe that energy infrastructure will continue to experience rapid growth as China attempts to meet its surging energy needs, and that distributed power generation will play an increasingly important role in meeting this demand. Gaoke, as a leading micronetwork developer in China, presents us with an ideal opportunity to participate in China's developing energy infrastructure. Since being founded in 2003, Gaoke has focused on building its engineering prowess, continuously improving on the functionality of its systems and on supporting the development of new green technologies that it may employ in the future."

Gaoke has designed and installed, or is in the process of installing, distributed power systems ranging in size from a few megawatts to 300 megawatts for customers in the chemical, steel, ethanol, cement, construction materials and food processing businesses. The company also designs and develops, under contract, stand-alone power and heat generating facilities.

On an un-audited Chinese GAAP basis, Gaoke had after-tax earnings of RMB55.6 million for the year ending December 31, 2006.

According to China's National Development and Reform Commission, the annual expenditure on China's power development will be RMB500 to RMB600 billion per year through 2010 and Gaoke management estimates that distributed power has the potential to capture 10% of this total expenditure. The total expenditure on micro power networks in China was estimated to be less than RMB1 billion in 2006.

At the close of the transaction the Head Dragon Stockholders will receive 13,000,000 shares of CSCA common stock in exchange for all of the outstanding common stock of Head Dragon.

Propper continued, "In addition to its expertise in micro power networks, Gaoke, through its academic technology development partnerships, is actively pursuing wind, solar, biomass and heat pump solutions for distributed power. These exclusive academic relationships are with Tsinghua University, the most distinguished scientific research university in China, and with the China Science Academy in Guangzhou, one of the leading research institutes in Asia for developing new energy technologies. We are very excited about the alternative energy technology pipeline that Gaoke has amassed, and are confident that it will be able to add a number of these to its armamentarium of green alternative energy solutions in the coming years."