HONG KONG - Chinese wind turbine company A-Power Energy Generation Systems said cost overruns at its 600-megawatt wind power project in Texas could reach $500 million and it was talking to Chinese state banks about funding the project.

A-Power, which is building the project with U.S. partners, said higher turbine and cable connection costs could push the total cost to $2 billion, a third more than the original estimate, Chief Operating Officer John Lin told Reuters.

State-owned Bank of China has expressed intention to fund the project, along with two other government-backed institutions, China Development Bank and China Export-Import Bank, he said.

The Chinese government fully supports this project because both countries are focused in green energy, said Lin.

He said the company expected funding to be finalized by March at the earliest.

The Texas wind project is A-Power's biggest wind power venture to date since it entered the wind turbine-making business in 2008.

Shares of A-Power touched a year-high on the Nasdaq in December after the company confirmed it is supplying the wind turbines for the project it is building with asset management firm US Renewable Energy Group and wind developer, Cielo Wind Power LP. They have since fallen 36 percent.

The company, through its 60 percent-owned unit, Shenyang Power Group, is taking a 49 percent stake in the Texas project, with its US partners owning the rest.

The project will be built across 36,000 acres, which will be contributed by the U.S. partners, said Lin.

While A-Power is seeking most of the funding from Chinese banks, other institutions including the World Bank and Asian Development Bank have shown interest to participate as financiers, he said.

Lin said it may also get funding from a U.S. bank, which he declined to identify.

With the project, A-Power expects its wind turbine business to be a major earnings driver for the company this year. The company has said in December it expects to produce over 100 wind turbines in 2010, outside its West Texas project.

Apart from wind turbines, A-Power makes equipment for power systems.

Lin said the company has several projects in the pipeline, including a $70 million wind turbine assembly plant it plans to build in the United States. He declined to disclose details.

On Thursday, A-Power raised $83 million from a sale of shares and warrants to institutions, sending its shares down as much as 21 percent.

The company said it will use proceeds of the offering to fund its $50 million purchase of Japanese solar firm Evatech Co. It is also using the cash to buy more wind turbine parts.

Notwithstanding today's disappointing news, we remain positive on A-Power's leverage to the robust long-term growth potential of the Chinese wind market, the world's largest, Raymond James analyst Pavel Molchanov said in a note to clients after A-Power's share sale.

(Editing by Michael Flaherty and Lincoln Feast)