 Being
an environmentally-friendly company is great. Reducing your expenses
if you're that company is even better. Getting paid something extra
just to do those two things is best of all - it's basically like
free money.
And
no,
we're not talking about Utopia or Fairy-Land. The scenario we described
above can be very real for companies with the wisdom to just take
a very simple action.
Here's
the question though ... as an investor, do you think a company able
to make this scenario a reality would be in high demand? That's a rhetorical
question, because the answer is obviously yes.
The
company? China Energy Recovery. The way to collect that 'bonus'
money? Carbon credits. We knew the possibility for this type of fiscal
benefit was looming out there. Today, we got an official confirmation that
real
companies are saving and earning real dollars - a lot of
them - using China Energy Recovery's technology.
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Crash
Course in Carbon Credits |
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I'm
not going to completely rehash the China
Energy Recovery (OTCBB: CGYV) story, as most all of you know it
by now. (If you don't, you really have to check
out our initial profile - it's very cool stuff.) Let's just suffice
it to say China Energy Recovery allows companies to save money and reduce
their pollution production.
 How?
Factories and power plants that use heat to make electricity (or steam)
are woefully wasteful with most of the heat created. China Energy
Recovery - or CER - effectively recycles what would have been wasted
heat, and turns that into electricity or steam power as well. A facility
that was only 33% efficient becomes 90% efficient using a CER system.
Something
we haven't talked about yet is the financial benefit to a company's
factory or plant when such a system is installed. We just didn't have time
or space to look at the idea, nor did we have an example to work
with. Now we've got both.
Just
to be clear, we're not talking about reduced energy expenses - we
already understand that. Nor are we talking about less pollution; it
only stands to reason if you burn less fuel to make the same amount of
heat, steam, or electricity, you're going to create less waste.
No,
we're
specifically talking about carbon credits, which can be sold to generate
additional revenue.
Not
familiar with the idea of carbon credits? Don't sweat it - here's the
crash course.
Unfortunately,
industrial companies have to create some pollution in order to manufacture
anything.
The less pollution the better, but it's going to happen. Too much pollution
though - namely carbon dioxide - will eventually cause irreversible
harm to the environment.
To
prevent that from happening, a regulatory body determines how much carbon
dioxide is too much to produce for any year, and they set a production
cap under that level. Then, that amount of carbon dioxide production
is 'divided up' among all the manufacturers who have to produce some
sort
of carbon footprint to do business. In other words, it's a CO2 emission
'allowance'.
As
you might expect, some facilities struggle to come in under their
allowance, while other factories have no problem coming in well
under their allotted level of carbon emission credits. Those credits
they've been given but don't actually need? Yep, they can sell them
... often for a big profit.
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China
Energy Recovery's Role |
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OK,
so what's this got to do with China Energy Recovery?
 Think
back to one of the two key benefits of what CER does ... they make energy
production more efficient, which means less fuel needs to be burned to
create the same amount of power or electricity. Less burned fuel means
a smaller carbon footprint. Factories with a CER system installed may
have more carbon credits than they need.
Anyway,
I had a feeling the dollar amounts involved with this aspect of the company's
technology would come up eventually. I was just surprised by how big
they'd be.
Per
the press release, one of China Energy's early customers recently disclosed
how much they sold some of their unused carbon credits for. Two Lions
Fine Chemical Co. just collected $2.5 million for the sale of carbon credits
- 250,000 tons of CO2 worth of carbon credits.
My
first thought was, $2.5 million ain't too shabby. My second thought
(as usual) was putting those numbers in perspective. That's when things
got real interesting.
The
Two Lions installation was just one job, completed in 2005. They've done
more than 100 of these installations though, with most of them being done
in the last couple of years. I don't know how much each installation
costs (I'm sure it varies from one job to another). However, since 2006,
by my count they've done about $27 million in business.
This
is all very rough 'scrap paper' math, but dividing the revenue by the number
of installations so far, I get a ballpark price of about a quarter of a
million bucks for each system. Like I said though, that's a wildly
rough estimate, designed only to offer perspective.
 The
point, however, is the cost/benefit ratio to the company paying China Energy
Recovery to install a system at their facility. In this case (assuming
my math is somewhere close to being reasonable), Two Lions probably got
a huge, triple-digit return on their investment just through the
sale of carbon credits. We haven't even factored in the fiscal advantage
of Two Lions' lower energy expenses.
Bigger
picture ...
This
whole carbon credit business may well be overlooked by the average investor,
so I'm glad our crowd was able to take a closer look at it. It's a big
deal because - from a customer's perspective - it may be the
big selling point on CER's technology. How many more companies are
out there in shoes similar to Two Lions'? Just through the sale of
credits alone, I don't think a ten-fold return on the equipment purchase
is out of the question in some cases.
In
any case, it points back to one of the key things we first mentioned about
China Energy Recovery... they're in demand because what they do saves
(and now earns) real dollars, in a pretty short period of time.
This
carbon credit concept may not make the stock pop today, but this is huge
- and I mean huge - to China Energy's growth. Eventually, it will
materialize on CGYV's top and bottom lines.
Here's
the press release.
| One of China's
Largest Sulfuric Acid Manufacturing Plants Celebrates Three Years Combined
Success of Advanced Waste Heat Energy Recovery System with Power Generation
Capacity of 54 MW of Electricity
Friday September
26, 7:00 am ET
-- Two Lions
Fine Chemical Company, a leader in using advanced heat recovery technology,
saves millions on energy costs allowing it to pay off cost of energy recovery
system in less than two years
-- Nearly 250,000
tons of reduced CO2 emissions result in approved carbon credits for the
project valued at approximately US$2.5 million per year
SHANGHAI, China--(BUSINESS
WIRE)--China
Energy Recovery, Inc. (OTCBB:CGYV) ("China Energy Recovery" or "CER"),
a leader in the waste-heat energy recovery sector of the alternative energy
industry, today recognized that an important client of CER, Two Lions (Zhangjiagang)
Fine Chemical Co., Ltd. ("Two Lions"), located in Jiangsu Yangtze River
International Chemical Industry Park, remains a model of waste heat recovery
technology application with installed power generation capacity of 54 MW
of electricity utilizing recovered heat energy, the largest of its kind
in the sulfuric acid industry in China.
When construction
was completed in 2005, the plant was considered the most technologically
advanced sulfuric acid production facility in the world, and its one million
ton per year output capacity continues to make it China's largest single
sulfuric acid manufacturing facility. Two Lions has been able to attain
a payback period of less than two years for the installed energy recovery
system from energy cost savings resulting from the system. Additionally,
Two Lions was granted Clean Development Mechanism (CDM) certification and
was approved to sell carbon credits for nearly 250,000 tons of reduced
CO2 emissions annually, the very first CDM certification in China's sulfuric
acid industry. The current value of the carbon credits is estimated to
be more than US$2.5 million per year.
"We are very proud
of the success of Two Lions and appreciate that they returned to us for
additional projects. With customers like Two Lions to recognize the benefits
of waste heat recovery technology, we are more committed than ever to making
sure our systems continue to improve in order to maximize heat energy recovery
capability for our customers," stated Chairman of the Board and CEO of
China Energy Recovery, Mr. Qinghuan Wu. "As a comparison, to generate the
same amount of electricity as Two Lion's installation in a coal fired power
plant would require burning approximately 100,000 tons of coal per year.
In contrast, Two Lion's energy recovery system generates the same amount
of electricity without consuming any additional fossil fuel. This represents
what our entire company's mission is about, and we look forward to continuing
to maximize our opportunity for growth with companies like Two Lions and
others throughout our target markets."
What is Waste
Heat Energy Recovery?
Industrial facilities
and power plants release significant amounts of excess heat into the atmosphere
in the form of hot exhaust gases or high-pressure steam. Energy recovery
is the process of recovering vast amounts of that wasted energy and converting
it into usable electricity, dramatically lowering energy costs. Energy
recovery systems are also capable of capturing the majority of carbon emissions
and other harmful pollutants that would otherwise be released into the
environment. It is estimated that energy recovery systems installed in
U.S. industrial facilities could produce up to 20% of U.S. electricity
needs without burning any additional fossil fuel, and could help many industries
to meet stringent environmental regulations.
About China
Energy Recovery, Inc.
CER is an international
leader in energy recovery systems, with a primary focus on the Chinese
market. CER's technology captures industrial waste energy to produce low-cost
electrical power, enabling industrial manufacturers to reduce their energy
costs, shrink their emissions footprint, and generate sellable emissions
credits. CER has deployed its systems throughout China and in such international
markets as Egypt, Turkey, Korea, Vietnam and Malaysia. CER focuses on numerous
industries in which a rapid payback on invested capital is achieved by
its customers, including: chemical, petro-chemicals, refining (including
Ethanol refining), coke processing, and the manufacture of paper, cement
and steel. CER continues to invest in R&D and plans to build China's
first state-of-the-art energy recovery system research and fabrication
facility to allow it to meet the increased demand for its products and
services. For more information on CER, please visit: http://www.chinaenergyrecovery.com/s/Home.asp.
Information on CER's website does not comprise a part of this press release.
Forward-Looking
Statement Disclaimer
This press release
includes "forward-looking statements" within the meaning of the Securities
Litigation Reform Act of 1995, as amended. All statements, other than statements
of historical fact, included in the press release that address activities,
events or developments that CER believes or anticipates will or may occur
in the future are forward-looking statements. These statements are based
on certain assumptions made based on experience, expected future developments
and other factors that CER believes are appropriate under the circumstances.
Such statements are subject to a number of assumptions, risks and uncertainties,
many of which are beyond the control of CER and may not materialize, including,
without limitation, the efficacy and market acceptance of CER's products
and services, and CER's customers' ability to successfully pay back the
costs associated with installed energy recovery systems, obtain CDM certification
and be approved to sell and actually sell carbon credits. Actual results
or developments may differ materially from those projected in the forward-looking
statements as a result of many factors. Furthermore, CER does not intend
(and is not obligated) to update publicly any forward-looking statements,
except as required by law. The contents of this release should be considered
in conjunction with the warnings and cautionary statements contained in
CER's filings with the SEC, including CER's Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 21, 2008.
Contact:
For China Energy
Recovery, Inc.
Media
Sean Mahoney,
310-867-0670
seamah@gmail.com
or
Investor Relations
Jim Blackman,
713-256-0369
jim@prfmonline.com
Source: China
Energy Recovery, Inc. |
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