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China Energy Recovery is making industry more efficient

The term ‘cleantech’ often conjures up visions of electric cars, wind farms and buildings bedecked by solar panels. But cleantech is also about energy efficiency and making households, businesses and activities like travel more energy efficient and energy efficient technologies are set to play an important part in the fight against climate change.

Traditionally energy efficiency is not a sexy subject. This is because it is easier to sell the concept of “free” energy to people, as represented by wind turbines and solar panels, than the idea that they might have to curtail their lifestyles in order to help save the planet. However, a wide range of technologies are currently being introduced that aim to improve energy usage without affecting how we go about our daily business.

For example, a group of technologies has emerged that seeks to address the issue of waste heat.

In the automotive industry, companies like BMW and GM are looking at ways of capturing waste heat from a car’s exhaust and transforming it into electricity. Such projects are likely to play an important part in making electric and hybrid vehicles a viable option for motorists.
But in the industrial sector itself businesses are already making huge savings in their operating costs by capturing waste heat and doing something useful with it.

However, plenty more needs to be done. The amount of energy currently lost in industrial processes is so great that it is estimated the US could make 20% of all its electricity simply by using existing technologies to capture the energy that industry wastes (source:  EPA).
A handful of engineering firms around the world are developing technologies designed to capture waste heat and turn it into alternative forms of energy. China Energy Recovery, whose shares are quoted in the US on the OTC Bulletin Board, is one such firm.

CER has a straightforward goal: it sells technology that captures industrial waste heat to produce low-cost electrical power so that its customers can reduce their energy costs, shrink their carbon footprint and generate sellable emissions credits.

The firm develops highly-customized energy recovery systems that are designed to be efficiently integrated into its customers’ manufacturing processes. It claims its systems can capture and reuse over 90 percent of the energy that would otherwise be lost, resulting in substantial improvements in energy efficiency and a reduction in energy expenditure. Meanwhile, manufacturing customers who use the technology are able to insulate themselves somewhat from rising energy costs and power supply constraints.

In addition, CER’s energy recovery systems capture industrial emissions, significantly reducing harmful emissions like carbon monoxide gas and sour gas.

So far, the firm has successfully installed well over one hundred energy recovery systems. It has deployed these systems throughout China and in a number of other countries such as Egypt, Korea, Malaysia, Turkey and Vietnam. CER also intends to market to customers in both North America and Europe.

However, it is not surprising that at the moment China remains the firm’s main market. The country is the world’s second-largest consumer of energy, with China’s industrial sector accounting for 70% of its total energy consumption.

Recent customers signed up in China include fertilizer companies Dongsheng Chemical and Hubei Yangfeng Group, and leading Chinese chemical firm Jiangsu Sopo Chemical Group.
Wu Qinghuan, CER’s chairman and chief executive officer, says industrial companies are becoming more proactive about including energy recovery systems in their plans not only for new facilities but also for existing plants, where systems can be retrofitted. “Customers are seeing the tremendous economic benefits of such systems in addition to the need to achieve compliance [with] government mandates for environmental protection and energy efficiency,” he says.

At the end of April, CER announced it had received record backlog orders for 2009. The contract values of these orders, at $32.7m, were 86% greater than the orders the company had a year earlier.

CER says the energy recovery systems under these backlog orders, upon completion, are expected to generate nearly 174MW of power. This is equivalent to achieving a total annual saving of roughly 370,000 tons of coal that would otherwise be required to produce the same amount of power as well as the, approximately, one million tons of carbon dioxide emissions that would be created by burning that coal.

At the beginning of May, CER announced that it had won a large order for three sets of waste heat recovery systems for a large nickel mine project in Papua New Guinea. The deal is with existing customer China Enfi Engineering Corporation – one of China’s largest engineering firms for overseas construction and the main contractor for the nickel mine project.

The total power recovered by CER’s systems at the mine will be the equivalent of 43MW.
The contract – valued at $4.85m – represents a significant order for the firm since total revenues generated in 2008 amounted to $23.2m (and this figure itself was a 96% improvement over the previous year!)

Net income last year increased by 73% to $1.1m, and it would be a surprise if CER failed to improve on that total this year given the increasing interest in its technology as evidenced by the firm’s mounting order book.

The firm’s board of directors is also impressive. As well as CEO Wu Qinghuan, who has spent his entire career designing and making energy recovery systems and who founded CER in 1995, it boasts Roger Ballentine, a specialist in energy and climate change matters who served under President Clinton as chairman of the White House Climate Change Task Force, and Fred Krupica, who has 30 years experience in developing high-growth companies.

Despite the firm’s progress, during the past year its share price has performed badly. Having been trading for more than $12 each, the shares are currently priced at $1.80. However, with balance sheet cash of $6.1m (equivalent to 20.4 US cents per share) at the end of last year, CER looks well set to continue building its share in the burgeoning energy recovery market.

Quick Facts

Market: OTCBB
Ticker: CGYV
Share price: $1.80
Shares issued: 29.9m
Market cap: $53.8m