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This is China Clean Energy's corporate presentation at the Rodman and Renshaw Global Investment Conference in New York, NY on Sept. 12, 2011. The CFO, William Chen, will be heading the presentation and available for one-on-one meetings with large private investors and institutional investors.
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www.chinacleanenergyinc.com
Safe Harbor Statement
This presentation contains forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, those factors that are disclosed under the heading "Risk Factors" and elsewhere in our documents filed from time to time with the United States Securities and Exchange Commission and other regulatory authorities.
Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved and these statements will prove to be accurate. Important factors could cause actual results to differ materially from those included in the forward-looking statements.
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Corporate Overview
Products:
Specialty Chemicals: high quality commercial products from renewable resources
Biodiesel: began production in 2005; sell to regional service stations
Facilities:
Jiangyin Plant: within 2 km of seaport - a key competitive advantage
• Can produce 40K tons of specialty chemicals and 50K tons of biodiesel
Fuqing Plant: 311,000 square feet ISO- certified production facilities
• Most equipment transferred to Jianqyin Plant in 3Q10 – except printing ink production line
44
Equity Snapshot
Ticker Symbol: CCGY
Stock Price (9/7/2011): $0.68
Market Capitalization: $21.4 mil
TTM Revenue (Q2 2011) : $72.3 mil
TTM Net Income (Q1 2011): (1) $10.7 mil
TTM EPS (Q2 2011): (1) $0.34
P/E: 2.03x
Book Value / Share: $1.50
Note: (1) Primary, based on current share count of 31.5 mil
Source: Capital IQ, Company SEC Filings
Return on Avg. Equity (TTM) 26%
55
Corporate History
1995
Nov 2006
Revenue reached $16 million for FY2009 Dec 2009
Key Milestones
Completed a $15 million private placement to finance the Jiangyin Plant
Jan 2008
Commenced production of biodiesel fuel using proprietary technology.
Dec 2005
Completed reverse merger and was listed on the OTC Bulletin Board
Offshore
Onshore
100%
China Clean Energy Inc
100%
China Clean Energy Resources Limited (BVI)
Fujian ZhongdeTechnology Co., Ltd.
100%
Fujian ZhongdeEnergy Co., Ltd
Corporate Structure
Sep 2010Transferred equipment to the new Jiangyin Plant
Jan 2010Launched commercial production at Jiangyin plant
Dec 2010Revenue of $59 million achieved for FY2010
Revenue growth in 1H11 of 54% Y-O-Y to $72.3 million on a latest 12 month basis. Aug 2011
Founded in Fujian Province, China, to produce environmentally-friendly specialty chemicals
• New plant – provides 3x more specialty chemicals and 4x more biodiesel capacity
• High margin products – dimer acid (30% of sales) and high-performance adhesives products (22% of sales) lead strong product mix
• Exports sales – further diversifies and strengthens customer base
• Specialty Chemicals – provides an array of products that are high value and cheaper than petroleum-based products
• Biodiesel – provides a platform for growth driven by energy needs and environmental concerns
Diversified Revenue and Customer Base
New Plant Capacity Enables Optimal Product Mix and Expanding Margins
Highly Experienced and Committed Management Team
Company Fundamentals
• Company has been in operation since 1995• Founding partners run day-to-day operations• Officers and directors own 32% of shares
Diversified Revenue Base
66
Products
Specialty Chemicals
Biodiesel
1H’11
Domestic
Exports
Revenue and Market Breakdown
Markets
Synergy in resource utilization enables CCGY to reduce its business risk while exports further diversifies its customer base
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18%
82%89%
19%
FY’10
Biodiesel
Specialty Chemicals
11%
81%
FY’10 1H’11
Exports
20%
80%Domestic
Capacity utilization near 100% at new plant
Very high levels of customer satisfaction
Domestic growth from a variety of industries continues to drive demand
Financial Highlights
Revenue of $59.0 MM vs. $15.9 MM in 2009
Operating income of $10.2 MM vs. $0.9 MM in ‘09
Adjusted net income of $7.8 MM and EPS of $0.25
Guidance for FY 2011
Expect revenue in fiscal year 2011 to reach approximately $75 million
Expect operating income to reach approximately $14 million
Highlights for FY 2010 and 1H 2011
Strong Revenue Growth Continues
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FY 2010 1H 2011
Revenue of $38.2 MM vs. $24.9 MM in 1H 2010
Operating income of $7.0 MM vs. $3.1 MM in 1H10
Adjusted net income of $6.6 MM and EPS of $0.21
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China’s specialty chemicals sector is expected to grow faster than the economy as a whole, with some sectors experiencing 20-30%+ growth
Commercial complexity is increasing to include product technology, customization and innovation; these also serve as barriers to entry for smaller companies
Large multi-national specialty chemical firms have found a lucrative base in China while consolidation of smaller companies is likely over the long-term
After spurring industry growth, the Chinese government could impose stronger environmental regulations over time
Foreign investment has been substantial in China’s specialty-chemicals sector led by Hong Kong, US, Japan, Singapore and South Korea due to China’s growth potential
Green innovation via sustainable production is a growing trend – creating quality products while minimizing toxins and emissions so as to preserve the environment
Specialty Chemicals: Market Overview
Market Size‘000 Metric Tons
China
Rest of the World
Source: Company estimates
China
Outside of China
Underlying Growth% per annum
Specialty Chemicals:Market Size and Growth
3 Million Metric Tons
10
Specialty Chemicals: Revenue Composition
Specialty chemicals are used in such diverse industries as textiles, construction and electronics.
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2010 FY Total revenue = $59 MM 2011 1H Total revenue = $38 MM
Dimmer Acid
Properties: Good stability, solvent releasing capacity and good resistant to bending, good glossiness, good adhesive force and good resistance to gel.
Applications: Used in printing industry to produce solvent type printing ink for soft plate, surface printing ink for plastic and hot-melt adhesive. It can work with pigment and filler to produce bright and brilliant colors.
Properties: A light yellow thick liquid with stable properties, non-toxicity, non-volatility, high flash point, high ignition point, and good adhesion.
Applications: Used in alkyd resin, polyamide resin, ink, coating, or as adhesive, for textile detergent, surfactant for lubricant and antirust oil, and food additive.
Polyamide Resins
Specialty Chemicals: End-User Applications
12
Hot Melt Adhesive
Printing Ink and Coatings
Specialty Chemicals: End-User Applications
13
Properties: Transparent, light yellow viscous solid, non-toxic, soluble in most organic solvents, non-soluble in water. It has good mechanical, fluidity, tenacity and high adhesion strength.
Applications: Used for the adhesion of heat-shrinkable material, and in packing, fabrics, leather, lumber, plastic, metal, ceramics, and electric appliances, electronics, among others.
Applications: Used for gravure surface printing, gravure inner printing and flexible typographic printing on plastic, aluminum foil and paper.
=== Expanding Customer Base
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1. Including NYSE: APD, NYSE:TOT
Number of Customers Customer Size
48
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$100K ~ 500K $500k ~ 1Million $1 ~ 5 Million
Biodiesel Segment Opportunity
15
Increasing car ownership in China should augur positively for biodiesel demand
Growth of Cars in China (Millions)
Source: Carnegie Endowment; Institute for Energy Research, Cars by M.Chamon, P.Mauro and Y.Okawa (of IMF and Univ. of VA)
Biodiesel a Key Fuel to Managing Vehicle Growth
Between 2000 and 2010, China’s car fleet grew by 20x with 20 MM vehicles expected to be sold in 2011.
China is projected to increase its proportion of cars relative to all developed economies from 10% in 2010 to 37% in 2030 and 66% in 2050.
China to lead the world in car sales for the third straight year, to be mainly run on oil-based fuels.
Sustainable biofuels is a key policy tool to manage China’s growing vehicle fleet; fits within current infrastructure
Biodiesel and Diesel Demand Forecast (Million Tons)
Biodiesel Segment Opportunity
Biodiesel is compatible with existing industrial capacity and can immediately address China’s energy security needs.
Source: US Dept. of Energy; BP Statistical Review, National Biodiesel Board, IEEJ, IEA 16
Biodiesel Fundamentals and Benefits
0
2
4
6
8
10
12
14
16
18
20
0
50
100
150
200
250
300
350
400
2007 2010 2020 2030
Diesel Forecast (LHS) Biodiesel @ 5% Blend (RHS)
Reduction in harmful emissions; US Dept. of Energy study showed 78% drop in carbon dioxide emissions
Higher flash point than petroleum diesel which makes it safer to handle
Tends to be more biodegradable than petroleum diesel; B100 eliminates all sulfur emissions relative to conventional diesel
Can be used in any diesel engine without modification whether in B100 or B20 form
Oil Dependency
Biodiesel Segment Opportunity
Source: Biodiesel 2020: A Global Market Survey 17
China’s Bio-Fuel Markets and Targets
China may have to import 75% of its needs to meet its
oil requirements by 2030
By 2020:
Target is to replace 15% of China’s transportation energy needs
Target is to produce 12+ million tons of biofuels
Plans are to install two 500 MW Coal-Fired power plants every week for the next 10 years
China’s growing oil dependency and safeguarding the environment are key concerns driving energy policy in China
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Edible Oil Consumption in ChinaMillion Tons
There is an ample supply of waste edible oil which may also be supplemented by imported palm oil waste
(source: Datamonitor Aug/2007).
CAGR: 6.5%
Waste Oil Supply Availability
Feedstock Procurement Strategy
• China Clean Energy’s multi feedstock technology allows use of palm oil waste in its production process
• We continue to evaluate the possibility of importing palm oil waste to diversify our feedstock supply
• We are also evaluating opportunities to acquire an upstream feedstock supplier to capture additional margin along the value chain as well as to protect margins over the cycle
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Proprietary technology allows China Clean Energy to use lower cost waste vegetable oils to produce an array of products
Production Technology
Waste grease
Oleic acid
Vegetable asphalt (fuel oil)
Stearic
Dimer acid
Monomer
Biodiesel
High purity Dimer acid
Polyamide resin
High performance polyamide hot melt Adhesive
Printing ink
ISO Stearic
Heating Esterification Dealcoholization
Methanol
Separator Alcoholysis
Glycerol
DealcoholizationSeparatorWashing and DryingBiodiesel
Hogwash oilPalm oilMethanolAcid catalysisB
iod
ies
el
Sp
eci
alt
y C
he
mic
als
•Build strong brand recognition for its environment-friendly specialty chemicals segment
•Expand offerings of high-end specialty chemicals that target import substitution
•Acquire upstream feedstock sourcing so as to secure supply
•Plan for additional plant capacity to meet projected demand
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Specialty Chemicals Biodiesel
Company Growth Strategy
• Capitalize on strong demand for transportation fuel in China
• Take advantage of favorable government policies supporting the adoption of clean energy
• Develop alternative markets such as power generation
Synergy derives from the development of a new generation of bio-refinery products that have economic and environmental benefits
Pro-Forma Production Capacity
2121
Bio
die
se
l
50,000
Capacity in TonsAvg. Selling
Price ($/Ton)*
$857
Revenue Potential ($Million)
$42.9
Sp
ec
ialt
y
Ch
emic
als
40,000
Capacity in TonsAvg. Selling
Price ($/Ton)*
$1,811
Revenue Potential ($Million)
$72.4
We expect to maintain specialty chemicals capacity at close to 100% for 2011
Additional capacity at Jiangyin plant of 20K tons possible at an est. cost of $6-8 MM
Additional expansion potential at Fuqing plant to meet demand
* Q2 FY2011 actual prices
Note: These are pro-forma calculations and are not provided for guidance purposes. Actual results will depend on market conditions as well as other risk factors detailed in fillings with SEC and available from http://www.sec.gov.
Gross Profit Net Revenue
Operating Profit Net Income
Key Performance Metrics
2222
269%
10x
*
*
321%
662%
Note: All figures in MM; * denotes non-GAAP which excludes changes in fair value of warrant, stock-based compensation expenses and impairment charges
2323
Balance Sheet Summary
Source: SEC filings
As of 31-Dec-08 31-Dec-09 31-Dec-10 30-Jun-10
Audited Audited Audited Unaudited(In $ millions)
Assets
Cash & Cash Equivalents $2.90 $4.15 $13.65 $22.31
Account Receivables $1.10 $1.77 $4.08 $3.23
Inventories $0.80 $0.46 $2.12 $2.59
Current Assets $5.10 $6.59 $21.51 $29.26
Total Assets $33.00 $36.64 $52.09 $59.45
Liabilities
Short-term Debt -- $3.08 $1.03 $7.31
Current Liabilities $1.10 $3.72 $6.32 $11.68
Long-term Debt $0.20 -- $4.23 --
Total Liabilities $1.10 $4.98 $12.75 $12.21
Total Stockholders' Equity $31.90 $31.66 $39.33 $47.24
2424
We announced a one million share repurchase on May 16th; the account in the US is fully funded and to date, we have repurchased shares opportunistically.
We are seeking two highly qualified individuals to join the Board of Directors as independent directors – and hope to announce their appointment by the end of the third quarter.
We will seek to increase China media and analyst coverage; website to be kept current with photos and video and operational developments.
The Company’s stock price is trading at levels we think is undervalued:
Cash is 104% of share price Market Cap / NAV of 0.57x Market value / book value of 0.45x EV / EBITDA of 0.37x
Going forward, will continue to engage in best practices regulatory and disclosure procedures. Will also seek to provide additional due diligence information so as toinspire more confidence in the Company and differentiate it as distinct from the currently challenging environment of the space.
Capital Markets – Confidence Building Measures
• High margin growth driven by its diversified customer base, consumption / export growth in China, and new plant and geographical base
• Innovative technologies and resourcing serve as an early-mover / clean fuel alternative to unsustainable levels of imported foreign oil
• Oil price volatility, global warming and sustainability issues are driving demand for specialty chemicals and biofuels derived from renewable resources
Diversified Revenue and Customer Base
SpecialtyChemicals
Biodiesel
ValueProposition
Investment Thesis
• Proprietary technology and expertise in renewable resourcing and the development of high-margin specialty chemicals and biofuels
Macro-thesis
Investment Thesis
2525
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Tai-ming Ou, Chairman and CEO• Co-founded the Company in 1995. Prior to forming China Clean Energy, Mr. Ou was the
Director of General & Administrative Office of Fuqing First Secondary School. Mr. Ou was also in charge of a factory operated by the school. He is a licensed senior economist and has a Bachelor’s Degree in Mathematics from Fujian Normal University.
Ri-wen Xue, Chief Operating Officer• Joined as Production Manager in 2000 and was promoted to Vice General Manager of
Operations in December 2003. Mr. Xue was formerly a Director of Credit at Commercial and Industrial Bank of China and an engineer at CMOS Chip Copperize Corp. in Japan (fluent in Japanese). He holds a Bachelor’s Degree in Finance Administration from Jimei University.
William Chen, Chief Financial Officer• Joined China Clean Energy as the Vice President of Investor Relations in December 2009 and
was appointed CFO in February 2010. Mr. Chen was formerly a financial analyst at Wealth Transition Planning LLC, a financial services firm in New York. Prior to that he was a director assistant in EKN Financial Services. Mr. Chen holds a Bachelors Degree in Finance and Investments from Baruch College and is working towards an MBA degree.
Yun He, Senior Vice President of Sales and Distribution• Mr. He participated in the initial financing efforts and was promoted to Deputy General
Manager - Sales & Distribution in December 2003. Mr. He is a former resident and international trade executive in the former Soviet Union and Czechoslovakia.
Management Team
Management Team @ New Plant
2727
Jiangyin Plant: Recent Photos
2828
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China Clean Energy’s new 90,000 ton plant has the flexibility to produce specialty chemicals and/or biodiesel to diversify business risk.
Jiangyin Plant: Recent Photos
3030
Contact Information:
China Clean Energy Inc.William Chen, CFOPhone: +1 (347) 235-0258 Email: [email protected]
IR Agency: CCG Investor RelationsDavid RudnickPhone: +1 (646) 626-4172Email: [email protected]
Thank You!
Auditors: Friedman, LLPEddie Wong Phone: +1 (212) 842-7640 Email: [email protected]
SEC Attorney: Haynes and Boone LLP Rick WernerPhone: +1(212) 659-7300 Email: [email protected]
This Presentation of China Clean Energy was developed by the Company and CCG and is intended solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy the Company’s stock. This presentation is based upon information available to the public, as well as other information from sources which management believes to be reliable, but is not represented by China Clean Energy or CCG as being fully accurate nor does it purport to be complete. Opinions expressed herein are those of management as of the date of publication and are subject to change without notice.
China Clean Energy Website www.chinacleanenergyinc.com