financial adviser and broker: svs securities plc
DESCRIPTION
China New Energy Limited. Placing and Admission to Trading on AIM March/April 2011. Financial Adviser and Broker: SVS Securities plc. Important Notice. - PowerPoint PPT PresentationTRANSCRIPT
1Financial Adviser and Broker: SVS Securities plc
China New Energy Limited
Placing and Admission to Trading on AIMMarch/April 2011
Important Notice•The information contained in this Presentation has been prepared by China New Energy Limited (the “Company”). This Presentation and its contents are for distribution in the United Kingdom only to persons of the kinds described in Articles 19(5) (investment professionals), 48 (certified high net worth individuals), 49(2) (high net worth companies), 50 (sophisticated investors) or 50A (self-certified sophisticated investors) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “Order”) and persons who are otherwise permitted by law to receive it. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. Persons of any other description, including those who do not have such experience in matters relating to investments, should not rely on this Presentation or act upon its content. By accepting this Presentation and not immediately returning it, the recipient represents and warrants that they are a person who falls within the above description of persons entitled to receive the Presentation.
•The information contained in this presentation has been prepared by the Company in connection with the proposed placing of securities in the Company. This presentation is being supplied to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person, or published, in whole or in part, for any purpose.
•This presentation and its contents are for distribution to persons or entities resident in the United Kingdom only. It is not intended to be distributed or passed on, directly or indirectly, to persons or entities resident outside of these jurisdictions. Persons of any other description, including those who do not have such experience in matters relating to investments, should not rely on this presentation or act upon its contents.
•This presentation and its contents are confidential. It is being supplied to you solely for your information and may not be copied, reproduced or further distributed to any other person or published in whole or in part, for any purpose.
•This presentation may be incomplete or condensed and it may not contain all material information concerning the Company. The information in this presentation may be subject to updating, revision, amendment and further verification.
•The information in this presentation does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of an offer or invitation to purchase or subscribe for, any shares in the Company nor shall this presentation, or any part of it, or the fact of its distribution, form the basis of, or be relied on, in connection with any contract.
•Certain statements throughout this presentation are "forward-looking statements" and represent the Company's projections, intentions, expectations, estimates or beliefs concerning, among other things, future operating results and various components thereof or the Company's future economic performance. The projections, intentions, expectations, estimates and beliefs contained in such forward-looking statements necessarily involve known and unknown risks and uncertainties which may cause the Company's actual performance and financial results in future periods to differ materially from any projections, intentions, expectations, estimates or beliefs. Accordingly, you should not rely on any forward-looking statements and the Company accepts no obligation to disseminate any updates or revisions to such forward-looking statements.
•The Company and the directors of the Company accept responsibility for the information contained in this presentation and to the best of their knowledge and belief such information is true and does not omit anything likely to affect the import thereof.
•SVS Securities plc and Cairn Financial Advisers LLP, who are both authorised by the Financial Services Authority, are acting solely for the Company in relation to the proposed placing of securities and admission to AIM described in this presentation and will not be responsible in respect of the proposed placing and admission to AIM to any other person for providing protections afforded to clients of SVS Securities plc or Cairn Financial Advisers LLP (including persons who have been, or may be, clients of SVS Securities plc or Cairn Financial Advisers LLP in respect of other services). Neither SVS Securities plc nor Cairn Financial Advisers LLP is advising any recipient of this presentation in respect of the proposed placing and admission to AIM.
•Recipients of this presentation who intend to participate in the proposed placing are reminded that no reliance may be placed by any person for any purpose whatsoever on the information contained in this presentation or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of the Company, SVS Securities plc or their respective shareholders, directors, officers or employees or any other person as to the completeness, accuracy or fairness of the information or opinions contained in the presentation and the accompanying verbal presentation, and no liability is accepted for any such information or opinions (including in the case of negligence, but excluding any liability for fraud).
•The distribution of the document containing this presentation in certain jurisdictions may be restricted by law and therefore persons into whose possession the document comes should inform themselves about and observe any such restrictions. Any such distribution could result in a violation of the law of such jurisdictions. Neither the document nor any copy of it may be distributed, reproduced, transmitted or otherwise made available in whole or in part to persons in the United States of America, Canada, Malaysia, Japan, Australia, the Republic of Ireland or the Republic of South Africa or to any corporation, partnership or other entity created or organised under the laws thereof. No securities commission or similar authority in Canada has in any way passed on the merits of the securities offered hereunder and any representation to the contrary is an offence. No document in relation to the proposed placing has been, or will be, lodged with, or registered by, The Australian Securities and Investments Commission, and no registration statement has been, or will be, filed with the Japanese Ministry of Finance in relation to the placing or the securities described in this presentation. Accordingly, subject to certain exceptions, the securities described in this presentation may not, directly or indirectly, be offered or sold within Canada, Malaysia, Japan, Australia, the Republic of Ireland or the Republic of South Africa or offered or sold to a resident of Canada, Malaysia, Japan, Australia, the Republic of Ireland or the Republic of South Africa.
•The securities described in this presentation have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “US Securities Act”) or with any securities regulatory authority of any state or other jurisdiction of the United States of America and may not be offered or sold within the United States of America or to, or for the account or benefit of, any US Person as that term is defined in Regulation S under the US Securities Act. The Company has not been registered and will not register under the United States Investment Company Act of 1940, as amended.
•This presentation contains information about the historical financial performance of the Company and its subsidiaries from time to time (the “Group” or “CNE”). Past performance is not, however, a guarantee or reliable guide as to the future financial performance of the Group.
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Overview• CNE is a technology, process and engineering solutions provider, whose operations are based
in China, for bioethanol and biobutanol projects focusing on the bioenergy sector.
• CNE:
– Has an established track record in China, as well as overseas customers in countries including Romania, Taiwan, Russia, Thailand and Indonesia.
– Has advised on 88 projects with an aggregate production capacity of approximately 9.0m tonnes per year and a total contract value of approximately RMB1.5bn.
– Has experienced and qualified personnel - CNE’s Chairman and CEO have many years of experience in the renewable energy industry.
– Has its own R&D laboratory and has proprietary bioenergy technology.
– Because of its experience in providing services to the bioenergy sector, the Directors of CNE believe that CNE is well positioned to benefit from the expected continued growth in the bioenergy sector, particularly in China.
• The global bioenergy industry is expanding, including in China.
• In September 2010, China’s biofuel industry was forecasted to bring about construction projects with a total value of RMB 96bn (US$14.1bn – based on a September 2010 exchange rate).
• Ethanol production in China is forecast to increase to 10m tons in 2020.
• CNE is seeking admission to AIM and looking to raise gross proceeds of up to US$2.0m pursuant to a placing of new shares.
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Board of Directors
• Chairman of CNE and ZKTY (Guangdong Zhongke Tianyuan New Energy Science and Technology Co. Ltd.). • Primarily in charge of the overall strategic planning and corporate development of CNE. • Prior to joining CNE, he worked in GIEC CAS (Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences), where he was latterly Deputy Chief, in charge of the industrial and external investments, asset management and financial matters.• Holds an Executive Master of Business Administration from Sun Yat-sen University and is a member of the Chinese Institute of Certified Public Accountants.
Yu Weijun MBA
Executive Chairman
• A director of CNE since 2006. • Managing Director of ZKTY. • Responsible for the overall company operation, sales and project design and management. • Prior to joining ZKTY, he was managing director of GZTY Regeneration Resources (of which he is still a director). • Mr. Tang graduated from South China Science & Tech University with a degree in Chemical Engineering, and has an EMBA from Peking University.
Tang Zhaoxing MBA
Chief Executive Officer
• President of Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences. Professor. • Bachelor’s degree in Chemical Engineering from Nanjing University of Technology.• Master’s degree from Aichi University of Technology, Japan.• Ph.D. in chemical engineering from Nagoya University, Japan.
Chen Yong Ph.D.
Non-Executive Director
• Has worked with Credit Suisse First Boston, UOB Asia Limited (part of the United Overseas Banking Group in Singapore) and BDO Raffles, Singapore before establishing NovusAsia Capital Limited, of which he is a director and shareholder.• Mr. Foo has a Master of Business Administration from Nanyang Technological University, Singapore.
Foo Shiang Peow MBA
Non-Executive Director
• Started his career in the energy industry working for General Electric in Asia - involved commercialising and bringing to market new technologies. • Co-founder of JFAX Inc., which became a leading internet communications company J2 Global Communications, Inc. that listed on NASDAQ (NASDAQ:JCOM) and today has a valuation exceeding $1bn. • Was involved in developing two businesses admitted to AIM, Virtual Internet UK Limited and Coms plc (AIM:COMS).• Actively working it the clean technology sector as CEO of Jade Clean Technology Limited (developing underground coal gasification projects in China and India).
Richard Bennett
Non-Executive Director
Senior Management
Ding Liren (“Adam”) – Chief Administrative Officer
• Mr Ding has been the Chief Administrative Officer of ZKTY since 2008. He is responsible for procurement, administration and human resources in ZKTY.
• Prior to joining ZKTY, he worked in Ningxia Xiacheng Import/Export Corporation, Ningxia Chengwei Advertising Co., Ltd. and Devotion Energy Group Ltd.
• Graduated from the University of International Business & Economics Beijing in 1990 with a Bachelor’s degree in Economics.
Wen Xiaoyi (“Sunny”) - Chief Financial Officer
• Ms Wen has been the Chief Financial Officer of ZKTY since 2007. She is responsible for the finance, accounting, taxation and compliance matters relating to the operations of ZKTY.
• Prior to joining ZKTY, she worked at Guangzhou Finance Bureau and Guangzhou Financing Guarantee Centre and was chief financial officer at Guangzhou Jinpeng Company and assistant chief executive officer at iTour Co. Ltd.
• Member of the Chinese Institute of Certified Public Accountants.
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Group Structure & Background
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OverseasChina
AIM quoted, Jersey incorporated, Group holding company
Wholly foreign owned enterprise and trading entity
Technology engineering
100%
Group Background:
The origins of ZKTY’s activities date back to 2002, with the formation of Guangdong Zhongke Tianyuan Regeneration Resources Engineering Co., Ltd (“GZTY Regeneration Resources”), which was formed as a result of a spin-out from the Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences.
In 2005, Guangzhou Baojie Electromechanical Co., Ltd. (“Guangzhou Baojie”) was founded to focus on the production and supply of equipment and provision of production technology and technical services to produce ethanol downstream products, including acetic acid and ethanol.
In 2006 ZKTY acquired certain assets, including customer contracts and technology, from Guangzhou Baojie and GZTY Regeneration Resources, which enabled the establishment of ZKTY's operations.
In October 2010, ZKTY acquired Guangdong Boluo Jiuneng High New Technology Engineering Co., Ltd. (“Boluo”), which fabricates equipment in accordance with project requirements, and provides services exclusively for ZKTY.
100%
Group Structure Chart (following Admission)
Background & Milestones
Key Group Milestones:
• 2002: GZTY Regeneration Resources secures its first major contract, which was subsequently transferred to ZKTY.
• 2003-04: GZTY Regeneration Resources was awarded the first in a series of contracts by Jilin Meihekou Foukang Alcohol Co., Ltd to increase its production of edible ethanol by 35,000 tonnes per year.
• 2006: The Company and ZKTY were formed.
• 2006: ZKTY secured its first contract in Europe to provide design and construction services for the production of a 80,000 tonnes per year fuel ethanol plant in Romania.
• 2007: ZKTY was awarded ISO 9001:2000 certification by the China Great Wall (Tianjin) Quality Assurance Centre.
• 2007: ZKTY secured contracts with further international clients, including the Blagoveschensk Alcohol Plant in Russia and clients in Taiwan and Thailand.
• 2008: ZKTY secured a contract with Indonesia Fuel Ethanol Co. Limited.
• 2008: CE accreditation granted confirming that certain of the pressure equipment designed and constructed by ZKTY and Boluo conformed to EU standards for pressure equipment.
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• The Group operates through its wholly owned subsidiary, Guangdong Zhongke Tianyuan New Energy Science and Technology Co. Ltd (“ZKTY”).
• The Group has extensive experience in designing and constructing ethanol and ethanol downstream production plants.
• Since ZKTY’s establishment, the Group has advised on 88 projects, with an associated total contract value of approximately RMB1.5bn.
• These completed projects demonstrate the Group’s track record in providing its customers with a range of technology and engineering services in relation to their ethanol and biobutanol production needs.
• The Directors believe that the Group is an established integrated service provider which can offer customers a range of services, thereby potentially saving customers costs and time by avoiding engaging multiple parties.
Revenue Model 1
In Operation Proposed
The Group intends to organise its business into two segments:
• Technology and Engineering Solutions.• Investments.
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Revenue Model 2
• The Group, through ZKTY, is an integrated service provider which principally provides technology and engineering services mainly to:
– Ethanol producers.
– Ethanol downstream product producers.
– Biobutanol producers.
• The Group’s “Technology and Engineering Solutions” business segment generates revenue from providing services which include:
– Technical design and engineering.
– Procurement and construction.
– Installation and testing.
– Training of customers’ staff.
• Going forward, the Directors expect the Group to develop its Biogas and Energy Management Conservation (“EMC”) revenue streams and to establish an Investments segment.
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SolutionsTechnology & Engineering Solutions - Bioethanol and Biobutanol
• Ethanol (alcohol) is commonly used in the manufacture of chemicals, cosmetics, and beverages.
• Butanol is commonly used in the manufacture of chemicals and solvents.
• Both ethanol and butanol may also be used as fuels.
• Bioethanol and biobutanol are commonly made from starchy materials and saccharides via a combination of both fermentation and distillation.
• The Group has technologies for producing various grades of ethanol (normal, superfine, fuel).
• The Directors believe that the Group’s core competency lies in the design and construction of fermentation, distillation and dehydration systems for ethanol production - the critical processes for the production of ethanol.
Selected Bioethanol and Biobutanol Projects:
Contractual Value Capacity (tonnes per year)
Project Description Date of Completion or Estimated Date of Completion
RMB 30,200,000 35,000 Super-grade edible alcohol project for Jilin Meihekou City Foukang Alcohol Co., Ltd. March 2011
€180,000 80,000 Ethanol fuel plant for Romania Biofuel Energy SRL. June 2011
RMB 43,173,000 100,000 Cassava-based edible alcohol project for Guangxi Mingyang Bio-Chemical Science & Technology Co., Ltd.
August 2011
PHOTO / IMAGE
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Solutions IITechnology & Engineering Solutions - Biogas
• Biogas refers to either a methane, hydrogen or carbon dioxide rich gas that is produced as organic matter breaks down.
• Plants can supply and sell clean biogas as fuel for civilian use to the local utility gas companies.
• The Group specialises in the production of biogas through the treatment and anaerobic fermentation of waste by-products from the ethanol production process.
• In addition to domestic and utility company use, biogas can be used in many industries such as fuel, materials, intermediates and additives.
• Although commercial production of biogas is relatively new, the Directors believe that the Group’s background and experience in designing and constructing ethanol production plants will help build a competitive strength for the Group in biogas production.
Existing Biogas Projects:
Project Description
An agreement with Dongguan Xin’ao Gas Co. Ltd, to design and construct a bio-gas recovery and purifying plant at a beer brewery located in Dongguan China.
A letter of intent to build a bio-gas recovery and purifying plant at a beer brewery owned by Kingway Beer Group, located in Shenzhen China, with the intention that the purified biogas be sold to Shenzhen City Gas Group.
Note: The image above is illustrative and is not a CNE Biogas project.
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Solutions III & InvestmentsTechnology & Engineering Solutions - Energy Management Conservation (‘EMC’)
• Under its EMC model, the Group offers customers with existing production facilities the ability to reduce energy consumption by modifying the customer’s existing equipment and/or installing ancillary equipment for the customer’s existing production infrastructure.
• Under the model, the Group bears the costs of modifying the customer’s existing equipment and installing ancillary equipment in return for a share of the customer's targeted net energy saving.
Existing EMC Project:
Contractual Value Customer Date of Completion
RMB 220,000 per month for a period of sixty months from January 2010 is due from the customer.
Yichang Sanxia Limin Biochemical Ltd.
November 2009.
The Group has identified the following potential future investment orientated income streams that it is currently exploring:
– Investing in undervalued biofuel operators and producers.
– Forming joint ventures to co-invest in next generation biofuel operators.
Investments
PHOTO / IMAGE
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Financial Snapshot
Year ended
31 December 2007
RMB’000
Audited
Year ended
31 December 2008
RMB’000
Audited
Year ended
31 December 2009
RMB’000
Audited
Year ended
31 December 2010
RMB’000Unaudited
Revenue 205,749 224,208 125,301 138,477
Revenue Growth (%) N/A 9% -44% 11%
Gross profit 41,802 42,080 31,520 40,738
Gross Margin (%) 20% 19% 25% 29%
Other operating income
1,079 4,587 5,563
464
Total Operating expenses
(55,696) (52,834) (19,820) (17,032)
Interest expenses (1,045) (9,622) (2,837) -
Income tax expense (9) (8) (2,508) (3,623)
Profit/(loss) for the financial year/period
(13,869) (15,797) 11,918 20,547
Net margin (%) -7% -7% 10% 15%
As at 31 December 2007
RMB’000
Audited
As at 31 December 2008
RMB’000
Audited
As at 31 December 2009
RMB’000
Audited
As at 31 December 2009
RMB’000
Unaudited
Total Assets 255,129 127,298 152,441 170,827
Total Liabilities 252,180 137,980 156,703 152,449
Net assets/(liabilities) 2,949 (10,682) (4,262) 18,378
PLEASE NOTE THAT PAST PERFORMANCE IS NO GUARANTEE AS TO THE FUTURE PERFORMANCE OF THE COMPANY
CNE’s financial performance:
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Market Drivers• Bioenergy is widely considered to be one of the key alternatives to fossil fuel use
because of its easy acquisition and clean emissions.
• The National Development and Reform Commission in China forecasts that the production of ethanol will increase from 1.7m tons in 2008 to 10m tons in 2020.
• Novozymes and Mckinsey & Company predict that cellulosic ethanol could be substituted for 31m tons of gasoline in China by 2020, cutting the nation's oil imports by 10%.
• China has overtaken the USA to become the world's biggest energy consumer - fuelled by its decades-long economic growth and its rapidly expanding position as an industrial giant.
• China is the second largest oil consumer behind the USA. China’s oil consumption growth accounted for about a third of the world’s oil consumption growth in 2009.
• The PRC government has enacted various laws and regulations encouraging the use of renewable energy as a substitute for petroleum.
• In September 2010, China’s biofuel industry was forecasted to bring about construction projects with a total value of RMB 96bn (US$14.1bn - based on a September 2010 exchange rate).
Market Opportunity• The Directors believe that the development of the Chinese ethanol industry and its
expanding production capacity will open up opportunities for the Group.
• The Directors believe that China will demonstrate increasing demand for alcoholic beverages in the future.
• The Directors also believe that there will be an increased demand for higher quality alcoholic beverages in China, and a demand for new plants which are capable of producing higher quality ethanol.
• The Directors believe that there will be an increase in the demand for the Group’s services from ethanol downstream producers – due to increasing industrialisation in China.
• As many industrial, commercial and household products contain ethanol and acetic acid, the Directors believe that the demand for ethanol production plants will continue to rise in the future.
• The conversion of biomass into fuel, energy and chemicals is predicted to have the potential to generate upwards of US$230bn for the global economy by 2020.
• The Directors are of the opinion that bioenergy demand will increase as a result of the expected continued increase in the price of oil in the near future.
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Growth StrategyThe Group intends to focus its strategy towards the future growth and expansion of its business as follows:
•Expand customer base and enlarge geographical market.
– Expand its capability to capture and maintain its market share in the China ethanol fuel market.
– Broaden its international presence by marketing its services globally, especially in Southeast Asia.
– CNE’s agent is in negotiations relating to the potential sale of the Group’s products and services for a cassava ethanol plant in Thailand.
•Broaden EMC business by developing new complementary services.
– Expand its existing service offering by further developing its engineering capabilities.
•Develop and commercialize new sources of biofuel through internal research efforts, and via joint collaborations with third parties.
– Carry out further research and development in the areas of biofuel production.
– Develop new processes to maximise the extraction of ethanol and other biogases from cassava.
•Achieve growth through acquisitions, joint ventures or strategic alliances:
– Expand its capabilities and business through acquisitions, joint ventures or strategic alliances.
– Explore opportunities to acquire other operations which are also involved in similar industries.
Current Trading and Prospects
The Directors envisage the operating environment for FY2011 to be encouraging, as the Directors believe that the recent increase in oil prices will result in increasing demand for bioenergy, which will in turn lead to growth in the ethanol markets in the PRC and around the world.
•As at 31 December 2010, the Group’s order book for existing contracts was approximately RMB39m.
•The Directors expect that a substantial part of this order book will be completed and recognized in FY2011.
•The Group is currently exploring opportunities and negotiating with prospective customers for new projects in the PRC and overseas.
•In particular, via its agent, the Group is negotiating to provide products and services for a cassava based ethanol project in Thailand.
•Barring unforeseen delays or cancellations of projects arising from factors including adverse weather and funding problems faced by the Group’s customers, the Directors expect the Company to register increased revenue in FY2011.
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Use of Proceeds & AIM
• CNE is seeking admission to AIM and looking to raise up to US$2.0m gross pursuant to a placing of new shares at Admission (the “Placing”).
• It is the intention of the Company to use the proceeds from the Placing to provide the business with additional working capital.
• Reasons for the Admission to AIM:
– Enhance the Group’s status with its customers (both existing and prospective) and its other stakeholders, including suppliers, potential joint ventures partners and collaborators.
– Provide access to capital for growth i.e. raise finance for further development both at the time of Admission and through further capital raising after Admission.
– Encourage and incentivise employees’ commitment through an employee benefit trust, determine a market value for the Group’s shares and broaden the Group’s shareholder base.
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Why Invest?
• The global bioenergy industry is developing and expanding:
– The Directors believe that the increase in oil prices is likely to lead to growth in ethanol markets in PRC and around the world.
– Cellulosic ethanol (bioethanol produced from wood, grasses etc) could be substituted for 31m tons of gasoline in China by 2020, cutting the nation's oil imports by 10%. In September 2010, China’s biofuel industry was forecast to bring about construction projects with a total value of RMB 96bn.
• Has an established track record in China, with overseas customers:
– 88 projects completed.
– International sales - the group has exported its services outside of China into other Asian jurisdictions, Russia and the EU.
• Has experienced and qualified personnel:
– Chairman and CEO have many years of experience in the renewable energy industry.
– Board of Directors includes members with relevant experience, supported by a team of dedicated and academically qualified personnel.
• Has proprietary technology and maintains own R&D laboratory to develop and commercialize new sources of biofuel internally and via collaborations with third parties.
• Is not a plant operator - CNE is a services company which targets the ethanol and bioenergy industries, rather than a bioenergy or ethanol plant operator.
• Pipeline of projects in negotiation.
CNE:
Placing Statistics & Timetable
Placing Statistics
Placing Price: p
Anticipated market capitalisation on Admission £ million to £ million
Gross proceeds to be raised by the Company pursuant to the Placing £ million
Percentage of the Enlarged Share Capital represented by the Placing Shares Approximately % to %
The Directors and existing Significant Shareholders (those who, prior to the Placing, hold Ordinary Shares representing 3% or more of the ordinary share capital of the Company) will be subject to the provisions of orderly market agreements.
Indicative Timetable
Last day for book building 2011
Anticipated date for despatch of placing letters 2011
Latest date for receipt of placing letters 2011
Dealing expected to commence on 2011
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China New Energy Limited
APPENDIX
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Financial Information
Year ended
31 December 2010
Unaudited
RMB’000
Year ended
31 December 2009
Audited
RMB’000
Year ended
31 December 2008
Audited
RMB’000
Year ended
31 December 2007
Audited
RMB’000
Revenue138,477 125,301 224,208 205,749
Gross profit 40,738 31,520 42,080 41,802
Other operating income
464 5,563 4,587 1,079
Total Operating expenses
(17,032) (19,820) (52,834) (55,696)
Interest expenses
- (2,837) (9,622) (1,045)
Profit /(loss) before income tax
24,170 14,426 (15,789) (13,860)
Income tax expense
(3,623) (2,508) (8) (9)
Profit /(loss) for the financial year/period
20,547 11,918 (15,797) (13,869)
PLEASE NOTE THAT PAST PERFORMANCE IS NO GUARANTEE AS TO THE FUTURE PERFORMANCE OF THE COMPANY
As at 31 December
2010
Unaudited
RMB’000
As at 31 December 2009
Audited
RMB’000
As at 31 December 2008
Audited
RMB’000
As at 31 December
2007
Audited
RMB’000
Non-current assets
21,089 17,090 7,938 8,133
Current assets
149,738 135,351 119,360 246,996
Current liabilities
151,431 155,648 86,379 189,619
Net current assets/ (liabilities)
(1,693) (20,297) 32,981 57,377
Non-current liabilities
1,018 1,055 51,601 62,561
Net assets/ (liabilities)
18,378 (4,262) (10,682) 2,949
Abbreviated Consolidated Statements of Financial Position
Abbreviated Consolidated Statements of Comprehensive Income
Current Capital StructureImmediately prior to Admission, the Company will have 69,351,002 Ordinary Shares in issue.
As at the date immediately prior to Admission
Name Number of Ordinary Shares
Percentage of total number of issued ordinary Shares
Cobalt Ventures Ltd 16,832,770 24.27%
Best Full Investments Limited
12,000,000 17.30%
Jiang Xinchun 5,000,000 7.21%
Qui Weiming 5,000,000 7.21%
1. Yu Weijun is the sole legal and beneficial owner of 16,000,000 Ordinary Shares held by Leader Vision Investments Limited. In addition to the interests referred to above, Mr Yu is the sole beneficial holder of Tewin Capital Holdings Limited, which has entered an agreement to acquire 6,733,110 Ordinary Shares from Cobalt Ventures Ltd.
2. Tang Zhaoxing is the sole legal and beneficial owner of the 12,000,000 Ordinary Shares held by Asia Tianxing Investment Limited.3. Foo Shiang-Peow is a director and shareholder in NovusAsia Capital Limited, to which the Company has agreed to issue 2,019,932 Ordinary Shares at Admission in
part settlement of fees.
Citadel Debt Financing: • In July 2007, CNE raised US$12 million from the Citadel Equity Fund Limited (“Citadel”) through the issuance of convertible bonds which the Company undertook to use for, inter alia, contributing to ZKTY’s registered capital.• In October 2008, the Company entered into a redemption arrangement with Citadel, pursuant to which the Company paid Citadel US$4m and the principal amount of convertible bonds held by Citadel was reduced to US$8m. • In December 2010, the Company entered into further agreements with Citadel to restructure the debt existing at such time, cancelling the convertible bonds and reissuing ordinary bonds to the same value. • In consideration for the restructuring of its bonds and reduction in debt, Citadel has been granted warrants to subscribe for 4,713,175 Ordinary Shares (being 7% of the issued ordinary share capital of the Company at the close of business on 28 February 2011).
Significant Shareholdings Director Shareholdings
As at the date immediately prior to Admission
Name Number of Ordinary Shares
Percentage of total number of issued ordinary Shares
Yu Weijun 1 16,000,000 23.07%
Tang Zhaoxing 2 12,000,000 17.30%
Foo Shiang-Peow 3 2,019,932 2.91%
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Summarised Risk FactorsBefore deciding whether to invest in the Ordinary shares, prospective investors should carefully consider the risks described below which will apply to the Company together with all other information contained in this presentation. If any of the following risks actually occur, the Group’s business, financial condition and/or results of operations could be materially and adversely affected. In such case, an investor may lose all or part of his or her investment. Additional risks and uncertainties not currently known to the Directors may also have an adverse effect on the Group’s business and the information set out below is not and does not purport to be an exhaustive summary of the risks affecting the Group.
• Failure to obtain or maintain requisite permits and licenses: The Directors believe that the Group currently holds all necessary licenses and permits to carry on the activities which it is currently conducting under applicable laws and regulations. ZKTY and Boluo are subject to various government rules and regulations to carry out their respective business activities in the PRC. They are also subject to the periodic audits by the relevant PRC authorities for the renewal of these licenses and certifications. The relevant PRC authorities may suspend or refuse to renew the existing licenses or certifications. There is no assurance that ZKTY and Boluo will be able to maintain or renew their respective existing permits, licenses and certifications in the future.
• Intellectual Property: The Company’s success depends in part on obtaining, maintaining, and enforcing its intellectual property rights, and its ability to avoid infringing the intellectual property rights of others. There is a risk that certain technology used by ZKTY in connection with the Group’s current business operations, may not be adequately protected by patents or any other intellectual property rights.
• The Group is largely reliant on the Chinese market: The Group’s operations in China represent a significant majority of the Group’s total revenues. As a result, the Group’s operations, prospects and financial condition could be adversely affected if there is any deterioration in or disruption to legal, political, economic or social conditions in China.
• Price of petroleum and related substitute ethanol downstream products: Biofuel is an alternative energy source to petroleum and ethanol is commonly used as a partial substitute of gasoline. The demand for biofuel may be significantly influenced by the price of petroleum and related products. In the event the price of petroleum decreases, this could lead to the increase in demand for biofuel. This will adversely affect the demand for the Group’s products and services. If the prices of petroleum and related products fall significantly, the Company’s financial performance may be materially and adversely affected.
• Prices of the feedstock for ethanol production: The prices of feedstock may be affected by factors such as climatic variations and government regulations. The increase in the prices of feedstock will increase the production cost of ethanol, which is likely to reduce the cost effectiveness of producing bioethanol. In such an event, capital expenditure by the Company’s customers in the building of new plants is likely to decrease. If the prices of feedstock increase substantially, this could affect the demand for the Group’s products and services and this may affect the Group’s financial performance.
•The M&A Regulations: there is a risk that the CSRC or other PRC governmental authorities may issue an interpretation or implementing rules in the future that could determine that the CSRC’s or another PRC governmental authority’s approval is required for the proposed listing of the company on AIM. The Group may face sanctions by the authorities if the authorities subsequently determine that the approval is required for the proposed listing of the Company on AIM.
• Political risks in PRC: The degree to which the PRC Government regulates industry is a key risk to business in PRC in the future. The rate of economic liberalization could change and laws and policies affecting the environmental protection sector, foreign investment, exchange rates and other matters affecting investment in PRC could change as well.
•.Limitations caused by PRC foreign exchange control: There can be no assurance that the PRC regulatory authorities will not impose further restrictions on the convertibility of the RMB. Any further restriction on currency exchanges may limit the ability of the Company to repatriate revenues.
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Company & Advisory TeamChina New Energy LimitedQueensway HouseHilgrove StreetSt HelierJerseyJE1 1ESChannel Islands
Contact: Foo Shiang Peow
Ding Liren (“Adam”)
SVS Securities plc, Broker & Financial Adviser21 Wilson Street London EC2M 2SN
Contact: Ian Callaway: 020 7638 5600
Alex Mattey: 020 7638 5600
Cairn Financial Advisers LLP, Nominated Adviser61 Cheapside
London EC2V 6AX
Crowe Clark Whitehill LLP, Reporting AccountantsSt Bride's House 10 Salisbury Square London EC4Y 8EH
Stephenson Harwood, Solicitors to the Company as to English LawOne Raffles Place #12-00Singapore 048616
Bird & Bird LLP, Solicitors to the Nominated Adviser and Broker15 Fetter LaneLondon EC4A 1JP
Walbrook Public Relations, Financial Public Relations4 Lombard StreetLondonEC3V 9HD