sino clean energy - investor presentation - april 2011

7/27/2019 Sino Clean Energy - Investor Presentation - April 2011

1/29


2/29

Sino Clean Energy Inc. 2

Safe Harbor Statement

Statements in this presentation may be "forward-looking statements" within the meaning of federal securities

laws. The matters discussed herein that are forward-looking statements are based on current management

expectations that involve risks and uncertainties that may result in such expectations not being realized. Forward-looking statements involve risks and uncertainties that may cause actual results, performance or financial

condition to be materially different from the expectations of future results, performance or financial condition

expressed or implied in any forward-looking statements. Such risks include, but are not limited to, competition in

the coal industry, declines in demand for the Companys products, rising raw materials costs, changes to

management or key personnel, risks associated with conducting business in China, the Companys ability to

expand into markets outside of China and other risks detailed in the Companys filings with the Securities and

Exchange Commission. Actual outcomes and results may differ materially from what is expressed or forecasted in

such forward-looking statements due to numerous potential risks and uncertainties. Forward-looking statementsmade during this presentation speak only as of the date on which they are made, and we do not undertake any

obligation to update any forward-looking statement to reflect events or circumstances after the date of this

presentation.

Additional information regarding the risks faced by the Company may be found in its filings from time to time

with the Securities and Exchange Commission. Because forward-looking statements are subject to risks and

uncertainties, we caution you not to place undue reliance on any forward-looking statements. All written or oralforward-looking statements by the Company or persons acting on its behalf are qualified by these cautionary

statements.


3/29


Leading producer of Coal Water Slurry Fuel (CWSF),

offering heating and energy solutions for residential,

commercial and industrial uses in China1

Largest third-party CWSF producer in China

Current installed capacity of 1,150,000 metric tons

with 6 production lines

Develop, produce, and distribute CWSF, which is a

liquefied form of coal that burns more efficiently and

cleaner than traditional briquette coal An economic alternative to oil and natural gas

(scarce and expensive resources in China)

Significantly cleaner than briquette coal

Mainly focus on two categories of customers

Residential/commercial steam for heating

Industrial: steam for heating /production

processes

Company Profile

1. Source: Frost & Sullivan

2. Adjusted Net Income (Non-GAAP): net income have been adjusted for expense related to escrow shares, cost of private

placement, change in fair value of derivative liabilities, extinguishment of derivative liability and amortization of notes

discount

3. 2011E data per Company guidance

2

3

(in $MM)


4/29


Financial Summary (as of 4/14/2011)

Market Price: $4.04 Common stock outstanding: 23.5MM shares

Market Cap:1 $94.9 MM Total diluted shares: 26.7MM sharesP/E Multiple: 3.0x (LTM Pre-money)

Record Financial Performance For FY 2010

FY2010 revenues increased 131% to $106.3 million; adjusted net income increased 154.7% to $27.9 million,

with adjusted EPS of $1.46

FY2010 gross margins increased 230 bps year-over-year to 39.4%

Generated $26.2 million in operating cash flow for full year 2010

Financial Summary

1. Market Capitalization is calculated using common stock outstanding multiplied by the market price

2. Adjusted Net Income (Non-GAAP): net income have been adjusted for expense related to escrow shares, cost of private placement, change in fair value of derivative liabilities, extinguishment of derivative

liability and amortization of notes discount

US$MM, except per share data) FY 2010 FY 2009 FY2008 FY2007 2007-2010 CAGR

Revenue $106.3 $46.0 $14.3 $2.8 236.1%

Revenue Growth 131.1% 222.8% 408.5% NA

Gross Profit $41.8 $17.1 $5.0 $1.0 247.1%

Gross Profit Margin 39.4% 37.1% 35.0% 36.3%

NonGAAP Adjusted Net Income2 $27.9 $10.9 $3.7 $1.0 203.3%

NonGAAP Net Income Margin 26.2% 23.7% 25.9% 36.3%

NonGAAP Diluted EPS $1.46 $0.57 $0.36 $0.12 130.0%


5/29


Company History

2004.04

Started CWSF

research and

planning

2010.06

2008.09

Raised $1.3million

through a PIPEtransaction

2006.12

Obtained public

listing through

reverse merger

2006.04

Started buildingCWSF operation

2007.07

Started producing

CWSF, annual

capacity of

100,000 metric

tons (Tongchuan

line 1)

2008.02

Boiler referral

agreement

signed with

Haizhong Boiler

2010.01

Increased productioncapacity to 850,000

metric tons (Tongchuan line 5)

2009.02

Increased

production

capacity to

350,000 metric

tons (Tongchuan

line 2)

2009.10

Listed on NASDAQ

2009.07

Raised $11.6million through aPIPE transaction

Joint developmentagreement signed with

Haizhong Boiler

Sino Clean is Well Positioned for Future Growth

Increased production

capacity to 650,000

metric tons (Shenyang

line 3 and 4)


6/29


Large and fast growing CWSF market in China

China is the no. 1 coal consumption country in the world

CWSF, a clean coal solution, offers both cost savings and environmental benefits to the end users

and is feasible for large scale adoption

Strong government support (legislation and incentives) on both national and local levels

Dominant CWSF producer already in full scale commercial production

Largest third-party CWSF producer in China with first mover advantages

Stable and growing customer base brings visibility on long-term growth prospects Long-term framework agreements in place with customers

100% customer retention rate since commercial operation began

Long-term strategic agreements with key industry partners

Strategic partnership with Haizhong Boiler, the largest CWSF boiler manufacturer in China

Experienced management team with extensive CWSF expertise

Key management team members have an average of 6 years of experience in the CWSF industry

Strong financial track record

Revenues increased at CAGR of 236% and non-GAAP net income increased at CAGR of 203% from

2007 to 2010

Key Investment Highlights


7/29Sino Clean Energy Inc. 7

1. Source: National Bureau of Statistics of China

2. Source: Frost and Sullivan

Chinas Heavy Reliance on Coal

72.2% 75.8% 76.2% 74.6% 67.8% 68.9% 66.7%

0

0.5

1

1.5

2

2.5

3

3.5

1980 1985 1990 1995 2000 2005 2010E

Billion

tce

Coal Other

Coal is the most widely used energy source in China

Significant: China is the largest coal consumption country in the world, total coal consumption in

China was 3 billion tons in 20091

Established:In 2010, coal accounted for 67% of overall energy consumption in China2

Abundant:Coal represents around 94% of Chinas fossil fuel reserves2, while oil represents 5.4%

and natural gas only 0.6%

Proven Fossil Fuel Resource Reserves (2008)Chinas Energy Consumption by Type1



Chinas Urgent Need to Switch to Clean Coal

China budgeted US$12 billion in 2010 for energyconservation and pollution reduction2

Government subsidy of $30 to $38 for every ton

saved by upgrading traditional coal boilers to clean

coal boilers and fining those who do not comply3


2. Report on China's central, local budgets (2010)

3. Policy on Top 10 Energy Reservation Projects made by NDRC in 2007

Abundant, cheap

and dirty coal

supply

Lack of oil & naturalgas supply and

other alternative

energies

National focus on

clean coal

technologies+ =

Increasing pollution from traditional coal usage a

terrible hidden price for the fast growing economy

China currently ranks first in terms of SO2 emissions Chinese coal resource is featured by high ash (23.0

percent) and high sulfur content (2.0 percent)

It is estimated that 85.0 percent of CO2, 80.0 percent of

SO2, 67.0 percent nitrogen oxide and 80.0 percent of soot

emissions are caused by coal burning in China1

Total Sulfur Dioxide Emissions by Country

1980-2000



Why CWSF?

CWSF is a significantly cheaper

source of energy than other major

traditional fossil fuels

50% cheaper than diesel oil

32% cheaper than natural gas 5% cheaper than coal briquette

CWSF is cleaner and more efficient

than briquette coal

80% lower sulfur emissions 33% higher burn off rate

21% higher thermal efficiency

38% more energy generated

CWSF is a liquefied form of coal that burns more efficiently and cleaner than

traditional briquette coal and an economic alternative to diesel oil and natural gas

Source: Frost & Sullivan

65%

98% 99% 99%

Briquette Coal CWSF Diesel Oil Natural Gas

Burn-off Rate

0

1.48

2.92

7.28

Natural Gas CWSF Diesel Oil Briquette

Coal

SO2 Emission Index

0 0.030.26

2.78

CWSF Natural Gas Diesel Oil Briquette

Coal

N0x Emission Index

Note: Emission index is emission/energy generated

Fuel Cost, Performance and Emission Comparison

100% 105%

147%

200%

CWSF Briquette Coal Natural Gas Diesel Oi l

Economic Cost



Why CWSF?

CWSF is one of the few energy sources that is available at low costs and with

ample supply

Much cheaper than diesel oil and natural gas

Significantly less pollution than coal-briquette and diesel oil

Abundant and stable coal supply

CWSFCoal

BriquetteDiesel Oil Natural Gas

Other clean

energy

Low Economic Cost

High Efficiency

Low Emission

Stable supply

Technology



Source: Frost & Sullivan

CWSF: Strong Government Support National Level

Development 1981 - 1985 CWSF successfully developed by Bayi Coal Mine

1986 1990 CWSF fuel started its trial use in key national projects and plants

Promotion 1991 1995 CWSF listed in the Current Catalogue of Key Industries, Products and

Technologies to be Encouraged

1996 2000 9th Five-Year Plan: Research scope set out + demonstrative 220 t/h CWSF

furnace built to replace oil burning boiler in power plants

2001 - 2005 10th Five Year Plan: Released stand-alone report 2010 Outline forDevelopment of CWSF in China

Wider

applications

2006 - today Central government policies filtering down to local governments, driving

increased support for CWSF

CWSF is listed in each national Five-Year Plan since 1981

Strong government incentive to promote CWSF for energy conservation and

emission reduction campaign

CWSF industry in China is still at an early stage



1. Include policies carried out in cities including Dongguan (Guangdong), Nanning (Guangxi), Nanchang (Jiangxi), Xiamen (Fujian), Hangzhou (Zhejiang), Huaihua (Hunan), Xian (Shaanxi), Tongchuan

(Shaanxi)

CWSF: Strong Government Support Local Level

Sample PoliciesCarried out by Local Government for Promoting CWSF 1

Goal Promote application of CWSF and other new clean energysources to save energy and reduce emissions

Upgrading Existing Boilers

(Government Mandate)

Convert all existing coal-briquette boilers to CWSF boilers or

other clean energy sources

Installing New Boilers

(Government Mandate)

All new boilers must use CWSF or other clean energy sources

to meet emission request or will be shut down

CWSF Centralized Heating Stations Build centralized heating project using CWSF in planned

areas/industrial parks and pull down existing boilers in that

area

Subsidies for Promoting CWSF Newly-built CWSF boilers: 10-15% of the total investment

Upgrading coal boilers to CWSF boilers: 20-30% of the total

investment

Upgrading diesel boilers to CWSF boilers: $15,000 to $30,000

Centralized heat supply using CWSF: $22,500 to $75,000

subsidy depending on the output scale



CWSF: Strong Growth Outlook

7.8

11

15.9

21.3

27.3

33.8

41.3

49.9

59.9

0

10

20

30

40

50

60

70

2006

2007

2008

2009

E

2010

E

2011

E

2012

E

2013

E

2014

E

Demand(milliontonnes)

Power Generation Plants

Industrial Customers

Residential Heating

2006-2014 CAGR: 29.0%

CWSF market key growth drivers CWSF is the only clean energy in China available at low

costs and with ample supply

Stricter government policies on pollution

Energy prices have been growing for the past few years

and the trend is expected to continue Supply shortage of diesel oil and natural gas in China

Strong CWSF growth outlook CWSF is used in 700 industrial furnaces and in

hundreds of industrial kilns1

600,000 traditional fossil fuel boilers currently installedin China, with approximately 100,000 requiring

replacement or major repairs each year2

Market demand for CWSF in China in 2008 was

15.9 million metric tons or less than 1% of total coal

consumption1

The growing overall demand for CWSF in China provides great opportunities and large

growth potential for CWSF suppliers


2. Source:Beijing Zhongjing Zongheng Information and Consulting Center

CWSF Demand in China, 2006-2014E2



Dominant Market Position

We are the largest-third party producer of CWSF

in China

We accounted for 15.9% of total domestic commercial

CWSF supply in 1H2010

Dominant CWSF supplier in existing markets and firstmover advantage

Approximately 40 to 50 commercial suppliers of CWSF in

China, most have volume of less than 100,000 metric tons

No foreign competitors with a material presence in China

Market Share of Leading commercial

Suppliers of CWSF in China 1

(by Sales Volume 1H2010)

Fast development of CWSFs commercial application

Historically, CWSF was only produced in-house by large state-owned manufacturers of

coal/electricity for internal consumption

Commercial supply refers to CWSF suppliers producing CWSF and selling to an external CWSF

customer rather than for internal use

The commercial supply of CWSF starts to grow with the increasing demand of CWSF in

residential, commercial and industrial use

Regional: Critical to establish production capacity within 200 km of the customer base




Integrated Business Model

Stable and abundant

supply of washed coal

(through long-term

supply contracts)

Our suppliers guaranteeto satisfy the maximum

volume demand of our

production lines

Large scale capacity and

fully automated production

lines

Able to produce a wide

range of CWSF particle sizes

Recognized as one of the

best CWSF products in

China

Top notch quality control

systems

Direct sales to

residential, commercial

and industrial

customers

Long term frameworkagreements in place

Strategic partnerships &

sales channels

Supply Processing End User

Sino Clean Energy Inc.



Substantial Production Capacity

Production Line

Capacity

(metrictons/yr) Method Start date Location

In-place

Line 1 100,000 Grinder July 2007 Tongchuan

Line 2 250,000 Atomizer March 2009 Tongchuan

Line 3 150,000 Grinder October 2009 Shenyang

Line 4 150,000 Grinder October 2009 Shenyang

Line 5 200,000 Grinder January 2010 Tongchuan

Sub-total 850,000

Additional Development

Line 6 300,000 Grinder January 2011 Guangdong

Line 7 750,000 Grinder August 2011 Guangdong

Grand total 1,900,000

LocationsProduction Lines

Substantial installed production capacity

Currently six production lines with installed capacity of 1,150,000 metric tons

Plan to increase capacity to 1.9 million metric tons by the first half of 2011

Most immediate geographic expansion will focus on Guangdong Province

Tongchuan facilityCurrent Capacity = 550,000

metric tons

Shenyang facilityCurrent Capacity = 300,000 metric tons

Xian, ShaanxiHead Office

Nanning facility(Future development)

Planned Capacity = 500,000 metric tons

Guangdong facilityCurrent Capacity =300,000

metric tons

Operating facility

Planned facility

Office



2009 Sales by Application

Residential/

commercial Industrial

2010 Sales Breakdown by Application

Established Customer Base

Diverse customer base representing multiple industries

43 direct customers as of December 31, 2010

Residential/commercial = steam for heating

Industrial = steam for heating + production processes

Long-term framework agreements in place with most customers

Dominant CWSF producer in both of our present markets: Shannxi and Liaoning provinces

100% customer retention rate since commercial operation

Long-term framework agreements in place with approximately 90% of our customers

Stable end-markets with predictable utility-like cash flows

Industrial Processes Residential/commercial Heating


18/29


Strategic Partnerships

Haizhong Industry Inc. (Haizhong Boiler)

The largest CWSF boiler manufacturer in China, with an estimated 78% market share1

We are the exclusive distributor in Shaanxi province and have sold 51 boilers to-date

Exclusive nationwide strategic partnership to provide one-stop shop for CWSF users

Leading CWSF Boiler

Supplier

Leading CWSF supplier

Strategic Partnership CWSF Users

1. Source: Beijing Zhongjing Zhongheng Information and Consulting Center

Province Potential Addressable Market Size

(metric tons/annum)

Shaanxi 5,000,000

Liaoning 6,000,000

Guangxi 9,000,000Guangdong 61,000,000


19/29


Growth Strategy

Pursue organic growth in

existing markets

Leverage strategic

partnership with Haizhong

Boiler

Capitalize on strong

government support for

CWSF

Grow through expansion

and acquisitions in other

regional markets

Continue to bring new production capacity on-line in existing

markets (e.g. Tongchuan and Shenyang)

Continue to grow customer base - grew from 30 customers as of

March 31, 2010 to 43 as of December 31, 2010

Haizhong Boiler is Chinas largest CWSF boiler manufacturer

Exclusive sales agency agreement in Shaanxi

Exclusive nationwide strategic partnership agreement

Focus on the environment + extensive coal reserves = attractive

opportunity for CWSF

CWSF has been listed as a key scientific and technological project in

each of Chinas Five-Year Plans

Nanning, Guangxi province developing 500,000 metric tons

Potential future acquisitions


20/29


Name

Baowen RenChairman & CEO

41

Founded SCEI in 2002

Over 8 years experience in CWSF research, development and sales

Member of China CWSF Research Center, China Association of Environmental

Protection Industry, and China Association of Low- Carbon Economy

Age Experience

Wendy FuCFO 42

Peng ZhouCOO

42

Xueping WangCTO

48

Former CFO of China Shenghuo Pharmaceutical Holdings Inc (NYSE: KUN)

Former VP-Finance of Shengdatech (Nasdaq: SDTH)

Former corporate controller of Wal-Mart China

Former senior consultant at Deloitte & Touche USA

11 years experience in plant operations and management

Former GM of Shaanxi Pengyuan Technology Co., Ltd.

Former VP of Hanzhong Ruisen Real Estate Company

Began research in CWSF in December 2004, focusing on papermaking, black

liquor, CWSF, sewage sludge and high efficiency desulfurization CWSF

dispersants

Former VP, Deputy GM and Chief Engineer of Xi'an Plastic Production Company

from 1987 to 1999

Experienced Management Team


21/29


Financial Summary


22/29


Proven Financial Track Record

Robust top-line and bottom-line growth

Strong and consistent margin and profitability

Strong Balance Sheet Solid financial position with sufficient financing flexibility

Excellent working capital management

Significant Growth Prospects

All sales are done through long-term sales contracts with end-users that have highly visible ongoing long-term needs

Consistent margins and cash flow to support capacity expansion

Financial Overview


23/29


Proven Financial Track Record

USD million

CWSF COGS Breakdown (2010)

Robust Gross Profit Growth

Strong Revenue Growth

Adjusted Net Income2

USD million

USD million

1

1

1. 2011E data per Company guidance

2. Adjusted net income (Non-GAAP)

(1)


24/29


Rapid growth in

revenue and profit

Effective cost

management

Consistent margins

and attractive

profitability

Income Statement

HighlightsIncome Statement

(USD million) 12 Months Ended

Dec 31, 2010 Dec 31, 2009

Revenue $106.3 $46.0

Cost of goods sold 64.4 28.9

Gross profit 41.8 17.1

Gross margin 39.4% 37.1%

Selling expenses 4.6 1.1

G&A expenses 2.6 1.8

Income from operations 34.7 14.2

Operating Margin 32.6% 30.8%Adjusted Net Income 27.9 10.9

Adjusted Net Margin 26.2% 23.7%


25/29


Strong Balance Sheet

Highlights

Maintained

consistent financial

flexibility to

capitalize on

attractive market

opportunities

Low financial

gearing with

virtually no debt

Low receivables and

no bad debt

(USD million)

Balance Statement

Assets

Cash and cash equivalents $52.1 $18.3

Accounts receivable, net 3.9 3.7

Inventory 1.3 0.9

Prepaid inventories 10.2 5.5

Total current assets 77.8 28.8

Property, plant and equipment, net 13.6 12.6

Total assets $103.4 $44.6

Liabilities & Shareholders' Equity

Accounts payable and accrued expenses $1.6 $2.7

Taxes payable and other payables 3.3 1.6

Derivative liabilities 14.6 16.8Total Current Liabilities 19.5 21.1

Total Liabilities 19.7 51.1

Total Stockholders Equity 83.7 -6.5

Total Liabilities & Equity $103.4 $44.6

Dec 31, 2010 Dec 31, 2009


26/29


Companies in the Clean Technology Industry

Source: Capital IQ and company reports as of November 26, 2010

1

Note: 1. 2010E data per Company guidance


27/29


Large and fast growing CWSF market in China

Dominant CWSF producer already in full scale commercial production

Stable and growing customer base brings visibility on long-term growth

prospects

Long-term strategic agreements with key industry partners

Experienced management team with extensive CWSF expertise

Strong financial track record

Key Investment Highlights


28/29

SupplementalInformation


29/29

Si Cl E I 29

Production Process

Method 1: Traditional Grinder Process Method 2: Advanced Atomizer Process

High Concentration Preparation with Mixed

Grinding process

1. Coal pulverization

2. Coal / water mixing

3. Quality control

4. CWSF Delivery Produces coal microns as fine as 50 to 80

microns

Supersonic Fluid Dynamics Atomizer process

(SFDA)

Similar to the Grinder process, but the

SFDA process uses a series of ultrasonic

chambers to break coal briquettes down

into smaller particle form

Produces coal microns as fine as 20 to 30microns

Consumes 10% less electricity

SCEI does regular quality control, checking for condensate, viscosity, evaporation

rate, energy content, particle size, sulfur content and ash content

All production lines are typically run at night to conserve electricity

sino clean energy - investor presentation - april 2011

Documents