Transcript Slide 1

China New Energy Limited
Placing and Admission to Trading on AIM
March/April 2011
Financial Adviser and Broker: SVS Securities plc
1
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
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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
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•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
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•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.
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.
3
Board of Directors
Yu Weijun MBA
Tang Zhaoxing MBA
Chen Yong Ph.D.
Foo Shiang Peow MBA
Executive Chairman
Chief Executive
Officer
Non-Executive Director
Non-Executive Director
• 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.
• 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.
• 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.
• 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.
4
Richard Bennett
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).
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.
5
Group Structure & Background
Group Structure Chart (following Admission)
AIM
quoted,
Jersey
incorporated, Group holding
company
CNE
(Jersey incorporated and
admitted to AIM)
100%
Wholly foreign owned
enterprise and trading
entity
Overseas
China
Guangdong Zhongke Tianyuan
New Energy Science &
Technology Co. Ltd.
(“ZKTY”)
100%
Technology
engineering
Guangdong Boluo Jiuneng
High New Technology
Engineering Co., Ltd.
(“Boluo”)
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.
6
Background & Milestones
• 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.
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.
7
Revenue Model 1
The Group intends to organise its business into two segments:
•
•
Technology and Engineering Solutions.
Investments.
ZKTY
Proposed
In Operation
Technology and
Engineering Solutions
Biofuel
Biogas
Investments
New-Gen
Biofuel
EMC
8
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.
9
Solutions
Technology & 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
10
Solutions II
Technology & 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 byproducts 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.
11
Solutions III & Investments
Technology & 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.
Investments
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.
12
Financial Snapshot
CNE’s financial performance:
Revenue
Revenue Growth (%)
Gross profit
Gross Margin (%)
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’000
Unaudited
205,749
224,208
125,301
138,477
9%
N/A
41,802
42,080
20%
19%
-44%
31,520
11%
40,738
25%
29%
Other operating
income
1,079
4,587
5,563
Total Operating
expenses
(55,696)
(52,834)
(19,820)
Interest expenses
(1,045)
(9,622)
(2,837)
-
(9)
(8)
(2,508)
(3,623)
Income tax expense
Profit/(loss) for the
financial year/period
Net margin (%)
(13,869)
(15,797)
11,918
-7%
-7%
10%
As at 31 December 2007
RMB’000
Audited
Total Assets
Total Liabilities
Net assets/(liabilities)
As at 31 December 2008
RMB’000
Audited
As at 31 December 2009
RMB’000
Audited
464
(17,032)
20,547
15%
As at 31 December 2009
RMB’000
Unaudited
255,129
252,180
127,298
137,980
152,441
156,703
170,827
152,449
2,949
(10,682)
(4,262)
18,378
PLEASE NOTE THAT PAST PERFORMANCE IS NO GUARANTEE AS TO THE FUTURE PERFORMANCE OF THE COMPANY
13
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).
14
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.
15
Growth Strategy
The 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.
16
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.
17
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.
18
Why Invest?
CNE:
•
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.
19
Placing Statistics & Timetable
Placing Statistics
p
Placing Price:
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
20
China New Energy Limited
APPENDIX
21
Financial Information
Abbreviated Consolidated Statements of
Comprehensive Income
Abbreviated Consolidated Statements of Financial
Position
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
138,477
125,301
224,208
205,749
40,738
31,520
42,080
41,802
Other
operating
income
464
5,563
4,587
1,079
Total
Operating
expenses
Interest
expenses
(17,032)
-
(19,820)
(2,837)
(52,834)
(9,622)
As at 31
December
2009
Audited
RMB’000
As at 31
December
2008
Audited
RMB’000
As at 31
December
2007
Audited
RMB’000
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
(1,693)
(20,297)
32,981
57,377
1,018
1,055
51,601
62,561
18,378
(4,262)
(10,682)
2,949
Non-current
assets
Revenue
Gross profit
As at 31
December
2010
Unaudited
RMB’000
(55,696)
Net current
assets/
(liabilities)
(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)
Non-current
liabilities
Net assets/
(liabilities)
PLEASE NOTE THAT PAST PERFORMANCE IS NO GUARANTEE AS TO THE FUTURE PERFORMANCE OF THE COMPANY
22
Current Capital Structure
Immediately prior to Admission, the Company will have 69,351,002 Ordinary Shares in issue.
Significant Shareholdings
Director Shareholdings
As at the date immediately prior to Admission
As at the date immediately prior to Admission
Name
Number of Ordinary
Shares
Percentage of total
number of issued
ordinary Shares
Name
Number of Ordinary
Shares
Percentage of total
number of issued
ordinary Shares
Cobalt Ventures Ltd
16,832,770
24.27%
Yu Weijun 1
16,000,000
23.07%
Best Full
Investments Limited
12,000,000
17.30%
Tang Zhaoxing 2
12,000,000
17.30%
Jiang Xinchun
5,000,000
7.21%
Foo Shiang-Peow 3
2,019,932
2.91%
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).
23
Summarised Risk Factors
Before 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.
24
Company & Advisory Team
China New Energy Limited
Stephenson Harwood, Solicitors to the Company as
to English Law
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
Channel Islands
Contact:
One Raffles Place #12-00
Singapore 048616
Bird & Bird LLP, Solicitors to the Nominated Adviser
and Broker
Foo Shiang Peow
15 Fetter Lane
London EC4A 1JP
Ding Liren (“Adam”)
SVS Securities plc, Broker & Financial Adviser
Walbrook
Relations
21 Wilson Street
London EC2M 2SN
Contact:
Public
4 Lombard Street
London
EC3V 9HD
Ian Callaway: 020 7638 5600
[email protected]
Alex Mattey: 020 7638 5600
[email protected]
Cairn Financial Advisers LLP, Nominated Adviser
61 Cheapside
London EC2V 6AX
Crowe Clark Whitehill LLP, Reporting Accountants
St Bride's House
10 Salisbury Square
London EC4Y 8EH
25
Relations,
Financial
Public