The deal involves select assets from China Recycling Energy Corp.’s Zhongbao Binhai Nickel Industry Co. Ltd. plant in Cangzhou, in China’s Hebei Province.
The leasing agreement stipulates that Xi’an TCH transfers its ownership of a set of 7 megawatt steam turbine waste heat power generation system, four furnaces, and other assets to Cinda Financial for 42.5 million Chinese yuan ($6.57 million).
In turn, Cinda Financial leases the assets to Xi’an TCH for 5 years, for an overall leasing fee of 51.54 million Chinese yuan. This fee is based on the transfer cost and the benchmark interest rate for 5 year loans by the People’s Bank of China (presently 6.65 percent annually), plus 15 percent of that rate, which will result in an interest rate of 7.65 percent.
The interest rate will increase if the five-year benchmark interest rate of the bank increases, but will stay as is if the benchmark rate decreases in the future.
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Xi’an TCH will make pro rata quarterly payments to Cinda Financial for the leasing fees. Upon the completion of the leasing term and full payment of all fees, Xi’an TCH can pay 4,250 Chinese yuan to acquire ownership of the assets as-is, at the end of the lease.
Apart from leasing fees, Xi’an TCH will pay a one-time non-refundable leasing service charge of 2.55 million Chinese yuan and a refundable security deposit of 2.12 million Chinese yuan to Cinda Financial.
Upon its execution of the lease, Cinda Financial has paid the entire transfer price of 42.5 million Chinese yuan to Xi’an TCH, while Xi’an TCH has transferred the ownership of the assets to the Cinda Financial.
Xi’an TCH will use its electricity fee income to guarantee its obligations under the leasing agreement.
The agreement was signed on June 28, 2011, following China Recycling Energy Corp.’s yearly stockholders meeting on June 21 at Xi’ian City, Shaanxi province.
Increasing market for waste-to-energy
Recycled energy represents only an estimated 1 percent of total energy consumption in China. However, waste-to-energy is considered a growth market due to intensified environmental concerns and rising energy costs brought about by the Chinese economy’s expansion.
China Recycling Energy Corp., based in Xi’an City and traded in NASDAQ under “CREG”, provides waste-to-energy technologies for recycling industrial byproducts for steel mills, cement factories, and coke plants in China.
China Recycling Energy Corp.’s first quarter financial report for 2011 reflected a net income of $4.56 million, representing a 108.2 percent increase from $2.19 million for the first quarter of 2010. Systems sales and contingent revenue was also up by 14.2 percent at $11.56 million, compared to $10.1 million for the first quarter last year.
The company’s total operating income grew by 52.1 percent to $8.25 million, from $5.42 million in 2010.
China Cinda Asset Management Limited Corporation is China’s largest holder of non-performing loans and has a registered capital of 25.1 billion Chinese yuan. Cinda has ownership in more than one hundred state-owned enterprises through debt/equity swaps. (Jen Balboa)
