China Clean Energy (PINK:CCGY)

We have been monitoring the China Clean Energy story  for sometime now.  We believe it is time to place CCGY on the GeoSpecial on the radar list.

We originally were attracted the company due to make good arrangements:

"In connection with our January 9, 2008 private placement, Tai-ming Ou, our Chief Executive Officer and Chairman, agreed to place 1,042,012 shares of common stock held by him into an escrow account, with such shares to be released to the investors in such private placement should we fail to either (i) commence the production of biodiesel at our production facility in Jiang Yin, People’s Republic of China on or before January 1, 2009 or (ii) record at least $14,000,000 of adjusted net income for the fiscal year ending December 31, 2009."

However, construction delays occurred:

"As a result of construction delays, we failed to commence the production of biodiesel at our production facility in Jian Yin on or before January 1, 2009 and on January 30, 2009 these 1,042,012 shares of common stock held by Mr. Ou were disbursed, pro rata, among the private placement investors."

Fast forward one year and the company is  finally in a position to generate revenues from its tJian Yin production facility.

"We commenced the construction of the new Jiangyin plant in December 2007 and completed construction in October 2009. The trial production phase at its Jiangyin plant has been successfully completed and as of January 2010 the new plant is operating on a commercial basis."

"The Jiangyin plant will increase the Company's specialty-chemicals capacity by 30,000 tons per year to a total of 40,000 tons per year. In addition, the new plant will increase biodiesel capacity by 40,000 tons per year to 50,000 tons per year. Management anticipates that for the first quarter of 2010, China Clean Energy will produce a total of 4,000-4,500 tons of specialty chemicals and 3,000-4,000 tons of biodiesel in both plants. Management presently expects revenue for the first quarter of 2010 to be RMB 50 million (approximately $7.3 million), representing an increase of approximately 150% over the comparable period in 2009."

"We expect our existing customers to absorb up to 50% of our increased specialty-chemicals capacity within the next 6 months, and intend to strengthen our business development efforts to ensure a ramp-up to full capacity by the end of 2010."

Further due diligence is required to gain an understanding of profit potential in this low margin business. We will request an interview with management. For the mean time it's quite possible that investors may bid CCGY shares up, to its book value per share of $0.98 , as an element of uncertainty has been taken off the table.

Warrants: 6.2 million with a strike price of $2.00