China Recycling Energy (NASDAQ:CREG)

First Quarter 2013 Results

• Total sales, including system sales and contingent rental income, for the three months ended March 31, 2013 was $14.34 million while the total sales for the comparable period of 2012 was $0.15 million, an increase of $14.19 million as a result of increases in system sales and in contingent rental income.
• For the first quarter of 2013, GAAP diluted EPS was $0.07 with approximately 50.22 million shares of common stock outstanding. This compares with GAAP diluted EPS of $0.04 in the first quarter of 2012 when the Company had 53.01 million shares of common stock outstanding.
• Non-GAAP EPS for the first quarter of 2013 were $0.08 vs $0.04 in the prior year.

Mr. Ku continued, "In terms of completed projects, we are excited to announce that we further enlarged our project portfolio with the completion of Shenqiu Project Phase II, a 12 MW biomass power generation project, by the end of the first quarter of 2013. Currently, the total generation capacity of Shenqiu power plant is increased to 24MW, and bringing our total operating capacity to 124 MW."

"As we complete existed projects, we are making great efforts to develop new projects and business model. Besides the methods we currently applied for waste power generation, we are focusing on developing coke dry quenching (CDQ) waste heat power generation. With large-scale application of coke ovens, CDQ is a trend in the future for the industry. By using CDQ technology, the energy could be used more efficiently and pollution will be greatly reduced. Therefore, CDQ waste power generation could reduce the costs for electricity for enterprises and also help them to reduce environmental pollution. By doing this, we could expand our market share and develop more projects. Additionally, we are continuously seeking more cost-effective financing options for our company and our customers in an effort to better grow our business. We intend to expand our waste-to-energy power generating capacity rapidly in order to meet the continuous demand growth for energy to gain market share. We look forward to announcing the completion of projects under development now and in the future and bringing more savings to our customers."

Fourth Quarter Financial Results

Mr. Guohua Ku, Chairman and CEO of CREG, commented, "Our full year 2012 financial results showed large decrease in net income, this is mostly caused by the decrease in our system sales as we did not complete any new projects during the year 2012. All our projects operated well and generated constant cash flow. During this year, we further strengthened our operations and increased operational efficiencies, while maintaining our fiscal discipline and cost controls. Currently, we have eleven operating systems and a series of potential projects which will bring our company a great growth in the future."

"The Company noted that in 2012 our systems related revenue is 0. It is important to note that we have a non-linear systems revenue flow. We only recognize system sales revenue when we complete new projects according to sales-type lease revenue recognition under US GAAP. Sales revenue from sales of completed power plants is not necessarily indicative of future revenue flows as the Company cannot complete new systems on a routine basis. The Company's main revenue is from interest income on sales-type leases, which kept stable quarter by quarter. And we have an increased contingent rental income from our operating projects."

Positioned for Growth:

"During the year, we made great effort in positioning the Company for growth," said Mr. Ku. "Most notably, we expanded our waste-to-energy project portfolio with Shenqiu Project Phase II. On October 8, 2012, Xi'an TCH, our wholly owned subsidiary, entered into a Letter of Intent for Technical Transformation with Shenqiu for technical transformation to enlarge the capacity of the Shenqiu Project Phase I, which will expand our existing 12 MW system to 24 MW."

"We currently have 11 waste-to-energy systems in operation and 2 waste-to-energy projects under construction." Mr. Ku added, "As more projects are completed, the trend of increasing interest income from sales type leases will continue to grow."

"We were granted two significant government awards in 2012; one is Xi'an City High Tech Development Special Financial Reward; the other one is Shaanxi Province Technology Innovation Award and provincial government grant, which indicates that the government's acknowledgement of our recycling energy technology, and their attention and great support to the development of recycling energy technology. These awards demonstrate the company's leading comprehensive competence in energy recycling's high-tech research and development.

On December 20, 2012, China Recycling Energy Corporation (the “Company”) received a written notification from the NASDAQ Stock Market Listing Qualifications Staff indicating that the Company has regained compliance with the $1.00 minimum bid price requirement for continued listing on the NASDAQ Global Market pursuant to NASDAQ Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) and that the matter is now closed.

 The closing bid price of the Company’s common stock has been at $1.00 per share or greater for at least 10 consecutive business days. Accordingly, the Company has regained compliance with the Minimum Bid Price Requirement.

Financial Results for Three Months Ended September 30, 2012

• Total Revenues $476,207 vs last years $261,556.
• Gross profit was $0.44 million for the three months ended September 30, 2012 compared to $4.52 million for the comparable period of 2011.
• Net income (loss) for the three months ended September 30, 2012 was a net loss of $1.41 million compared to net income of $8.66 million for the comparable period of 2011, a decrease of $10.06 million.
• GAAP diluted EPS was minus $0.03 with approximately 50.83 million shares of common stock outstanding, as compared with $0.16 in the same period of 2011 when the Company had 54.95 million shares of common stock outstanding.

Mr. Guohua Ku, Chairman and Chief Executive Officer of China Recycling Energy, discussed quarterly financial results, current projects and the company's growth potential, "As expected, we do not have project completion during the third quarter, hence we do not realize system sales for this quarter. Interest income from our sales-type lease is our other major revenue. During this quarter, we generate stable income and cash flow from our 11 systems. As most of our projects are recognized as sales-type lease, we experience non-linear revenue flows in our financial statement due to the special revenue recognition method for sales-type lease. We need to indicate that this quarterly result does not represent the long-term growth potential of the Company. Currently, we have a large-scale ongoing project and a series of projects with great potentials. We will expand our recycling energy market in 2013 and payback our shareholders with consistent and growing profits."

Mr. Ku continued to comment: "For ongoing projects, construction of Shanxi Datong Project goes on well. It is estimated that one of the power stations will be completed by the end of 2012. As of September 30, we successfully won two significant government awards; one is Xi'an City High Tech Development Special Financial Reward; the other one is Shaanxi Province Technology Innovation Award and provincial government grant. These awards not only demonstrate the company's leading comprehensive competence in energy recycling high-tech research and development, but also show the government support to energy recycling industry. While developing new projects, we also focus on the development and improvement of recycling energy technology, apply new technology to our existing projects and develop more projects, which in turn becomes a beneficial cycle for us and our customers. We intend to lead the development of recycling energy technology, bring more social and economic benefits to our customers, provide better results to our investors, and make greater contributions to the environmental protection of the country."

XI'AN, China, October 1, 2012 /PRNewswire-FirstCall/ -- China Recycling Energy Corp. (NASDAQ: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announced that the ongoing construction of its previously announced Shanxi Datong Coal Group Steel Ltd. Energy Recovery Project ("Shanxi Datong Project") is progressing according to schedule. The Company expects Shanxi Datong Project, which has 23MW of total power generation capacity, will be completed by end of 2012.

As previously announced, Xi'an TCH Energy Technology Company, a wholly owned subsidiary of China Recycling Energy Corp., signed a definite agreement with Shanxi Datong Coal Group Steel Ltd. to co-develop the Shanxi Datong Project which recycles gas and steam from groups of blast-furnaces and converter of Shanxi Datong's metal refining plants to generate power. According to the agreement, China Recycling Energy will install two 3MW Top Gas Recovery Turbine (TRT) unites, one 15MW Waste Gas Power Generation (WGPG) system and two 1MW steam power generation systems. The total investment for the project is estimated to be approximately $27.45 million (RMB 180 million), and it will generate up to 23MW of electricity annually. After all construction completed at the end of 2012, the facility will be leased back to Datong Coal Group Steel Ltd. for 30 years, and Datong will be responsible for operating the facility and pay service fee to CREG during the lease term. The service fee is based on an average of 8,000 electricity-generating hours per year and $0.05 (RMB 0.33) per kilowatt hour ("Kwh") for the first 5 years after the completion of each power generation station. For each of the leases, at the 6th year, 11th year and 21st year thereafter, the rate will be RMB 0.3 Kwh, 0.27 Kwh and 0.25 Kwh, respectively. This project is a Build and Operate (BO) project, the operation period is permanent.

Total payback period of the project is 5 years. The project is progressing smoothly at present, and it will complete by the end of 2012.

"We are very pleased that the construction of Datong project is progressing smoothly," said Mr. Ku Guohua, Chairman and Chief Executive Officer of China Recycling Energy, "It is expected to bring increased revenues and significantly enhance the overall attractiveness of our company. Datong has abundant resources and will be an important partner for CREG in waste heat electricity generation going forward."

Item 3.02 Unregistered Sales of Equity Securities.

On September 17, 2012, China Recycling Energy Corporation (the “Company”) issued 3,750,000 shares of Common Stock of the Company to Great Essential Investment, Ltd., a company registered in the Virgin Islands (“Great Essential”), upon receipt of Great Essential’s conversion notice of the Company’s 8% Secured Convertible Promissory Note dated April 29, 2009 in the principal amount of $3,000,000 at the stated conversion price per share of $0.8.

Second Quarter 2012 Financial Highlights

• Net sales increased 10.1% to $403k from $366k
• Income from operations was $4.3 million, as compared to income from operations of $4.1 million.
• The net income was $1.2 million, or $0.03 per share, as compared to net income of $3.7 million, or $0.07 per diluted share
• The cash and cash equivalents was $41.6 million as of June 30 2012, an increase of 300% comparing to $14.9 million as of December 31, 2011

Mr. Guohua Ku, Chairman and Chief Executive Officer of China Recycling Energy, discussed quarterly financial results, current projects and the company's' growth potential, "As expected, we do not have project completion during the second quarter hence zero systems sales for the quarter. Interest income from the sales-type leases is our other major revenue in addition to systems sales revenue. The interest income has declined marginally as we now have interest income from 11 systems compared to 12 systems in 2011. Our business model is such that we frequently experience non-linear revenue flows on a quarterly basis, which is not indicative of the long-term growth potential of the Company. We have a number of projects in the development phase - none of which are slated for completion until the end of calendar year 2012, and we have a solid pipeline of new projects backed by a strong balance sheet.

Mr. Ku continued, "In terms of projects under construction, currently we have two projects, Phase III of Erdos Power Generation Project and Shannxi Datong Coal Group Power Generation Project, under construction with a total capacity of 48 megawatts. The Company temporarily suspended construction of the Erdos Phase III due to the restructuring of products and industry by the customer. The Datong project was previously halted due to business reorganization of Shannxi Datong and a renegotiation of one of the power stations with Xi'an TCH to amend certain construction plans. The Company resumed the construction in April 2012 and we expect to complete this project by the end of 2012."

"We remain positive and optimistic on the future earnings potential for China Recycling Energy Corporation," concluded by Mr. Ku.

First Quarter 2012 Results

• Total sales for the 2012 first quarter, comprised of system sales and contingent rental income, was $0.15 million, as compared to $0.52 million reported in the fourth quarter of 2011 and $11.56 million for the first quarter of 2011.
• Net income for the 2012 first quarter was $2.02 million, as compared with $4.54 million for the 2011 fourth quarter and $4.56 million for the 2011 first quarter.
• For the first quarter of 2012, GAAP diluted EPS was $0.04 with approximately 53.01 million shares of common stock outstanding. This compares with GAAP diluted EPS for the 2011 fourth quarter of $0.06 with approximately 56.18 million shares of common stock outstanding, and $0.09 in the first quarter of 2011 when the Company had 55.13 million shares of common stock outstanding.

Mr. Guohua Ku, Chairman and Chief Executive Officer of China Recycling Energy, discussed quarterly financial results, current projects and the company's' growth potential. "We are encouraged by the pipeline of new business that we see in 2012 and well into the future. While we saw a decline in our financial results for the first quarter, it should be noted that historically CREG has experienced non-linear revenue flows on a quarterly basis due to the nature of the company's business model, and this is not indicative of the long-term growth potential of CREG over time. We have a number of projects in the development phase - none of which are slated for completion until the end of calendar year 2012. In addition, we have a solid pipeline of new projects backed by a strong balance sheet."

Mr. Ku noted, "By leveraging the very strong relationships we have with Chinese industrial giants, CREG is optimally positioned to capitalize on its growth opportunities. Our partnerships include Sino-Steel Group, Binhai Branch - China's largest nickel steel plant, Erdos Metallurgy Co. - the world's largest ferrosilicon alloy plant, and Shengwei Cement Group - a major Chinese cement producer. CREG currently has a total of eleven power plants in operation with a total capacity of 107 MW. In addition, we have two heat recovery/WGPG projects under construction, with a total capacity 48 MW, as well as memorandums of understanding (MOUs) for six other TRT, CHPG, and WGPG projects for a total capacity 279 MW."

Fourth Quarter 2011 Resutls

• Total sales for the three months ended December 31, 2011, comprised of system sales and contingent rental income, was $0.52 million, as compared to $18.84 million reported in the third quarter of 2011 and $31.82 million for the fourth quarter of 2010.
• For the fourth quarter of 2011, GAAP diluted EPS was $0.06 with approximately 56.18 million shares of common stock outstanding. This compares with GAAP diluted EPS for the 2011 third quarter of $0.16 with approximately 54.95 million shares of common stock outstanding, and $0.12 in the fourth quarter of 2010 when the Company had 50.18 million shares of common stock outstanding.
• Adjusted non-gaap EPS for the fourth quarter 2011 was $0.00 vs $0.24 in prior year

Mr. Guohua Ku, Chairman and CEO of CREG, commented, "Our full year 2011 net results showed significant growth in net income, interest income from the leasing of our systems and earnings for our shareholders, despite lower system sales revenues. During the year, we further strengthened our operations and increased operational efficiencies, while maintaining our fiscal discipline and cost controls; and in 2011 we delivered a very strong operating performance, culminating in our third consecutive year of profit growth, with net earnings of $21.5 million or $0.39 per diluted share."

The Company noted that while systems related revenue declined 59 percent as compared with 2010, it is important to note that the nature of CREG's business model routinely results in a non-linear systems revenue flow. Sales revenue from sales of completed power plants is not necessarily indicative of future revenue flows as the Company cannot complete new systems on a routine basis. The Company's main revenue is from interest income on sales-type leases, which has been growing steadily quarter by quarter.

We believe we have sufficient cash to continue our current business through 2012 due to stable recurring receipts from sales-type leases in place. As of September 30, 2011, we have two TRT systems, two CHPG systems, one WGPG system, five recycling waste heat power generating systems from the Erdos projects, two BMPG and one WHPG of Zhongbao, currently generating net cash inflow. In addition, we have access to bank loans in case of an immediate need for working capital. We believe we have sufficient cash resources to cover our anticipated capital expenditures in 2012.

same

Third Quarter 2011 Results

Rodman and Renshaw on CREG                        8/19/2011

CREG: 2Q11 Earnings Update

2Q11 Results: CREG reported revenue, Non-GAAP net income, and Non-GAAP diluted EPS of $0.37 MM, $2.23 MM, and $0.04, compared to our expectations of $0.29 MM, $3.28 MM, and $0.06, respectively. System sales revenue was negligible at $72.5K in 2Q10 with no systems installed during the quarter. Interest income on BOT projects increased 65.1% y-o-y to $5.49 MM from $3.32 MM in 2Q10 due to 5 new projects installed over the past twelve months. Operating income was $4.11 MM, versus $7.7 MM in 2Q10, due to a lower revenue base.

Recurring Interest Income Offset Shortfall in Sales: CREG had no system sales income during the quarter given that no project was completed or installed. However, that shortfall has been partially offset by 65.1% y-o-y increase in recurring interest income from a total of 12 currently installed systems with 121 MW of total capacity. Total interest income amounted to $5.78 MM, including $5.49 MM based on minimum payment agreement (as part of operating income) and $0.29 MM in contingent rental income (as part of top-line).

Carlyle Converted $5.0 MM to Common Shares: On July 25, the company announced Carlyle Asia Growth Partners has converted $5.0 MM worth of convertible notes into 4.3 MM shares of common stock at $1.154 per share.

Financing Remains Crucial to the Story: We were slightly disappointed that management again did not provide any meaningful color on potential contract wins and revenue visibility. We understand that it should be challenging for the company to execute on new projects without sufficient financing resources under acceptable terms. Management did disclose that CREG has signed a number of MOUs with many state-owned industrial users under China Cinda umbrella. However in order to turn MOUs to real contracts, CREG will have to demonstrate its ability to secure financing, and we believe the company is currently in the process of obtaining project funding, therefore any funding related announcement may be viewed as a catalyst for CREG stock.

Financial Estimates: We continue to expect at least the 25 MW Eardos IV project to be completed in 3Q11, and that should lead to the system sales of ~$27 MM and a total of installed capacity of 146 MW by the end of 3Q. Based on these assumptions, we are now expecting revenue, interest income on projects, Non-GAAP earnings to be $27.3 MM, $5.65 MM, $6.86, with EPS of $0.11. For full year FY11, we are projecting top-line of $81.6 MM, $22.6 MM in recurring interesting income, $24.1 MM in bottom-line, and $0.41 in diluted EPS.

Valuation: At current levels CREG is trading at P/E multiples of ~4.0x to our FY11 Non-GAAP earnings estimates. This is well below averages of ~30.0x for US domestic ESCOs, and ~22.0x for China/HK listed comparables.


Notice Regarding Privacy and Confidentiality:


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

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Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
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Rodman & Renshaw, LLC reserves the right to monitor and review the content of all e-mail communications sent and/or received by its employees.

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

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Second Quarter 2011 Results

Mr. Guohua Ku, Chairman and CEO of CREG commented, "As expected, the second quarter 2011 showed steady growth in net income, significant increase in interest income from the leasing of our systems and decreased revenue as compared to last year's second quarter. CREG booked net income growth of 16.6% and interest income growth on sales type leasing of 65.4% in the first six months of 2011 as compared to the corresponding period of 2010. The decrease in sales was anticipated since there were no system completions and revenue from system sales booked in the second quarter. Erdos Phase III, a 25 MW heat power generation system, is expected to be completed in the next several months, bringing our annual capacity to 146 MW, an increase of roughly 20% by year-end 2011."

On July 21, 2011, China Recycling Energy Corporation (the “Company”) issued 4,149,599 shares of Common Stock of the Company to Carlyle Asia Growth Partners III, L.P. and 184,593 shares of Common Stock to CAGP III Co-Investment, L.P. (together as the "Investors"), pursuant to the 5% Secured Convertible Promissory Note dated April 29, 2008, disclosed in the Form 8-K filed on April 30, 2008.

The Investors have converted the principal amount under the 5% Secured Convertible Promissory Note in the principal amount of $5,000,000 into total 4,334,192 shares of Common Stock of the Company at the conversion price per share of $1.154.

Rodman and Renshaw on CREG                      5/31/2011

CREG: Higher Power Price Should Be A Positive

China Raises Power Prices In 15 Provinces: China has raised prices for electricity used for industrial, commercial and agricultural purposes across the country's 15 provinces and municipalities by 16.7 yuan (about 2.57 U.S. dollars) per 1,000 kilowatt-hours (kwh), while electricity prices for residential use remained unchanged, according to the National Development and Reform Commission. The 15 provinces include Shanxi, Qinghai, Gansu, Jiangxi, Hainan, Shaanxi, Shandong, Hunan, Chongqing, Anhui, Henan, Hubei, Sichuan, Hebei and Guizhou.

Key Takeaways: On a macro level, we view this price hike as a positive for CREG’s business since its solutions are primarily considered as alternatives to traditional power generation model from coal-fired plants. The company’s main operating region, Shaanxi province is included on the list announced by NDRC, and we believe CREG may have an opportunity to renegotiate with its customers on the prices, benefit from higher margins in future contracts or benefit from potentially stronger demand from large industrial users seeking cheaper power solutions. The company’s strategic partner, China Cinda Asset Management, may also push its state-owned subsidiaries to adopt CREG’s energy recycling solutions to lower their operating costs.

Shelf Filing: CREG filed a $200 MM shelf offering last week that caused a pull back in the stock. We believe the filing is not effective yet. We would be surprised to see the company execute on the shelf at current stock levels given the negative dilutive implications for existing shareholders.

Valuation: At current levels CREG is trading at P/E multiples of ~4.4x to our FY11 Non-GAAP earnings estimates. These multiples are well below averages of 9x for small cap Chinese Cleantech companies listed in the US, 38x for US domestic ESCOs, and 22x for China/HK listed comparables. We believe CREG should be trading in line with the industry given the growth opportunity associated with it. We are comfortable maintaining a $6.00 price target on CREG, which translates into P/E multiples of 8.6x to our estimates for FY11. We believe these are reasonable multiples given that historically clean technology and environmental remediation companies have traded within a range of 8x to 25x on a P/E basis.

Risks

(1) Customer Concentration (2) Competitive Market (from other ESCOs and state-owned companies’ in-house build out) (3) Dilution Risks (4) Financial Leverage (5) Dependence On Supplier Relationships (6) Outsourcing Cost May Go Up

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Some History: (Reveals that CREG was born from a previous failed RTO)

On June 23, 2004, we completed a stock exchange transaction with the stockholders of Sifang Holdings Co., Ltd. (“Sifang Holdings”). The exchange was consummated under Nevada and Cayman Islands law pursuant to the terms of a Securities Exchange Agreement, dated June 23, 2004 by and among Boulder Acquisitions, Sifang Holdings and the stockholders of Sifang Holdings. Pursuant to the Securities Exchange Agreement, we issued 13,782,636 shares of our common stock to the stockholders of Sifang Holdings, representing approximately 89.7% of our post-exchange issued and outstanding common stock, for 100% of the outstanding capital stock of Sifang Holdings.

Effective August 6, 2004, we changed our name from Boulder Acquisitions, Inc. to China Digital Wireless, Inc.  From August 2004 to December 2006, we primarily engaged in pager and mobile phone distribution and provided value added information services to the customers in the PRC.  We phased out and scaled down most of the business of mobile phone distribution and provision of pager and mobile phone value-added information services, and on May 10, 2007, the Company approved and announced that it ceased and discontinued these businesses.

In December 2006, we began to conduct business in the energy saving and recycling industry, including purchasing certain equipment, devices, hardware and software for the construction and installation of TRT systems and other renewable energy products. TRT is an electricity generating system that utilizes the exhaust pressure and heat produced in the blast furnace of steel mills to generate electricity. It has commercial value for the steel mills by using waste heat and steam to produce electricity for the operation of the mills

Rodman and Renshaw on CREG                       5/18/2011

CREG: 1Q11 Earnings Update

1Q11 Results: CREG reported revenue, Non-GAAP net income, and Non-GAAP diluted EPS of $11.6 MM, $5.3 MM, and $0.10, compared to our expectations of $7.6 MM, $10.2 MM, and $0.15, respectively. System sales revenue grew by 14.2% y-o-y from $10.1 MM in 1Q10 but down 84.7% sequentially from $31.8 MM in 4Q10. Interest income on BOT projects increased 62.9% y-o-y to $5.14 MM.

Erdos Phase II Drives Revenue: CREG recorded $11.56 MM in total revenues, including $11.27 MM in system sales revenue from the completion of the third 9 MW WHPG system for Erdos Phase II, and a $0.29 MM in contingent rental income from Tongchuan Shengwei project. Total top-line grew at a 14.2% pace y-o-y from a year ago.

Interest Income: During the quarter, the company reported $5.14 MM in interest income from sales type leases, which represents the minimum periodic revenue guaranteed by its customers. Interest income increased 66.3% y-o-y from $3.15 MM in 1Q10 and 9.2% sequentially from $4.71 MM in 4Q10. Total installed capacity at end of 1Q11 was 112 MW, and management expects the third 9 MW Erdos WHPG system to start running in 2Q11, to bring the total interest generating installed capacity to 121 MW in 2Q11.

Outlook: Management indicated that Erdos Phase III, a 25 MW WHPG system, should be finished during 3Q11, bringing the total installed capacity to 146 MW. Additionally during the earnings call management told analysts and investors to stay tuned for more updates on new project contract wins and potential M&A transactions. In our view, the nature of CREG’s business model requires material external financing to win large sized contracts, and potentially rising financing cost may hurt the company’s bottom-line. We believe the ability to secure strategic financing with lower interest should be critical to the company’s success.

2Q11 Estimates: For 2Q11, we are now projecting revenue, interest income, Non-GAAP earnings and EPS of $0.29 MM, $6.44 MM, $6.69 MM, and $0.06 per share. We assume no major system sales during 2Q and therefore the income stream will be primarily driven by interest income on installed systems with ~121 MW total capacity. We project $6.67 MM in operating income due to a higher installed capacity in 2Q and more running hours compared to 1Q holiday break. For the full year, we are now expecting $82.73 MM for top-line, $27.83 MM for interest income, $32.03 MM for Non-GAAP earnings, and $0.54 per diluted EPS.

Valuation: At current levels CREG is trading at P/E multiples of ~3.7x to our FY11 Non-GAAP earnings estimates. These multiples are well below averages of 4.4x for small cap Chinese Cleantech companies listed in the US, 29.2x for US domestic ESCOs, and 23.2x for China/HK listed comparables. We believe CREG should be trading in line with the industry given the growth opportunity associated with it. We are comfortable maintaining a $6.00 price target on CREG, which translates into P/E multiples of 8.6x to our estimates for FY11.


Notice Regarding Privacy and Confidentiality:


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Highlights:

• Systems sales and contingent revenue was $11.56 million, an increase of 14.2% as compared to $10.1 million for the first quarter 2010.
• Net income was $4.56 million, up 108.2% from $2.19 million for the first quarter of 2010.
• Total Operating Income grew by 52.1% to $8.25 million from $5.42 million in the previous year.
• Fully diluted EPS of $0.09, as compared to $0.05 for the first quarter of 2010.
• On adjusted Non-GAAP measures, as defined below, non-GAAP net income grew to $5.3 million, or non-GAAP fully diluted EPS of $0.10, as compared to $3.9 million, or fully diluted EPS of $0.08, for the same period of 2010.

Mr. Guohua Ku, Chairman and CEO of CREG commented, "We are very pleased with our first quarter 2011 financial results. CREG booked revenue growth of 14.2% in the quarter as compared to the corresponding quarter 2010. An increase in sales and interest income led to the rise in our revenue and net income during this three month period."

Mr. Ku continued, "In terms of completing projects, we had a very productive quarter. We are excited to announce that we have completed and booked the sale of the third 9MW capacity power station as a part of Erdos Phase II project. We are now in the midst of constructing Erdos Phase III, a 25 MW waste heat power generation system, which we anticipate will be completed in the third quarter of 2011, bringing our total capacity close to 146 MW."

"On an on-going basis, CREG employs its expertise to find more avenues to recycle energy and provide saving to new types of energy intensive industries. We have a wealth of projects ahead of us, some that we will embark upon and even more that we will evaluate and select for our energy recovery services down the road. China Cinda, one of our strategic partners, has provided CREG referrals to many of their industrial clients and we expect to source clientele from those relationships in the future. Right now, we are evaluating additional strategic financing options for our projects, and anticipate reducing the interest cost in this area in the future. We look forward to updating the investment community as more large projects are formerly signed and financed," concluded Mr. Ku.

Rodman and Renshaw on CREG                              4/6/2011

China Recycling Energy

Amit Dayal - Senior Analyst (212-356-0535)
Chang Liu - Associate China Analyst (212-430-1733)


CREG: 4Q10 Earnings Update

4Q10 Results: CREG reported revenue, net income, and diluted EPS of $31.8 MM, $5.8 MM, and $0.12, compared to our expectations of $24.8 MM, $5.1 MM, and $0.10, respectively. On a Non-GAAP basis, excluding the non-cash charges, earnings and diluted EPS for the quarter were $9.3 MM and $0.19 per share. System sales revenue grew by 207.5% y-o-y from $10.35 MM in 4Q09 and 186.2% sequentially from $11.1 MM in 3Q10. Interest income on BOT projects increased 57.2% y-o-y to $4.7 MM.

Full Year Results: On a full year basis, the company generated revenue, earnings, and diluted EPS of $75.6 MM, $16.0 MM, and $0.33 per share. Excluding non-cash charges, full year Non-GAAP earnings and diluted EPS would be $25.9 MM and $0.52 respectively. Full year system sales grew by 70.9% from FY09, while interest income on BOT projects was up 112% y-o-y to $15.14 MM.

Expect Strong Project Pipeline in FY11: We expect the Cinda relationship should bring more large-sized industrial enterprises onto CREG’s customer list in 2011. During the earnings call, management indicated that Erdos phase 4 and phase 5 should come in place this year, and Erdos will continue to play a significant role driving FY11 top-line. Additionally management mentioned a pending project from a customer that is potentially larger than Erdos. If this is the case, we should see some upside in CREG’s top-line once the contract is awarded. However, we are not factoring in any revenue contribution in our revenue model from this project.

Revising Estimates: Currently we are expecting the company to generate 1Q11 revenue, Non-GAAP net income, and diluted EPS of $7.6 MM, $10.2 MM, and $0.15. We are projecting $7.6 MM in system sales and $9.5 MM in interest income on BOT projects. For the full year, our projections are now $44.9 MM in system sales, $44.2 MM in BOT project income, $36.5 MM in Non-GAAP earnings, and $0.70 in diluted EPS.

Valuation: At current levels CREG is trading at P/E multiples of ~3.7x to our FY11 Non-GAAP earnings estimates. These multiples are well below averages of 4.4x for small cap Chinese Cleantech companies listed in the US, 29.2x for US domestic ESCOs, and 23.2x for China/HK listed comparables. We believe CREG should be trading in line with the industry given the growth opportunity associated with it. We are comfortable maintaining a $6.00 price target on CREG, which translates into P/E multiples of 8.6x to our estimates for FY11. We believe these are reasonable multiples given that historically clean technology and environmental remediation companies have traded within a range of 8x to 25x on a P/E basis.

Risks: (1) Customer Concentration (2) Competitive Market (from other ESCOs and state-owned companies’ in-house build out) (3) Dilution Risks (4) Financial Leverage (5) Dependence On Supplier Relationships (6) Outsourcing Cost May Go Up

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

2010 Year End:

• Revenues were $75.61 million, an increase of 70.9% as compared to $44.23 million for full year 2009.
• Net income was $16.03 million, up 65.1% from $9.71 million for the full year 2009.
• Total Operating Income grew by 90.6% to $33.71 million from $17.69 million in the previous year.
• Fully diluted EPS of $0.33, as compared to $0.21 for full year 2009.
• On adjusted Non-GAAP measures, as defined below, non-GAAP net income grew to $25.88 million, or non-GAAP fully diluted EPS of $0.52, as compared to $13.59 million, or fully diluted EPS of $0.29, for the same period of 2009.　

GeoTeam Note: Fourth Quarter 2010 vs. 2011 EPS was $0.18 vs. $0.06.

Mr. Guohua Ku, Chairman and CEO of CREG commented, "The Company has continued to perform well ahead of expectations, achieving record revenue for the year ended December 31, 2010 and exceeding our guided revenue range of $68 - 72 million. Our non-GAAP net income figures came in at $25.88 million, above our target expectation of $22 million. Overall, our BOT business model, growth strategy and key partnerships have made this year the most successful year yet and we anticipate seeing this trend continue as we embark on more projects in the waste-to-energy space."

XI'AN, China, Jan. 6, 2011 /PRNewswire-Asia-FirstCall/ -- China Recycling Energy Corp.  today announced that the company has appointed experienced industry veteran David Chong as its Chief Financial Officer and Secretary effective immediately. The company's previous CFO and Secretary, Tony Peng, resigned effective December 30, 2010.

Rodman & Renshaw on CREG                                   1/06/2011

CREG: New CFO Appointed 

The Appointment: CREG announced that it has appointed David Chong to replace Tony Peng as the company’s new Chief Financial Officer and Secretary, effective immediately. David Chong has over 20 years of experience in financial management, corporate governance, and capital market activities for mid/large sized companies. Chong has been hired as a consultant to CREG since June 2010 and has assisted the company on non-deal road shows and investor relations. Before joining CREG, Chong was the CFO for Guangdong Yan Zhi Hong Shoes Manufacturing Co., Ltd, a Chinese shoe manufacturer. Prior to that, he was a financial controller at Amtek Engineering (M1P-SES, Not Rated), a Singapore manufacturer of precision metal, plastic, and rubber components, where he ran the financial management for six plants in China. Chong will be based in Xi’an City, Shaanxi province.

Key Takeaways: We believe David Chong’s appointment should be a pre-cursor to a more proactive IR effort by CREG.

Valuation: At current levels CREG is trading at P/E multiples of ~6.4x and ~4.0x to our FY10 and FY11 earnings estimates. These multiples are well below averages of 8.6x and 6.4x for small cap Chinese Cleantech companies listed in the US, 39.7x and 22.8x for US domestic ESCOs, and 31.9x and 24.6x for China/HK listed comparables. We believe CREG should be trading in line with the industry given the growth opportunity associated with it. We are comfortable assigning CREG a $6.00 price target, which translates into P/E multiples of 12.9x and 8.2x to our estimates for FY10 and FY11. We believe these are reasonable multiples given that historically clean technology and environmental remediation companies have traded within a range of 8x to 25x on a P/E basis.


Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Mr. Guohua Ku, Chairman and CEO of CREG commented, "We are very pleased with the Company's performance in the third quarter and remain highly confident that we will reach our stated financial goals for the year. Although the revenues posted were modest in comparison to our year ago quarter, we achieved solid income and continue to execute well on our BOT business model and growth strategy. In the quarter, we successfully completed and delivered to Zhongbao Binhai Nickel Co., a 7 MegaWatt ('MW') capacity Waste Heat Power Generation ('WHPG') system that has a term of nine years. We are now ardently focused on completing Phase II and III of the Erdos Power Generation Project in the final months of 2010 and preparing for a very busy, successful 2011 project year."

2010 Business Guidance

• reaffirms its guidance for revenue for 2010 in the range of $68 million -$72 million

• raises its guidance for net income, excluding non-cash charges, from previous $18 million - $20 million, to $22 million. The reason for raising the guidance for net income is due to the estimated increase of profit margin, as a result of contingent rental income that is earned from actual electricity charge in addition to minimum lease payments of some projects for the year.

For the quarter ended June 30, 2010:

• Revenues grew 102% to $22.54 million for the quarter ended June 30, 2010 from $11.14 million for the quarter ended June 30, 2009.
  
• Income from operations grew 140% to $9.06 million for the quarter ended June 30, 2010 from $3.83 million for the quarter ended June 30, 2009.
  
• Net income grew to $5.04 million for the quarter ended June 30, 2010 from $3.23 million for the quarter ended June 30, 2009.
  
• Fully diluted earning per share ("EPS") of $0.10 for the quarter ended June 30, 2010 compared to $0.07 for the quarter ended June 30, 2009.
  
• On an adjusted Non-GAAP basis, the Company reported Non-GAAP net income of $7.42 million, or non-GAAP fully diluted EPS of $0.15 for the quarter ended June 30, 2010, compared to $3.44 million, or fully diluted EPS of $0.08, for the same period in 2009.

Mr. Guohua Ku, Chairman and CEO of CREG commented, "Our Company continues to deliver superior financial and operating results on every level. I am very pleased to report tremendous growth on both our top and bottom line results. All of our projects are at or ahead of schedule, including Phase II and III of the Erdos Power Generation Project, which is expected to be completed in 2010."

Mr. Ku continued, "I am also pleased to announce that we expanded our energy recycling efforts to include Biomass Power Generation Systems (BPGS) which we recently acquired. Biomass is an important renewable energy resource and is one of the main strategic energy alternatives to conventional energy sources. It contains all the features of high power generation efficiency while protecting and improving the environment and benefiting from strong government incentive programs. To this extent, we successfully executed a new contract with Pucheng Biomass Power Generation Company. The agreement will allow us to have a minimum of $3.3 million per year in cash inflow for the next 15 years. BPGS will play an important role in our revenue growth going forward and expand our existing waste-to-energy business model to now include agriculture waste-to-energy."

Subsequent Event

On August 13, 2010, the Board of Directors authorized the grant of options for an aggregate of 2,200,000 shares of common stock to be issued to 36 employees, including options for 1,460,000 shares granted to Guohua Ku, the Company's Chairman of the Board and Chief Executive Officer, with an exercise price of the closing price on the date of grant.

2010 Business Guidance

The Company reaffirms its guidance that:

• Revenue for 2010 will be in the range of $68 million to $72 million.
  
• Net income, excluding non-cash charges, of $18 million to $20 million.

These targets are based on the Company's current views on operating and market conditions, which are subject to change. Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . For a more complete explanation of the company's definition of non-GAAP please refer to its financial press releases. The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures. The GeoTeam® non-GAAP figures apply a 25% and 36% tax rate for Chinese and United States companies respectively.

On June 29, 2010, Xi’an TCH Energy Technology Co., Ltd, a wholly owned subsidiary of China Recycling Energy Corporation entered into a Biomass Power Generation Asset Transfer Agreement (the “Transfer Agreement”) with Xueyi Dong, a natural person with Chinese citizenship.
 
The Transfer Agreement provides for the sale to Xi’an TCH of a set of 12,000 KW biomass power generation systems from the Seller.  As consideration for the biomass power generation system, Xi’an TCH will pay to the Seller RMB 100,000, 000 (approximately $14,705,882), among which RMB 20,000,000 in cash and RMB 80,000,000 with equivalent shares of the Company’s common stock. The stock price will be the same price as the Company’s public offering price in the first public offering which occurs in 2010 or 2011 but in no circumstance less than $4 per share.  The exchange rate between U.S. Dollar and Chinese RMB in connection with the stock issuance is 1:6.8.   These shares have piggy back registration rights and are subject to a one year lock-up period.

On June 29, 2010,  Xi’an TCH also entered into a Biomass Power Generation Project Lease Agreement with PuCheng XinHengYuan Biomass Power Generation Co., Ltd., a limited liability company in Pucheng, China.  Under the Lease Agreement, Xi’an TCH will lease a set of 12,000 KW biomass power generation systems to XHY at minimum RMB 1,900,000 per month (approximately $279,412) for a term of 15 years.  The leasing fee will increase proportionately with the biomass generated electricity fee in China during the term of the Lease Agreement.  XHY will provide one month leasing fee as security deposit to Xi’an TCH as well as personal guarantees from one of its shareholders.

The Company expects revenues for 2010 to be in the range of $68 million to $72 million, with net income, excluding non-cash charges, $18 million to 20 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.

The GeoTeam® is speculating that   is preparing for an uplisting due to the following commentary in its 2009 third quarter press release:

On November 6, 2009, the Company's Board approved an increase in the size of the Board of Directors from three members to six members and the appointment of Mr. Sean Shao, Mr. Julian Ha and Mr. Timothy Driscoll as new members of the Board. Mr. Shao is expected to chair the Audit Committee of the Board and serve on the Nominating Committee. Mr. Ha is expected to chair the Compensation Committee of the Board and serve on the Audit Committee of the Board. Mr. Driscoll is expected to chair the Nominating Committee of the Board and serve on the Compensation Committee of the Board.

'I am pleased with our continued profitability since the third quarter of last year and our steady revenue streams from operational rental business and interest income from sales-type leases,' Mr. Guohua Ku, Chairman and CEO of CREG, said. 'Our business model is working and our cash flow has continued to be positive since late last year. If the macro economic environment continues to improve and the Chinese government continues to induce more clean energy generation,

China Recycling Energy reaffirmed its positive previous financial guidance.

Source: See Release

Guidance Report: 

Mr. Ku said, 'Looking forward, we are encouraged that the Chinese government has earmarked $31 billion, or 5% of the country's $584-billion stimulus package, for the creation of a sustainable environment. We believe the bulk of the spending will be to reduce the pollution generated by heavy-industrial plants in Northern and Western China, stimulating the growth of the use of low-emission and energy-efficient power generators by our customers in the steel, cement and chemical sectors. Considering this robust market condition, we expect to complete at least 3 projects this year, including Shengwei's phase two which should be completed in the second quarter of 2009, with a projected product sales of approximately $8 million and additional interest income of approximately $1 million in 2009.' 

Full Year Fiscal 2009 Guidance Ending December

* EPS Figures exclude non-operating gains and losses. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information.For a more complete explanation of the company's definition of non-GAAP please refer to their fourth quarter financial press release.

** The company did not provide EPS guidance. The GeoTeam calculated an implied EPS using the company's year end outstanding shares of 59,861,719.

Source: PR Newswire (March 23, 2009)