Victor Sula, Ph.D.Initial ReportJanuary 14th, 2009
China Energy Recovery Inc. (OTCBB: CGYV)
ar power, but with the added benet of reduced greenhouse gas emissions. CGYV’s energy recovery technologycould reduce the cost of electricity to $6 per megawa hour (MWh), compared to costs for coal-produced electric
ity at $48 per MWh.Because CGYV’s technology generates power at a fraction of the cost of other technologies, customers realize arapid return on invested capital. The Company’s energy recovery systems reduce fuel consumption and costs by
potentially tripling the useable energy extracted from a given amount of fuel, allowing users to slash energy ex-
penditures by as much as 2/3rds.
Numerous advantages will support rapid deployment of the Company’s technology
Additional benets associated with CGYV’s energy recovery systems include: (1) reductions in the amount oftoxic, combustible wastes such as carbon monoxide gas, sour gas, carbon black-o gases and oil sludge releasedinto the atmosphere; (2) reduced equipment spending since waste heat recovery allows for smaller sized ue gas-handling equipment (fans, stacks, ducts, burners, etc.); and (3) lower auxiliary energy consumption. Smaller-sizedequipment reduces auxiliary energy consumption by fans, pumps and related items.
Exponential revenue growth
The Company reported revenue of approximately $16 million for the rst nine months of 2008, which is 112%more than for the same period last year. CGYV’s revenue growth reects increased contract volume and higherrevenues per contract. During the rst nine months of 2008, CGYV completed 60 contracts with revenues per con
tract averaging $255,377. This compares to 36 completed contracts and revenues per contract averaging $209,403for the same period of 2007.
Growing 2009 order backlog
The Company reported strong growth in contract volume during 2008 and is optimistic regarding full-year 2008and 2009 results. The total value of contracts and orders completed during 2007 and 2008 exceeded $40 million
and CGYV has already secured orders valued at approximately $19 million for 2009.
We believe CYGC’s sales will continue to grow, despite the sluggish global economic outlook, since the Companyhas already secured orders for future periods and is uniquely well-positioned with the engineering skills neces
-sary to design, build and install large energy recovery systems. In addition, the Company is pursuing sales op-portunities in new high-growth segments such as bio-mass.
Improving prot marginsThe Company signicantly improved gross margins in 2008 by expanding sales and gradually increasing contractprices to oset rising raw material costs. Operating and net margins gains were achieved by improving operatingeciency and increasing the number of higher-margin licensing and design service contracts. We anticipate netincome will continue to climb in 2009 as a result of sales growth, eciency gains and expanded sales of higher-
The Company has aracted the aention of well-known venture capitalists. Roger Ballentine, a Venture Part
ner with ArborView Capital and the former Chairman of the White House Climate Change Task Force underPresident Clinton, serves on CGYV’s Board of Directors. eBay senior executive Steve Westley through his Westley
Group is an investor in the Company.