Mr. Baowen Ren, Chairman and CEO of Sino Clean Energy, discusses his company’s outlook for the rest of the year and offers some insight into their emphasis on making their operations more transparent and their growth plans for the next 3-5 years.

Full Transcript:

Ben Lack: Can you give us a brief history of the company and an idea of the current operations?
Baowen Ren:   Our company began its operations in 2003. In 2004, we started our research and development about coal-water slurry fuel and, after that, in April of 2006, we started building coal-water slurry fuel factory operations.  In December of 2006, we obtained a public listing through reverse merger in OTCBB.  In July of 2007, we started producing coal-water slurry fuel.  We reached an annual capacity of 100,000 metric tons.  This line was started in Tongchuan in the Shanxi province.  In February 2008, we got a boiler referral agreement signed with Haizhong Boiler.  In September of 2008, through a PIPE transaction, we raised 1.3 million US dollars.  In February of 2009, a second operation line was built and contributed the total capacity 350,000 metric tons.  In July 2009, we raised another 11.6 million US dollars through another PIPE transaction.  In the same month of the year, we signed a joint development agreement with Haizhong boiler.  In October 2009, we started our operation in the production in Shenyang.  We increased production capacity to 650,000 metric tons.  In January 2010, we reached a total capacity to 850,000 metric tons.  In this year, we have line 5 in Tongchuan city and in the same year in April, we applied for NASDAQ listing.Let me tell you about our IPO.  Our offering price then is 5.25 US dollars.  In the next year, March 2011, in Dongguan, we achieved an additional capacity of 300,000 metric tons.  Currently, we have three facilities in Tongchuan, Shenyang and Dongguan separately. I am especially pleased with the performance of our Dongguan facility.  More customers are in need of CWSF (coal-water slurry fuel) and now we are going to increase 750,000 metric tons more in Dongguan facility.
Ben Lack: When you look at your current company and your competitors, what would say is your competitive advantage among other coal-water slurry fuel companies in China?  And how do you try to beat your competitors to try to acquire customers and new business?
Baowen Ren:   Our competitors can only offer low prices to compete with us. As for our company Sino Clean Energy, we have three advantages.  The first one is that we started the CWSF facility from 2004. So we have been running for seven years and have established long-term research and development in the operation.  As a result, we have already accumulated our own customers, and we have our market share and a good reputation with our customers.  This is one aspect.  The second one is we have signed long-term operation agreement with Qingdao Haizhong hydro boiler, so we have priority from this way to attract new customers.  The last one is, through the long-term operation agreement with our coal suppliers, we have stable and competitive prices as well as a stable supply. It is through these three points that we feel that we are in strong position to compete.
Ben Lack: There have been a lot of Chinese-based companies who are publically traded in the United States through reverse mergers and a lot of these companies are experiencing significant negative press from the media. I’m curious to know what your thoughts are on this and what do you plan to do to improve your companies’ image from a public relations standpoint?
Baowen Ren:  There are definitely some US-listed Chinese companies which are being attacked by short sellers and institutional shorters.  These companies also probably have some shortcomings on information disclosure.  For SCEI (Sino Clean Energy), we plan to improve our image through the following ways.  The first is to disclose information related to operating, developments and strategies as early as possible, so that we can show company transparency.  The second is to strengthen our company’s internal controls through applying to SEC and NASDAQ rules and regulations.  And finally, we are also going to engage some reputable auditing companies, such as the top four or top six.  It will be in this way that we can make our company better.
Ben Lack:   You appointed Mr. Paul K. S. Chiu as Chairman of the Audit Committee.  Mr. Chiu has US experience. Do you plan to add to your company’s Board any additional members with extensive US experience?
Baowen Ren:   Mr. Chiu offers a lot of experience and suggestions for our company’s operations and governance.  The management will continue engaging more potential board directors with US public company experience.
Ben Lack:   In your last quarterly report, your company reported challenges with sales with one customer and this impacted the overall sales of the business and the earnings per share.  Can you provide some guidance for what’s going to happen for the rest of 2011 and for 2012?
Baowen Ren:   This year, we do have some impact from one of our customers Hai-Zhong Heating Resources because they are re-routing a pipeline near the Ming Fa real estate development.  Fortunately, this influence will not last long-term.  It will recover and get back to normal operations very soon.  As for the 2011 outlook of the sales, we have made a small adjustment.  First, I think we are going to strengthen our operations in the Dongguan facility.  Because of this, we should achieve higher sales which will overcome most of the losses in this year.  We expect at the end of this year, we probably will have a total capacity of 920,000 metric tons with sales of 110 million US dollars.  As for 2012, because we are potentially acquiring another clean-coal company in the Guangdong province, we have the opportunity to show large growth.  As for the exact number, we need to operate some evaluation appraisals to make it clear and exact.
Ben Lack:   Are the issues with the customers something that is unique to that customer?  Or is it something that might happen with additional customers down the line?
Baowen Ren:   Because Haizhong is one of our largest customers, this influence might last several months, but not be long term problem.  We are working hard to help them get back up and running.  After they are back to operation, we will keep on continuing supply coal-water slurry fuel to this customer.
Ben Lack:   What does the growth plans look like for Sino Clean Energy for the next three to five years?
Baowen Ren:   In the next three to five years, we will take advantage of the government policies that promote making the environment cleaner and China more energy efficient. Because China mainly relies on coal consumption, making coal clean and friendly is one of the government’s top priorities.  Sino Clean Energy, will take advantage of this and look to grow quickly through increased manufacturing capacity and additional mergers and acquisitions of other clean coal companies.
Ben Lack:   Are you able to update us on the lawsuit that you have with Seeking Alpha and have you actually filed the suit in the United States?
Baowen Ren: We did file the suit the New York State Supreme Court because Alfred Little and Seeking Alpha are pseudonyms. So the first thing for our legal council is to break the pseudonyms and to find their true identification.  This whole process has certain limitations and takes around 120 days.  If we can’t find their true identify in these days, we will keep extending our file to continue finding their true identification and solve this issue.
Ben Lack: Mr. Ren, why does this industry interest you and why have you chosen to spend your time building Sino Clean Energy?
Baowen Ren: The first is that offering a clean energy service increases our chance of strong sales and profits for Sino Clean Energy.  The second one is social value.  Our technology helps to improve our residential environment; it is very friendly.  As for the coal-water slurry fuels industry, coal pollution is very serious in certain areas in China. China’s coal consumption accounts for 67% of our country’s total energy consumption. So, that is why I work on clean coal-water slurry fuel solutions, to improve our living environment.  This is not only good for our government, but also good for our people.

Note: Interview translated by Jing Li of Sino Clean Energy

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