Brief Introduction of Experience of Shandong ESCO Dai Cunfeng Chinese Renewable Energy Industries Association (CREIA) Adviser of EMC Association (EMCA)
Content Profile of Shandong ESCO Establishment of the Company Business Development Experience
Brief Introduction Established in 1996 One of the three demonstrate ESCO under ECP I Paid in capital: 34.4 million RMB Staff: 32 employees By the end of 2004, total 62 projects were implemented, with a total investment of 327 million.
Main Project Line Green lighting Steam hammer renovation Waste Heat recovery Building Conservation Co-generation Main contract types: Energy saving Sharing Contract Frequency and speed changing for electromotor(ASD) Frequency and speed changing for electromotor(ASD) Boiler renovation Furnace renovation District Heating renovation Others
Project Investment
Frequency and speed changing
Circulating-Fluidized-Bed(CFB) Boiler Renovation Total project investment: mil. RMB Recovery period: 1.94 years Profit: annual profit of 6.8 mil. RMB, with 9660 tce/year and CO 2 emission reduction of 6864 t/year.
Sinter cooler Waste Heat Recovery Total investment: 2.6 mil. RMB Payback period: 0.9 year Result: generated steam of 62,123.2 t/year, equivalent to of 8366 tce, with profit of 2,997,700 RMB and CO 2 emission reduction of 5944 t/year.
Glass Furnace Renovation
Waste Heat Recovery
Replace Steam Hammer by Electro hydraulic Hammer
Establishment of Company
Main Shareholders Fund Market Technology Shandong Provincial Government Jinan Iron and Steel Group ESCO Seeds Money Us$2.4 million Shandong Energy Conservation Technology &Service Center
Supervisor Board General Manager DGM FinanceDGM ProjectDGM Admin. Panels Tech, Finance, Plan Legal Counsel Finance DeptOperationProject I, II, IIIPlanningGeneral Manager Office Board of Directors Shareholder Congress Organization Chart Appraisal Center MarketDevelopme &Implementation Center Adviser Group Logistic Center Decision Center
Project Approval Procedures Initial intent Client assessment Cancel Feasibility report Draft contract N Y Lawyer GM meeting approval Tech experts Negotiation team negotiate N Signing contract Y Y Energy auditing
Client Selection and Market Development Three types of clients: gold clients, opportunity clients and high-risk clients. Adopting different management methods for different clients. Focus on project development of public utilities units Focus on developing “long-term relationship clients”. Market development through main equipment vendors
Main clients segment
Laiwu Iron and Steel Group Case First project: water pump frequency changing project. Investment: 0.6 mil. RMB The later three projects –Blast-furnace waste heat recovery project –Sinter cooler waste heat recovery project –Mixture gas recovery project Total investment of 12 million RMB
Case: Beijing Shenwu Company First project: Yegang Group Ltd.’s heating furnace renovation project: 5.7 million RMB The later three projects –Dongfang Steel Ltd. –Kunming Steel Ltd. –Taiyuan Steel Ltd. Total investment of 23 million RMB
Failed Cases Ningjin Crystal Materials Factory’s Furnace heat preservation project. Clients: small private firms. Investment: 490,000 RMB. Equipment: custom-made. IRR: 24%. Company bankrupt, then was acquired. Project failed
Business Development
projects. Average 1.8 mil. RMB per project. Yearly average investment of 12 mil. RMB. Project features : –Mature technologies; energy conservation measures not diversified; less sophisticated technologies. E.g., green lighting, ASD, high-efficiency boiler replacement, etc. –Contract term (average): 1.4 years –IRR: 15-17% Financing: own fund, World Bank long-term loan, GEF grant.
projects. Average 5.3 mil. RMB per project. Average yearly investment of 58 mil. RMB. Project features: –Comprehensive application of multiple technologies; more sophisticated techniques and technologies. Typical cases: building renovation (Green lighting, automatic control of heating & cooling systems, etc.), waste heat recovery, co-generation. –Contract term (average): 2.5 years –IRR: over 18% Financing: own fund, World Bank long-term loan, GEF grant, commercial bank loan. Serious competition for low investment and less sophisticated technologies; company is getting stronger in terms of technology, management and financing abilities.
projects. Average 8.5 mil. RMB per project. Yearly investment of 100 mil. RMB. Project features: not a pure increase of investment; new trends: –BO operation model. Typical case: waste gas recovery for power generation. –There were contracts with term of 8-10 years: seeking more higher and stable profit. –Service extension: not only limited in energy conservation; but also environment protection; waste materials treatment, etc. –Possess own technologies; new products. Financing: mainly own fund and commercial bank loans.
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