A Leading Non-State-Owned Integrated Energy Company. Company Presentation March 2011

Transcription

1 A Leading Non-State-Owned Integrated Energy Company Company Presentation March 2011

2 Safe Harbor Statement The market and industry information contained in this document has not been independently verified. No representation or warranty, whether express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of such information or opinions contained herein. Neither the Company nor any of its affiliates, advisers or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. This presentation contains statements that reflect the Company s beliefs and expectations about the future, such as the Company s anticipated growth strategies, future business development, ability to attract and retain new clients, ability to develop new products, and ability to expand to other related industries or markets in other geographical locations. These forward-looking statements are based on a number of assumptions about the Company s operations, and are subject to risks, uncertainties and other important factors, many of which are beyond the Company s control, and, accordingly, actual results may differ materially from the results discussed in these forward-looking statements. This presentation is highly confidential, is being given solely for your information and for your use only in connection with this offering. No part of this presentation may be reproduced, photocopied, redistributed or passed on, directly or indirectly, to any other person (whether within or outside your organization/firm) or published, in whole or in part, for any purpose. The information contained in this presentation does not constitute an offer of any securities nor does it contain an invitation to subscribe for, purchase or sell any securities. No securities of the Company may be sold in the United States without registration with the United States Securities and Exchange Commission (the SEC ) or an exemption from such registration. Any offering of the Company s common stock to be made in the United States will be made solely by means of the statutory prospectus. The prospectus will contain detailed information about the Company and as well as the financial statements of the Company. Any decision to purchase the Company s common stock in the offering for sale in the United States or anywhere else should be made solely on the basis of the information contained in the prospectus. The prospectus will be made publicly available in due course and can be obtained free of charge from the SEC s website at

3 Capital Markets Summary Q4 10 Revenue $118.0 M FY 2010 Revenue $ M Q4 10 Net Income $15.3 M FY 2010 Net Income $53.8 M Q4 10 EPS (Basic) $0.45 Q4 10 EPS (Diluted) $0.39 FY 2010 EPS (Basic) $1.60 FY 2010 EPS (Diluted) $1.28 Ticker Symbol (Nasdaq) CBEH Share Price (3/11/2011) $6.05 Average Volume (3-month) 441,726 Shares Outstanding (Basic) 12/31/ M Shares Outstanding (Fully Diluted) 12/31/ M (a) Market Capitalization $203.9 M Management Ownership (Fully Diluted) 50.6% (a) Includes 6.1M preferred shares, 4.0M $3.86 and 1.1M $7.00

4 Management Team with Proven Track Record Management Experience Xincheng Gao Chairman of the Board of Directors, CEO & President Albert Pu Chief Financial Officer Gaihong (Lisa) Li Executive V.P., Controller & Director Susan Zhou V.P., Investor Relations Extensive experience in the research and marketing of oil products Founded CBEH in 1999 Prior to founding CBEH, Mr. Gao worked in the Oil and Chemical Department of Shaanxi Province and Zhongtian Oil and Chemical Group, responsible for R&D and marketing BS degree from Xi an Technology University and EMBA from Xi an Jiaotong University Former Global Controller of Amphenol Corporation Industrial Operations, a division of Amphenol Corporation (NYSE: APH) 20 years of accounting/audit experience in the US and China New York State Certified Public Accountant (CPA) and practiced at PwC B.S. in Accounting from State University of New York Institute of Technology in 1990 Served as CBEH s CFO from Sept 05 May 09 Served as CFO of Xi an Dongfang Oil Group, a Chinese petroleum producer, from EMBA from Xi an Jiaotong University; B.S. in Accounting from Xi an Northwest University Joined CBEH in May 2010 Served as a Senior IR consultant at Hawk Associates from Worked at the Shenzhen branch of British Petroleum for 3 years MBA from University of Florida Nengde He Chief Technology Officer Joined CBEH in 2005, in charge of research and development of bio-diesel Specializes in oil extraction, trans-esterification and separation technologies for bio-diesel production Ph.D. in chemical engineering from Sichuan University

5 Company Snapshot A Leading Non-State-Owned Integrated Energy Company in China Founded in 1999 Operates in China as Xi an Baorun Industrial Three business segments Wholesale distribution Production and sale of biodiesel Operation of retail gas stations Products distributed to 16 provinces and municipalities Seven sales offices in China FY 2010 Revenue Mix 21% 17% 62% Revenue Net Income Gross Margin (U.S. $ in millions) $600.0 $525.0 $450.0 $438.7 $588.1 (a) (U.S. $ in millions) $80.0 $70.0 $60.0 $53.8 (a) $ % 11.6% 14.2% 14.3% 14.4% $375.0 $300.0 $225.0 $216.5 $289.6 $50.0 $40.0 $30.0 $37.9 $28.6 (b) 9.0% $150.0 $75.0 $87.1 $0.0 $ (a) Revenue and net income guidance provided by the Company for 2011, as of 3/10/2011. (b) Excludes non-cash compensation charges of $9.8 million. $20.0 $10.0 $ %

6 A Leading Non-State-Owned Vertically Integrated Energy Company Diversified Feedstock Biodiesel Production Storage Wholesale Distribution Retail Distribution Production and Sale of Biodiesel Wholesale Distributor of Finished Oil and Heavy Oil Products Operation of Retail Gas Stations 200,000-ton current capacity Two plants in Shaanxi Province One 50,000-ton plant in Chongqing, acquired in Oct. 2010, with expected payback in 2 years Plan to build a 300,000-ton plant (phase I: 200,000-ton) in Hainan, after closing acquisition of the facility The only biodiesel producer with a distribution license One of the only four non-stateowned distributors in Shaanxi Province licensed to sell both finished and heavy oil products 279,000 tons distributed in ,000 tons distributed in retail gas stations Located in Xi an City and other areas in Shaanxi Province

7 Key Investment Highlights Rapidly Growing Chinese Economy Drives Petroleum Consumption Leading Chinese Biodiesel Producer with Proprietary Technology & Distribution Wholesale Distribution Business Provides Platform to Achieve Vertical Integration Platform Expansion & Brand Awareness Through Growth in Retail Gas Stations Diversified Customer Base with High Retention Rates Consistent Profitability & Cashflow Growth Over the Last 5 Years Experienced Management Team and Board of Directors

8 Favorable Industry Dynamics China s Increasing Demand for Finished Oil Products Huge Imbalance of Finished Oil Supply and Demand Between China s Different Regions Xi an Net oil producing area Net oil consuming area Direction of Finished Oil Transport Source: CEIC Strategically located in Shaanxi Province to take advantage of China s increasing demand for finished oil products and its supply imbalance

9 China s Huge Biodiesel Opportunity China s Demand for Crude Oil Outpaces Supply and the Imbalance Keeps Growing Increasing Biodiesel Production in China Net Import Source: U.S. Energy Information Administration Source: China Biodiesel Industry Investment Value Report 2008, China Venture By 2020, 15% of energy consumed will come from renewable energy, such as biodiesel China to adopt B-5 biodiesel standard in 2011 China to reduce carbon dioxide emissions per unit of GDP by 40% to 45% by 2020

10 Leading Biodiesel Producer Established leading position utilizing superior patented production technology 200,000-ton capacity 3 production facilities 2 nd generation technology broadens range of low-cost feedstock Exceeds all major quality standards China B-100 standard, North America and Europe Strategically Located Biodiesel Production Facilities Tongchuan Chongqing Raw Material Sources Non-Edible Seed Oil 40,000 22,000 Waste Cooking Oil 43,000 41,000 Hainan Vegetable Oil Residue 17,000 37,000 Total 100, ,000 Strategically located biodiesel production facilities leverage distribution and retail network as well as diversified, low cost supply of local feedstock

11 Current Biodiesel Raw Materials First Generation Biodiesel Raw Material Sources Non-Edible Seed Oil Long-standing arrangements with local nonedible seed oil producers 240,000 acres in Shaanxi Province can produce 430,000 tons of biodiesel annually The only biodiesel producer in Northwestern China No other biodiesel producers in Shaanxi Province who utilize non-edible seed oil Waste Cooking Oil Long-standing contracts with waste cooking oil disposition centers Established Waste Cooking Oil Disposition Center near Tongchuan facility in May 2008 Waste Cooking Oil in Xi an City can support 135,000 tons of biodiesel annually The Environment Protection Bureau of Xi an City establishes the guidance price Vegetable Oil Residue Secured vegetable oil residue supply from manufacturers producing edible vegetable oil

12 Strong Biodiesel Research & Development Platform Our first generation biodiesel production processes enable the use of multiple raw material sources 4 patents granted 6 patents pending approval Continue to explore technology to use broader range of cheaper feedstock R&D partnerships with top universities and research institutes in China Patent ownership and technology transfer for production and blending Research and development of biodiesel production Biodiesel production processes R&D Chemical composition of catalyst R&D Transfer of technical know-how Use 3 raw materials interchangably at any ratio -Non-Edible seed oil -Waste cooking oil -Vegetable oil residue

13 Proprietary Biodiesel Production Process First Generation Production Process 150,000 tons of capacity includes 50,000 tons acquired in Oct., 2010 High temperature process increases conversion rate (90%) and removes more impurities Multilevel molecular distillation removes additional impurities and improves yield Filtration Trans- Esterification Methanol Recovery & Water Removal Distillation Second Generation Production Process (Under Construction) Significantly reduces feedstock cost utilizes abundant supply of raw materials, including crop waste, agricultural waste and organic waste 50,000 ton production facility completed construction in Jan patents pending approval Provides better input cost controls 600M tons of crop and forestry waste available per year Meets Europe IV fuel standards Can be mixed with both petro-diesel and first-generation biodiesel at any ratio Able to recycle feedstock residue and water used in the production process

14 Early Mover Advantages in Finished Oil Distribution Centralized Location & Transportation Access Xinjiang Inner Mongolia Beijing Ningxia Hebei Shanxi Shandong Henan Xi an Sichuan Hubei Chongqing Guizhou Hunan Fujian Yunnan Guangxi Distribution areas covering over 800 million population Convenient access from Shaanxi Province Established Distribution Leadership Distribution License One of four non-state-owned distributors licensed in Shaanxi Province to distribute finished and heavy oil products nationwide Sales Network Seven sales offices 36 full-time salespersons Covering 16 provinces and municipalities Storage Capacity Four oil storage depots Total capacity of 59,000m 3 Access to Railway Lines Access to 2.65 km special rail track Oil distribution to Yunnan, Guizhou and Sichuan Provinces, with 45% of total distribution volume CBEH s distribution network and licenses create high barriers to entry

15 Pricing Regime for Finished Oil Products Chinese Government Pricing Policy For the past nine years, China has kept retail prices of finished oil products fixed to protect consumers against rising costs 2 pricing adjustments each year from 2006 to 2008 Beginning on Jan. 1, 2009, the domestic selling prices of refined oil products have been determined on the basis of the corresponding international crude oil prices 8 pricings adjustments in pricings adjustments in 2010 Feb. 20, 2011, prices were increased by $53/ton for gasoline and diesel, or 4.5% The Government s pricing policy protects the profitability of distributors We continue to have the ability to pass on changes in commodity prices to customers As a result, gross margins are relatively stable despite volatile global crude oil prices

16 Established Relationships with Suppliers and Customers Suppliers Long-standing relationship with Shaanxi Yanchang Group CBEH s largest supplier 4 th largest oil company in China 2 nd largest oil reserve Over 10 million tons of refinery capacity 11% of China s oil production We have successfully found new suppliers in different regions as we have expanded geographically Reduce Concentration Risk of Top 5 Suppliers 77.6% 65.5% 52.6% Customers Strong Customer Base High customer retention rate each of our top 10 customers in 2007 continued to purchase from us in 2008, 2009 and ,180 1,213 Increasing number of customers 761 additional customers since

17 Fast-Growing Retail Gas Station Business 13 retail gas stations sell all grades of gasoline and diesel Customer base cars, buses and trucks 10% increase in same station sales volume YoY Compete with other privately owned and stateowned gas stations Competitive advantages Wholesale business provides stable and sufficient supply to support retail gas stations Vertical integration captures higher margins Increased profitability lower cost biodiesel blended with petro-diesel sold at the same price Maintain competitive pricing to attract customers Growth strategies Continued acquisition of selected gas stations Potential introduction of convenience stores Number of Retail Gas Stations Revenue from Retail Gas Stations (U.S. $ in millions) $100.0 $90.7 $90.0 $80.0 $70.0 $60.0 $50.0 $37.9 $40.0 $30.0 $23.0 $20.0 $10.0 $

18 Strong Competitive Positioning Centralized Location & Transportation Access Traditional Distributors Biodiesel Producers Biodiesel Production Biodiesel Distribution Finished Oil Distribution Operation of Retail Gas Stations Competitive Advantages Over Traditional Wholesale Distributors Higher profitability with biodiesel business Better control of low-cost biodiesel feedstock gives pricing flexibility and profitability Convenient railway access Large storage capability Competitive Advantage Over Other Biodiesel Producers The only biodiesel producer with a distribution license Superior patented production technology Low-cost diversified base of feedstock Retail distribution network

19 Independent Board of Directors Board of Directors Experience Larry Goldman Independent Director, Audit Committee Chair A CPA with over 25 years of auditing, consulting and technical experience with public companies Former treasurer and acting CFO of Lightbridge Corporation (NASDAQ: LTBR); and a former partner at Livingston Wachtell & Co., LLP, where Mr. Goldman stayed for 19 years Independent director and audit committee chairman of Winner Medical Group Inc. (NASDAQ: WWIN), Wonder Auto Tech, Inc. (NASDAQ:WATG), China GengSheng Minerals (AMEX: CHGS ), China Advanced Construction Materials (NasdaqGM: CADC) Wenbing (Christopher) Wang Independent Director, Compensation Committee Chair Currently serves as President and a director of Fushi Copperweld, Inc. (NASDAQ: FSIN) Prior to Fushi, served as an executive vice president of Redwood Capital, Inc.; an assistant VP of Portfolio Management at China Century Investment Corporation; and a management analyst at VCChina Independent director of Winner General Steel Holding (NYSE: GSI), Orient Paper (AMEX: ONP ) Junrong Guo Independent Director, Nominating and Corporate Governance Committee Chair A professional researcher in the forestry field Engaged in R&D in forestry resources with Shaanxi Forest Researching & Planning Institute since June Served as director of Shaanxi Forest Institute from 1999 to 2000, and director of Shaanxi Ginkgo Research Institute from 1997 to 1999 Mr. Guo has been granted honors and awards, including Shaanxi New Century Talent, Specialist to Enjoy the State Subsidies in 2004, member of the Evaluation Committee of Shaanxi Scientific & Technological Progress Award from 2005 to 2008, Professional Researcher in 2006 and Shaanxi Agricultural Expert in 2008

20 Growth Strategies 4. Apply for oil import/export license -Leverage global supply/demand imbalances -Access external supply in constrained Chinese market 3. Diversify finished and heavy oil supplier base -Enter new markets and broaden geographic reach -Mitigate supply distruptions and ensure timely delivery 2. Expand our wholesale and retail distribution network through organic growth and acquisitions -Acquire/Lease wholesale and retail operations -Expand retail format to convenience stores 1. Increase our biodiesel production capacity -Acquire existing biodiesel facilities -Build biodiesel facilities utilizing our proprietary technology CBEH Is Well Positioned to Capitalize on China s Growing Demand for Energy

21 Financial Overview

22 Biodiesel & Retail Gas Stations Accelerating Sales and Lifting Gross Margin Revenue Net Income Gross Margin by Business Segment (U.S. $ in millions) $600.0 $525.0 $450.0 $375.0 $300.0 $225.0 $150.0 $75.0 $0.0 $87.1 $216.5 $289.6 $438.7 $588.1 (a) (U.S. $ in millions) (a) Revenue and net income guidance provided by the Company for 2011, as of 3/10/2011. (b) Excludes non-cash compensation charges of $9.8 million. $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $- $8.6 $37.9 $28.6 (b) $53.8 (a) $ (% Margin) 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 29.0% 28.4% 30.5% 24.3% 13.5% 13.1% 10.7% 10.9% 9.5% 10.5% 10.4% Revenue Mix by Business Segment FY 2010 Targeted 21% 15% 45% 17% 62% 40%

23 Strong Balance Sheet and Cash Flow Statement FY 2008 FY 2009 FY 2010 Key Balance Sheet Items Strong Cash Flow Cash and Cash Equivalents $23.1 $62.4 $90.3 Total Current Assets Fixed Assets and Non- Current Assets Intangible Asset Total Assets $94.7 $163.6 $264.5 Bank Debt Total Current LiabiliKes Long Term Liability Total Shareholders' Equity Total LiabiliNes and Shareholders' Equity $94.7 $163.6 $264.5 OperaNng Cash Flow $8.7 $4.4 $58.2 (b) (a) Note: U.S.$ in millions. (a) As of the full year ended December 31, 2010.

24 Key Investment Highlights Rapidly Growing Chinese Economy Drives Petroleum Consumption Leading Chinese Biodiesel Producer with Proprietary Technology & Distribution Wholesale Distribution Business Provides Platform to Achieve Vertical Integration Platform Expansion & Brand Awareness Through Growth in Retail Gas Stations Diversified Customer Base with High Retention Rates Consistent Profitability & Cashflow Growth Over the Last 5 Years Experienced Management Team and Board of Directors

25 Investor Q&A A Leading Non-State-Owned Integrated Energy Company

26 Appendix

27 Second Generation Biodiesel Production Process

28 World Class B-100 Biodiesel Quality Standards Specification Chinese Standard GB/T American Standard ASTNPS European Standard 14214:2003(E) German Standard DINE51606 Test Method CBEH Standard Qualified or not Kinrmatic Viscosity 40mm²/s mm 2 /sec mm 2 /sec mm 2 /sec GB/T Flash Point min.130 min.130 min.120 min.110 GB/T Sulfurm/m) max.0.05% max.0.05% 10mg/kg max.0.01% SH/T % Density20kg/m³ GB/T Cold Filter Point Report SH/T Recovery Temperature GB/T Recovery Temperature Max.360 GB/T Waterm/m) Max.0.05% Max.0.05vol.% max.500mg/kg Max.300mg/kg SH/T 0246 Only Imprint Sulfated Ashm/m) max.0.02% max.0.02% max.0.02% max.0.03% GB/T % Carbon Residuefeom10% Distillation Residuem/m) Max.0.3% max.0.03% GB/T % Cetane min.49 min.47 min.51 min.49 GB/T Machinery Impuritym/m) GB/T 510 Copper strip Corrosion Max.Class 1 Max.no.3 Max.Class 1 Max.Class 1 GB/T 5096 la(light shing Acid NumbermgKOH/g max.0.8mgkoh/g max.0.8mgkoh/g max.0.5mgkoh/g max.0.5mgkoh/g GB/T mgKOH/g Oxidation Stability110)/h Min.6.0 EN Free Gltcerine max.0.020% max.0.02% max.0.02% max.0.02% ASTM D % Total Glycerine max.0.240% max.0.24% max.0.25% max.0.25% ASTM D %