Upcoming Backdoor Listing of HK BLDG & LOAN(ong Kong Economic Journal)

April 6, 2011

China Finance Online: Hong Kong media reported that HK BLDG & LOAN (145) announced in late February to acquire mainland HVAC energy conservation service provider—Weldtech at a price of 2.8 billion. By this Monday, the market value of HK BLDG & LOAN is 813 million, and therefore its M&A is widely conceived as “an overambitious action”, and its new service is ready for backdoor listing. Wang Haoyuan, Chairman of Weldtech pointed out his company would seek for support from China Energy Conservation and Environmental Protection Group (CECEPG) affiliated to State-owned Assets Supervision and Administration Commission to enhance business coverage in mainland market.

HK BLDG & LOAN disclosed that the M&A of Weldtech involved cash, convertible note and consideration shares. CECEPG would hold 4.02~8.68% shares of HK BLDG & LOAN upon completion of M&A. Chairman Wang stated that compared to Weldtech’s 3.2 million valuation, this M&A enjoyed 15%-20% discount.

He also said that the chiller sets consuming most electricity of a Weldtech’s client was not covered by energy efficiency tools and most engineering companies are only engaged in monitoring instead of providing automatic energy efficiency optimization tools, so they joined the design of ultra-performance plant control system (UPPC). From statistics of site survey by Tongji University and others, the overall energy saving rate may reach 10%.
Later one of Shuion (272)’s property signed EMC of chiller units with Weldtech and the company had a new shareholder - CECEPG, one of mainland leading emission reduction providers, followed by the investment of CCB International and Shanghai NewMargin Ventures. As far as it is concerned, there are not many EMC participants inland in chiller energy efficiency industry. The sum total of Weldtech’s EMC projects signed with Shuion and SHK (016) is about 400 billion. Weldtech also promoted EMC with petroleum companies and hotels, and intended to advance in semi-conductor industry in future. The profit-sharing ratio is subject to negation with clients. Recommended ratio in the first two years is nine to one, which is 90% energy savings for Weldtech. After that the ratio may decrease to seven to three. Normally 6-year profit-sharing ratio is eight to two with fixed upper limit. Return on investment via the current operation mode will incur in one year or one year and a half, with the marginal profit exceeding 50%.

Over the next decade, the scale of EMC nationwide is estimated to reach RMB 370 billion. Mr. Wang said the current market value is only 900 million. He predicted that 60 employees are sufficient for 120 projects, and by the end of this year, there will be 80 employees involved in 200 projects before a further increase to 100 employees next year.

The company’s products will upgrade from water cooling to seawater and even ice cooling, and the second generation of UPPC will be developed for monitoring energy consumption of road lights from distant end.