NF Energy Should Benefit From Chinese Energy Policies

| About: NF Energy (NFEC)

Chinese energy conservation specialist NF Energy Saving Corporation (OTC: NFEC.OB) noted the publication of a new opinion of the People's Republic of China's State Council Plan, which defines a number of policies for the energy service industry in China.

NF Energy expects to directly benefit from the policies outlined by the government, on a number of financial levels. Notably the opinion provides incentives in relation to energy service companies (ESCOs) and energy management contracts (EMCs).

Essentially the opinion, referred to as the ‘Opinion on Accelerating the Implementation of Energy Management Contract to Promote the Development of Energy Service Industry’, outlines development goals, financial subsidies, preferential-tax policies, accounting policies and pilot projects.

NF Energy’s President & CEO Mr Gang Li, also acts as the Deputy Director of the China Energy Management Companies Association (EMCA). The EMCA participated and assisted in the preparation of the report.

Gang Li commented:

Benefiting from the government incentive policies, there is now a new catalyst for continued growth for energy service industry companies and ESCOs. EMCA estimates that the energy service industry will achieve an output of RMB80 billion in 2010 and maintain a growth rate of 30%-40%.

NF Energy will continue to expand its exposure in the energy service industry and EMC business by taking advantage of the preferential policies released by the Chinese government.

The opinion consists of two phases, in Phase I the aim is to support and cultivate a group of professional ESCOs, with a goal of establishing an active energy service market by 2012. Later in Phase II, the opinion aims at establishing an improved energy service system and further expand the ESCOs. This second phase will make EMCs one of the major approaches for Chinese energy retrofitting by 2015.

According to NF Energy, an EMC is an effective energy service mechanism widely used in developed countries.

Under the EMC model, ESCOs provide a series of services such as energy auditing, financing, and retrofitting to energy consumption companies to reduce their per unit energy consumption and green house gas emissions. Subsequently the ESCO generate returns by sharing energy saving benefits during the contract period.

In terms of financial incentives, the Chinese government will provide financial subsidies for EMC projects, and ESCOs will benefit from preferential tax policies. Additionally, preferential accounting policies will also apply in relation to EMC expenditures.

Disclosure: No positions