Nf Energy Exploits Multiple China Industry Trends (Part I)

| About: NF Energy (NFEC)
This article is now exclusive for PRO subscribers.

On July 28, 2009, the GeoTeam coded Nf Energy Saving Corp America (NFES.OB) as a GeoSpecial at $1.10. The Nf Energy Saving Corp America story is easy to understand supported by industry fundamentals that should drive growth into the foreseeable future. We are particularly impressed with the information provided in the company's 10K filings which thoroughly address the various product/service lines as they relate to ever-changing industry dynamics. It ultimately remains to be seen if Nf Energy will rise to the challenge posed by China's increased emphasis on clean/efficient energy solutions. We urge interested parties to peruse the company's filings and website to gain a taste of the opportunities present for Nf Energy Saving Corp America.

Understanding Nf Energy Saving Corp: NF Energy Saving Corp of America is a China-based provider of integrated energy conservation solutions.

Nf Energy's products address some fundamental deficiencies present in China's aging industrial infrastructure. Seventy percent of the Company's sales revenues come from it's major customers involved with large-scale electricity generation and commodity supply, industry's that need efficient processes when producing and distributing their products and services.

The country's energy saving goals can be solved by a Nf Energy's capabilities to address energy conservation and emissions through the modernization of industrial boilers and furnaces, steam thermal systems, motor drive systems, lighting lamps, wind power equipment components, heat recovery systems and flow control systems. Each component of the Company's focus plays an integral part in contributing to a large picture of optimizing the output of various systems and supporting the idea of sustainable energy as China enters an industrial boom. In breaking down Nf Energy as a company, it can be categorized into four major business directions, all of which provide the company market opportunity.

  • Energy Saving Reconstruction Projects
  • Production and sales of energy-saving valves, intelligent valves and flow control equipment
  • Comprehensive energy conservation and emission reduction services for municipalities
  • Equipment Manufacturing for Wind Power Plants

I Energy Saving Reconstruction Project

  • Refurbishing of industrial energy producing systems
  • Installation of new modern energy efficient systems
  • Other initiatives to renew and recover various forms of energy

Industrial Boilers

The source of heat for a boiler is combustion of any of several fuels, such as wood, coal, oil, or natural gas. In the case of China, 95% of the total burners in the country are coal-fired. Boilers have many applications. They can be used in stationary applications to provide heat, hot water, or steam for domestic use, or in generators and they can be used in mobile applications to provide steam for locomotion in applications such as trains, ships, and boats. Using a boiler is a way to transfer stored energy from the fuel source to the water in the boiler, and then finally to the point of end use. (Source:Wikipedia:boiler) Furnaces, explained later, are sometimes a component of boilers that supply the heat needed to maintain a constantly flowing process.

Problem - Boiler Inefficiency

  • Due to the mechanism of operation, 60% of boilers in China are below current efficiency standards.
  • The use of old and inefficient boiler equipment and associated components leads to small capacities and incompatible coal use.
  • The reliance of higher grade/expensive coal to operate boilers.
  • Loss of potential energy due to inefficient systems.

Nf Energy Solutions to Boiler Inefficiency

  • Retrofit old boilers with modern equipment and improve the efficiency of the boiler operating mechanism.
  • Constructing new efficient boilers for its customers, further limiting energy loss.

Opportunity within the Boiler Market

  • In light of boilers not meeting efficiency standards, the opportunity for Nf Energy is immense as companies race to meet code.
  • Companies that contract with Nf Energy Saving Corp to improve boiler operating systems will be able to refurbish old boilers or construct new boilers that will meet new standards. Added benefits to these companies will be increased margins through the use of cheaper coal, less energy loss and the ability to capture lost heat/energy that occurs in the combustion process.

Industrial Furnaces

China's industrial furnaces are mainly used in high energy consumption industries, accounting for 10% of China's total energy use. An industrial furnace or direct-fired heater, is a piece of equipment used to provide heat for processes such as those used in the iron and steel, metallurgy, building materials, machinery manufacturing and chemical industries. Furnace designs vary with the intended function, heating duty, type of fuel and method of introducing combustion air. However, most process furnaces have common features. (Source:Wikipedia:furnace)

Problem - Archaic Furnace Design

  • Equipped with backward technology
  • Outdated equipment
  • Experiencing serious waste of energy.

Nf Energy Solution to Archaic Furnace Design

  • Use existing technology to reconstruct furnace structure, its heat source system, combustion system and control system.

Opportunity within the Furnace Market

  • Half of the enterprises that utilize furnaces experience problems.

Steam Thermal Systems

The main goal of steam thermal systems is to transfer heat resulting in the energy needed to drive a process. The flow of heat from point to point in a thermal system is usually related to the temperatures at various locations within the system. When the energy is extracted from the steam, the steam condenses into a low-temperature reservoir, where it can be reused as feed water to make more steam.

Problem - Inefficient Steam Thermal Systems

  • Inefficient systems lead to energy leakage

Nf Energy Solution to Steam Thermal System Inefficiency

  • Reconstruct thermal systems
  • Eliminate leakage losses
  • Recovery condensed water to be used as energy.

Opportunity with Steam Thermal Systems

  • Companies can benefit from efficient steam trap designs and other components that help to make the systems more self sufficient. Their bottom lines will be positively affected as a result of the containment of reusable resources.

Motor Drive Systems

A motor drive system is comprised of an electric motor and other parts of a mechanical system for operating a machine or machines.

Problem - Excessive Power Consumption

  • China's motor drive system power consumption accounts for 2/3 of total electricity consumption of the country.

Nf Energy Solution

  • Reconstruct an efficient motor drive system with modern equipment.

Opportunity with Motor Drive Systems

  • Companies will view the NFES solution as a way to consume less energy when powering machinery.

Green Lighting Project

Funded by the China State Economic and Trade Commission (OTC:SETC) and the Global Environment Facility, the China Green Lights Project began its expanded implementation in September 2001. The primary objective of the project is to, by 2010, reduce lighting energy use in China by ~10%. This involves the optimization of power distribution and how it is used by the overall system.

Problem - Overload on Lighting

One of the fastest growing sectors of electricity growth is in lighting energy consumption.

  • Annual growth in electrical consumption by lighting was 15% for much of the 1990s.
  • Lighting currently accounts for approximately 12% of lighting energy use in China.

Nf Energy Solution

Given the predominant reliance on coal as a generation fuel, serious health and environmental problems can be reduced if the use of coal is curtailed by way of smart processes and higher quality products.

  • The Company accommodates the project through the manufacture of energy efficient green light products, renewing the lighting power supply, rational distribution of lamps, improving the quality of power supply and on-demand control.

Green Lighting Project Opportunity

The project will set minimum efficiency standards for lighting products and designs.

  • Those who supply the most efficient products will rise to the top.
  • Companies can outsource product manufacturing to NFES.
  • As the government continues to implement its green light project demand for related products should increase.
  • Because the project is in its infancy, NFES can garner a favorable reputation as one of the original contributors if the project's goals are met.
  • NFES is the only commercial distributor of energy efficient lighting lamps in Liaoning Province where the provincial government is targeting 2.5 million bulb installations for 2009.

Recovery of Residual Heat

Problem - Lost Energy

In the various industries that Nf Energy serves, residual heat is created during energy creation and can be considered a source of lost energy.

Nf Energy Solution

The company has developed reliable methods to recover and utilize residual heat from a variety of different sources.

Residual Heat Opportunity

  • There is the potential for Nf Energy to generate contracts with companies that see the Company's recovery methods as a competitive advantage.

Disclosure: Long NFES

Part II >>