China Recycling Energy: Full Year 2013 Net Income Increases by 359%

China Recycling Energy Corp. (NASDAQ: CREG; "CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2013.

Highlights for the Fouth Quarter 2013

• Total sales increased $12.98 million as compared to the fourth quarter of 2012.
• Net income increased by 169% to $4.21 million as compare to $1.57 million of fourth quarter of 2012.
• Fully diluted earnings per share ("EPS") of $0.07 increased by $0.04 as compared to $0.03 of fourth quearter of 2012.
• Completion and sale of Jilin waste heat power generation project.

Highlights for the Full Year 2013

• Total sales increased $61.95 million, as compared to $1.25 million for the year ended December 31, 2012.
• Net income increased by 359% to $15.63 million as compared to $3.41 million for the year ended December 31, 2012.
• Fully diluted earnings per share ("EPS") of $0.29 increased by 314 % from fully diluted EPS of $0.07 in the year ended December 31, 2012.
• New completed systems：two biomass power generation systems, two BPRT systems and one waste heat power generation system.

Summary of Financial Results:

Mr. Guohua Ku, Chairman and CEO of CREG, commented, "Our full year 2013 financial results showed a large increase in net income; we have five new systems completed this year. All our projects operated well and generated constant cash flow. During this year we further strengthened our operations and increased operational efficiencies, while maintaining our fiscal discipline and cost controls. Currently, we have fifteen operating systems and a series of potential projects which will bring our company great growth in the future."

Positioned for Growth:

"During the year, we made great effort in positioning the Company for growth," said Mr. Ku. "Most notably, we expanded our waste-to-energy project portfolio with the acquaition of Pucheng phase II, a biomass power generation system. Xi'an TCH, our wholly owned subsidiary, entered into a Letter of Intent for Technical Transformation with Pucheng for technical transformation to enlarge the capacity of the Pucheng Project Phase I, which will expand our existing 12 MW system to 24 MW. We completed our Shenqiu phase II biomass power generation project. In June 2013, we had the two 3MW BPRT power generation systems of Datong project completed. We also had the Jilin project completed at the end of 2013, which was to build furnace gas waste heat power generation systems for electricity generation from recycled heat and steam from groups of ferroalloy furnaces and electric furnaces.

"We currently have 15 waste-to-energy systems in operation and 4 projects under construction," Mr. Ku added, "As more projects are completed, the trend of increasing interest income from sales type leases will continue to grow."

Projects in the Development Phase:  

In 2013 we have built a energy fund with Hongyuan Huifu Venture Capital Co. Ltd to finance our Coke Dry Quenching projects (CDQ project). We now have two CDQ projects under construction with a total capacity of 75 MW. We expect to complete these two projects in 2015.

In addition, the Company is also in the process of constructing for Shanxi Datong Coal. In June 2013, the two 3 MW BPRT power generation systems were completed. And the remaining one, 15MW WGPG, will be completed this year. Revenue on these systems will be recognized at the point of system delivery and monthly lease payments, based on off-take agreements with the customers, begin thereafter.

Looking ahead, we are very confident that we will continue to grow in 2014 and beyond. We look forward to updating you as more projects are finalized.

Financial Results for Full Year Ended December 31, 2013

SALES. Total sales, including system sales and contingent rental income, for the year ended December 31, 2013 were $63.19 million while total sales for the year ended December 31, 2012 were $1.25 million, an increase of $61.94 million as a result of increases in the sales of systems. Of the total sales, sales of systems for the year ended December 31, 2013 were $62.01 million, as compared to $0 for the year ended December 31, 2012, an increase of $62.01 million. For the year ended December 31, 2013, Shenqiu Phase II project, Datong project, Pucheng Biomass Phase II project and Jitie project were completed and sold. In comparison, in the year ended December 31, 2012, none of the Company's power generation system were completed and sold. For the year ended December 31, 2013, the Company received contingent rental income of $1.18 million from the usage of electricity in addition to the minimum lease payments, compared to $1.25 million for the year ended December 31, 2012. For the sales-type lease, sales and cost of sales ("COS") are recorded at the time of the lease; in addition to sales revenue, our other major source of revenue is interest income from the sales-type leases.

COST OF SALES. COS for the year ended December 31, 2013 was $47.85 million while our COS for the year ended December 31, 2012 was $0, an increase of $47.85 million. This increase was mainly due to the completion and sale of the Shenqiu Phase II, Datong project, Pucheng Biomass Phase II project and Jitie project.

GROSS PROFIT. Gross profit was $15.35 million for the year ended December 31, 2013 compared to $1.25 million for the year ended December 31, 2012, a blended gross margin of 24% and 100% for the year ended December 31, 2013 and 2012, respectively, the decreased profit margin for the year ended December 31, 2013 was mainly due to the sale of projects for which profit margin range between 23% to  28% compared to no sale of any projects in 2012 except for sale of extra electricity which result in contingent rentals and hardly bears any cost.

INTEREST INCOME ON SALES TYPE LEASES. Interest income on sales-type leases for the year ended December 31, 2013 was $19.34 million, a $1.11 million increase from $18.23 million for the year ended December 31, 2012. During the year ended December 31,  2013, interest income was derived from 15 systems: TRT system to Zhangzhi with terms of 13 years; CHPG systems to Jing Yang Shengwei for 5 years, BMPG systems to Pucheng Phase I and II for 15 and 10 years respectively, BMPG systems to Shenqiu Phase I for 11 years and Shenqiu Phase II for 9.5 years, a power and steam generating system from waste heat from metal refining to Erdos (five projects) for 20 years, WHPG system of Zhongbao for 9 years, WHPG systems of Jitie for 24 years, and Datong two TRT systems for 30 years.. In comparison, during the year ended December 31,  2012, interest income was derived from 11 systems: one TRT systems, two CHPG systems, two systems with Erdos Phase I project and three systems of Erdos Phase II project, the Pucheng biomass power generation system, Shenqiu biomass power generation system and Zhongbao WHPG system.

OPERATING EXPENSES. Operating expenses consisted of selling, general and administrative expenses totaling $4.16 million for the year ended December 31, 2013 as compared to $5.66 million for the year ended December 31, 2012, a decrease of $1.50 million or 27%. The decrease was mainly due to a $2.97 million loss resulting from the termination of the Erdos TCH Phase III power generation project in 2012; however, the following expenses increased: (i) our consulting expenses, by $0.62 million relating to the HYREF Fund raising, (ii) our legal and miscellaneous expenses, by $0.56 million relating to HYREF Fund raising, and (iii)  our salary and bonus expenses, by $0.25 million resulting of additional projects put into operations in 2013.

NON-OPERATING INCOME (EXPENSES). Non-operating expenses consisted of non-sales-type lease interest income, interest expense, bank charges and miscellaneous expenses. For the year ended December 31, 2013, net non-operating expense was $7.83 million compared to $7.67 million for the year ended December 31, 2012. For the year ended December 31, 2013, we had $6.72 million interest expense on loans and $1.29 million one-time commission to the Fund Management Company for successfully initiating and completing the RMB 460 million financing for the Company. For the year ended December 31, 2012, we had $9.25 million interest expense on loans and $1.13 million non-cash income from changes in fair value of BCF of the convertible note from China Cinda, and $349,300 net subsidy income from Xi'an City Science and Technology Bureau and Xi'an City Finance Bureau under the Xi'an Hi-Tech Industry Development Special Project Fund.

NET INCOME. Net income for the year ended December 31, 2013 was $15.63 million compared to net income of $3.41 million for the year ended December 31, 2012, an increase of $12.22 million. This increase in net income was mainly due to the increased sales and interest income on sales-type leases compared with the year 2012.

For the year ended December 31, 2013, GAAP diluted EPS was $0.29 with approximately 61.9 million shares of common stock outstanding, as compared with $0.07 for the year ended 2012, when the Company had approximately 50.2 million shares of common stock outstanding.

Financial Position as of December 31, 2013

As of December 31, 2013, the Company had cash and cash equivalents of $7 million, other current assets were $15.80 million and current liabilities were $31.8 million. Total shareholders' equity was $155.02 million, as compared to $114.98 million as of December 31, 2012.

Net Investment in Sales-Type Leases as of December 31, 2013

The Company, through its subsidiary, Xi'an TCH Energy Technology Co., Ltd ("Xi'an TCH"), sells and leases energy saving systems and equipment. Under sales-type leases, Xi'an TCH leased TRT systems to Zhangzhi with terms of 13 years; and leased CHPG systems to Jing Yang Shengwei for 5 years, BMPG systems to Pucheng Phase I and II for 15 and 10 years respectively, BMPG systems to Shenqiu Phase I for 11 years and Shenqiu Phase II for 9.5 years, a power and steam generating system from waste heat from metal refining to Erdos (five projects) for 20 years, WHPG system of Zhongbao for 9 years, WHPG systems of Jitie for 24 years, and Datong two BPRT systems for 30 years. The components of the net investment in sales-type leases as of December 31, 2013 and 2012 are as follows:

As of December 31, 2013, the future minimum rentals to be received on non-cancelable sales-type leases by years are as follows: 

For more information regarding China Recycling Energy Corp's financial performance during the year ended December 31, 2013, please refer to the Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 24, 2014.

Full Year 2013 Financial Results Conference Call

The Company will host a conference call at 8:30 am. EDT on Wednesday, March 26, 2014, to discuss the Company's 2013 full year financial results.  Mr. Guohua Ku, Chief Executive Officer, and Mr. David Chong, Chief Financial Officer, will be hosting the call.

Conference Call Wednesday, March 26, 2014 8:30 am. EDT

Investors are invited to participate on the live call by dialing +1(877) 870-4263 for domestic callers and +1(412) 317-0790 for international callers. The conference number for login is 04021401.

Telephonic Replay

If you are unable to participate in the call at this time, a replay of the call will be available for one hour following the call starting at 9:30 a.m. EDT, March 26, 2014 and ending at 9:00 a.m. EDT on April 2, 2014. To listen to the replay, domestic investors can dial +1 (877) 344-7529 and international investors can dial +1 (412) 317-0088.  The conference number for the replay is: 04021401.

For more information regarding China Recycling Energy Corp's financial performance during the year ended December 31, 2013, please refer to the Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 24, 2014.

About China Recycling Energy Corp.

China Recycling Energy Corp. (NASDAQ: CREG or "the Company") is a leading developer of waste energy recycling projects for industrial applications in China. Our waste energy recycling projects allow customers who use substantial amounts of electricity to recapture previously wasted pressure, heat, and gas from their manufacturing processes to generate electricity. We currently offer waste energy recycling systems to companies for use in iron and steel, nonferrous metal, cement, coal and petrochemical plants. We construct our projects at our customer's facility and the electricity produced is used on-site by the customer. We provide an energy-efficient solution aimed at reducing the emission and air pollution in China. Our recycling energy projects capture industrial waste energy to produce low-cost electricity, enabling industrial manufacturers to reduce their energy costs, lower their operating costs and extend the life of primary manufacturing equipment. The Chinese government has adopted policies to encourage the use of recycling technologies to optimize resource allocation and reduce pollution. Currently, recycled energy represents only an estimated 1 percent of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand. Our management and engineering teams have over 20 years of experience in industrial energy recovery in China. For more information about CREG, please visit http://www.creg-cn.com.

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of China Recycling Energy Corp. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For more information, please contact:

Mr. David Chong
Chief Financial Officer
China Recycling Energy Corp.
Tel: +86-13701813139
+65-9721 6163
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.