In a new report on efforts by U.S. cities to outdo the federal government on reducing greenhouse gas emissions, Seattle Mayor Greg Nickels admits that even the early strides made by Seattle -- reducing the city's 1990 carbon footprint by 8% in 2005 -- don't allow the city to rest on its laurels. Today's gains could be tomorrow's losses. Real measures to slow the warming of the planet will take patience, persistence and a determination to press on despite setbacks.
"I'm a realist, and I see Seattle's population growing, so I know we're going to have to increase our environmental vigilance in the coming years in order to stay on track and reach our climate protection goals," said Nickels, who announced that 1,000 mayors have signed on to the U.S. Conference of Mayors initiative to unilaterally limit their own greenhouse gas emissions.
"I also know that this generation, which is showing such a bold willingness to shed old behaviors and habits in the name of climate protection, won't come up with all the answers and won't make the atmosphere a pure place any time soon," he added. "But with each passing decade, we'll make more and more progress greening our cities ... and nobody will forget that all this started because 1,000 courageous and broad-minded mayors thought of the Earth as well as their neighborhood turf at the same time."
The report on the program so far outlines what cities across the country are doing to transition to cleaner fuels, phase in lower-energy lighting, synchronize traffic lights to keep traffic moving more quickly and cleanly and raise energy-efficiency standards for new construction.
"The city of Los Angeles has the largest carbon emissions output of any city in the state of California, which has the largest carbon footprint of any state in the U.S., which has the largest carbon footprint of any country in the world," Mayor Antonio Villaraigosa said in the profile on Los Angeles, which has pledged to reduce greenhouse gas emissions by 35% below 1990 levels by the year 2030.
Last year's Olympics in Beijing brought China to the verge of global embarrassment over its pollution problem. Only shutting down some of its factories temporarily stopped the city from choking the tourists and athletes.
But beyond such quick fixes, there are signs that China is getting more serious about its long-term environmental problems. In June 2008, the government tightened its gas emission standards.
One of its rules related to sintering, a process that makes solid alloys out of metal powder using high heat. The process emits sulfur dioxide when powered by coal, so the new rules mandate desulfurization equipment on all coal-fired sinters.
Builds Better Mousetrap
Enter Rino International (NasdaqGM:RINO - News) of Dalian, China. More than three-quarters of its sales come from flue gas desulfurization systems, or FGD, designed for that very niche. It costs about a third of what the competition costs without sacrificing quality, says Chief Financial Officer Jenny Liu.
"Our technology can remove 92% to 93% of sulfur," she said. "The current technology can only remove 88%."
So far, the company has installed 29 systems in the sintering facilities of China's major steel producers, more than half of all such installations in China. Its most recent deployment, which started Sept. 8, is a $14 million deal with Hunan Lianyuan Iron and Steel Co. The technology is a new ammonia-based FGD system called DXT, which resolves an earlier issue over what to do with the waste products the process creates, Liu says. DXT's waste comes in the form of ammonia sulfate, which can be used as fertilizer.
There should be more business in the pipeline, according to analyst Amit Dayal of Rodman & Renshaw. Only about 10% of the 500 or so sinters in China have had FGD gear installed. And unlike some sectors of the Chinese market, the steel industry seems to be expected to comply.
"In many cases where polluters have not adhered to the new laws, arrests have been made," Dayal wrote in his Sept. 3 initiation report. "In regards to Rino's position in this context, a majority of its customers are state-owned steel entities that cannot avoid meeting these mandates."
The FGD business has driven explosive growth. In 2005, Rino pulled just $3.6 million in sales, but last year it reached $139 million. In the second quarter of this year, profit jumped 86% from last year to 39 cents a share. Sales rose 18% to $40.7 million.
Though FGD sales climbed a brisk 20% in the quarter, it wasn't the fastest-growing segment. That honor went to wastewater treatment, whose sales vaulted 53.4% to $6 million. Strange as it sounds, the customer base for this is the same as for FGD gear. Iron-making blast furnaces and steel-making converters both consume and expel large amounts of water, contributing to industrial pollution.
Rino's Lamella wastewater treatment system cost $4 million to install and draws a 40% gross margin for the company. But it is a somewhat more mature market than FGD. Dayal says 68% of blast furnaces and 54% of converters already have treatment systems, some of them installed by the steel producers without recourse to third-party vendors.
Wastewater treatment is Rino's original product line, launched when its first facility started production in 2003. Since then, the firm has been developing new equipment jointly with the research departments of several Chinese universities.
Apart from the FGD line, this system has produced an anti-oxidation technology to combat pollution from production of hot-rolled steel. That drew $1.1 million in sales in the second quarter. Last year, the R&D department also created dust-catching and sludge-treatment technology, but this has yet to produce revenue.
Meanwhile, demand for the existing products has been so brisk that Rino is outsourcing some of its work. This has put pressure on margins, since the firm generally benefits from controlling the supply chain. Liu says the company is "in the closing stage" of a deal to buy another piece of land in Dalian where it will build a factory.
Becoming Visible
The growth has helped raise Rino's U.S. profile. It first started trading on the Nasdaq in 2007 after a complicated reverse merger, but it was trading only around 3,000 shares a day and rarely topped $10 in price. In July, however, it was upgraded to the Nasdaq Global Market, and hired U.S.-educated Liu as CFO. The price and volume both shot up, and it now trades about 600,000 shares a day at over 20.
So far Dayal is the only analyst to launch coverage, but his outlook is promising. The main thing to keep an eye on, in his view, is the restructuring of China's steel industry. It got hit by the global recession like everybody else, causing an ongoing consolidation of production into a few companies. This could potentially limit demand for Rino's products.
But that still leaves room for growth. Dayal expects earnings to jump 122% this year to $1.91 a share, climbing 11% next year to $2.09.

