Interest in Energy Saving Solutions On the Rise in China
The expertise of Finnish energy efficiency specialist GreenStream is in high demand in China. Support from Finnpartnership was vital to finding a suitable Chinese partner.
China, a country with severe air pollution problems, is taking earnest steps to reduce industrial emissions and improve the energy efficiency of its industrial plants. For Finland’s GreenStream Network, this means a rapidly increasing market for its energy efficiency services. “There is plenty to do in this field in China. The outlook is bright with lots of opportunities for growth,” says Jussi Nykänen, CEO and chairman of GreenStream.
GreenStream began offering its services in China in 2006. The first years on such a massive market were not easy. “As an SME, we banged our heads against many a brick wall,” Nykänen recounts.
Finding the Right Partner
In 2009, GreenStream received support from Finnpartnership to identify a suitable local partner. According to Nykänen, this was a significant help. GreenStream found a partner in Juno Capital Group, a Chinese family business, and the cooperation continues today. “Our aim was to find a strong partner. With Finnpartnership’s support, we were able to thoroughly check the background of potential partners. It took a while for us to learn to work together, but we got there in the end.”
GreenStream and Juno initially intended to identify Chinese projects aimed at reducing greenhouse gas emissions which would allow them to sell the surplus allowances on the global marketplace. However, the price of emission allowances plummeted and it became necessary to find a new focus for the business. As a result, GreenStream began developing its ESCO (Energy Service Company) business model, which involves implementing energy efficiency projects in Chinese factories using Finnish technology.
A Boost from Finnfund
In the ESCO model, GreenStream designs each project, finds equipment suppliers in Finland, handles financial administration and monitors the implementation. The revenue model is based on sharing the financial savings with the customer. “First we measure how much energy, water or materials the project will save. The savings are converted to a monetary value, and we share that amount with the customer for five years. The customer then has full ownership of the equipment, and we move on to the next project.”
In 2014, Finnfund made a €3.5 million investment in the Chinese joint venture of GreenStream and Juno Capital Group. According to Nykänen, the investment allows them to continue developing the rapidly growing ESCO model.
Ministerial Leverage in Contract Negotiations
GreenStream has won agreements for five energy saving projects to date, four of them in the paper industry. In the Shandong province, some 500 miles from Shanghai, GreenStream is delivering a paper plant project which will provide between 40% and 60% savings for the plant’s drying system. The investment is based on a solution by the Finnish firm Runtech Systems. In the steel industry, the first venture is a project carried out for Delong Steel to significantly reduce the energy consumption of pneumatic systems at the company’s plant. The technology is provided by the Finnish company Sarlin.
In addition to the paper and steel industries, GreenStream is seeking to attract customers from the chemical industry. “We have benefited from Juno’s contacts in energy-intensive industries. The ESCO model is off to a flying start.” GreenStream intends to grow its business by partnering with Chinese banks. The idea is for GreenStream to provide some of the initial outlay and finance the rest with loans. “Chinese banks have shown great interest in these types of energy projects.”
In addition to Finnpartnership, GreenStream has also utilised other services of Team Finland. According to Nykänen, ministerial visits to China have been crucial. “In many projects, we have been able to speed up the signing of contracts with the knowledge that ministers from both countries will be present. The Chinese place great importance on these matters.”