NF Energy Executives May Buy Back 80% of Stock After Shares Slump

(Corrects from first paragraph to make clear executives, not the company, are considering a purchase of the stock.)

The management team of NF Energy Saving Corp. (NFEC), a Chinese energy conservation and efficiency services provider, may buy a majority of the company’s outstanding shares after they plunged 84 percent this year in Nasdaq trading.

“We may repurchase as much as 80 percent of outstanding” shares, Chief Executive Officer Li Gang said in an interview on Oct. 27. “Our stock is extremely undervalued.”

NF Energy was informed by the Nasdaq Stock Market on Sept. 20 that the value of the company’s publicly held shares fell below $5 million for the previous 30 consecutive business days. The company may face delisting if the threshold value isn’t met for at least 10 consecutive days before March 19.

Liaoning Nengfa Weiye New Energy Application Co., owned by Li and Chief Financial Officer Wang Lihua, is the biggest shareholder in NF Energy, owning 47.7 percent of the stock through unit Pelaria International Ltd., according to a June 27 company filing.

The management’s potential share purchase has been discussed with the company’s board of directors, Li said, without disclosing the price that may be offered for the stock. NF Energy shares fell 2.3 percent to close at 81 cents yesterday.

“NF Energy’s stock was partly affected by doubts on Chinese operations,” Li said. Fraud accusations have heightened investor concern about companies with operations in China and shares traded in North America, he said, without giving details.

Sino-Forest Shares

The Ontario Securities Commission, Canada’s main securities regulator, suspended trading in shares of Sino-Forest Corp. (TRE), a forestry company, on Aug. 26. The trading ban was extended to Jan. 25 as part of an investigation into possible fraud at the company.

Sino-Forest’s stock has plunged 74 percent in Toronto since June 1, the day before short seller Carson Block’s Muddy Waters LLC published a report alleging that the company, based in Hong Kong and Mississauga, Ontario, overstated its China timberland holdings. Sino-Forest executives have denied the allegations.

Small Capitalization

“Our share decline is also attributed to less liquidity due to small capitalization,” said Li. At the end of the second quarter, NF Energy, with a market value of $4.3 million, had $400,000 of cash and cash equivalents.

NF Energy was recognized by China’s National Development and Reform Commission as an “Energy Service Company,” entitling it to benefits including income-tax deductions, value- added tax and business tax exemptions, government financing and subsidies, it said in September 2010.

The Shenyang-based company is “placing greater emphasis on building and reforming pipe networks for power, petrochemicals, coal and metallurgy industries to help recycle heat and water,” said Li.

The company may sell of bonds next year to help construction of a new plant in Shenyang that will make flow- control equipment and battery-storage systems for wind farms as well as solar and nuclear power plants, Li said.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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