COMMITMENTS

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

20. COMMITMENTS

Lease Commitment

On March 5, 2010, Xi’an TCH leased its office under a two year operating lease that expired March 4, 2012. The Company renewed the lease for two years untill March 4, 2014, and it can be renewed with the monthly payment increasing by 8% after March 5, 2014. Currently, the monthly rental payment is $18,000. For the years ended December 31, 2012 and 2011, the annual rental expense was $213,000 and $209,000.

ShangHai TCH entered into a one-year renewable rental agreement to lease a virtual office effective April 1, 2011. The lease will be automatically renewed when expires. The monthly payment is $260. For the years ended December 31, 2012 and 2011, the rental expense was $3,120 and $2,340, respectively.

In November 2012, Sifang Holding renewed its office in Beijing for monthly rent of $1,900 expiring on December 18, 2013. Sifang was required to pay in advance for the first six months rent for $11,450 at the beginning of the lease. The lease will be automatically renewed when it expires.

Future minimum annual rental payments required under operating leases as of December 31, 2012 are as below (by year):

2013	$	242,000
2014		256,000
2015		275,000
2016		295,000
2017	$	316,000
Total	$	1,384,000

Shanxi Datong Coal Group Power Generation Projects

In February 2011, Xi’an TCH signed a contract with Shanxi Datong Coal Group Steel Co., Ltd (the “Shanxi Datong”) to recycle gas and steam from groups of blast-furnaces and converter of Shanxi Datong’s metal refining plants to generate power. According to the contract, Xi’an TCH will install two 3MW TRT, one 15MW WGPG and two 1MW steam power generation systems, with a total of 23MW power capacity for an estimated total investment of $27.45 million (RMB 180 million). The lease term is 30 years. During the lease term, Shanxi Datong will be responsible for operating the projects and pay service fee to Xi’an TCH. The service fee is based on an average of 8,000 electricity-generating hours per year and $0.05 (RMB 0.33) per kilowatt hour (“kWh”) for the first 5 years from the completion of each power generation station. For each of the leases, at the 6th year, 11th year and 21st year thereafter, the rate will be RMB 0.3 kWh, 0.27 kWh and 0.25 kWh, respectively. After 30 years, the units will be transferred to Shanxi Datong without any charge.

On February 28, 2011, Xi’an TCH entered into an agreement with Xi’an Huaxin Energy Tech Co., Ltd (the contractor for construction) for Shanxi Datong Coal projects of two 3MW TRT and one 15 MW WGPG systems described above. The project was scheduled to be completed 12 months from construction commencement.

As of December 31, 2012, the Company had paid $19.27 million for Shanxi Datong Coal Group Power Generation project. The Company is committed to pay an additional $10.02 million for the Shanxi Datong Coal Group Power Generation project. This project was previously halted due to business reorganization of Shanxi Datong and a renegotiation of one of the power stations with Xi’an TCH to amend certain construction plans. The Company resumed the construction in April 2012 and expects to complete one of the power stations by the middle of fiscal year 2013.

Shenqiu Project Phase II

In October 2012, Xi’an TCH signed a contract with Shenqiu to reform Shenqiu power generation station to enlarge the capacity of Shenqiu Project Phase I to 24 MW. The project was commenced on October 25, 2012 and is expected to be completed by the end of the first quarter of 2013. During the construction period, Xi'an TCH stopped charging Shenqiu with rental fees until completion of the reformation.

On October 15, 2012, Xi’an TCH entered into an agreement with Xi’an Huaxin Energy Tech Co., Ltd (the contractor for construction) for Shenqiu Project Phase II described above. The total cost of the project is $10.82 million. As of December 31, 2012, the Company had paid $3.72 million to Xi’an Huaxin Energy Tech Co., Ltd. The Company is committed to pay an additional $7.10 million for Shenqiu Project Phase II.