China is entering a new generation of heating and cooling systems with more energy efficiency, said Preben Tolstrup, CEO of Logstor. Preben which unveil its plan of entering the Chinese market.
Earlier this year, the Danish company signed a 1 billion yuan (111.3 million euros) contract with a Chinese company to build 2,000 km of pre-insulated pipes within five years to replace the heating and cooling systems of Harbin, capital city of Northeast China’s Heilongjiang province.
This deal, according to Tolstrup, is only the first step his company has taken to enter the Chinese market.
“We have two objectives in the Chinese market. One is to develop the cooling and heating system market. And we also have the ambition to develop the oil and gas market,” he says.
Headquartered in Denmark, Logstor is the world’s preeminent producer of pre-insulated pipe systems, employing about 1,250 people in nine production facilities.
It is credited with having invented pre-insulated pipe technology and have supplied more than 160,000 km of pipe with over 40 years of experience in this area.
The company entered the Chinese market in 2003, when its first factory was built in Wuxi, Jiangsu province to supply China’s shipping industry with heating and cooling systems.
“Back in Europe and the Middle East, our business focus is on district heating and cooling. And when I participated the meeting in Copenhagen in 2009, I saw Chinese government’s commitment to energy efficiency activities. I think it is time to bring a new concept of district heating and cooling to China,” says Tolstrup.
The new systems can help save up to 50 percent of energy, and the operating cost will be reduced by up to 25 percent, according to Tolstrup.
As China is on the stage of where true modernization of district heating and cooling is about to happen, Tolstrup said the market potential is “so big that I cannot even put numbers on it”.
In Denmark, more than 80 percent has been covered with combined heat and power systems, while the figure is only 10 percent in China, according to Statistics Denmark.
“Harbin is the benchmark city in China for efficient district heating, and we will try to cover the northern part of China first as they have already pre-set heating pipelines,” says Tolstrup.
To better control the operation of its business in China, Logstor has located its Chinese headquarter in Langfang, Hebei province.
“Langfang is very close to Beijing, and from Langfang, within the region of Hebei, we can reach roughly 200 million people. It’s a very dense part of China,” Tolstrup explains.
The company now has about 100 employees in China. When the construction of its Langfang and Harbin factories are finished, 300 more employees will be recruited. “But still, we are looking for other strategic locations in China. Now we are just taking the very first step,” says Tolstrup.
Tolstrup does not see his company as a threat to Chinese companies in the district heating and cooling industry.
“We are in close contact with a number of Chinese companies,” he said, adding that their expertise in technology and Chinese companies’ familiarity with local market will bring a win-win situation to this industry.
“Currently, 15 percent of China’s energy is imported. With so large amount of energy buying from other countries, it is very beneficial for China to be more energy efficient,” says Tolstrup.
The company is also working with the Royal Danish Embassy to China to promote the new generation of district heating and cooling systems.
“We would like to share our experiences in Denmark for the past 25 years, and it will help China not to make the mistakes we have made,” said Jesper Kamp, commercial counselor of the Danish Embassy.
“In the following five to 10 years, we would like to see that situation that everybody, including government and local companies, benefits from lifting the district heating and cooling system to a new generation,” says Kamp.
The biggest task for the company, according to Tolstrup, is about how to educate, explain and introduce the new concept to local officials, decision-makers and residents.
“China is a country that can reach a goal with strong government regulations. I think with the country’s strong commitment to energy efficiency, we can overcome the problems of implementing a new style of living into different groups of people in China,” he said.