8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

November 2, 2009

CHINA RECYCLING ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	000-12536	90-0093373
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Suite 909, Tower B

Chang An International Building

No. 88 Nan Guan Zheng Jie

Xi An City, Shan Xi Province

China 710068

 (Address of principal executive offices, including zip code)

(86-29) 8769-1097

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

£        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

£        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

£        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

£        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.  Entry into a Material Definitive Agreement

On November 2, 2009, China Recycling Energy Corporation (the “Company”) announces that on September 30, 2009 its wholly owned subsidiary Xi’an TCH Energy Technology Co., Ltd (“Xi’an TCH”) has delivered to Shenmu County Juijiang Trading Co., Ltd. (“Shenmu”) a set of 18 megawatt capacity power generating systems pursuant to a Cooperative Contract on Coke-oven Gas Power Generation Project (including its Supplementary Agreement) and a Gas Supply Contract for Coke-oven Gas Power Generation Project (collectively as “Contracts”).  The Contracts are for 10 years and provide that Xi’an TCH will recycle coke furnace gas from the coke-oven plant of Shenmu to generate power, which will then be supplied back to Shenmu.  Shenmu agrees to supply Xi’an TCH the coke-oven gas free of charge.  Power generation and delivery of power begin in October of 2009.

Under the Contracts, Shenmu will pay to the Company “energy-saving service fees” of approximately $473,000 per month for the life of the Contracts, as well as such additional amount as may result from the supply of power to Shenmu in excess of 10.80 million kilowatt hours per month at the rate of .30 yuan (approximately $.04) per kilowatt hour.  The Company is responsible for operating the systems and will do so through an unrelated third party at a cost of approximately $438,000 per year.

The Company expects to treat the Contracts as a sale-type lease.  Based on the accounting model CREG applies regarding sale-type leasing under GAAP, the Company expects to recognize approximately $18.3 million in revenue at September 30, 2009 (the delivery date) with a related cost of goods sold of $14.1 million.  After the inception of the lease, CREG anticipates that it will recognize a total amount of $38.4 million as interest income from this sale-type lease over the 10-year term, on a monthly accumulative basis as it receives the monthly installment payments from Shenmu.

Shenmu agrees to provide enough gas to support power generation for 7,200 hours annually for the generation systems which are the subject of the Contracts.  Xi’an TCH expects to receive 0.30 yuan (about $0.04) per kilowatt hour for the power generated.  The Company anticipates that the volume of power generation contemplated in the contract by this arrangement will yield approximately $5.7 million per year. Shenmu guarantees that monthly gas supply will not be lower than 21.6 million standard cubic meters, paid monthly. If gas supply is lower than that, Shenmu agrees to pay Xi’an TCH an energy-saving service fee of up to 10.80 million kilowatt-hours a month, the amount that results in the “energy-saving service fees” of approximately $473,000 per month described above.

Xi’an TCH maintains the ownership of the project throughout the term of the Contracts, including the already completed investment, design, equipment, construction and installation as well as the operation and maintenance of the project.  Xi’an TCH agrees to pay to Shenmu50,000 yuan (about $7,300) a year to use the land for the power station.   At the end of the 10-year term, ownership of the systems transfers to Shenmu at no additional charge.

Shenmu agrees to provide a lien on its production line to guarantee its performance under the Contracts.  Three individuals provide an unlimited joint liability guarantee to Xi’an TCH for Shenmu’s performance under the Contracts and the Yulin Huiyuan Group provides a guarantee to Xi’an TCH for Shenmu’s performance under the Contracts.

Item 9.01.  Financial Statements and Exhibits.

(d)The following exhibit is filed with this report.

Exhibit No.	Description
10.1	Cooperative Contract on Coke-oven Gas Power Generation Project
10.2	Gas Supply Contract for Coke-oven Gas Power Generation Project
10.3	Supplementary Agreement to Cooperative Contract on Coke-over Gas Power Generation Project
99.1	Press release dated November 2, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	China Recycling Energy Corporation
Date: November 2, 2009	/s/ Xinyu Peng
	Xinyu Peng, Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
10.1	Cooperative Contract on Coke-oven Gas Power Generation Project
10.2	Gas Supply Contract for Coke-oven Gas Power Generation Project
10.3	Supplementary Agreement to Cooperative Contract on Coke-over Gas Power Generation Project
99.1	Press release dated November 2, 2009

EX-10.1

EXHIBIT 10.1

Cooperative Contract on Coke-oven Gas Power Generation

Project of Xi’an TCH Energy Technology Co., Ltd. and

Shenmu County Jiujiang Trading Co., Ltd.

2009

Cooperative Contract on Coke-oven Gas Power Generation Project

Party A: Xi’an TCH Energy Technology Co., Ltd. (hereinafter referred to as Party A)

Address: No. 86, Gaoxin Road, Hi-tech Zone, Xi’an, Shaanxi Province

Legal Representative: Ku Guohua

Party B: Shenmu County Jiujiang Trading Co., Ltd. (hereinafter referred to as Party B)

Address: Shagoumao Village, Xigou Office, Shenmu County

Legal Representative: Hao Ziwei

Through friendly negotiation, based on the principle of equality and voluntariness, both Party A and Party B conclude the following clauses on the relevant cooperation matters that Party A invests and constructs auxiliary coke-oven gas power generation device to the coke-oven plant of Shenmu County Jiujiang Trading Co., Ltd. which is wholly owned and controlled by Party B.

Article 1: Definition of investment construction

1. By mutual consent, Party A shall invest, construct and manage the tail gas power generation project for the coke-oven plant of Party B ( hereinafter referred to as “power generation project”) and supply energy saving and emissions reduction service for Party B.

2. The “power generation project” belongs to Party A, Party A shall be responsible for the design, equipment selection, equipment procurement and manufacture, construction work, project installment and test/adjustment, formal synchronization power generation of the whole project and the project management, maintenance, operation and safety after put into production, and Party B shall provide active cooperation.

Article 2: Party A's term

1. The term of Party A supplying energy saving service to Party B is 10 years from the date of signing this contract and the power generation project is formally built and put into operation.

Article 3: Rights, obligations and guarantee of the both parties

1. Party B shall guarantee the coke-oven plant is its wholly owned holding company, and the coke-oven plant is established legally and a China enterprise legal person that continues to exist effectively and can operate and produce normally.

2. Party B guarantees to urge coke-oven plant to sign written gas supply agreement with Party A with a term not less than 10 years.

3. Party B shall be responsible for all the procedures including project proposal, review and approval, and environment evaluation etc. for the project construction which are required by state laws and regulations and bear the expense. Party B shall be responsible for synchronization power generation procedure of “power generation project”, which should be done after the signing date of this contract and before the date of power generation project is formally built and put into operation.

4. Party A promises that the construction of the “power generation project” shall be finished within 90 days after this agreement becomes effective and both parties confirm the commencement condition for the project is available. However, if  the project cannot proceed successfully due to Party B's reason (including, but not limited to its activities that affect normal construction, installation, test/adjustment or safety work etc.), Party A's construction period shall be extended accordingly and Party B shall compensate relevant losses caused to Party A hereof.  If the project cannot proceed successfully due to Party A's reason (including, but not limited to its activities affect normal construction, installation, testing or safety work etc.), Party A shall compensate relevant losses caused to Party B hereof.

5. Party A shall be responsible for the design, equipment order, construction, installation and test/adjustment of the “power generation project”, etc. Party B shall be responsible for completing the connection of utilities and level the ground of the land before the commencement of construction of the project, and provide necessary utility facilities to the project.

6. Party B shall provide a lien with sufficient value as its guarantee for this cooperative “power generation project” and sign a Lien Agreement with Party A within 10 working days after signing this contract. Party B shall complete the lien/mortgage registration process within 15 working days after signing this contract. The Lien Agreement shall take effect along with this contract on “the effective day”.

7. Party B shall urge its top five individual shareholders to assume an unlimited joint liability guarantee for Party B for the implementation of this contract and urge the individual shareholders to sign Unlimited and Joint Liability Guarantee Agreement with Party A within 15 working days after signing this contract. The Unlimited and Joint LiabilityGuarantee Agreement shall become effective along with this contract on “the effective day”.

8. Party B shall have a third party that is approved by Party A to provide joint liability guarantee and sign Joint Liability Guarantee Agreement with Party A within 15 working days after signing this contract. Joint Liability Guarantee Agreement shall take effect along with this contract on “the effective day”.

9. Party B shall be responsible for all the relevant procedures for construction and operation of “power generation project”, including, but not limited to the procedures, such as project proposal, review and approval, and synchronization etc., Party B shall complete the above relevant procedures within 90 days from the date of signing this contract.

10. Party B shall guarantee that the normal supply time of coke-oven gas shall be no less than 7200 hours a year.

11. Party B shall guarantee to cooperate with Party A for its due diligence work, provide materials required by Party A in order to do the due diligence work, and guarantee the provided materials to be true and reliable without any false, error or omission.

Article 4: Consumption raw material and expense of “power generation project”

1. During the construction process of “power generation project”, Party B shall be responsible for introducing electric power to the construction site at 1 meter away from the site line, and Party B shall supply the electricity for construction free of charge.

2. Party A shall pay RMB 50,000 Yuan/year to Party B at the beginning of year for renting the land of “power generation project”.

3. Party B shall guarantee to supply the power generation project with the amount of coke-oven gas needed to support 7200 hours power generation annually. When the above condition is satisfied, Party A’s energy saving service charge standard is:

1. Provided that the on-grid price is regulated at RMB 0.31 Yuan per kilowatt hour, ..

Party B shall be refunded for RMB 0.01 Yuan per kilowatt hour from the energy saving service fee charged by Party A

2. Provided that the on-grid price is regulated at RMB 0.315 per kilowatt hour,

Party B shall be refunded for RMB 0.015 Yuan per kilowatt hour from the energy saving service fee charged by Party A.

3. Provided that the on-grid price is regulated at RMB 0.38 per kilowatt hour,

Party B shall be refunded for 50% of the premium part plus RMB 0.01 Yuan per kilowatt hour from the energy saving service fee charged by Party A.

If Party B breaches the contract and fails to supply sufficient gas required, Party A should deduct the part that should be distributed to Party B from the energy saving service charge standard calculation for that year as a compensation.

Party B shall supply necessary and effective assistance during the construction process of “power generation project”.

Article 5: The ownership and intellectual property of “power generation project”

1. The ownership of “power generation project” belongs to Party A.

2. The intellectual property related to the “power generation project” belongs to Party A, Party B shall not disclose the intellectual property to any third party without Party A's approval.

Article 6: CDM profit

Both Party A and Party B shall cooperate to apply for CDM together, the earned profit after deducting the necessary expenses such as commission etc. shall be shared by the both parties 50% each.

Article 7: Liability for breach of contract

1. Unless agreed by both parties in writing otherwise, neither party shall modify or terminate the contract during the term of this contract without the written consent of the other party.  Either party who breaches this contract shall compensate the losses caused to the other party.

2. If any situation occurs to Party A or Party B that affects its ability of continue operation, including but not limited to bankruptcy, cease operation, merger, transfer and spin-off etc, such party shall notify the other party within 5 working days and provide relevant certification/proof documents.  If this contract can not be performed due to above situation, the party that suffers losses shall be entitled to compensate for the losses from the other party.

3. If Party B breaches its guarantee obligation under article 3 of this contract or any other obligations, Party A has the right to give certain extension.  If Party B still cannot correct or take relevant measures to cure its breach during such extension period, Party A shall have the right to terminate the contract and Party B shall compensate all the losses caused to Party A, including , but not limited to the whole expense that Party A paid for investing and constructing power generation project.

4. Party B shall have the right to terminate this contract if Party A breaches its guarantee obligation in article 3 of this contract.

Article 8: Force majeure

If the “power generation project” cannot be constructed or completed on schedule or supply power normally due to force majeure (force majeure scope as defined by the law) under this contract, Party A and Party B shall be exempted from liability partially or wholly that caused by force majeure based upon the facts.  Each party shall notify the other party if it fails to perform this contract due to force majeure, and it shall provide certification/proof of force majeure within 15 days, and it should try to retrieve/control loss with reasonable effort.

Article 9: Settlement of disputes

All of dispute arising from this contract shall be settled by Party A and Party B through friendly negotiation. In case no settlement can be reached, either party may bring it to the people’s court where plaintiff is located for judgments.

Article 10: Contract, appendix and miscellaneous

1. This contract shall be established upon signed and sealed by both Party A and Party B.

2. This contract shall take effect on the effective day, which is the last day when Party A has completed its due diligence for its internal risk control procedures, and Party B has completed the relevant procedures of synchronization and the relevant parties have signed Unlimited and Joint Liability Guarantee Agreement, Joint Liability Guarantee Agreement and Lien Agreement.

3. Lien Agreement, Unlimited and Joint Liability Guarantee Agreement, Joint Liability Guarantee Agreement and Technical Appendix of this Contract are an integral part of this contract and have the same effect of this contract.

4. If this contract has to be terminated, Party A and Party B shall discuss and consult with each other to reach an agreement to determine the relevant conditions and terms of termination in writing.

5. Place of signing this contract: Xi’an City

6. Through negotiation, Party A and Party B may reach a Supplement Contract for other matters not covered by this contract, and Supplement Contract shall have the same legal effect to this contract. If there is any conflicts between this contract and the supplement contract,  the supplement contractprevails.

7. This contract has four original copies, and both Party A and Party B shall keep two copies that all have the same legal effect.

Party A: Xi’an TCH Energy Technology Co., Ltd. (seal)

Authorized agent: Zhou *

May 14, 2009

Party B: Shenmu County Jiujiang Trading Co., Ltd. (seal)

Authorized agent: He *

May 14, 2009

EX-10.2

EXHIBIT 10.2

Gas Supply Contract for Coke-oven Gas Power Generation Project

Party A: Shenmu County Jiujiang Trading Co., Ltd. (hereinafter referred to as Party A)

Address: Shagoumao Village, Xigou Office, Shenmu County

Legal Representative: Hao Ziwei

Party B: Xi’an TCH Energy Technology Co., Ltd. (hereinafter referred to as Party B)

Address: No. 86, Gaoxin Road, Hi-tech Zone, Xi’an, Shaanxi Province

Legal Representative: Ku Guohua

Whereas:

1. Through friendly negotiation, Party A and Party B signedCooperative Contract on Coke-oven Gas Power Generation Project on May 14, 2009 (hereinafter referred to as “project contract”).

2. According to the agreement of above project contract, both parties reach the following agreement on matters of Party A supplies coke-oven gas to Party B.

I.  Party A shall supply coke-oven gas to Party B for free;

II.  Party A ensures that monthly gas supply shall be not less than 21,600,000 standard cubic meters. If Party A's monthly gas supply is lower than 21,600,000 standard cubic meters, Party B shall settle energy-saving service charge with Party A according to the generating capacity of up to 10,800,000 Kwh a month (i.e. calculated at 0.30 yuan per kilowatt-hour, and 3.24 million yuan a month.)

III. Party A shall issue a written notice to Party B with five working days in advance if it needs to stop its production for inspection and repair due to its production matters, so that Party B is able to revise its production plans accordingly; however, Party A still must pay the energy-saving service charge to Party B according to the article 2.

IV. If Party A's gas supply is insufficient and it is caused by its equipment malfunction, Party A shall pay the energy-saving service charge to Party B according to the requirement in article 2.

V. If Party A fails to supply sufficient gas according to the contract due to force majeure such as natural disaster and national policy etc., Party A shall prolong Party B's operating period accordingly according to Party B's actual shutdown time.

VI.  Based upon the premise that Party A supplies sufficient amount of gas, Party B shall ensure a stable operation of this project and satisfy Party A's demand on electricity.

VII. This contract shall take effect on the date of execution and will remain effective until both parties terminateCooperative Contract on Coke-oven Gas Power Generation Project. This contract shall have the same legal effect to the Cooperative Contract on Coke-oven Gas Power Generation Project.

Party A: Shenmu County Jiujiang Trading Co., Ltd. (seal)

Representative: Zhao Jun

May 20, 2009

Party B: Xi’an TCH Energy Technology Co., Ltd. (seal)

Representative: Zhou Yao

May 20, 2009

EX-10.3

EXHIBIT 10.3

Supplementary Agreement

Party A: Xi’an TCH Energy Technology Co., Ltd. (hereinafter referred to as Party A)

Address: No. 86, Gaoxin Road, Hi-tech Zone, Xi’an, Shaanxi Province

Legal Representative: Ku Guohua

Party B: Shenmu County Jiujiang Trading Co., Ltd. (hereinafter referred to as Party B)

Address: Shagoumao Village, Xigou Office, Shenmu County

Legal Representative: Hao Ziwei

Through negotiation, both parties hereby agrees to sign this agreement as a supplement to Cooperative Contract on Coke-oven Gas Power Generation (‘Contract’) signed on May 14, 2009 between both parties as follows

In Article 2. 1

1.   Party A shall supply energy saving services to Party B within agreed term. After the term expires, Party A shall transfer the title of ownership of this power generation project to Party B for free.

2.   The above Article was omitted in typing and printing when the original Contact was signed. This supplement agreement shall be interpreted together with the Contract when parties read the Contract.

Both parties agree this supplement agreement is an integral part of the Contract.

This contract has four original copies, and Party A and Party B shall keep two copies each, and all have the same legal effect.

Party A: Xi’an TCH Energy Technology Co., Ltd. (seal)

Authorized agent: Zhou Yao

October 19, 2009

Party B: Shenmu County Jiujiang Trading Co., Ltd. (seal)

Authorized agent: He Ziwei

October 19, 2009

EX-99.1

EXHIBIT 99.1

 

China Recycling Energy Corp. Announces New 10-Year Energy Efficiency Build Operate Transfer

(“BOT”) Contract with Shenmu County Jiujiang Trading Co., Ltd.

- $18.3 million top-line revenue to be recognized in Q3 2009

- Additional $38.4 million in interest income to be recognized over the 10-year term on a monthly basis

- Project is expected to decrease annual coal consumption by 52,000 tons, equivalent of 130,000 tons of CO2 emissions

XI'AN, China, November 2, 2009 /PRNewswire-Asia-FirstCall/ -- China Recycling Energy Corp. (OTC Bulletin Board: CREG) ('CREG' or 'the Company'), a fast-growing industrial waste-to-energy solutions provider in China, today announced that it has delivered to Shenmu County Jiujiang Trading Co., Ltd. (“Shenmu”) a set of 18-megawatt capacity power generating systems pursuant to a Cooperative Contract on Coke-oven Gas Power Generation Project and a Gas Supply Contract for Coke-oven Gas Power Generation Project. The 10-year Contracts provide that the Company will recycle waste gas from Shenmu’s 600,000 tons per year coke production line to generate power, which will then be sold back to Shenmu for use in production. Shenmu agrees to supply the coke-oven gas free of charge. Power generation and delivery of power begin in October 2009.

Under the Contracts, Shenmu will pay to the Company “energy-saving service fees” of approximately $473,000 per month for the life of the Contracts, as well as such additional amount as may result from the supply of power to Shenmu in excess of 10.80 million kilowatt hours per month at the rate of .30 yuan (approximately $.04) per kilowatt hour. The Company will subcontract a third party operator at a cost of approximately $438,000 per year.

The Company expects to treat the Contracts as a sale-type lease. Based on the accounting model CREG applies regarding sale-type leasing under US GAAP, the Company expects to recognize approximately $18.3 million in revenue at September 30, 2009 (the delivery date) with a related cost of goods sold of $14.1 million. After the inception of the lease, CREG anticipates that it will recognize a total amount of $38.4 million as interest income from this sale-type lease over the 10-year term, on a monthly accumulative basis as it receives the monthly installment payments from Shenmu.

The Company maintains the ownership of the project throughout the term of the Contracts, including the already completed investment, design, equipment, construction and installation as well as the operation and maintenance of the project. CREG agrees to pay to Shenmu 50,000 yuan (about $7,300) a year to use the land for the power station. At the end of the 10-year term, ownership of the systems transfers to Shenmu at no additional charge.

'This is CREG’s first project in the coking industry, one of the most energy intensive sectors in China.' said Mr. Guohua Ku, CEO of CREG. 'This project is expected to reduce annual coal consumption by 52,000 tons, equivalent of 130,000 tons of CO2 emissions. We are excited about the substantial growth in our Company as we take on ever larger projects with waste gas-to-energy solution.'

About China Recycling Energy Corp.

China Recycling Energy Corp. ('CREG' or 'the Company') is based in Xi'an, China and provides environmentally friendly waste-to-energy technologies to recycle industrial byproducts for steel mills, cement factories and coke plants in China. Byproducts include heat, steam, pressure, and exhaust to generate large amounts of lower-cost electricity and reduce the need for outside electrical sources. The Chinese government has adopted policies to encourage the use of recycling technologies to optimize resource allocation and reduce pollution. Currently, recycled energy represents only an estimated 1% of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand. The management and engineering teams have over 20 years of experience in industrial energy recovery in China.

For more information about CREG, please visit http://www.creg-cn.com.

Safe Harbor Statement

This press release may contain certain 'forward-looking statements' relating to the business of China Recycling Energy Corp. and its subsidiary companies. All statements, other than statements of historical fact included herein are 'forward-looking statements.' These forward-looking statements are often identified by the use of forward-looking terminology such as 'believes,' 'expects' or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

In China:

Mr. Leo Wu

Investor Relations

China Recycling Energy Corp.

Email: tch@creg-cn.com

In USA:

Mr. Howard Gostfrand

American Capital Ventures, Inc.

Email: hg@amcapventures.com

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