Leader Environmental Technologies Announces Strategic Joint Venture for Food Waste and Organic Sludge Treatment

Key Highlights

• Joint Venture Formation: Leader Environmental Technologies Limited (“Leader” or “the Company”) is forming a new joint venture company (“JV Co”) through its wholly-owned subsidiary United Greentech (Guangzhou) Co., Ltd. (“UG GZ”) with Mr. Yang Peng (“YP”), founder of Chengdu Zhanlan Future Environmental Protection Co. Ltd (“Chengdu Zhanlan”).
• Equity Structure: UG GZ will hold 51% of JV Co, while Chengdu Zhanlan, represented by YP, will hold 49%. The initial paid-up capital is set at RMB10 million.
• Business Focus: The JV will focus on Engineering, Procurement and Construction (EPC) and Operation and Maintenance (O&M) services for food waste and organic sludge treatment.
• Technology Acquisition: JV Co will acquire Chengdu Zhanlan’s proprietary technologies (including patents) and waste treatment facilities with specific treatment capacities, as part of the capital contribution.
• Performance-Linked Structure: Leader’s initial investment of RMB5 million is at risk if profitability is not achieved by the end of FY2028; a clawback mechanism is in place.

Detailed Overview of the Joint Venture

Background of Key Partner: Mr. Yang Peng

Mr. Yang Peng is an industry veteran with over 15 years of experience in the environmental sector. He is an alumnus of Sichuan University (Bachelor’s in Environmental Engineering, 2003) and holds a Master’s degree via a joint program between Nanyang Technological University (NTU) and Stanford University. His credentials include significant stints with the Institute of Environmental Science and Engineering (IESE) at NTU, where he spearheaded business development in China and built cross-sector partnerships, as well as serving as Chief Representative in China for the Lien Foundation, a leading Singaporean philanthropic organisation.

Terms of the Investment and Collaboration

• The JV Co will acquire:
  • All proprietary technologies of Chengdu Zhanlan for sludge, food waste, and other organic waste treatment, including all associated patents.
  • Waste treatment facilities with a capacity of 80 tons/day for sludge and 50 tons/day for wastewater-to-organic carbon source recovery.
• The total cost for the above acquisitions will not exceed RMB10 million, and these assets will be contributed as capital to the JV.
• Leader will advance RMB5 million as Initial Consideration for its 51% equity stake. No further startup capital is required from Leader under this agreement.
• YP will manage and lead the JV Co with a clear target: to reach profitability (net profit after tax) by 31 December 2028, covering FY2026–FY2028.
• If profitability is not achieved by FY2028, Leader can reclaim its initial RMB5 million investment and transfer its entire 51% stake back to YP, effectively reversing the transaction.
• For each profitable year during the first three Future Financial Years (FY2026–2028), Leader will pay YP an “Adjusted Consideration” calculated as 17% of 10 times that year’s NPAT. The cumulative Adjusted Consideration will be offset against the Initial Consideration advanced.
• Leader has full discretion on how to pay the Adjusted Consideration: in cash, new ordinary shares, or a combination of both. If shares are issued, the price will be based on the 30-day volume-weighted average price before the settlement date, in accordance with SGX-ST Listing Manual requirements.

Strategic Rationale and Potential Impact

• Complementary Technologies: Leader’s Continuous Thermal Hydrolysis (CTH) drying technology is effective for large-scale sludge treatment but is capital intensive. YP’s technology suite includes:
  • Carbon source production—converting food waste and sludge into organic carbon sources for further use.
  • Bio-iron flocculant—a cost-effective, high-efficiency agent for wastewater treatment and sludge conditioning.
  • Vacuum integrated drying machines—offering high energy efficiency and low operating costs, powered solely by electricity.

  These strengths are highly complementary, positioning the JV to offer comprehensive, integrated solutions to customers.

• Innovation and Market Expansion: Leveraging combined expertise and resources is expected to foster innovation, enhance project execution, unlock new market opportunities, and create a platform for sustainable long-term growth.
• Funding: Leader’s initial investment in the JV will be financed using proceeds from the Company’s previously issued convertible bonds.

Implications for Shareholders

• This is a strategic investment with performance-based risk and upside potential. The clawback clause on the initial consideration makes Leader’s capital exposure contingent upon the JV’s profitability, protecting shareholder interests.
• The JV gives Leader access to new technologies, market segments, and operational synergies, which could drive earnings and share value in the long term if the partnership succeeds.
• No immediate material impact on earnings or net tangible assets per share is expected for the financial year ending 31 December 2025, but the JV could contribute significantly from FY2026 onwards if successful.
• No directors or substantial shareholders have any direct or indirect interest in this transaction, apart from their holdings in the Company.

Conclusion

This joint venture represents a significant, potentially price-sensitive development for Leader Environmental Technologies. The partnership not only expands the Company’s technological and business footprint in the fast-growing waste treatment sector but also incorporates a prudent, performance-linked investment structure that aligns interests and limits downside risk.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence or consult with a professional advisor before making any investment decisions. The information herein is based on public disclosures as of the date of publication and may be subject to change.

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