Imagine if your air-conditioning bill was 36 million yuan (about HK$33.73 million)? By some calculations that is what the average customer of mainland coolant distributor Greencool Technology Holdings pays on refrigeration in a six to 10-month period. At least one analyst, Joe Zhang Huaqiao of UBS Warburg, questioned the group's revenues, noting that expected sales last year of 500 million yuan (according to management guidance) imply customers used five billion yuan worth of electricity over a six to 10-month period last year. 'As its customers are few and far apart, this electricity bill appears to be high,' Mr Zhang said. He could not be reached for comment but as he is being sued by Greencool for defamation, he might not have been too chatty. (The writ did not include his remarks about revenues.) The five billion yuan is derived from the fact that Greencool charges customers about 10 per cent of their electricity bills for refrigeration and air-conditioning when they switch to its coolants. Customers are expected to cut 15 per cent to 25 per cent from electricity bills by using the more efficient refrigerants. And they only have to pay the 10 per cent for six to 10 months. Thus 500 million yuan can translate to five billion yuan in electricity charges. To be more exact, we translate it into 4.5 billion yuan, as 10 per cent of its revenues are derived elsewhere. At the end of 2000, the group had 125 projects, according to the company. If they shared 4.5 billion yuan in refrigeration electricity bills, that would imply the typical customer paid 36 million yuan over - at most - a 10-month period. It implies the average project size is growing, as it had 57 projects in 1999 when revenues were 92.8 million yuan, according to its prospectus. This is an implied average customer electricity bill of 16.14 million yuan over six to 10 months. What do analysts think of this? Most we spoke to had no idea how many customers or projects were in the pipeline. They said that was not how they looked at the company. One was under the impression Greencool had 150 customers, which would imply electricity usage of 30 million yuan each. The analyst said big customers included banks, hotels, warehouses and cold storage, supermarkets and recreational centres. 'For hotels, especially, refrigeration is a huge part of their costs,' he said. If that is the case, let us compare it to Shangri-La Asia, which has 15 mainland hotels. The annual report shows last year the group had an average revenue of 89 million yuan per hotel or 74 million yuan in 10 months. If the chain had to pay 30 million yuan in 10 months on refrigeration, that would translate into 40 per cent of revenues. Hotel analysts we spoke to said such a figure would be astounding - staff costs, food costs, supplies and renovation all cost more than electricity. Greencool pointed out that one 'project' might involve many buildings; they used as an example the Shenzhen Mission Hills Golf Club, a contract which covered 10 buildings in the complex. Still, the overall sales figure was 1.47 million yuan, which would imply a refrigeration bill of 14.7 million yuan. Still again, it is not at all clear that the 500 million yuan revenue outlook translates into five billion yuan (or even 4.5 billion yuan) in electricity bills. Greencool's revenue model is simply not that straightforward. To be precise, it works this way - you take the kilowatt capacity of the electricity systems running the customer's refrigeration and air-conditioning systems; you multiply this by the local electricity charge (yuan per kilowatt-hour); you multiply that by the deemed operational hours per month (usually 24 hours for 30 days); multiply that by the number of months being charged (six to 10) and this figure is multiplied, finally, by 10 per cent. One analyst pointed out that the formula implied customers had to pay for the back-up refrigeration systems, which of course were used only in emergencies. There are other possibilities as well as to why the revenue model does not anchor the company to a '10 per cent' formula, including a tougher sales force negotiating stronger fees. But then, if its clients are paying more than 10 per cent of average costs, and the system only saves 15 per cent to 25 per cent, the incentive for switching over declines. An official at Greencool's Hong Kong public relations firm said customers might be willing to pay more than 10 per cent because it was only for a limited period of time whereas the coolants should keep saving them money as long as the refrigeration system held up. Fair point. We are not questioning the revenues as much as the revenue model. The upshot is this: It is a revenue model that begs for management guidance. The consensus revenue for last year is HK$556 million - analysts are obviously confident the company will meets its targets. We would not bet against them. We would, however, wager that no one, except Greencool, is sure just how it meets those targets.