(EnergyAsia, September 26 2012, Wednesday) — Longwei Petroleum Investment Holding Ltd, a specialist in storing and distributing petroleum products in China, said it expects to complete the purchase of a 100,000-metri-ton fuel storage depot in northern Shanxi province by the end of this month.
Longwei said it has agreed to pay Huajie Petroleum Co Ltd a total of RMB700 million for the depot, comprising RMB550 million as deposit and the final instalment of RMB150 million by September 30.
Located in Xingyuan Township in Shanxi’s Fanshi county, the assets include fuel storage tanks supported by accessory facilities and equipment, delivery and distribution platforms comprising a dedicated rail spur and a vehicle loading and unloading station. The purchase also includes a 3,000-sq-m office building and land use rights for 98 acres of land adjacent to the main regional rail line.
The new facility is sited in a growing industrial and mining region, approximately 200 km to the north of Taiyuan.
Cai Yongjun, Longwei’s chairman and CEO, said:
“We are pleased to close on the Huajie asset purchase without dilution to our shareholders. We have chosen to move forward at this time to use our own cash to close on the purchase and put our capital to work now at the new facility.
“This acquisition nearly doubles our storage capacity to a total of 220,000 metric tons and extends our reach into the fast-growing industrial area of northern Shanxi province. With the addition of the Huajie facility, we have strengthened our lead as the largest non-state-owned fuel storage and distribution business in the province and are better positioned to capitalise on the demand for petroleum products in our regional market.”
Michael Toups, Longwei’s chief financial officer, said:
“We have been balancing our working capital to take advantage of petroleum pricing opportunities in the market, as well as balancing the funding required to complete the Huajie purchase.
“Based on our inventory management and first fiscal quarter 2013 cash flow, we are confident to close the Huajie asset purchase at this time. We were exploring financing options available to us, but decided the economics were not right at this time.
“Shanxi’s growing industrial and vehicle market demand, combined with our proven ramp-up performance of our Gujiao facility since 2010, which has now grown to account for approximately 48% of our total product sales, or US$233.8 million, strengthens our confidence that we can quickly ramp up sales at the Huajie facility.”