(EnergyAsia, May 16 2011, Monday) — Longwei Petroleum Investment Holding Ltd (LPH), a New York-listed company engaged in storing and distributing oil products in China, has announced its plan for financing the acquisition of the fuel storage assets of Haujie Petroleum Co Ltd in China’s northern Shanxi Province for RMB700 million (US$1=RMB6.5).

LPH had earlier signed a letter of intent with Shangxi Jiangtong Chemicals Co Ltd to acquire the assets of Haujie, its wholly-owned subsidiary. The assets include land use rights for 98 acres of land, a 100,000-tonne fuel terminal comprising several tanks and equipment, a special transportation railway line, and a 3,000-square-meter office building. The assets are located in Xingyuan township in Fanshi County in northern Shanxi province.

LPH said it expects the depot to contribute approximately US$300 million to revenues and US$40 million to net income during the fiscal year ending June 30 2012.

LPH plans to finance the acquisition through a combination of cash on hand, bank loans and working capital assets. It has increased its deposit paid from approximately US$20 million to US$32.8 million as of March 31 2011 and will finance at least 50% of the asset acquisition through cash on hand. The remaining 50% of the purchase price will be financed through either debt or equity financing.

LPH said it will not use its common stock to finance more than US$25 million of the acquisition price at a per-share price of no less than US$3. If it cannot establish suitable terms for debt or equity financing, it will complete the purchase price using cash generated through operations. The transaction is expected to be completed on or before June 30.

“We are confident in our financing plans and will only issue equity on suitable terms for the company, creating real value for our shareholders,” said Cai Yongjun, LPH’s chairman and CEO.

Michael Toups, LPH’s chief financial officer, said: “The acquisition of the assets of Haujie Petroleum nearly doubles our current storage capacity to a total of 220,000 metric tons and solidifies our footprint in the region.

We are looking to replicate the success of our 2009 acquisition of the Gujiao facility, which now accounts for approximately 40% of our total revenues.”