(EnergyAsia, July 19 2011, Tuesday) — Longwei Petroleum Investment Holding Ltd, a US-listed company engaged in the storage and distribution of oil products in China, said it has increased its cash deposit to RMB550 million to complete its proposed purchase of the 100,000-tonne oil storage assets of Huajie Petroleum Co Ltd in northern Shanxi Province. (US$1=RMB6.45).

Longwei, which said it intends to acquire the assets for a total of RMB700 million, acknowledged that it had not completed the deal by the original target of June 30 when it was to have paid at least half the total purchase price through cash on hand as a deposit.

It said: “The parties could not reach a final agreement relating to the terms of the promissory note and have agreed that (Longwei) shall pay the balance of the purchase price, RMB 150 million by December 31 2011, at which time the assets will be transferred. As of June 30, 2011, Longwei had paid a RMB550 million deposit, or 78.6% of the total purchase price, using cash on hand.”

Located in Xingyuan town in Shanxi’s Fanshi County, Huajie Petroleum’s assets include fuel tanks, accessories, equipment, a special transportation railway line, a 3,000-sq-meter office building and land use rights for 98 acres of land adjacent to the main regional rail line.

Longwei said it expects the assets to contribute approximately US$300 million to revenues and US$40 million to net income during the first 12 months of operations.

The company said the acquisition will nearly double its storage capacity to a total of 220,000 metric tons and extend its reach into the fast-growing industrial area of the province.

Cai Yongjun, Longwei’s chairman and CEO, said:

“We did not close on the transfer of ownership of the assets because we believe it is important for the integrity of the transaction to complete the purchase under terms suitable to the company and our shareholders. We intend to close as soon as possible, and we remain committed to not diluting our shareholders in this transaction.

“With the addition of the Huajie facility, we will strengthen our lead as the largest non-state-owned fuel storage and distribution business in the province and will be better positioned to capitalise on the rising demand for petroleum products in our regional market.”

Michael Toups, Longwei’s chief financial officer, said:

“Given the recent investor concerns about acquisitions and asset purchases by Chinese companies, we believed, based on advice from our US counsel and auditor, that it was in the company’s best interest to reach a final agreement on the transfer of assets with a clear transfer of title at closing

“We remain committed to the asset purchase as part of our growth strategy for fiscal 2012 and advanced RMB335 million during the quarter ended June 30 2011 toward the purchase price.”