China Integrated Energy, Inc., a leading non-state-owned integrated energy company in the People's Republic of China, announced that it has signed a non-binding letter of intent to acquire all of the assets of Hainan Lin Gao Chemical Co., Ltd ("Hainan Lin Gao Chemical"). The Company plans to build a 300,000-ton biodiesel plant at this facility in Lin Gao County, Hainan Province. The Company is performing due diligence, and expects to complete the acquisition by the end of the first quarter 2011. Phase one, which includes a production facility with 100,000-ton capacity, is expected to commence production approximately twelve months after the closing of the acquisition.
The Company will acquire all of the assets of Hainan Lin Gao Chemical for a total cash consideration of approximately $9 million. This includes a land use right to approximately 15 acres of land, an oil storage facility with 15,000 cubic meters of storage capacity, and built-in infrastructure including power, water, and waste treatment. In addition, this facility is located near a seaport, which is convenient for feedstock and biodiesel transport.
"We are excited to announce this LOI to acquire the assets of Hainan Lin Gao Chemical, where we plan to build a new second generation biodiesel plant," stated Mr. Gao Xincheng, Chief Executive Officer of China Integrated Energy, Inc. "With our track record of expanding our biodiesel business profitably, we believe that this purchase will help us solidify our position as a leader in the renewable energy sector."
The feedstock for this facility is mainly bagasse, the fibrous residue that remains after sugarcane stalks are crushed to extract their juice for sugar production in the region. Management believes this new facility will generate a profit margin superior to that of its current biodiesel production due to the abundant supply of this low cost feedstock nearby.
China Integrated Energy Inc. also continues with the construction of its new 50,000-ton biodiesel production facility, adjacent to the Company's existing 100,000-ton biodiesel production facility in Tongchuan City, Shaanxi Province. The completion of the newly constructed 50,000-ton biodiesel production facility had been slightly delayed, due to a holdup on the clearance through customs of the equipment shipped from Japan. . However, the last shipment of equipment has already cleared customs and is expected to arrive in early January. The Company expects to commence testing and ramp-up of the newly constructed biodiesel production facility in January 2011.