OREANDA-NEWS. March 23, 2011. Longwei Petroleum Investment Holding Ltd. (NYSE Amex: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), announced that it has entered into a letter of intent to acquire a fuel storage depot in northernShanxi Province with a 100,000 metric ton storage capacity. Longwei paid a deposit of RMB 140 million(approximately USD20 million) at the signing of the letter of intent toward the full purchase price of RMB 700 million (approximately USD 106.5 million). The Company expects the facility to contribute approximately USD 300 million to revenues and USD 40 million to net income during the fiscal year ending June 30, 2012.

The Company signed a letter of intent with Shangxi Jiangtong Chemicals Co., Ltd. ("Jiangtong") to acquire the assets of Jiangtong's wholly-owned subsidiary Haujie Petroleum Co., Ltd. ("Haujie") for RMB 700 million (approximately USD 106.5 million). The assets of Haujie include land use rights for 98 acres of land, 100,000 tonnage fuel tanks with accessory facilities and equipment, a special transportation railway line, and a 3,000-square-meter office building. The Company intends to use its cash on hand, bank and other financing, and working capital assets to finance the acquisition. At December 31, 2010 the Company had USD 182 million in working capital assets.

"The acquisition of Haujie Petroleum almost doubles our current storage capacity to a total of 220,000 metric tons and solidifies our footprint in the region," said Cai Yongjun, Chairman and Chief Executive Officer of Longwei. "The new facility has no geographic overlap with our existing markets and services the growing industrial northern region of our province." 

The facility was engineered and built under specifications from Sinopec by Jiangtong, a private enterprise. "The government and its private partner have been looking for a proven operator to purchase the assets to maximize the throughput. The fuel storage facility is located in Xingyuan, Shanxi Province in order to serve the large industrial plants, mining operations and transportation fleets in the area, as well as the growing consumer market serviced through gas station operators in the region," said Michael Toups, Chief Financial Officer of Longwei. "We are staying in line with our current business model to expand capacity and become a dominant player in the market. We believe we can ramp up sales very quickly at the new facility based on our access to product and the growing demand in the regional market." 

According to a report released in November 2010 by the US Energy Information Administration ("EIA"),China's oil consumption will continue to rise in 2011 and 2012, with oil demand reaching 9.6 million barrels per day in 2011 and almost doubling to 17 million barrels per day by 2035. The price of crude oil is also expected to continue to rise, especially with recent unrest in the Middle East. Because fuel prices inChina are linked to international crude prices, the PRC government adjusts fuel prices based on a trailing 22-business-day period. This gives the Company time to adjust its inventory levels accordingly.

Mr. Cai continued, "We are continuing to grow our business model and identify strategic opportunities that allow us to add accretive assets to our distribution model. With Haujie Petroleum, we are looking to replicate the success of our 2009 acquisition of the Gujiao facility, which has contributed approximately\\$160 million to revenues and USD 22 million to net income during the trailing twelve months ended December 31, 2010." 

Based on an anticipated 25% minimum annual growth in its organic business from growing demand and rising prices, the Company anticipates that its Taiyuan and Gujiao facilities will contribute USD 625 million to revenues and USD 85 million to net income on an adjusted basis for the fiscal year ending June 30, 2012. On a combined basis with the newly acquired facility, total revenues for the fiscal year ending June 30, 2012are anticipated to be approximately USD 925 million and net income to be USD 125 million, adjusted net of warrant derivative liability expenses.