TIANJIN, China, Sept. 21 /PRNewswire-Asia-FirstCall/ -- China New
Energy Group Company (OTC Bulletin Board: CNER) ("China New Energy"
or the "Company"), a natural gas network developer and distributor
of natural gas to residential, industrial, and commercial users in
small and medium sized cities in China, announced today that on
September 14, 2010, the Company's
wholly-owned PRC subsidiary, China New Energy Investment Co., Ltd
(the "Buyer"), entered into certain equity transfer agreements (the
"Equity Transfer Agreements") with Beijing Fengyin Xianghe
Scientific Technology Co., Ltd. (the "Seller"), a PRC company
controlled by Mr. Tang Zhixiang ("Mr. Tang"), to acquire 70% equity
interests in Beijing Century Dadi Gas Engineering Co., Ltd. and
Zhoulu Dadi Gas Co. Ltd. (collectively, "Dadi Gas") for a total
purchase price of RMB 270 million
(approximately $40 million).
On September 14, 2010, China New
Energy also raised $15 million from
the sale of 18.7 shares of Series C Convertible Preferred Stock and
4.0 shares of Series D Convertible Preferred Stock to China Hand
Fund I, LLC ("China Hand"). Also, on September 14, 2010, the Company raised
$3.0 million from the sale of
convertible notes to certain accredited investors (the "Convertible
Notes Offering").
"Our financing and acquisition of Dadi Gas represent major
milestones for China New Energy," said Mr. Yangkan Chong, Chief
Executive Officer. "With a long established brand name, a complete
business model, a seasoned technical team, and its state-of-the-art
technologies, we believe Dadi Gas will significantly enhance our
position in China's natural gas industry. Our financing provides us
with the financial strength to make this very attractive and
strategic acquisition."
Dadi Gas is a vertically integrated natural gas distribution
company and one of the top four private city gas companies in
China. It currently operates in northern and central China and
holds long term exclusive franchise agreements with local
municipalities. Dadi Gas generates revenues from selling natural
gas products and services to residential, commercial and industrial
customers in these municipalities and from the transportation of
natural gas. Beyond its city gas operations and industrial gas
supply business, Dadi Gas engages in the sale and leasing of gas
equipment and operates gas filling stations. Dadi Gas is the only
private gas enterprise in China which owns a gas transportation
unit and controls a fleet of over 100 gas transportation vehicles.
Dadi Gas holds several national patents and is recognized
nationally as a "high-tech" enterprise by the PRC government. As
such, it enjoys national high-tech enterprise preferential tax
treatment.
Mr. Chong added, "We anticipate that the acquisition will bring
about substantial synergies, including guaranteed and steady supply
of gas from upstream suppliers; better pricing for gas, related
products and other purchases; lower transportation costs; lower
operating expenses; and flexible mobilization and placement of
professional and technical staff. In addition, we expect the
acquisition to improve our cash flow and overall financial
position, creating great opportunities for revenue, profit growth,
and an increase in shareholder value."
Pursuant to the Equity Transfer Agreements, the purchase price
is payable in three installments. The first installment of
RMB 120 million (approximately
$17.8 million) is required to be paid
into a mutually managed account within five business days of the
execution of the agreement (with an additional five day grace
period), and will be released from this account upon the
satisfaction of certain conditions. The second installment of
RMB 130 million (approximately
$19.3 million) is payable within 180
days (with an additional 90 day grace period) of the release of the
first installment payment subject to the satisfaction of certain
conditions. The third and final installment is RMB 20 million (approximately $3 million) and is required to be paid within 180
days after the payment of the second installment.
On September 14, 2010, in
connection with the execution of the Equity Transfer Agreements,
the Buyer entered into an Exclusive Option Agreement (the "Option
Agreement"). Under the Option Agreement, after the completion of
the transfer of the 70% interest under the Equity Transfer
Agreements, the Buyer has the right to purchase the remaining 30%
equity interest in Dadi Gas from the Seller for a purchase price of
RMB 130 million (approximately
$19.3 million).
The Equity Transfer Agreements replace the agreement originally
executed on March 8, 2010, between
China New Energy and Mr. Tang (which agreement was terminated
pursuant to a Supplementary Agreement of Equity Transfer Agreement
dated September 14, 2010).
The Company will finance the first installment of the purchase
price with the $18 million in
proceeds raised from the Private Placement and Convertible Notes
Offering. The Company plans to raise capital from third party
investors to fund the rest of the transaction. In connection with
the closing of the Private Placement, the Company and China Hand entered into a Backstop Agreement
dated as of September 14, 2010 (the
"Backstop Agreement"). The Backstop Agreement provides that
China Hand has committed to provide
additional financing of up to $20.1
million to the extent that the Company is unable to raise
capital from third party investors. The proceeds of the additional
financing will be used to fund in part the payment of second and
third installments of the purchase price due in connection with the
acquisition of Dadi Gas.
Mr. Chong concluded, "We believe that Dadi Gas is an excellent
fit with our strategy of increasing our presence in fast growing
second and third tier cities in China that are located in close
proximity to economically developed areas with natural gas
resources. We remain optimistic about the growing market for
natural gas in China, and we look forward to leveraging the Dadi
Gas acquisition for additional growth opportunities."
About China New Energy Group Company
China New Energy Group Company ("China New Energy" or the
"Company") is a vertically integrated natural gas company engaged
in the development of natural gas distribution networks, and the
distribution of natural gas to residential, industrial, and
commercial users in small and medium sized cities in China. The
Company generates revenues primarily from the connection fees it
charges its customers for interconnecting to pipelines in its
natural gas distribution networks, and fees for natural gas usage.
For more information, please visit http://www.cnegc.com .
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995: Any statements set forth above that are not
historical facts are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Such
factors include, but are not limited to, the Company's ability to
access natural gas for distribution, and ability to identify and
develop operational locations under favorable terms, changes in
natural gas pricing mechanism imposed by the Chinese government,
changes in the regulatory environment and future national or
regional economic and competitive conditions, and other factors
detailed from time to time in the Company's filings with the United
States Securities and Exchange Commission and other regulatory
authorities. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
For more information, please contact:
Company Contact:
Eric Yu, Chief Financial Officer
Email: ericyu@cnegc.com
Web: http://www.cnegc.com
Investor Relations Contact:
CCG Investor Relations
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: athan.dounis@ccgir.com
Web: www.ccgirasia.com
SOURCE China New Energy Group Company
Copyright . 21 PR Newswire
