China IE to build second-gen plant

By Erin Voegele | January 05, 2011

Posted Jan. 5, 2011

China Integrated Energy Inc. has announced the signing of a nonbinding letter of intent to acquire the complete assets of Hainan Lin Gao Chemical Co. Ltd. According to China Integrated Energy, the company intends to build a 300,000 ton-per-year (90 MMgy) biomass-to-liquid plant at Hainan Lin Gao Chemical's site in the Hainan Province.

Due diligence activities are currently underway, and the acquisition is expected to close during the first quarter of 2011. The project is scheduled to be developed in stages. The first stage, which includes construction of a 100,000 ton-per-year production line, is expected to be complete approximately one year after the acquisition closes.

The acquisition will include the land-use rights to approximately 15 acres of land and built-in infrastructure, including power, water, and waste treatment. Additional assets to be included in the transaction include an oil storage facility with 15,000 cubic meters of capacity.

According to China Integrated Energy, sugarcane bagasse will serve as the primary feedstock for the planned facility. A statement released by the company states that management believes the new facility will generate a profit margin superior to that of its current biodiesel production due to the abundant supply of low cost bagasse feedstock.

"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," said China Integrated Energy CEO Gao Xincheng in the statement. "With our track record of expanding our biodiesel business profitability, we believe that this purchase will help us solidify our position as a leader in the renewable energy sector."

According to China Integrated Energy's website, the company has recently begun operations at a similar 50,000 ton-per-year second-generation facility. In addition its ability to process traditional biodiesel feedstocks like waste cooking oils, the plant can also process straw materials, agricultural waste, and organic wastes. In addition, the technology developed by China Integrated Energy is able to recycle unused feedstocks and water from the production process.

A flow chart demonstrating the second-generation technology shows that biomass feedstocks are first crushed and put through a decontamination process. The next step involves gasification. The resulting syngas is then put through a cooling and purification process before being introduced into a Fischer-Tropsch reactor. The system is designed to utilize residual gas as a source of power.

One day following the announcement of the planned acquisition of Hainan Lin Gao Chemical, China Integrated Energy announced it has entered into definitive agreements with several institutional investors for a registered direct placement of approximately $24.17 million of common stock at a price of $7 per share. The company will issue more than 3.45 million shares to institutional investors. China Integrated Energy will also issue investors warrants to purchase more than 1.72 million shares of common stock, which could provide an additional $12.95 million in gross proceeds. According to the company, the capital raised in this registered direct placement will be used, in part, to expand production capacity.

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