Biodiesel, China

Gushan Environmental Sets IPO Terms

December 7, 2007 (AP) – Chinese biodiesel fuel producer Gushan Environmental Energy Ltd. said Friday it plans to raise about $171.6 million in an initial public offering of American Depositary Shares.  According to a filing with the Securities and Exchange Commission, Gushan is selling 15 million ADS, and a group of selling shareholders is offering 3 million ADS. Each ADS represents two ordinary shares.

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Gushan expects the offering to price between $11.50 and $13.50 per ADS.

Gushan filed a preliminary prospectus with the SEC Monday, but did not disclose any terms of the offering.

Assuming an offering price of $12.50 per ADS, Gushan expects proceeds of about $171.6 million. The company plans to use a majority of the IPO proceeds to expand its production capacity by buying manufacturing equipment and constructing additional facilities. Remaining proceeds will be used for research and development efforts and for other general corporate purposes.

Gushan is the largest biodiesel producer in China in terms of annual production capacity in 2006, according to the filing. The company produced and sold 136,587 tons of biodiesel in the first nine months of 2007, and aims to increase annual production capacity to 400,000 tons by the end of 2008.

Biodiesel is a renewable, clean-burning and biodegradable fuel produced from feedstocks such as vegetable oil, animal fat and recycled cooking oil. Typically blended with diesel fuel, biodiesel is used in the diesel engines of trucks, mass transit vehicles, ships and generators. Additionally, the byproducts of biodiesel production have numerous commercial applications in the food, pharmaceutical and manufacturing industries.

Gushan, which currently operates three production facilities in China, works with local suppliers to acquire the raw materials needed to produce the biodiesel.

Jianqiu Yu, who has more than 15 years of experience in corporate operations and management in the petrochemical and auto industries, founded Gushan in June 2001.

For the nine months ended Sept. 30, the company reported income of $33.4 million, compared with $36 million in the prior-year period. Revenue for the period rose to $98.3 million from $81.5 million in the first nine months of 2006.

Merrill Lynch & Co. is serving as lead underwriter of the offering. CIBC World Markets and Piper Jaffray are also underwriting the IPO. The selling shareholders have given the underwriters the option to buy up to 2.7 million additional ADS at the offering price to cover any overallotments.

The company plans to list its ADS on the New York Stock Exchange under the symbol “GU.”


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