On Dec.25,2013, Tian Lun New Energu Limited, the wholly-owned subidiary of Tian Lun Gas Group and the original shareholder of Huasheng Century Limited entered into Equity Transfer Agreement, acquired 100% equity interests of Huasheng Century and indirectly held 60% equity interests of Caozhou Huamao Energy Distribution Company Limited, therefby, Tian Lun Gas could engage in the investment and construction of natural gas pipelines, as well as the distribution and sales of natural gas in the triple-township of Fuyang, Longhu and Dongfeng in Chaozhou.

The production of ceramics in Chaozhou has more than one thousand years of history. It is the largest production and exporting base of arts and crafts porcelains, daily-used porcelains and sanitary ware in the PRC. It is also one of the few regions in the PRC where LPG (liquefied petroleum gas) and LNG (liquefied natural gas) are heavily used. Currently, LPG is widely used among the ceramic industry users in Chaozhou, accounting for approximately one-sixth of the annual usage in Guangdong Province. Ceramic industry users prefer to use LNG which is cleaner, of superior quality and is more competitive in the market. With the gradual popularity of LNG in recent years, Chaozhou has become one of the top LNG users in the Pearl River Delta area in terms of annual usage. The end-user prices of natural gas in this area are determined by referring to those of LNG. This gives a relative price advantage over LPG, and better room for the gross margin of each unit of gas volume.

With the rapid development of Chaozhou ceramic industry, the ceramic industrial enterprises are gradually moving toward the south-east of Chaozhou (to the direction of Fuyang, Longhu and Dongfeng). With the current ceramic industry foundations in these three towns, there will be a lot of room for the growth of the natural gas market in ceramic production in this area in the future. JV Company has already installed most of the pipelines and facilities needed for natural gas in these three towns. The whole project is expected to be completed in the first half of 2014, at which time the supply of gas to end-users will begin. According to surveys and researches conducted by the Group with the current users of ceramic industry in the three towns, there are no less than 260 companies within the operating area of JV Company. It is expected that gas consumption will reach 600,000 m3/day for the current users of ceramic producers, and the potential market capacity will be over 1,000,000 m3/day. It is expected that after JV Company’s gas supply and distribution is in operation, the supply will reach 300,000 m3/day within two years, and exceed 400,000 m3 within three years.

Very successful precedent cases with similar business model have been found in the other industrial park districts in Chaozhou. The Board believes that, with this Acquisition, the Group will hold a controlling interest in JV Company through the Target Company. This is an opportunity for the Group not only to gain access to the natural gas market in southern part of the PRC, but also provide a solid foundation for the rapid uplifting of natural gas production as well as a continuous and steady income in the sale of gas, and a good platform for the future natural gas business development in southern part of the PRC.