Changfeng Announces Approval of Gas Quota in Xiangdong Project

Changfeng Energy Inc., /quotes/zigman/492959 CA:CFY -8.33% ("Changfeng" or the "Company"), is pleased to announce today that the Company has begun construction of pipelines and related facilities in Xiangdong district, Pingxiang City, Jiangxi province, China ("Xiangdong Project") after receipt of the approval of construction by the Xiangdong Government. The Xiangdong project was originally announced on May 26, 2010, pending the final approval of the project by the provincial energy regulator. The Company, through its majority-owned subsidiary, is responsible for the design, construction, and operation of pipeline networks in Xiangdong district, including its Pingxiang Industrial Ceramic Park (the "Park").

The construction consists of approximately 10 kilometers of mid-pressure pipeline in the Xiangdong downtown area, a 10 kilometers mid-pressure pipeline in the Park, and a gate station with CNG storage and gasification facilities to link the Xiangtan sub-line of the second West-East Pipeline. It is expected that the Xiangdong project will be completed in two phases to coincide with both the project financing and the commencement of construction of a 25 kilometer high-pressure pipeline. This high-pressure pipeline connecting the Company's gate station in Xiangdong District with Xiangtan sub-line of the second West-East Pipeline, will be built and operated by Jiangxi Provincial Natural Gas Investment Co., Ltd. a state-owned company.

The total capital investment for the Xiangdong project is expected to be approximately RMB34 million ($5.4 million), of which approximately RMB6 million ($1 million) for the first phase of construction and will be funded from its existing cash on hand, and the remaining capital requirement will be funded through project loan financing through local banks. Upon the completion of the first phase of construction planned for the middle of 2012, the Company will be able to gradually supply gas for this region through CNG facilities before pipeline gas arrives. The Company has been in discussion with several potential gas customers in the Park, many of which have provided serious expressions of interest in purchasing gas when available.