Contract
Document
3
Hong Kong Exchanges
and Clearing Limited and The Stock Exchange of Hong Kong Limited take no
responsibility for the contents of this document, make no representation as to
its accuracy or completeness and expressly disclaim any liability whatsoever for
any loss howsoever arising from or in reliance upon the whole or any part of the
contents of this document.
(a
Sino-foreign joint stock limited company incorporated in the People’s Republic
of China)
(Stock
Code: 902)
CONNECTED
TRANSACTION REGARDING JINLING POWER PLANT
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On
31 March 2009, Jinling Power Plant and Chengdu Power Plant entered into
the Agreement, pursuant to which Chengdu Power Plant agreed to transfer
its production targets out of the generation capacity of 200 MW to Jinling
Power Plant which in turn agreed to pay to Chengdu Power Plant RMB160
million as compensation.
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Jinling
Power Plant is a subsidiary of the Company, while Chengdu Power Plant was
established by Huaneng Group. Huaneng Group and its associates (including
Chengdu Power Plant) are connected persons to the Company. The Agreement
(and the relevant compensation) thus constitutes a connected transaction
of the Company.
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Since
the relevant percentage ratios calculated pursuant to Rule 14.07 of the
Hong Kong Listing Rules in connection with the transaction contemplated
under the Agreement (and the relevant compensation) are all less than
2.5%, the transaction contemplated under the Agreement (and the relevant
compensation) is only subject to the reporting and announcement
requirements as set out in Rules 14A.45 and 14A.47 of the Hong Kong
Listing Rules and is exempt from the independent shareholders´ approval
requirements.
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RELATIONSHIP
BETWEEN THE COMPANY AND HUANENG GROUP
The
Company and its subsidiaries mainly develop, construct, operate and manage
large-scale power plants in China nationwide. It is one of the largest listed
electricity power suppliers in China, owning within the PRC a generation
capacity of 39,203 MW on an equity basis.
Huaneng
Group is principally engaged in the operation and management of industrial
investments; the development, investment, construction, operation and management
of power source; organizing the generation and sale of power (and heat); and the
development, investment, construction, production and sale of products in
relation to information, transportation, new energy and environmental protection
industries.
Huaneng
Group is the controlling shareholder of HIPDC, holding a 51.98% direct interest
and a 5% indirect interest in HIPDC. In addition, Huaneng Group also holds an
aggregate of 8.92% effective interest in the total issued share capital of the
Company. As at the date of this announcement, HIPDC holds approximately 42.03%
of the total issued share capital of the Company.
The
relationships among the Company, Huaneng Group, Jinling Power Plant and Chengdu
Power Plant are illustrated as follows:
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Huaneng
Group, through its wholly owned subsidiary China Xxx Xxxx Group Hong Kong
Limited (“China Xxx Xxxx Group HK”), indirectly holds a 100% interest in
Pro-Power Investment Limited while Pro-Power Investment Limited holds a 5%
interest in HIPDC.
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#
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Of
the 8.92% interest, 0.17% represents the interest in the H shares of the
Company indirectly held by Huaneng Group through China Xxx Xxxx Group
HK.
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Currently,
each of the Company, Xxxxxxx Xxxxxx Asset Management Group Company Limited and
Nanjing Municipal Investment Corporation holds 60%, 30% and 10% interests in
Jinling Power Plant, respectively. Xxxxxxx Xxxxxx Asset Management Group Company
Limited and Nanjing Municipal Investment Corporation are third parties
independent of the Company and the connected persons of the Company. Neither of
them holds any share in the Company.
Chengdu
Power Plant was established by Huaneng Group. Prior to the closing down of its
generation units on 16 June 2007 in accordance with the policy of “replacing
small units with larger units”, it had an installed generation capacity of
200MW.
Under the
Hong Kong Listing Rules, Huaneng Group and its associates (including Chengdu
Power Plant) are connected person of the Company while the transactions between
the Company and Huaneng Group and its associates (including Chengdu Power Plant)
constitute connected transactions of the Company, subject to the compliance with
the relevant disclosures and/or independent shareholders approval requirements
as stipulated in the Hong Kong Listing Rules (as the case may be).
BACKGROUND
The
“Eleven five-year plan” has identified its target in reducing emission and
promoting energy saving. The electricity industry has been an area of focus for
emission reduction and energy saving. Hence, the State has promulgated the
policy of “replacing small units with larger units”, the purpose of which is to
reduce flue-gas emission and to hasten the speed of constructing large scale and
high efficiency generation units. Compensation will be payable to encourage the
closure of small-sized power generation units. The State will continue to allot
appropriate power production targets to those generation units which had been
closed down within the closure compensation period. Such production targets out
of the closure of the small generation units can be transferred at a price to
larger generation units.
On 7
October 2008, the construction of 1 x 1,000MW domestic ultra-supercritical
coal-fired generation unit pursuant to the policy of “replacing small units with
larger units” at Jinling Power Plant Phase II has been given the approval by the
State Development and Reform Commission. The construction project requires the
closure of certain small generation units including the 200MW coal-fired
generation units of Chengdu Power Plant. Of those small generation units,
Chengdu Power Plant had already closed down its 200MW coal-fired generation
units on 16 June 2007. The closure was duly verified by the State. Pursuant to
the principles set out in the State Council Document No. 2 of 2007 entitled
“Notification regarding certain opinions on hastening the speed of closing down
small generation units issued by the State Council to the State Development and
Reform Commission and the State Energy Office”, Jinling Power Plant shall pay
part of the compensation to Chengdu Power Plant for disposal of the relevant
staff and loan settlement out of the closure of the generation units. So far as
the Company is aware, the compensation will not involve any transfer of loan
obligation or loan liabilities.
Accordingly,
Jinling Power Plant and Chengdu Power Plant agreed to enter into the Agreement,
brief terms of which are set out below:
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Date:
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31
March 2009
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2
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Parties:
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Jinling
Power Plant and Chengdu Power Plant
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Subject
Matter:
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In
relation to the payment of compensation by Jinling Power Plant to Chengdu
Power Plant due to the closure of the coal-fired generation units having a
generation capacity of 200MW by Chengdu Power Plant for constructing 1 x
1,000 MW domestic ultra-supercritical coal-fired generation unit at
Jinling Power Plant. The construction is to follow the policy of
“replacing small units with larger units”
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Compensation
fee:
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Jinling
Power Plant agreed to pay to Chengdu Power Plant a sum of RMB 160 million
as compensation on the basis of RMB 800 per kW for compensating Chengdu
Power Plant’s closure of its generation capacity of 200
MW
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Method
of payment:
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To
be funded internally by Jinling Power Plant and be payable to Chengdu
Power Plant within 30 working days from the date of signing of the
Agreement
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Closing:
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Upon
signing of the Agreement, Chengdu Power Plant shall according to the
relevant regulations transfer its production targets out of the generation
capacity of 200 MW to Jinling Power
Plant
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REASONS
FOR ENTERING INTO THE AGREEMENT AND PRICING FACTORS
The
construction of 1 x 1,000 MW domestic ultra-supercritical coal fired generation
unit pursuant to the policy of “replacing small units with larger units” at
Jinling Power Plant Phase II requires the closure of the small generation units
of 200MW at Chengdu Power Plant. Jinling Power Plant shall by following the
principles set out in the said State Council Document No. 2 of 2007 pay the
compensation to Chengdu Power Plant. Given that the Company has relatively fewer
small generation units the capacities of which meet with the State’s requirement
for closure and for purposes of supporting our development, the Company has
agreed with Chengdu Power Plant to utilize the product targets allocated to its
small generation units. The construction project at Jinling Power Plant Phase II
is a highly effective environmental protection project. Such project is located
in Jiangsu Province which is a province with better economic strengths in the
PRC. Against the background of implementation of the policies of the State
including emission reduction and energy saving. Such compensation is consistent
with the Company’s development strategy and long-term benefit both from the
perspective of operating benefits of the Company and fulfillment of the social
responsibility of constructing a green environmental protection enterprise by
the Company.
The
consideration payable under the Agreement has been determined based on the
prevailing market price, with reference to the compensation standard for
“replacing small units with larger units” in the area and the guiding principles
set out in the said State Council Document No.2 of 2007. The financial impact
resulting from the entering into of the Agreement is not expected to be
significant as compared to the Company´s overall earnings, assets and
liabilities, the Directors are of the view that the transaction under the
Agreement (and the relevant compensation) will have no material effect on the
earnings, assets and liabilities of the Company.
The
Company believes that the transfer of the production targets of 200 MW owned by
Chengdu Power Plant to Jinling Power Plant for constructing its 1 x 1,000 MW
domestic ultra-supercritical coal-fired generation unit pursuant to the policy
of “replacing small units with larger units” is consistent with the operating
benefits of the Company. The Directors are of the view that the Agreement (and
the relevant compensation) was entered into based on the following principles:
(1) on normal commercial terms (based on arm’s length negotiations and on terms
which are no less favourable than those obtained by the Company from independent
third parties); (2) on terms that are fair and reasonable that are consistent
with the interest of the Company and its shareholders as a whole; and (3) on
terms that are under the normal and general business operation of the
Company.
INFORMATION
REGARDING JINLING POWER PLANT AND CHENGDU POWER PLANT
Jinling
Power Plant is a limited liability company established in the PRC and located in
Qixia Economic Technology Development Zone (Xidu), Qixia District, Nanjing City,
Jiangsu Province. It was incorporated on 2 February 2005 and since 29 December
2007 it became a subsidiary of the Company. Its principal scope of business
includes development, operation and management of power plants and relevant
constructions works.
Chengdu
Power Plant had small coal-fired generation units with a capacity of 200MW.
Following the work arrangement of the State Development and Reform Commission
and Huaneng Group regarding the policy of “replacing small units with larger
units”, and pursuant to the Responsibility letter regarding the closure of small
generation units signed with the Government of Sichuan Province and the
Agreement relating to closure of small Generation Units signed with the Economic
Commission, the Development and Reform Commission of Sichuan Province, the
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Government
of Chengdu City and Sichuan Province Power Corporation, Chengdu Power Plant had
formally closed down its 200 MW coal-fired generation units on 16 June 2007. As
at 31 December 2007, the assets of Chengdu Power Plant amounted to
RMB50,635,037.49, liabilities amounted to RMB150,192,312.63, the equity interest
amounted to -RMB99,557,275.14. In 2007, the realised profit of Chengdu Power
Plant amounted to RMB3,969,170 and the net profit amounted to
RMB3,969,170.
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IMPLICATION
UNDER HONG KONG LISTING RULES
The
transaction contemplated by the Agreement (and the relevant compensation)
constitutes a connected transaction of the Company under the Hong Kong Listing
Rules. Since the relevant percentage ratios calculated pursuant to Rule 14.07 of
the Hong Kong Listing Rules in connection with the transaction contemplated
under the Agreement (and the relevant compensation) are all less than 2.5%, the
transaction is only subject to the reporting and announcement requirements as
set out in Rules 14A.45 and 14A.47 of the Hong Kong Listing Rules and is exempt
from the independent shareholders´ approval requirements.
DEFINITIONS
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“Agreement”
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Agreement
entered into between Jinling Power Plant and Chengdu Power Plant on 31
March 2009 in relation to the payment of compensation by Jinling Power
Plant to Chengdu Power Plant due to the closure of coal-fired generation
units having a generation capacity of 200MW by Chengdu Power Plant for
constructing 1 x 1,000 MW domestic ultra-supercritical coal-fired
generation unit at Jinling Power Plant. The construction is to follow the
policy of “replacing small units with larger units”;
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“Chengdu
Power Plant”
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China
Huaneng Group Chengdu Coal-fired Power Plant
Sub-Company;
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“Company”
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Huaneng
Power International, Inc.;
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“Directors”
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the
Directors of the Company (including the independent non-executive
Directors);
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“HIPDC”
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Huaneng
International Power Development Corporation;
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“Hong
Kong Listing Rules”
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the
Rules Governing the Listing of Securities on the The Stock Exchange of
Hong Kong Limited;
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“Huaneng
Group”
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China
Huaneng Group;
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“Jinling
Power Plant”
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Huaneng
Nanjing Jinling Power Limited Company;
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“PRC”
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the
People´s Republic of China; and
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“RMB”
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the
lawful currency of the
PRC.
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By
Order of the Board
Huaneng Power International,
Inc.
Gu Biquan
Company
Secretary
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As at the
date of this announcement, the directors of the Company are:
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CaoPeixi
(ExecutiveDirector)
XxxxxXxxx
(Non-executiveDirector)
WuDawei
(Non-executiveDirector)
HuangJian
(Non-executiveDirector)
XxxXxxxxx
(ExecutiveDirector)
FanXiaxia
(ExecutiveDirector)
ShanQunying
(Non-executiveDirector)
XxXxxxxx
(Non-executiveDirector)
XxxxxXxxxxxxx
(Non-executive
Director)
Xxx
Xxxxxxx
(Non-executive
Director)
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Xxx
Xxxxxx
(IndependentNon-executiveDirector)
YuNing
(IndependentNon-executiveDirector)
ShaoShiwei
(IndependentNon-executiveDirector)
ZhengJianchao
(IndependentNon-executiveDirector)
WuLiansheng
(Independent
Non-executive Director)
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Beijing,
the PRC
31 March
2009
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