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(Incorporated in Bermuda with limited liability)

(Stock Code: 2886)

ANNOUNCEMENT

CONTINUING CONNECTED TRANSACTIONS

RENEWAL OF THE MASTER GAS SUPPLY AGREEMENT AND THE

MASTER GAS SUPPLY CONNECTION AGREEMENT

Reference is made to the announcement of the Company dated 2 December 2015 which announced that the Company entered into the 2015 Master Gas Supply Agreement and the 2015 Master Gas Supply Connection Agreement with TEDA, constituting continuing connected transactions of the Company.

As the 2015 Master Gas Supply Agreement and the 2015 Master Gas Supply Connection Agreement will expire on 31 December 2018, and it is expected that the Group will continue to carry out similar transactions with TEDA or its subsidiaries or associates, the Company has entered into (i) the Master Gas Supply Agreement with TEDA for a term from 1 January 2019 to 31 December 2021, under which the Group will supply natural gas to TEDA and its subsidaries and associates pursuant to agreements to be entered into from time to time; and (ii) the Master Gas Supply Connection Agreement with TEDA for a term from 1 January 2019 to 31 December 2021, under which the Group will provide Gas Supply Connection Services to TEDA and its subsidiaries and associates pursuant to the Gas Connection Facilities Construction Engagement Agreements to be entered into from time to time.

TEDA is the ultimate controlling shareholder of the Company, holding 706,818,659 Shares (representing approximately 60.19% of the total number of Shares in issue) through its wholly owned subsidiary, and is thus a connected person of the Company under the Listing Rules.

Subsidiaries and associates of TEDA are also regarded as connected persons of the Company.

Therefore transactions under the Master Gas Supply Agreement and the Master Gas Supply Connection Agreement respectively will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Since at least one of the applicable percentage ratios for the Master Gas Supply Annual Caps calculated under Rule 14.07 of the Listing Rules exceed 5%, the transactions under the Master Gas Supply Agreement are subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

Since at least one of the applicable percentage ratios for the Master Gas Supply Connection Annual Caps in aggregation with the Master Gas Supply Annual Caps calculated under Rule 14.07 of the Listing Rules exceed 5%, the transactions under the Master Gas Supply Connection Agreement are also subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

A circular containing, amongst other things, the recommendation from the Independent Board Committee and the letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders on these continuing connected transactions and annual caps, and a notice to convene a special general meeting of the Company to approve (i) the Master Gas Supply Agreement and the transactions thereunder and the Master Gas Supply Annual Caps; and (ii) the Master Gas Supply Connection Agreement and the transactions thereunder and the Master Gas Supply Connection Annual Caps is expected to be despatched to the Shareholders in accordance with the Listing Rules on or about 10 December 2018.

BACKGROUND

Reference is made to the announcement of the Company dated 2 December 2015 which announced that the Company entered into the 2015 Master Gas Supply Agreement and the 2015 Master Gas Supply Connection Agreement with TEDA, constituting continuing connected transactions of the Company.

As the 2015 Master Gas Supply Agreement and the 2015 Master Gas Supply Connection Agreement will respectively expire on 31 December 2018, and it is expected that the Group will continue to carry out similar transactions with TEDA or its subsidiaries or associates, the Company has entered into (i) the Master Gas Supply Agreement with TEDA for a term from 1 January 2019 to 31 December 2021, under which the Group will supply natural gas to TEDA and its subsidaries and associates pursuant to agreements to be entered into from time to time; and (ii) the Master Gas Supply Connection Agreement with TEDA for a term from 1 January 2019 to 31 December 2021, under which the Group will provide Gas Supply Connection Services to TEDA and its subsidiaries and associates pursuant to the Gas Connection Facilities Construction Engagement Agreements to be entered into from time to time.

THE MASTER GAS SUPPLY AGREEMENT

The Company entered into the Master Gas Supply Agreement with TEDA with particulars as follows:

Date

19 November 2018

The parties

  • (a) TEDA

  • (b) the Company

Nature of the Transactions

Supply of natural gas by the Group to TEDA and its subsidiaries and associates.

The Group will supply natural gas to TEDA and its subsidaries and associates pursuant to agreements for supply of natural gas to be entered into from time to time.

Term

1 January 2019 to 31 December 2021

Condition precedent to the taking effect of the Master Gas Supply Agreement

The Master Gas Supply Agreement shall take effect after approval by the Independent Shareholders in accordance with requirements under the Listing Rules.

Consideration

The payment for gas supply shall be settled on a monthly basis according to the amount of gas supplied by the Group.

Basis of Consideration

The price for the supply of natural gas under the Master Gas Supply Agreement will be determined based on arm's length negotiations between the relevant parties, with reference to (i) the notice on adjustments to the natural gas sale prices as stipulated by Development and Reform Commission of the Tianjin Municipal Government from time to time; (ii) the notice on adjustments to the city-gate prices of natural gas (i.e. trading prices between pipeline natural gas suppliers and municipalnatural gas enterprises or direct users) consumed by non-residential users as stipulated by National Development and Reform Commission of the PRC Government from time to time; and (iii) the quantities of the natural gas to be consumed by TEDA or its subsidiaries or associates.

The pricing provisions in notices issued by the National Development and Reform Commission (as referred to in (ii) above) apply to the prices for sourcing of natural gas by the Group, while the pricing provisions in notices issued by Development and Reform Commission of the Tianjin Municipal Government (as referred to in (i) above) apply to the prices for sale of natural gas by the Group. The regulatory notices are updated from time to time by the PRC Government authorities without any fixed schedule, and the extent, direction or frequency of updating the provisions are at the discretion of the regulatory authorities.

For the purpose of determining the price for the sale of natural gas under the Master Gas Supply Agreement, the Group is bound to abide by the above pricing provisions as stipulated by the Development and Reform Commission of the Tianjin Municipal Government. The management of the relevant subsidiary of the Group will also take into account the market competition in determining the prices for sale of natural gas by the Group. In case there is an adjustment to the policy of the PRC Government or the Tianjin Municipal Government on natural gas sale price, the price for the supply of gas will be adjusted correspondingly. In the absence of market competition at the relevant location in relation to supply of natural gas, the Group will adhere to the exact relevant price as stipulated by the Tianjin Municipal Government. Where market competition is present at the relevant location, discounts may be provided to customers with bulk purchases, as permitted by the relevant law and regulations.

Reference will also be made to the relevant comparable prices of natural gas supplied by the Group to independent third parties in the same region to ensure that prices charged to TEDA or its subsidiaries or associates are not lower than those charged to independent third party customers.

With reference to the above, the agreements for supply of natural gas to be entered into by the Group with TEDA or its subsidiaries or associates shall be on normal commercial terms that are fair and reasonable, and shall be on terms no less favourable to the Group than those available to the Group for supply of natural gas to independent third parties.

Proposed Master Gas Supply Annual Caps

The Company estimates that the amount of the transactions under the Master Gas Supply Agreement will not exceed the following Master Gas Supply Annual Caps:

Proposed Master Gas Supply Annual Caps amounts (in RMB)

For the period from

For the period from

For the period from

1 January 2019 to

1 January 2020 to

1 January 2021 to

31 December 2019

31 December 2020

31 December 2021

499,495,000

537,234,000

550,270,000

Basis of the Master Gas Supply Annual Caps

The Master Gas Supply Annual Caps were determined after taking into account the following:

  • 1. estimates on natural gas sale prices which are applicable to all transactions under the Master Gas Supply Agreement) based on (i) the maximum city-gate price of natural gas consumed by non-residential users as stipulated by the PRC Government (effective from 1 September 2017); and (ii) an increase of 20% of such city-gate price of natural gas as allowed by the relevant rules and regulations (effective from 20 November 2016);

  • 2. the historical transaction amounts of natural gas supplied by the Group to TEDA and its subsidiaries and associates as follows:

    Approximate historical transaction amounts (in RMB)

    For the period from

    For the period from

    For the period from

    1 January 2016 to

    1 January 2017 to

    1 January 2018 to

    31 December 2016

    31 December 2017

    present

    446,296,000

    310,324,000

    150,060,000

  • 3. estimates on the demands for natural gas by subsidiaries and associates of TEDA based on (i) the actual volumes of natural gas supplied by the Group to the subsidiaries and associates of TEDA for the period from January to the most recent practicable date in November 2018; (ii) the estimated volumes of supply of natural gas by the Group to the subsidiaries and associates of TEDA for the remaining period from November to December 2018; (iii) the historical transaction amounts of gas supplied by the Group to TEDA and its subsidiaries and associates; and (iv) the future trend with an annual increase of 5% in the demand for natural gas despite the decrease in transaction amounts for the supply of natural gas under the 2015 Master Gas Supply Agreement from 2016 to 2018 (partly due to the temporary halt of the Group's supply of natural gas to two of its large customers from October 2017) based on the following:

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Binhai Investment Company Limited published this content on 19 November 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 19 November 2018 12:23:01 UTC