China Coal Energy : CONNECTED TRANSACTIONS

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中國中煤能源股份有限公司

(A joint stock company incorporated in the People's Republic of China with limited liability)

(Stock Code: 01898)

CONNECTED TRANSACTIONS:

(1)ACQUISITION OF PRODUCTION CAPACITY OF YANGCUN COAL MINE AND XINJI NO. 3 COAL MINE FROM XINJI ENERGY;

(2)ACQUISITION OF PRODUCTION CAPACITY OF MAYING COAL MINE FROM MAYING COAL;

AND

(3)ACQUISITION OF PRODUCTION CAPACITY OF XINJI NO. 1 COAL MINE FROM XINJI ENERGY

SUMMARY

The Board is pleased to announce that:

(1)On 23 April 2019, Yihua Mining, a subsidiary of the Company, Xinji Energy and Times Asset entered into the capacity replacement quota transaction agreement, pursuant to which Yihua Mining shall acquire the closure-for-exit capacity of 1,476 thousand tonnes per year legally held by Yangcun Coal Mine and Xinji No.3 Coal Mine from Xinji Energy at the unit price of RMB115 per tonne, and the total transaction price shall be RMB169,740,000 (including the VAT at the tax rate of 6%).

(2)On 23 April 2019, Yihua Mining, Maying Coal and Times Asset entered into the capacity replacement quota transaction agreement, pursuant to which Yihua Mining shall acquire the closure-for-exit capacity of 900 thousand tonnes per year legally held by Maying Coal Mine from Maying Coal at the unit price of RMB115 per tonne, and the total transaction price shall be RMB103,500,000 (including the VAT at the tax rate of 6%).

(3)On 23 April 2019, Nanliang Coal, a subsidiary of the Company, Xinji Energy and Times Asset entered into the capacity replacement quota transaction agreement, pursuant to which Nanliang Coal shall acquire the closure-for-exit capacity of 765,600 tonnes per year legally held by Xinji No.1 Coal Mine from Xinji Energy at the unit price of RMB115 per tonne, and the total transaction price shall be RMB88,044,000 (including the VAT at the tax rate of 6%).

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HONG KONG LISTING RULES IMPLICATIONS

As at the date of this announcement, Xinji Energy and Maying Coal are subsidiaries of China Coal Group, and therefore constitute associates of connected person of the Company. Accordingly, the Capacity Acquisitions constitute connected transactions of the Company under Chapter 14A of the Hong Kong Listing Rules. The Capacity Acquisitions also constitute acquisitions under Chapters 14 and 14A of the Hong Kong Listing Rules. The Capacity Acquisitions shall therefore be aggregated with the previous acquisition transactions as required by Rules 14.22 and 14A.81 of the Hong Kong Listing Rules. As one or more of the applicable percentage ratios (as defined under Rule 14.07 of the Hong Kong Listing Rules), on a standalone or aggregated basis, exceed 0.1% but are less than 5%, the Capacity Acquisitions shall be subject to the reporting and announcement requirements but exempt from the independent shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules.

DIRECTORS' CONFIRMATION

The Directors, Mr. Li Yanjiang, Mr. Peng Yi, Mr. Du Ji'an and Mr. Zhao Rongzhe, who are also directors or senior management of China Coal Group, are deemed to have material interests in the Capacity Acquisitions, and thus have abstained from voting on the resolutions in relation to the Capacity Acquisitions at the Board meeting. Save as mentioned above, none of the other Directors has any material interest in the Capacity Acquisitions.

The Directors (including the independent non-executive Directors) are of the view that the capacity replacement quota transaction agreements were entered into on normal commercial terms, and the terms and conditions therein are fair and reasonable, in line with the overall development strategy of the Group and in the interests of the Company and its shareholders as a whole although the Capacity Acquisitions thereunder are not in the ordinary and usual course of business of the Company.

I.ACQUISITION OF PRODUCTION CAPACITY OF YANGCUN COAL MINE AND XINJI NO. 3 COAL MINE FROM XINJI ENERGY

(a)Introduction

On 23 April 2019, Yihua Mining, Xinji Energy and Times Asset entered into the capacity replacement quota transaction agreement, pursuant to which Muduchaideng Coal Mine from Yihua Mining shall acquire the closure-for-exit capacity of 1,476 thousand tonnes per year legally held by Yangcun Coal Mine and Xinji No.3 Coal Mine from Xinji Energy at the unit price of RMB115 per tonne, and the total transaction price shall be RMB169,740,000 which shall be paid in cash by Yihua Mining.

(b)The Capacity Replacement Quota Transaction Agreement

Date:	23 April 2019
Parties:	(1)	Yihua Mining;
	(2)	Xinji Energy; and
	(3)	Times Asset.

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Subject matter and	Pursuant to the capacity replacement quota transaction
consideration:	agreement, Muduchaideng Coal Mine from Yihua Mining
	shall acquire the closure-for-exit capacity of 1,476 thousand
	tonnes per year legally held by Maying Coal Mine from
	Xinji Energy.
	The unit price shall be RMB115 per tonne, and the total
	transaction price shall be RMB169,740,000 (including the
	VAT at the tax rate of 6%). The price of the transaction
	was determined after arm's length negotiations between
	Yihua Mining and Xinji Energy on normal commercial
	terms with reference to the Consultation Report on Capacity
	Replacement Quota Transactions, which, as commissioned
	jointly by the Company and China Coal Group, was
	prepared by Times Asset through (a) referring to the national
	macro policy, (b) researching on the actual transaction status
	such as the transaction models and pricing methods of coal
	capacity quotas in various places, and (c) establishing the
	best optimization model and the income equilibrium model
	in line with the supply and demand situation, development
	trend and latest transaction price of the current capacity
	quota transaction market, and the proposed unit price of the
	capacity replacement quota transactions was calculated to be
	RMB115 per tonne.
Payment arrangement:	Yihua Mining shall pay the consideration of the quota
	transaction in two instalments to the bank account
	designated by Xinji Energy. The first instalment of
	RMB49,740,000 in total shall be completed before
	31 December 2019 and the second instalment of
	RMB120,000,000 in total shall be completed before 31
	December 2020. Xinji Energy shall assist Yihua Mining with
	the payment procedures. Yihua Mining and Xinji Energy
	shall each pay an intermediary service fee of RMB10,000
	(including the VAT at the tax rate of 6%) to Times Asset
	within 10 working days upon the capacity replacement quota
	transaction agreement becoming effective.
Replacement quota:	After the transaction price is fully paid by Yihua Mining,
	Xinji Energy shall assist Yihua Mining in preparing the
	capacity replacement certification documents as required
	by the National Energy Administration within its scope of
	competence.
Effective date of the	The capacity replacement quota transaction agreement shall
Agreement:	come into force on the date when the legal representatives
	or authorized representatives of the parties thereto sign the
	agreement affixed with the company chop or contract chop.

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(c)Reasons for and Benefits of Entering into the Capacity Replacement Quota Transaction Agreement

According to the requirements of the Opinions of the State Council of the PRC on

Reducing Overcapacity in the Coal Industry to Achieve Development by Solving the Difficulties (國務院關於煤炭行業化解過剩產能實現脫困發展的意見) (Guo Fa [2016] No. 7) and other documents, any newly constructed coal mine and coal mine under construction shall obtain the coal production capacity quota by means of capacity replacement quota transactions in order to complete relevant construction procedures of projects, and the approval of the capacity replacement scheme from the relevant PRC authorities is the premise for project approval, application of mining license and acceptance of project completion.

The Board is of the view that entering into the capacity replacement quota transaction agreement is in line with the relevant policy requirements of the State. The completion of capacity replacement procedures is conducive to the completion of the relevant procedures of Muduchaideng Coal Mine Project and in the interests of the Company, medium and minority shareholders and all its shareholders as a whole.

II.ACQUISITION OF PRODUCTION CAPACITY OF MAYING COAL MINE FROM MAYING COAL

(a)Introduction

On 23 April 2019, Yihua Mining, Maying Coal and Times Asset entered into the capacity replacement quota transaction agreement, pursuant to which Muduchaideng Coal Mine from Yihua Mining shall acquire the closure-for-exit capacity of 900 thousand tonnes per year legally held by Maying Coal Mine from Maying Coal at the unit price of RMB115 per tonne, and the total transaction price shall be RMB103,500,000 which shall be paid in cash by Yihua Mining.

(b)The Capacity Replacement Quota Transaction Agreement

Date:	23 April 2019
Parties:	(1)	Yihua Mining;
	(2)	Maying Coal; and
	(3)	Times Asset.
Subject matter and	Pursuant to the capacity replacement quota transaction
consideration:	agreement, Muduchaideng Coal Mine from Yihua Mining
	shall acquire the closure-for-exit capacity of 900 thousand
	tonnes per year legally held by Maying Coal Mine from
	Maying Coal.

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	The unit price shall be RMB115 per tonne, and the total
	transaction price shall be RMB103,500,000 (including the
	VAT at the tax rate of 6%). The price of the transaction
	was determined after arm's length negotiations between
	Yihua Mining and Maying Coal on normal commercial
	terms with reference to the Consultation Report on Capacity
	Replacement Quota Transactions, which, as commissioned
	jointly by the Company and China Coal Group, was
	prepared by Times Asset through (a) referring to the national
	macro policy, (b) researching on the actual transaction status
	such as the transaction models and pricing methods of coal
	capacity quotas in various places, and (c) establishing the
	best optimization model and the income equilibrium model
	in line with the supply and demand situation, development
	trend and latest transaction price of the current capacity
	quota transaction market, and the proposed unit price of the
	capacity replacement quota transactions was calculated to be
	RMB115 per tonne.
Payment arrangement:	Yihua Mining shall pay the total consideration in a lump
	sum to the bank account designated by Maying Coal within
	20 working days upon the capacity replacement quota
	transaction agreement becoming effective. Maying Coal
	shall assist Yihua Mining with the payment procedures.
	Yihua Mining and Maying Coal shall each pay an
	intermediary service fee of RMB10,000 (including the VAT
	at the tax rate of 6%) to Times Asset within 10 working days
	upon the capacity replacement quota transaction agreement
	becoming effective.
Replacement quota:	After the consideration is fully paid by Yihua Mining,
	Maying Coal shall assist Yihua Mining in preparing the
	capacity replacement certification documents as required
	by the National Energy Administration within its scope of
	competence.
Effective date of the	The capacity replacement quota transaction agreement shall
agreement:	come into force on the date when the legal representatives
	or authorized representatives of the parties thereto sign the
	agreement affixed with the company chop or contract chop.

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