China Shenhua Energy : CONTINUING CONNECTED TRANSACTIONS - ENTERING INTO MUTUAL SUPPLIES AND SERVICES AGREEMENT

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the content of this announcement, make no representation 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 content of this announcement.

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

(Stock Code: 01088)

CONTINUING CONNECTED TRANSACTIONS ENTERING INTO MUTUAL SUPPLIES AND

SERVICES AGREEMENT

ENTERING INTO MUTUAL SUPPLIES AND SERVICES AGREEMENT

As disclosed in the announcement dated 24 March 2016 and 1 March 2018, and the circulars dated 29 April 2016 and 12 March 2018, the Company has entered into the Current Mutual Supplies and Services Agreement with China Energy on 24 March 2016 to provide for the mutual supply of products and services between the Group and the China Energy Group, the term of which will expire on 31 December 2019.

The Company has entered into a new Mutual Supplies and Services Agreement with China Energy on 22 March 2019. Pursuant to the Mutual Supplies and Services Agreement, the Group has agreed to supply products and provide services to the China Energy Group and the China Energy Group has agreed to supply products and provide services to the Group. The Mutual Supplies and Services Agreement will be effective from 1 January 2020.

China Energy holds 69.45% interest in the Company, and is the controlling shareholder of the Company. As such, China Energy is a connected person of the Company under the Hong Kong Listing Rules, and the Mutual Supplies and Services Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company pursuant to Chapter 14A of the Hong Kong Listing Rules.

In respect of the proposed annual caps under the Mutual Supplies and Services Agreement, as one or more of the applicable percentage ratios exceeds 0.1% but all are below 5% as calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules, the Mutual Supplies and Services Agreement and the transactions contemplated thereunder are subject to reporting and announcement requirements under Chapter 14A of the Hong Kong Listing Rules but are exempted from independent shareholders' approval requirement. However, according to Shanghai Listing Rules, the Mutual Supplies and Services Agreement and the transactions contemplated thereunder are subject to independent shareholders' approval requirement.

The Company will seek approval from the Independent Shareholders for the Mutual Supplies and Services Agreement and the proposed annual caps thereto at a general meeting to be convened. According to the Hong Kong Listing Rules, China Energy and their respective associates shall abstain from voting in respect of the resolutions for the Mutual Supplies and Services Agreement and the proposed annual caps thereto.

The Company and the Independent Board Committee have reviewed the Mutual Supplies and Services Agreement and the proposed annual caps thereto. The Company will appoint an independent financial adviser to make recommendations to the Independent Board Committee and the Independent Shareholders as to whether the terms, proposed annual caps of and the transactions contemplated under the Mutual Supplies and Services Agreement are fair and reasonable, on normal commercial terms or better and in the ordinary and usual course of business of the Group and are in the interests of the Company and its shareholders as a whole, and to advise the Independent Shareholders on how to vote.

A circular containing, among other things, further details regarding the continuing connected transactions under the Mutual Supplies and Services Agreement, a letter from the Independent Board Committee and an opinion of the independent financial adviser will be dispatched to the Shareholders in due course, in any event, no later than 6 May 2019.

BACKGROUND

The Company is a world-leading coal-based integrated energy company. The main business of the Company and its subsidiaries includes production and sales of coal and power, railway, port and ship transportation, and coal-to-olefins and other coal related chemical processing business.

China Energy and its subsidiaries operate eight business segments including coal, thermal power, new energy, hydropower, transportation, chemical industry, environmental technology and finance, and are principally engaged in coal liquefaction, coal-related chemical processing business, coal production, power generation business and investment and financing activities. China Energy is the controlling shareholder of the Company. As at the date of this announcement, China Energy holds 69.45% interest in the Company.

As disclosed in the announcement dated 24 March 2016 and 1 March 2018, and the circulars dated 29 April 2016 and 12 March 2018, the Company has entered into the Current Mutual Supplies and Services Agreement with China Energy on 24 March 2016 to provide for the mutual supply of products and services between the Group and the China Energy Group, the term of which will expire on 31 December 2019.

The Company has entered into a new Mutual Supplies and Services Agreement with China Energy on 22 March 2019. Pursuant to the Mutual Supplies and Services Agreement, the Group has agreed to supply products and provide services to the China Energy Group and the China Energy Group has agreed to supply products and provide services to the Group. The Mutual Supplies and Services Agreement will be effective from 1 January 2020.

MUTUAL SUPPLIES AND SERVICES AGREEMENT

Date

22 March 2019

Parties

The Company and China Energy

Mutual Supplies and Services

Pursuant to the Mutual Supplies and Services Agreement:

(a) the Group has agreed to supply products and provide services to the China Energy Group, including:

• (i) production: power trading and other related or similar services.

• (ii) supplies: chemical products, production equipment and spare parts, office products and other related or similar product supplies or services.

• (iii) ancillary production services: rail transportation, hardware and software equipment and related services, information technology services, logistics and support services, training and other related or similar services.

(iv) administrative services: various daily administrative services and other ancillary production services to the headquarter of China Energy (exclusive of financial management and services).

(b) the China Energy Group has agreed to supply products and provide services to the Group, including:

• (i) production: power trading and other related or similar services.

• (ii) supplies: oil products, and other related or similar production supplies and services.

• (iii) ancillary production services: construction, logistics and support services, training, tendering services, technical consulting and other related or similar services.

(iv) administrative services: social security and pension management services and staff data recording services.

Term and termination

The Mutual Supplies and Services Agreement is conditional on the Company's compliance of all announcement, shareholders' approval and other requirements under the Shanghai Listing Rules and the Hong Kong Listing Rules in respect of the Mutual Supplies and Services Agreement and is effective from 1 January 2020 and will expire on 31 December 2022.

Price determination

The pricing of the products and services provided under the Mutual Supplies and Services Agreement shall be determined in accordance with the general principles and order of this section:

• (a) Government-prescribed price and government-guided price: if at any time, the government-prescribed price is applicable to any particular product or service, such product or service shall be supplied at the applicable government-prescribed price. Where a government-guided fee standard is available, the price will be agreed within the range of the government guided price.

• (b) Tender and bidding price: where tender and bidding process is necessary under applicable laws, regulations and rules, the price ultimately determined in accordance with the tender and bidding process.

• (c) Market price: the price of the same or similar products or services provided by an independent third party during the ordinary course of business on normal commercial terms. The management shall consider at least two comparable deals with independent third party for the same period when determining whether the price for any product transaction under the Agreement is market price.

(d) Agreed price: to be determined by adding a reasonable profit over a reasonable cost. The management shall consider at least two comparable deals with independent third party for the same period when determining the reasonable profit of any product transaction under the Agreement.

In addition to the above, for certain type of product or service, specific pricing policy is adopted as follows:

• (a) Rail transportation: price prescribed by NDRC or other related government authorities.

• (b) Construction: where tender and bidding process is necessary under applicable laws, regulations and rules, the price ultimately determined in accordance with the tender and bidding process; where tender and bidding process is not necessary under applicable laws, market price.

• (c) Oil products: government-guided price.

• (d) Power trading: Where a government-guided price is available, the government guided price will be applied. Market standard price will be applied for call auction transactions. Off market transactions will take reference of recent comparable market price.

• (e) Hardware and software equipment and related services: market price (including tender and bidding price).

• (f) Chemical products: market price.

• (g) Production equipment and spare parts, office products: market price.

• (h) Tendering service: price prescribed by NDRC.

• (i) Technical consulting service: agreed price with a profit margin of approximately 10%.

• (j) Information technology services: the budget is reviewed by professional institution with pricing reviewing qualification according to relevant rules and regulations on construction pricing, pricing mechanism and fee standards, with reference to market custom of information technology industry, actual standards and market price, taking into account the actual condition of the company's information technology construction. The parties negotiate and agree on service price within the scope of budget.

• (k) Logistics and support services and training services: agreed price (cost plus a profit margin of approximately 5%).