China Shenhua Energy : DISCLOSEABLE TRANSACTION - CONTINUING CONNECTED TRANSACTIONS...

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

(Stock Code: 01088)

DISCLOSEABLE TRANSACTION CONTINUING CONNECTED TRANSACTIONS ENTERING INTO FINANCIAL SERVICES AGREEMENT

ENTERING INTO FINANCIAL SERVICES AGREEMENT

As disclosed in the announcement dated 24 March 2016 and the circular dated 29 April 2016, the Company has entered into the Current Financial Services Agreement with China Energy on 24 March 2016 under which the Company has agreed to provide, through Finance Company, financial services to Members of China Energy Group, and the China Energy Group has agreed to provide, at the request of the Group and through Finance Company, entrustment loans to the Group. The term of the Current Financial Services Agreement will expire on 31 December 2019.

The Company has entered into a new Financial Services Agreement with China Energy on 22 March 2019. Pursuant to the Financial Services Agreement, the Company has agreed to provide, through Finance Company, financial services to Members of China Energy Group, and the China Energy Group has agreed to provide, at the request of the Group and through Finance Company, entrustment loans to the Group. The Financial 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 Financial 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 Financial Services Agreement, as one or more of the applicable percentage ratios exceeds 5% as calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules, the Financial Services Agreement and the transactions contemplated thereunder are subject to reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Hong Kong Listing Rules. In respect of loans, consumption credit, buyer's credit and financial leasing granted by Finance Company to Members of China Energy Group under the Financial Services Agreement, as one or more of the applicable percentage ratios exceeds 5% but all such percentage ratios are less than 25% as calculated in accordance with Rule 14.07 of the Hong Kong Listing Rules, it also constitutes a discloseable transaction of the Company under Chapter 14 of the Hong Kong Listing Rules.

The Company will seek approval from the Independent Shareholders for the Financial 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 Financial Services Agreement and the proposed annual caps thereto.

The Company and the Independent Board Committee have reviewed the Financial 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 Financial 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 Financial 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.

Finance Company is principally engaged in the provision of financial consultation services, credit appraisal and other related consultancy and agency services to Members of China Energy Group and the Group; assistance to members in the collection and payment of transaction amount; authorised insurance agency services; provision of guarantee between members; providing entrusted loans and entrusted investments between members; provision of bill acceptance and discount services to members; provision of internal fund transfer and settlement services and corresponding settlement planning to members; accepting deposits from members; provision of loans and finance leasing to members; provision of inter-bank lending; authorised issue of bonds; underwriting of corporate bonds of members; equity investments in financial institutions; investments in negotiable securities; provision of consumer credit facilities, buyers' credit and finance leasing. As at the date hereof, the Company directly and indirectly holds 100% interest in Finance Company.

As disclosed in the announcement dated 24 March 2016 and the circular dated 29 April 2016, the Company has entered into the Current Financial Services Agreement with China Energy on 24 March 2016 under which the Company has agreed to provide, through Finance Company, financial services to Members of China Energy Group, and the China Energy Group has agreed to provide, at the request of the Group and through Finance Company, entrustment loans to the Group. The term of the Current Financial Services Agreement will expire on 31 December 2019.

The Company has entered into a new Financial Services Agreement with China Energy on 22 March 2019. Pursuant to the Financial Services Agreement, the Company has agreed to provide, through Finance Company, financial services to Members of China Energy Group, and the China Energy Group has agreed to provide, at the request of the Group and through Finance Company, entrustment loans to the Group. The Financial Services Agreement will be effective from 1 January 2020.

FINANCIAL SERVICES AGREEMENT

Date

22 March 2019

Parties

The Company and China Energy

Financial Services

Pursuant to the Financial Services Agreement, the Company has agreed to provide, through Finance Company, the following financial services to Members of China Energy Group:

• (1) financial consultation, credit appraisal and other relevant advice and agency services to Members of China Energy Group;

• (2) provision of assistance to Members of China Energy Group to receive and pay transaction proceeds;

• (3) provision of financial service of guarantee (including guarantee business within the business scope of financial enterprises, such as performance guarantee and quotation sharing) to Members of China Energy Group;

• (4) entrustment investments between Members of the China Energy Group and associates of China Energy;

• (5) bill acceptance and discount services to Members of China Energy Group;

• (6) internal settlement and settlement planning services between Members of the China Energy Group and associates of China Energy;

• (7) taking deposits from Members of China Energy Group;

• (8) granting loans, consumption credit, buyer's credit and finance leasing to Members of China Energy Group;

• (9) underwriting corporate bonds of Members of China Energy Group.

Pursuant to the Financial Services Agreement, China Energy has agreed that the China Energy Group may provide entrustment loans through Finance Company to the Group on the conditions that any such entrustment loans must be granted on normal commercial terms and with no security being given on assets of the Group.

Term and termination

The Financial 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 Financial Services Agreement and is effective from 1 January 2020 and will expire on 31 December 2022.

Price determination

• (1) Subject to compliance with the terms and conditions of the Financial Services Agreement, Finance Company shall be appointed as one of the financial institutions to provide financial services to Members of China Energy Group. Members of China Energy Group may obtain financial services from other financial institutions in addition to or instead of Finance Company, as it thinks fit;

• (2) the interest rates for deposits placed by Members of China Energy Group with Finance Company under the Financial Service Agreement are negotiated on arm's length terms and by reference the interest rate prescribed by the PBOC for the same type of deposit and interest rates charged by major commercial banks in the PRC for comparable deposits provided to Members of China Energy Group;

• (3) the interest rates for loans granted by Finance Company to Members of China Energy Group under the Financial Service Agreement are negotiated on arm's length terms and by reference the interest rate prescribed by the PBOC for the same type of loan and interest rates charged by major commercial banks in the PRC for comparable loans provided to Members of China Energy Group;

• (4) the service fees charged by Finance Company for the provision of the financial services to Members of China Energy Group are determined according to the fee rates fixed by the PBOC or the CBIRC, and if such fixed fee rates are not available, the service fees are negotiated on arm's length taking into account the market conditions and by reference the fee rates charged by major commercial banks for comparable services provided to Members of China Energy Group.