LongiTech Smart Energy : Announcements and Notices -

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LONGITECH SMART ENERGY HOLDING LIMITED

隆 基 泰 和 智 慧 能 源 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1281)

CONTINUING CONNECTED TRANSACTIONS

FIRST MASTER AGREEMENT

On 10 July 2017, Guangshuo New Energy, a wholly-owned subsidiary of the Company, entered into the First Master Agreement with Longjitaihe Property in respect of the continuing connected transactions between members of the Group and Longjitaihe Property and its subsidiaries.

Longjitaihe Property is a company controlled and owned by Mr. Wei Shaojun and its associates, a Director and the controlling shareholder of the Company. The transactions contemplated under the First Master Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

SECOND MASTER AGREEMENT

On 10 July 2017, Guangshuo New Energy entered into the Second Master Agreement with Longjitaihe Industrial and Lightway Green Energy in respect of the continuing connected transactions between members of the Group and Longjitaihe Industrial, Lightway Green Energy and their subsidiaries.

Longjitaihe Industry and Lightway Green Energy are companies respectively controlled and owned by Mr. Wei Shaojun and Mr. Wei Qiang, both are the Directors of the Company and their associates. The transactions contemplated under the Second Master Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

LISTING RULES IMPLICATIONS

Mr. Wei Shaojun is the father of Mr. Wei Qiang. As such, they are associates with each other for the purpose of the Listing Rules. As the annual caps in respect of the continuing connected transactions under the Master Agreements on an aggregate bases are expected to be more than 0.1% but less than 5%, the Master Agreements are subject to the reporting, announcement and annual review requirements and exempted from the Independent Shareholders' requirement under Chapter 14A of the Listing Rules.

Rule 14A.52 of the Listing Rules provides that the duration of continuing connected transaction agreements must be fixed and reflect normal commercial terms and, except in special circumstances, must not exceed three years. As both the First Master Agreement and the Second Master Agreement have a term of 20 years for the leases and 25 years for the supply of electricity, the Company has engaged Southwest Securities, an independent financial adviser, to review and analyse the terms of the Master Agreements and the Independent Financial Adviser has confirmed and formed the view that it is usual and normal business practice for agreements in the nature of the Master Agreements to be of such durations.

INTRODUCTION

Reference is made to the announcement of the Company dated 27 April 2017, the circular of the Company dated 22 May 2017 and the announcement of the Company dated 9 June 2017 in respect of the Acquisitions.

The Acquisitions were completed on 9 June 2017 and Guangshuo New Energy became an indirect wholly-owned subsidiary of the Company. As Guangshuo New Energy leases or intends to lease rooftop and relevant premises from Longjitaihe Property, Longjitaihe Industrial and Lightway New Energy for the installation of photovoltaic power station equipment and sells electricity to each of such parties in its normal and ordinary course of business, such transactions with the Connected Parties became continuing connected transactions of the Company upon completion of the Acquisitions.

On 10 July 2017, Guangshuo New Energy entered into the First Master Agreement with Longjitaihe Property and the Second Master Agreement with Longjitaihe Industrial and Lightway New Energy to regulate the continuing connected transactions between the parties and their subsidiaries. Details of the transactions contemplated under the Master Agreements are as follows:

THE FIRST MASTER AGREEMENT

Date

10 July 2017

Parties

1. Guangshuo New Energy; and

2. Longjitaihe Property Co., Ltd. (隆基泰和置業有限公司).

Longjitaihe Property Co., Ltd. is a company established in the PRC and is principally engaged in the business of industrial-urban complex development, community development, leasing and commercial management, property services, etc. Longjitaihe Property is controlled and owned by Mr. Wei Shaojun, a Director and the controlling shareholder of the Company and his associates. Accordingly, Longjitaihe Property is a connected person of the Company and the transactions contemplated under the Master Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

Subject matter

Pursuant to the terms of the First Master Agreement, members of the Group will lease roof top and related storage and operation spaces from Longjitaihe Property and its subsidiaries for the installation of the photovoltaic power station facilities of the Group, and upon the photovoltaic power stations get connected to the grid, supply electricity to Longjitaihe Property and its subsidiaries.

Pricing terms

No rent is payable by Guangshuo New Energy in respect of the leasing of roof tops and other operational spaces from Longjitaihe Property. This arrangement is in-line with common market practice and in-line with the agreement commonly adopted by Guangshuo New Energy with independent third party customers under equivalent circumstances.

In respect of the supply of electricity by Guangshuo New Energy to Longjitaihe Property, the fees will be based on the unit price per kWh as published by the Provincial Price Bureau of which the power station projects are located at (which is subject to adjustment from time to time), with a discount of no more than 20% being offered in comprehensive consideration of the free rental of roof top and the electricity usage of the landlord, etc. The transactions under such electricity purchase agreement are conducted in the usual and ordinary course of business of the Group on normal commercial terms, and under equivalent conditions, the terms and consideration are similar to those offered to independent third party customers. The Directors (including the independent non-executive Directors) are of the view that the fees charged for the supply of electricity, including the discount rate, are on normal commercial terms and are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Term of the First Master Agreement

The First Master Agreement has a term of 20 years for the leases and a term of 25 years for the supply of electricity.

Upon the expiry of the lease term, unless Guangshuo New Energy has notified Longjitaihe Property in writing of not to renew the lease, Guangshuo New Energy will have the exclusive right to continue to lease the roof top and operational space and new lease agreement will be entered into to cover the remaining term for the supply of electricity.

Payment terms

The payment terms of the electricity supplied to Longjitaihe Property is based on monthly account, which is in line with the payment terms charged by the Group for electricity supplied to independent third parties.

Cap Amount

The transaction amount under the First Master Agreement during the term of the agreement will not exceed the following annual cap:

RMB'000

Supply of electricity to Longjitaihe Property 10,000

The annual caps under the First Master Agreement were determined based on the historical transactional amounts between Guangshuo New Energy and Longjitaihe Property, and the expected newly added installed capacity that may be added by Guangshuo New Energy and the adjustments in tariff for the supply of electricity during the term of the First Master Agreement.

The historical transaction amount between Guangshuo New Energy and Longjitaihe Property for the three financial years ended 31 December 2016 and the 5 months ended 31 May 2017 are as follows:

For the year

ended 31 December

2014

For the year

ended 31 December

2015

For the year

ended 31 December

2016

For the 5 months

ended 31 May

2017

RMB'000 RMB'000 RMB'000 RMB'000

Supply of electricity to

Longjitaihe Property 393 7,488 6,520 2,668

THE SECOND MASTER AGREEMENT

Date

10 July 2017