Shanghai Electric : PROVISION OF LOAN TO CONNECTED PERSON

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SHANGHAI ELECTRIC GROUP COMPANY LIMITED

上海電氣集團股份有限公司

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

(Stock Code: 02727)

CONNECTED TRANSACTION

PROVISION OF LOAN TO CONNECTED PERSON

INTRODUCTION

The Board is pleased to announce that, on 3 March 2020, the Board considered and approved the Relevant Resolution, pursuant to which Electric Finance, a subsidiary of the Company, will provide a loan in an amount of not more than RMB1 billion to SINOMEC for a term of one year provided that SINOMEC or a third party shall provide guarantee in a sufficient amount in line with requirements. The interest rate shall not be lower than 10% above the interest rate available to the Company for its funds obtained from banks. The resulting value-added tax and income tax costs are to be borne by SINOMEC.

LISTING RULES IMPLICATION

As at the date of this announcement, SINOMEC and Thvow Technology hold 16% and 80% equity interests in CSEEC respectively. The Company currently holds voting rights corresponding to an aggregate of 263,748,888 shares of Thvow Technology, representing 30.34% voting rights corresponding to the total share capital of Thvow Technology and is the controlling shareholder of Thvow Technology. Both Thvow Technology and CSEEC are subsidiaries of the Company and SINOMEC is a substantial shareholder of a subsidiary of the Company. Therefore, SINOMEC is a connected person of the Company as defined under Chapter 14A of the Listing Rules and this transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

Given that the highest applicable percentage ratio (as defined in the Listing Rules) for this transaction, aggregated with the applicable ratios for the Previous Transaction according to Rule 14A.81 of the Listing Rules, is more than 1% but less than 5%, this transaction is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

INTRODUCTION

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The Board is pleased to announce that, on 3 March 2020, the Board considered and approved the Relevant Resolution, pursuant to which Electric Finance, a subsidiary of the Company, will provide a loan in an amount of not more than RMB1 billion to SINOMEC for a term of one year provided that SINOMEC or a third party shall provide guarantee in a sufficient amount in line with requirements. The interest rate shall not be lower than 10% above the interest rate available to the Company for its funds obtained from banks. The resulting costs of value-added tax and income tax are to be borne by SINOMEC.

ARRANGEMENT OF THE LOAN

The principal content of the Arrangement of The Loan is listed as follows:

Borrower:	SINOMEC
Lender:	Electric Finance
Loan Amount:	Not more than RMB1 billion
Interest rate:	Not lower than 10% above the interest rate available to the
	Company for its funds obtained from banks
Term of the loan:	One year
Condition precedent of	SINOMEC or a third party shall provide guarantee in a
the loan:	sufficient amount in line with requirements

SHAREHOLDING STRUCTURE OF SINOMEC

As at the date of this announcement, the shareholding structure of SINOMEC is listed below:

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As shown in the diagram above, SINOMEC's controlling shareholder is China Pufa Machinery Industry Co., Ltd., and China Pufa Machinery Industry Co., Ltd. is a subsidiary of China Machinery Industry Corporation Ltd. The ultimate beneficial owner of SINOMEC is China National Machinery Industry Corporation Ltd.

FINANCIAL INFORMATION OF SINOMEC

The major financial information of SINOMEC for the most recent two years are as follows:

		RMB: 0'000
Particulars	As at 31 December 2018	As at 31 December 2019
(audited)	(unaudited)
Total assets	1,593,053	2,025,824
Net assets	531,601	642,009
	For the year ended 31	For the year ended 31
Particulars	December 2018	December 2019
	(audited)	(unaudited)
Operating revenue	659,739	792,535
Net profit	20,041	17,055

The financial information of SINOMEC for the year ended 31 December 2018 was audited by Beijing Branch of Pan-China Certified Public Accountants LLP (天健會計師事務所（特殊 普 通 合夥 ）which is qualified to audit securities and futures business and the financial information of SINOMEC for the year ended 31 December 2019 was unaudited.

REASONS FOR, BENEFITS FROM AND FINANCIAL IMPACT OF THE TRANSACTION

The reasons for the loan is to provide financial assistance to SINOMEC and to assist SINOMEC to further develop in the areas of energy, chemical industry, energy conservation, environmental protection etc., which could help the Company to strengthen the cooperation with SINOMEC to jointly develop cutting-edge products and businesses in relevant areas and occupy the commanding heights of the market. Through industry collaboration, we will optimize our respective industrial structure, strengthen our main industry, form a complementary development pattern and drive the development of the Company's existing business. The Arrangement of The Loan will not have material impact on the operating results of the Company.

OPINION FROM THE BOARD

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None of the Directors has material interests in this transaction.

Directors (including the independent non-executive Directors) consider that the proposed connected transaction contemplated by the Arrangement of The Loan is on normal commercial terms and conducted in the ordinary and usual course of business, and the terms under the Arrangement of The Loan are fair and reasonable and are in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATION

As at the date of this announcement, SINOMEC and Thvow Technology hold 16% and 80% equity interests in CSEEC respectively. The Company currently holds voting rights corresponding to an aggregate of 263,748,888 shares of Thvow Technology, representing 30.34% voting rights corresponding to the total share capital of Thvow Technology and is the controlling shareholder of Thvow Technology. Both Thvow Technology and CSEEC are subsidiaries of the Company and SINOMEC is a substantial shareholder of a subsidiary of the Company. Therefore, SINOMEC is a connected person of the Company as defined under Chapter 14A of the Listing Rules and this transaction constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

Given that the highest applicable percentage ratio (as defined in the Listing Rules) for this transaction, aggregated with the applicable ratios for the Previous Transaction according to Rule 14A.81 of the Listing Rules is more than 1% but less than 5%, this transaction is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

INFORMATION OF PARTIES TO THE CONNECTED TRANSACTION

The principal business of Electric Finance includes: financial and financing consultations for member companies, credit forensics and related consultations, agency business, assisting member companies to facilitate receipts and payments from transactions, providing guarantees for member companies, entrusting loans and investments among member companies, handling the bill acceptance and discounting for the member companies, handling the internal transfer settlement and corresponding settlement among the member companies, the liquidation plan design, taking the deposits of the member companies, offering the loan and granting financial lease to the member companies, engaging in inter-bank lending, the issuance of financial corporation bonds upon approval, underwriting corporate bonds for member companies, equity investments in financial institutions, securities investment, buyer credit for member companies and financing leases. (Items subject to approval according to laws shall only be carried out after approval by relevant authorities.) The ultimate beneficial owner of Electric Finance is Shanghai State-owned Assets Supervision and Administration Commission.

The principal business of SINOMEC includes: energy development, construction, operation, consultation, and management within and outside China; chemical engineering, petroleum, pharmaceuticals, chemical fiber, municipal administration, environment, architecture, urban and rural planning, landscaping, as well as renovation and decoration services; general contracting of engineering projects; project and equipment supervision; project management;

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project cost consulting services; tendering and bidding agency services; consultation, services, development and application of technologies; anticorrosion and heat preservation works for electronic products, steel structure and pipelines, as well as manufacturing, installation and maintenance of petrochemical equipment and accessories; contracting of the development projects of domestic and overseas computer application systems and related projects; contracting of the design, construction and installation of various domestic and overseas computer rooms and related projects; import and export business; development and organised production of new technologies and new products; sales of computers, software, electronic products, hi-tech products and the equipment, instruments and materials therefor; domestic trade (excluding those specially regulated); and import and export of commodities and technologies. (Items subject to approval according to laws shall only be carried out after approval by relevant authorities.)

DEFINITIONS

Unless the context otherwise requires, the following expressions in this announcement shall have the following meanings:

"Arrangement of The Loan"	The arrangement, pursuant to which Electric Finance
	will provide a loan in an amount of not more than
	RMB1 billion to SINOMEC for a term of one year
	at the interest rate which is 10% above the interest
	rate available to the Company for its funds obtained
	from banks provided that SINOMEC or a third party
	shall provide guarantee in a sufficient amount in line
	with requirements;
"Board"	the board of Directors of the Company;
"CSEEC"	China Sino Electric Engineering Co., Ltd. (中機國
	能 電 力 工 程 有 限 公 司 ), a limited company
	established in the PRC on 30 October 2002 and a
	subsidiary of the Company as at the date of this
	announcement;
"Company"	Shanghai Electric Group Company Limited, a joint
	stock limited company duly incorporated in the PRC
	with limited liability, the H shares of which are listed
	on The Stock Exchange of Hong Kong Limited
	under stock code 02727 and the A Shares of which
	are listed on the Shanghai Stock Exchange under
	stock code 601727;
"connected person(s)"	has the meaning ascribed thereto under the Listing
	Rules;
"controlling shareholder(s)	has the meaning ascribed thereto under the Listing
	Rules;
"Directors"	the directors of the Company;

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"Electric Finance"	Shanghai Electric Group Finance Co., Ltd. (上海電
	氣 集 團 財 務 有 限 責 任 公 司), a company
	incorporated in Shanghai, the PRC with limited
	liability and a subsidiary of the Company;
"Hong Kong"	the Hong Kong Special Administrative Region of the
	People's Republic of China;
"Listing Rules"	The Rules Governing the Listing of Securities on
	The Stock Exchange of Hong Kong Limited;
"PRC" or "China"	the People's Republic of China, but for the purposes
	of this announcement only, excludes Hong Kong
	Special Administrative Region, Macau Special
	Administrative Region and Taiwan;
"Previous Transaction"	The connected transaction dated 22 January 2019,
	pursuant to which Electric Finance will provide a
	loan in an amount of not more than RMB1 billion to
	SINOMEC for a term of one year, details of which
	are set out in the relevant announcements published
	by the Company on 22 January 2019, 31 Jan 2019
	and 13 March 2019;
"Relevant Resolution"	the Resolution Regarding Provision of Financing in
	an amount of not more than RMB1 billion to
	SINOMEC Engineering Group Co., Ltd. by the
	Company, which was submitted to the Board for
	considering on 3 March 2020;

"RMB"

"SINOMEC"

Renminbi, the lawful currency of the PRC；

SINOMEC Engineering Group Co., Ltd. (中國能源 工程集團有限公司), a limited company established in the PRC on 10 August 1987 and is owned by the Company as to 20% and by independent third parties as to 80%, as at the date of this announcement;

"Subsidiary(ies)" "substantial shareholder(s)"

"Thvow Technology"

has the meaning ascribed thereto under the Listing Rules;

has the meaning ascribed thereto under the Listing Rules;

Suzhou Thvow Technology Co., Ltd. (蘇州天沃科 技股份有限公司), a joint stock limited company established in the PRC on 31 March 2001, the A Shares of which are listed on the Shenzhen Stock Exchange under stock code 002564 and a subsidiary of the Company, as at the date of this announcement.

"%"Percentage

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By order of the Board

Shanghai Electric Group Company Limited

ZHENG Jianhua

Chairman of the Board

Shanghai, the PRC, 3 March 2020

As at the date of this announcement, the executive directors of the Company are Mr. ZHENG Jianhua, Mr. HUANG Ou, Mr. ZHU Zhaokai and Mr. ZHU Bin; the non-executive directors of the Company are Ms. YAO Minfang and Ms. LI An; and the independent non-executive directors of the Company are Dr. CHU Junhao, Dr. XI Juntong and Dr. XU Jianxin.

* For identification purpose only

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