Shanghai Electric : ANNOUNCEMENT ON CONDUCTING ASSET SECURITIZATION OF ACCOUNTS RECEIVABLE

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

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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)

POTENTIAL DISCLOSEABLE TRANSATCTION

ANNOUNCEMENT ON CONDUCTING ASSET SECURITIZATION OF

ACCOUNTS RECEIVABLE

INTRODUCTION

The Board is pleased to announce that on 27 September 2019, the Board considered and approved the Company to conduct the proposed asset securitization of accounts receivable and apply for the issuance of Asset-backed Securities of RMB3.59 billion.

LISTING RULES IMPLICATION

As the highest applicable percentage ratio (as defined under the Listing Rules), calculated based on currently available information, for the proposed transaction contemplated under the potential agreements to be entered into by the Company exceeds 5%, but all of the ratios are below 25%, the proposed transaction contemplated is expected to constitute a discloseable transaction of the Company if the proposed transaction materialised and shall be subject to the notification and announcement requirements under Chapter 14 of the Listing Rules. The Company will comply with the applicable requirements of the Listing Rules as and when necessary.

As at the date of this announcement, the proposed transaction has not yet been materialised, no agreement has been signed by the Company, and no performance arrangement has been made. Therefore, the Shareholders and potential investors of the Company are advised to exercise caution when dealing in the securities of the Company.

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1. INTRODUCTION

The Board is pleased to announce that on 27 September 2019, the Board considered and approved the Company to conduct the proposed asset securitization of accounts receivable and apply for the issuance of Asset-backed Securities of RMB3.59 billion.

1. OVERVIEW ON THE SPECIAL PROJECT

In order to optimize the asset structure and improve the turnover efficiency of accounts receivable, the Company proposes to conduct the program on the asset securitization of accounts receivable. It will establish the "Asset-backed Special Project on Accounts Receivable of Shanghai Electric" with Great Wall Securities as the manager of the Special Project, and conduct financing through issuance of Asset-backed Securities.

1. BASIC INFORMATION ON THE SPECIAL PROJECT

1. Original interest holder/Asset service agency Shanghai Electric Group Company Limited

1. Project manager

China Great Wall Securities Co., Ltd.

1. Underlying assets ("Underlying Assets")

The accounts receivable and their ancillary guarantee interests (if any) of the Company against the purchasers under the construction contracts, sales contracts and accounts receivable transfer contracts, which will be transferred to the project manager on the establishment date of the Special Project by the Company in the capacity of original interest holder.

(IV) Transaction structure

1. Subscribers enter into subscription agreement with the project manager to entrust the project manager to manage the subscription funds in the form of special assets management. The project manager establishes and manages the Special Project and

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subscribers will become the holders of the Asset-backed Securities upon acquisition of such Asset-backed Securities.

1. The project manager purchases the Underlying Assets from the original interest holder with the funds raised from the Special Project in accordance with the Agreement on Purchase and Sale of Underlying Assets entered into between the project manager and the original interest holder.
2. The asset service agency is responsible for the management and other services in relation to the Underlying Assets and their recovery in accordance with the service agreement.
3. The regulatory bank supervises the transfer of the cash from the Underlying Assets by the asset service agency to the account for the Special Project on the transfer date of the recovered amount in accordance with the regulatory agreement, and the custodian manages the funds for the Special Project under trusteeship in accordance with the escrow agreement.
4. Where any liquidity backing event is triggered, the liquidity backing covenantor shall transfer the funding shortfall to the account for the Special Project according to the Letter of Liquidity Backing Guarantee. Upon subsequent debt recovery from the Underlying Assets, the liquidity backing covenantor is entitled to retrieve out of such recovery of Underlying Assets the amount (comprising the principal and interests) equivalent to the advance which the liquidity backing covenantor has actually made.

1. Size of issuance

The size of the Special Project proposed to be applied for issuance is RMB3.59 billion, including superior asset-backed securities amounting to RMB3.39 billion and secondary asset-backed securities amounting to RMB200 million. The specific size of issuance shall be subject to the conditions of the Underlying Assets and the amount approved to be registered by Shanghai Stock Exchange.

(VI) Target subscribers

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The Special Project is targeted at eligible investors in compliance with requirements under the Interim Measures for Administration and Supervision of Private Equity Funds and Guidelines on Asset Securitization Operations of Shanghai Stock Exchange.

(VII) Term of issuance

The Asset-backed Securities are expected to have a term of 2.5 years, and the specific term of issuance shall be subject to relevant requirements, market conditions and the Company's funding needs at the time of the issuance.

(VIII) Interest rate

The interest rate of the Asset-backed Special Project to be issued will be determined with reference to the market conditions when each tranche of issuance is initiated.

(IX) Credit enhancement measures

SEC, the controlling shareholder of the Company is the liquidity backing covenantor of the Special Project. Within the duration of the Special Project, where any liquidity backing event is triggered, the liquidity backing covenantor shall transfer the funding shortfall to the account for the Special Project according to the Letter of Liquidity Backing Guarantee. Upon subsequent debt recovery from the Underlying Assets, the liquidity backing covenantor is entitled to retrieve out of such recovery of Underlying Assets the amount (comprising the principal and interests) equivalent to the advance which the liquidity backing covenantor has actually made.

Funds received from the transfer of accounts receivable to the Special Project by the Company will be used to replenish the working capital of the Company. The transaction will not have any material impact on the profit and loss of the Company.

IV. IMPACT OF THE SPECIAL PROJECT ON THE COMPANY

The asset securitization of accounts receivable to be conducted by the Company can convert the accounts receivable of the Company into cash assets which are of higher liquidity, which in turn may expand the financing channels and revitalize the existing assets of the Company. As a financing approach other than equity financing and debt

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financing, asset securitization helps effective reduction of financing costs and improvement of capital utilization efficiency, and can serve as a useful alternative of the current financing approaches of the Company. The implementation of the Special Project is able to improve the asset utilization efficiency of the Company, further optimize the financing structure and provide additional guarantee for the Company's needs of working capital for its future business development.

1. POTENTIAL RISKS OF THE SPECIAL PROJECT

A letter of no objection to listing and transfer is required to be obtained from Shanghai Stock Exchange for the Special Project, and such Special Project shall be filed with the Asset Management Association of China (中國證券投資基金業協會) upon completion of issuance. As the interest rate of the Asset-backed Securities to be issued is subject to changes in the macro economic environment, the financing costs of the Company might be affected accordingly. Given that the commencement of the special project is exposed to risks of being suspended or terminated due to macro environment, market conditions and regulatory requirements, and its successful implementation will also be subject to the confluence of policy conditions, interest rate in the market and other factors, the Company will fulfil its obligation of information disclosure according to the progress of the matter.

VI. LISTING RULES IMPLICATION

None of the Directors has any material interests in the proposed transaction contemplated under the potential agreements and thus shall abstain from voting on the relevant board resolutions in respect of the proposed transaction.

As the highest applicable percentage ratio (as defined under the Listing Rules), calculated based on currently available information, for the proposed transaction contemplated under the potential agreements to be entered into by the Company exceeds 5%, but all of the ratios are below 25%, the proposed transaction contemplated is expected to constitute a discloseable transaction of the Company if the proposed transaction materialised and shall be subject to the notification and announcement requirements under Chapter 14 of the Listing Rules. The Company will comply with the applicable requirements of the

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Listing Rules as and when necessary.

VII. GENERNAL INFORMATION

1. Information of the Group

The Group is one of the largest industrial equipment manufacturing conglomerates in China engaged in the following principal activities: (i) design, manufacture and sale of nuclear power nuclear island equipment products, wind power equipment products and heavy machinery including large forging components, and provision of solution package for comprehensive utilisation of solid waste, sewage treatment, power station environmental protection and distributed energy systems; (ii) design, manufacture and sale of thermal power equipment products and auxiliary equipment, nuclear power conventional island equipment products and power transmission and distribution equipment products; (iii) design, manufacture and sale of elevators, electric motors, machine tools, marine crankshafts and other electromechanical equipment products; and

1. provision of integrated engineering services for power station projects and other industries, financial products and services, and functional services including international trading services, financial lease and related consulting services and insurance brokerage services.

1. Information of the Counterparty

Great Wall Securities, established on 2 May 1996, is engaged in the following principal activities: securities brokerage, securities investment consulting, financial consulting relating to the securities trading and securities investment, securities underwriting and sponsorship, proprietary trading of securities, securities asset management, margin financing and securities lending, proxy sale of securities and investment funds, intermediary introduction business for futures companies, and proxy sale of financial products. As at 30 June 2019, total assets and net assets of Great Wall Securities amounted to RMB58.051 billion and RMB16.837 billion, respectively. From January 2019 to June 2019, its operating revenue and net profit amounted to RMB1,739 million and RMB503 million, respectively.

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DEFINITION

"Asset-backed Securities"

"Board"

"Company"or "Shanghai Electric"

"Great Wall Securities"

"connected person(s) "

"controlling shareholder(s)"

"Directors" "Group" "Hong Kong"

"Listing Rules"

"PRC" or "China"

the asset-backed securities to be issued by Great Wall Securities backed by the Underlying Asset and to be subscribed by investors, who shall be entitled to interest pursuant to its terms;

the board of Directors;

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;

China Great Wall Securities Co., Ltd., a joint stock limited company duly incorporated in the PRC with limited liability, the A Shares of which are listed on the Shenzhen Stock Exchange under stock code 002939, is the project manager of Asset-backed Special Project;

has the meaning ascribed thereto under the Listing Rules;

has the meaning ascribed thereto under the Listing Rules;

the directors of the Company;

the Company and its subsidiaries;

the Hong Kong Special Administrative Region of the People's Republic of China;

The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

the People's Republic of China, but for the purposes of this announcement only, excludes

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	Hong Kong Special Administrative Region, Macau
	Special Administrative Region and Taiwan;
"SEC"	Shanghai Electric (Group) Corporation (上海電氣
	(集團)總公司), the controlling shareholder of the
	Company (as defined in the Listing Rules) holding
	approximately 59.18% equity interests in the total
	issued share capital of the Company as at the date
	of this announcement;
"Shareholder(s)"	the shareholder(s) of the Company, including
	holder(s) of both A share(s) and H share(s) of the
	Company;
"Special Project" or "Asset-	Asset-backed Special Project on Accounts
backed Special Project"	Receivable of Shanghai Electric
"subsidiary(ies) "	has the meaning ascribed thereto under the Listing
	Rules;
"RMB"	the lawful currency of China; and
"%"	percent.

By order of the Board

Shanghai Electric Group Company Limited

ZHENG Jianhua

Chairman of the Board

Shanghai, the PRC, 27 September 2019

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 Mr. KAN Shun Ming, Dr. CHU Junhao and Dr. XI Juntong.

* For identification purpose only

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