Beijing Enterprises Water : CONNECTED TRANSACTION IN RELATION TO THE FORMATION OF JOINT VENTURE AND FINANCIAL ASSISTANCE

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CONNECTED TRANSACTION

IN RELATION TO THE FORMATION OF JOINT VENTURE

AND

FINANCIAL ASSISTANCE

The Board is pleased to announce that on 3 August 2020, Public Partner issued a bid winning notice in respect of the PPP Project. It was stated in the notice that BEWG (China) Investment (a wholly-owned subsidiary of the Company), Nanjing Municipal (a non-wholly owned subsidiary of the Company), YEE, CNCE 14, Sinohydro Bureau 8 as Private Partners were the successful bidder in the PPP Project of the comprehensive improvement in rural sewage treatment facilities in Luhe district of Nanjing city. On 18 August 2020, the Private Partners and Public Partner entered into the PPP Contract in relation to the PPP Project. On the same day, the Private Partners and Luhe Sheng Tang entered into the JV Agreement and articles of association in relation to establishment of the Joint Venture for the PPP Project under the operation of Joint Venture.

PPP CONTRACT

According to PPP Contract, the estimated total investment amount of the PPP Project (including current and future registered capital of Joint Venture representing 20% of the total investment amount of the PPP Project) is approximately RMB2,067,002,000 (equivalent to approximately HK$2,309,758,000), subject to the need of the PPP Project.

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FORMATION OF THE JOINT VENTURE

Pursuant to the JV Agreement and articles of association, the current registered capital of the Joint Venture shall be RMB100 million (equivalent to approximately HK$111.74 million). BEWG (China) Investment and Nanjing Municipal will inject RMB45,815,000 (equivalent to approximately HK$51,196,000) and RMB500,000 (equivalent to approximately HK$559,000) in cash, representing 45.815% and 0.5% of the current registered capital of the Joint Venture respectively. YEE, CNCE 14, Sinohydro Bureau 8 and Luhe Sheng Tang will inject RMB47,685,000 (equivalent to approximately HK$53,285,000), RMB500,000 (equivalent to approximately HK$559,000), RMB500,000 (equivalent to approximately HK$559,000) and RMB5,000,000 (equivalent to approximately HK$5,587,000) in cash, representing 47.685%, 0.5%, 0.5%, and 5% of the current registered capital of the Joint Venture respectively. Upon establishment, the Joint Venture will be accounted as an associate of the Company.

Pursuant to the PPP Contract, each of the Joint Venture partners will proportionately make further cash capital contribution of a maximum amount of RMB313,410,000 in the capital requirement of the Joint Venture for the need of the PPP Project. As such, BEWG (China) Investment and Nanjing Municipal will accordingly further contribute RMB143,589,000 (equivalent to approximately HK$160,453,000) and RMB1,567,000 (equivalent to approximately HK$1,751,000) in proportion to their respective equity interests in the Joint Venture.

FINANCIAL ASSISTANCE

Private Partners signed a consortium agreement on 13 July 2020, pursuant to which, each of Private Partners will be jointly and severally liable for the liabilities under the PPP Project. As such, each of Private Partners is contingently liable for the other Private Partners' liabilities under the PPP Project. After deducting the current and future registered capital of approximately RMB20,670,000 (equivalent to approximately HK$23,098,000) injected by Luhe Sheng Tang into the Joint Venture, BEWG (China) Investment together with Nanjing Municipal are likely to invest a maximum amount of approximately RMB392,740,000 (equivalent to approximately HK$438,865,000) in relation to the PPP Project, inter alia, BEWG (China) Investment together with Nanjing Municipal shall be liable in respect of the obligation of YEE in the maximum amount of RMB197,135,000 (equivalent to approximately HK$220,287,000). Therefore, it constitutes the financial assistance of the Company to YEE.

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IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, CTG is a connected person of the Company under the Listing Rules by virtue of being the substantial shareholder of the Company. As CTG beneficially owns not less than 30% equity interest in YEE, YEE is an associate of CTG. Therefore, the entering into of the PPP Contract and the JV Agreement as well as the Financial Assistance constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules exceed 0.1% but are less than 5%, the entering into of the PPP contract and the JV Agreement as well as the Financial Assistance are subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

INTRODUCTION

The Board is pleased to announce that on 3 August 2020, Public Partner issued a bid winning notice in respect of the PPP Project. It was stated in the notice that BEWG (China) Investment (a wholly-owned subsidiary of the Company), Nanjing Municipal (a non-wholly owned subsidiary of the Company), YEE, CNCE 14, Sinohydro Bureau 8 as Private Partners were the successful bidder in the PPP Project of the comprehensive improvement in rural sewage treatment facilities in Luhe district of Nanjing city. On 18 August 2020, the Private Partners and Public Partner entered into the PPP Contract in relation to the PPP Project. On the same day, the Private Partners and Luhe Sheng Tang entered into the JV Agreement and articles of association in relation to establishment of the Joint Venture for the PPP Project under the operation of Joint Venture.

PPP CONTRACT

The PPP Contract governs the Joint Venture in terms of the financing, construction, operation, maintenance and transfer of the PPP Project. The PPP Project comprised comprehensive improvement in rural sewage treatment facilities in Luhe district of Nanjing city, pursuant to the PPP Project List stipulated in the bidding documents of the PPP Project.

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Date

18 August 2020

Parties

1. BEWG (China) Investment
2. Nanjing Municipal
3. YEE
4. CNCE 14
5. Sinohydro Bureau 8
6. Public Partner

Total Investment of PPP Project

According to the PPP Contract, the estimated total investment amount of the PPP Project (including current and future registered capital of Joint Venture representing 20% of the total investment amount of the PPP Project) is approximately RMB2,067,002,000 (equivalent to approximately HK$2,309,758,000), subject to the need of the PPP Project.

Cooperation period of PPP Project

The cooperation period of the project is 22 years, comprising a construction period of 1.5 years and an operation period of 20.5 years.

Finance of PPP Project

Private Partners shall be responsible for the portion of investment in the PPP Project in excess of the registered capital of Joint Venture by way of financing from other financial institutions.

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THE JV AGREEMENT

Date

18 August 2020

Parties

1. BEWG (China) Investment (in the capacity of holder of 45.815% equity interest in the Joint Venture)
2. Nanjing Municipal (in the capacity of holder of 0.5% equity interest in the Joint Venture)
3. YEE (in the capacity of holder of 47.685% equity interest in the Joint Venture)
4. CNCE 14 (in the capacity of holder of 0.5% equity interest in the Joint Venture)
5. Sinohydro Bureau 8 (in the capacity of holder of 0.5% equity interest in the Joint Venture)
6. Luhe Sheng Tang (in the capacity of holder of 5% equity interest in the Joint Venture) The principal terms of the JV Agreement are as follows:

(a) Capital contribution

Pursuant to the JV Agreement, the capital contribution from each party and the structure of the current registered capital of the Joint Venture are as follows:

	Current Registered	Shareholding
Parties	Capital Contribution	Percentage
	(RMB)
BEWG (China) Investment	45,815,000	45.815%
Nanjing Municipal	500,000	0.5%
YEE	47,685,000	47.685%
CNCE 14	500,000	0.5%
Sinohydro Bureau 8	500,000	0.5%
Luhe Sheng Tang	5,000,000	5%
	100,000,000	100%

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The part of current registered capital of the Joint Venture shall be paid within 90 days after the establishment of the Joint Venture, each of Joint Venture partners shall pay in proportion to their equity interests. The remaining current registered capital shall be injected according to the construction progress and capital requirements of the PPP Project but in any event within 12 months from the date of establishment of the Joint Venture.

Pursuant to the PPP Contract, each of the Joint Venture partners will proportionately make further cash capital contribution of a maximum amount of RMB313,410,000 in the capital requirement of the Joint Venture for the need of the PPP Project. As such, BEWG (China) Investment and Nanjing Municipal will accordingly further contribute RMB143,589,000 (equivalent to approximately HK$160,453,000) and RMB1,567,000 (equivalent to approximately HK$1,751,000) in the proportion to their respective equity interests in the Joint Venture.

The respective contribution to the current and future registered capital of the Joint Venture is determined after arm's length negotiations between the parties with reference to the proposed capital requirements of the Joint Venture and the parties' interests in the Joint Venture. The capital contribution of BEWG (China) Investment and Nanjing Municipal in the Joint Venture will be paid in cash and funded by internal resources.

Upon establishment, the Joint Venture will be accounted as an associate of the Company.

(b) Operative term

The operative term of the Joint Venture is 22 years from the date of the issuance of the business licence of the Joint Venture, subject to the approval of the Industrial and Commercial Registration Authority.

(c) Projects

The Joint Venture will mainly be engaged in sewage and reclaimed water treatment and water pollution control.

1. Board of directors

The board of directors of the Joint Venture comprises 3 directors in which Luhe Sheng Tang shall be entitled to nominate 1 director, YEE shall be entitled to nominate 1 director and BEWG (China) Investment shall be entitled to nominate 1 director. The chairman of the board of directors of the Joint Venture shall be nominated by YEE. Subject to the shareholders' approval of the Joint Venture, the board composition may be changed or the number of board members may be increased.

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(e) Profit sharing

Luhe Sheng Tang is not entitled to share profits and also not bear loss. However, each of Joint Venture partners will be entitled to share the profits after transfer of 10% of the profit after tax to statutory reserves or will bear the losses of the Joint Venture in proportion to their respective capital contribution in the Joint Venture. Such transfer to statutory reserve may be ended as and when the statutory reserves were accumulated to 50% of the registered capital of Joint Venture.

(f) Restriction on transfer of equity interests in the Joint Venture

Unless and until transfer of equity interests in the Joint Venture shall be enforced by the applicable laws, each of Joint Venture partners (excluding Luhe Sheng Tang) shall not have the right to transfer of its equity interests, in whole or in part, of the Joint Venture for the first two years from the commencement date of operation of the PPP project. Thereafter, with prior written consent of Luhe Sheng Tang, each of Joint Venture partners shall have the right to transfer its equity interests, in whole or in part, of the Joint Venture.

As at the date of this announcement, CTG is a connected person of the Company under the Listing Rules by virtue of being the substantial shareholder of the Company. As CTG beneficially owns not less than 30% equity interest in YEE, YEE is an associate of CTG. Therefore, the entering into of the PPP Contract and the JV Agreement as well as the Financial Assistance constitute connected transactions of the Company under Chapter 14A of the Listing Rules.

To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, Public Partner, CNCE 14, Sinohydro Bureau 8 and Luhe Sheng Tang and their ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons.

Parties to the PPP Contract and JV Agreement may agree to modify, vary, amend and supplement to the respective agreements when and where necessary.

FINANCIAL ASSISTANCE

Private Partners signed a consortium agreement on 13 July 2020, pursuant to which, each of Private Partners will be jointly and severally liable for the liabilities under the PPP Project. As such, each of Private Partners is contingently liable for the other Private Partners' liabilities under the PPP Project. After deducting the registered capital of approximately RMB20,670,000 (equivalent to approximately HK$23,098,000) injected by Luhe Sheng Tang into the Joint Venture, BEWG (China) Investment together with Nanjing Municipal are likely to invest a maximum amount of approximately RMB392,740,000 (equivalent to approximately HK$438,865,000) in relation to the PPP Project, inter alia, BEWG (China)

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Investment together with Nanjing Municipal shall be liable in respect of the obligation of YEE in the maximum amount of RMB197,135,000 (equivalent to approximately HK$220,287,000) ("Financial Assistance"). Therefore, it constitutes the Financial Assistance of the Company to YEE.

INFORMATION OF THE GROUP

The Company is an investment company and the holding company of the Group. The Group is principally engaged in construction of sewage and reclaimed water treatment plants and seawater desalination plants, and provision of construction services for comprehensive renovation projects in the PRC, Malaysia and Australia and Republic of Bostswana; provision of sewage and reclaimed water treatment services in the PRC, the Republic of Singapore, Portuguese Republic, Australia and New Zealand; distribution and sale of piped water in the PRC, Portuguese Republic and Australia; provision of technical and consultancy services and sale of machineries related to sewage treatment and construction services for comprehensive renovation projects in the PRC and Australia; and the licensing of technical know-how related to sewage treatment in the PRC.

BEWG (China) Investment is a company incorporated in the PRC with limited liability and an investment holding company wholly-owned by the Company.

Nanjing Municipal is a company incorporated in the PRC with limited liability and indirectly held as to 99.17% by the Company. Its principal activities are undertaking survey, design, supervision, testing, technology research and development and general contracting of engineering projects in the PRC and overseas in the municipal, highway, water conservancy, construction, environment and other industries; whole-process engineering consultation, technical consultation, cost consultation; urban and rural planning preparation; cultural relic protection engineering survey and design.

INFORMATION OF YEE

YEE is a company incorporated in the PRC with limited liability and is a wholly-owned subsidiary of CTG. CTG is a connected person of the Company under the Listing Rules by virtue of being the substantial shareholder of the Company. As CTG beneficially owns not less than 30% equity interest in YEE, YEE is an associate of CTG. Its principal activities are responsible for the construction of the Yangtze River Economic Belt and planning, design, investment, construction, operation, technology research and development, products and services related to ecology, environmental protection, energy saving, and clean energy, and operating state-owned assets companies in accordance with the law.

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INFORMATION OF OTHER PARTIES

Public Partner is Nanjing Luhe Water Bureau and is a working bureau in the PRC under the People's Governement of Luhe, Nanjing city. It is mainly responsible for water service matter.

CNCE 14 is a company incorporated in the PRC with limited liability. It is a subsidiary under China National Chemical Engineering Co., Ltd. that focuses on serving petrochemical, coal chemical, fine chemical, energy, housing construction, infrastructure, environmental protection engineering and other business fields.

Sinohydro Bureau 8 is a company incorporated in the PRC. It is a subsidiary of China Power Construction Corporation, the world's top 500 companies. It has the qualifications of main contractor of water conservancy and hydropower engineering construction, main contractor of architectural engineering construction, and main contractor of municipal public engineering construction.

Luhe Sheng Tang is a company incorporated in the PRC. It is a professional water company under the public utilities of Nanjing Liuhe District.

REASONS FOR AND THE BENEFITS OF THE PPP CONTRACT AND THE JV AGREEMENT

Being the largest water company in China, the Group has actively participated in the Yangtze River protection. In addition, the PPP Project further strengthens the cooperation with the CTG at the project level. In this cooperation, the Group will fully exert its professional operational capability and further promote asset-light transformation.

The terms of the PPP Contract and the JV Agreement were determined after arm's length negotiation between the parties. The Directors (including the independent non-executive Directors), having considered the terms and conditions of the PPP Contract and JV Agreement, are of the view that its terms and conditions are on normal commercial terms, which are fair and reasonable and in the interests of the Company and its shareholders as a whole.

None of the Directors has a material interest in the the PPP Contract, the JV Agreement as well as the Financial Assistance and therefore none of them is required to abstain from voting on the Board resolution for considering and approving the PPP Contract and the JV Agreement.

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IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, CTG is a connected person of the Company under the Listing Rules by virtue of being the substantial shareholder of the Company. As CTG beneficially owns not less than 30% equity interest in YEE, YEE is an associate of CTG. Therefore, the entering into of the PPP Contract and the JV Agreement as well as the Financial Assistance constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules exceed 0.1% but are less than 5%, the entering into of the PPP contract and the JV Agreement as well as the Financial Assistance are subject to the reporting and announcement requirements but is exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms have the following meanings:

"BEWG (China)	Beijing Enterprises Water Group (China) Investment Limited*
Investment"	(北控水務（中國）投資有限公司), a company incorporated
	in the PRC and is a wholly-owned subsidiary of the Company;
"Board"	the board of directors of the Company;
"CNCE 14"	China National Chemical Engineering No. 14 Construction
	Co., Ltd.* (中國化學工程第十四建設有限公司), a company
	incorporated in the PRC with limited liability;
"Company"	Beijing Enterprises Water Group Limited, a company
	incorporated in Bermuda with limited liability, the shares of
	which are listed on the main board of the Stock Exchange
	(stock code: 371);
"connected person(s)"	has the meaning ascribed to it under the Listing Rules;
"CTG"	China Three Gorges Corporation, a company incorporated in
	the PRC with limited liability and is a substantial shareholder
	of the Company as at the date of this announcement;
"Directors"	the directors of the Company;

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"Group"	the Company and its subsidiaries;
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong;
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC;
"Joint Venture"	Three Gorges Beijing Enterprise (Liuhe District, Nanjing)
	Ecological Environment Management., Limited (三峽北控(南
	京六合)生態環境治理有限公司), the joint venture enterprise
	to be set up between BEWG (China) Investment, Nanjing
	Municipal, YEE, CNCE 14, Sinohydro Bureau 8 and Luhe
	Sheng Tang pursuant to the JV Agreement;
"JV Agreement"	the shareholder agreement dated 18 August 2020 entered into
	between BEWG (China) Investment, Nanjing Municipal, YEE,
	CNCE 14, Sinohydro Bureau 8 and Luhe Sheng Tang for the
	formation of the Joint Venture;
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange;
"Luhe Sheng Tang "	Luhe Sheng Tang Water Services Co., Ltd.* (南京六合盛棠水
	務有限公司), a company incorporated in the PRC with limited
	liability, funded institution of Nanjing Luhe government;
"Nanjing Municipal"	Nanjing Municipal Design and Research Institute Co., Ltd.*
	( 南 京 市市 政設 計 研究 院 有限 責任 公 司 ), a company
	incorporated in the PRC with limited liability and indirectly
	held as to 99.17% by the Company;
"PPP"	Public-private-partnership
"PPP Contract"	the PPP Contract dated 18 August 2020 entered into between
	BEWG (China) Investment, Nanjing Municipal, YEE, CNCE
	14, Sinohydro Bureau 8 and Luhe Sheng Tang in relation to the
	PPP Project;
"PPP Project"	the PPP project comprised of sewage water treatment facilities
	in Luhe district of Nanjing city pursuant to the PPP Project list
	stipulated in the bidding document of the PPP Project;

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"PRC"	the People's Republic of China (excluding, for the purpose of
	this announcement, Hong Kong, the Macao Special
	Administrative Region of the PRC and Taiwan);
"Private Partners"	BEWG (China) Investment, Nanjing Municipal, YEE, CNCE
	14 and Sinohydro Bureau 8;
"Public Partner"	Nanjing Luhe Water Bureau* (南京市六合區水務局);
"RMB"	Renminbi, the lawful currency of the PRC;
"Sinohydro Bureau 8"	Sinohydro Bureau 8 Co., Ltd. (中國水利水電第八工程局有限
	公 司 ), a company incorporated in the PRC with limited
	liability;
"Stock Exchange"	The Stock Exchange of Hong Kong Limited;
"substantial shareholder"	has the meaning ascribed to it under the Listing Rules;
"YEE"	Yangtze Ecology and Environment Co., Ltd.* (長江生態環保
	集團有限公司), a company incorporated in the PRC with
	limited liability and is a wholly-owned subsidiary of CTG; and
"%"	percentage.

For the purpose of this announcement and for illustrative purpose only, RMB is converted into HK$ at the rate of RMB1: HK$0.8949. No representation is made that any amounts in RMB has been or could be converted at the above rates or at any other rates.

By order of the Board

Beijing Enterprises Water Group Limited

Li Yongcheng

Chairman

Hong Kong, 18 August 2020

As at the date of this announcement, the Board comprises nine executive directors, namely Mr. Li Yongcheng (Chairman), Mr. Jiang Xinhao, Mr. Zhou Min (Chief Executive Officer), Mr. Li Haifeng, Mr. Zhang Tiefu, Mr. Ke Jian, Ms. Sha Ning, Mr. Tung Woon Cheung Eric and Mr. Li Li, and five independent non-executive directors, namely Mr. Shea Chun Lok Quadrant, Mr. Zhang Gaobo, Mr. Guo Rui, Mr. Wang Kaijun and Dr. Lee Man Chun Raymond.

* For identification purpose only

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