Binhai Investment : Announcements and Notices - MAJOR TRANSACTION IN RELATION TO HEAT SUPPLY CONSTRUCTION PROJECT IN TIANJIN FUTURE SCIENCE AND TECHNOLOGY CITY BEIJING-TIANJIN COOPERATION DEMONSTRATION ZONE

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.

(Incorporated in Bermuda with limited liability)

(Stock Code: 2886)

MAJOR TRANSACTION

IN RELATION TO HEAT SUPPLY CONSTRUCTION PROJECT IN

TIANJIN FUTURE SCIENCE AND TECHNOLOGY CITY

BEIJING-TIANJIN COOPERATION DEMONSTRATION ZONE

THE HEAT SUPPLY CONSTRUCTION AGREEMENT

On 30 October 2019, the Project Company (a non wholly-owned subsidiary of the Company) and Capital Urbanization (which is responsible for the organization of the development and construction of the Demonstration Zone) entered into the Heat Supply Construction Agreement. Pursuant to the Heat Supply Construction Agreement, the Project Company has agreed to carry out the overall investment, construction, operation and maintenance of the supporting facilities related to heat supply in the Demonstration Zone to meet the needs of customers for safe, stable and comfortable heat supply in the Demonstration Zone at the Consideration of RMB843,440,000.

LISTING RULES IMPLICATIONS

As one of the applicable percentage ratios calculated in accordance with Rule 14.07 of the Listing Rules in respect of the Transaction exceed(s) 25% but less than 75%, the Transaction constitutes a major transaction of the Company and is therefore subject to reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

No Shareholder would be required to abstain from voting if the Company were to convene a general meeting for approval of the Heat Supply Construction Agreement and the Transaction. The Company is in the course of obtaining from Teda HK, being the controlling Shareholder holding 706,818,659 shares (representing approximately 60.19% of the total number of issued Shares as at the date of this announcement) its written approval for the Heat Supply Construction Agreement and the Transaction. Upon the issue by TEDA HK of such written approval, such written approval will be accepted in lieu of holding a general meeting of the Shareholders pursuant to Rule 14.44 of the Listing Rules.

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A circular containing, among other things, (i) further details in relation to the Heat Supply Construction Agreement and the Transaction; and (ii) other information as required under the Listing Rules will be despatched to the Shareholders. As it is expected that additional time will be required to prepare the relevant information to be included in the circular, the Company will apply to the Stock Exchange for an extension of time for dispatch of the circular by no later than 20 December 2019.

INTRODUCTION

Capital Urbanization is the wholly-owned subsidiary of 北京首都創業集團有限公司 (Beijing Capital Group Company Limited*), a large PRC state-owned enterprise principally engaged in services in relation to urban investment, construction and operation. Capital Urbanization is responsible for the organization of the development and construction of the Demonstration Zone. The Demonstration Zone is a synergistic development of Beijing, Tianjin and Hebei Province of the PRC, which will serve as an important hub for the transferring of industrial functions of the Beijing capital city and a pilot demonstration area for the cooperation and joint development of Beijing and Tianjin. The total planned area of the Demonstration Zone is approximately 38.07 square kilometers.

THE HEAT SUPPLY CONSTRUCTION AGREEMENT

On 30 October 2019, the Project Company (a non wholly-owned subsidiary of the Company) and Capital Urbanization entered into the Heat Supply Construction Agreement, pursuant to which the Project Company agreed to carry out the overall investment, construction, operation and maintenance of the supporting facilities related to heat supply in the Demonstration Zone to meet the needs of customers for safe, stable and comfortable heat supply in the Demonstration Zone at the Consideration of RMB843,440,000.

Date

30 October 2019

Parties

1. Project Company (a non wholly-owned subsidiary of the Company)
2. Capital Urbanization

To the best of the Directors' knowledge, information and belief having made all reasonable enquiry, Capital Urbanization and its ultimate beneficial owner(s) are third parties independent of the Company and its connected persons.

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Heat Supply Construction

Pursuant to the Heat Supply Construction Agreement, the Project Company shall be responsible for the investment, construction and operation of the heat supply supporting facilities such as boiler room, main heating pipelines and heat stations (the "Heat Supply Construction") in the Demonstration Zone according to the overall planning, specific heat supply planning, heat supply detailed planning and urban pipelines network comprehensive planning of the Demonstration Zone. The details of the Heat Supply Construction are set out below:

1. the scope of the Heat Supply Construction includes 31 boilers, 93 boiling facilities, 140 heat stations, main heating pipeline network (including secondary heating pipelines extending 1 metre from the heat stations), heat dispatching centre, intellectual control system, etc.;
2. the construction of heat sources in the boilers includes all works in relation to the construction work of boilers, the supply and installation of facilities, the main heating pipeline network connecting the boilers and the heat stations, the construction works of municipal roads, greening and municipal pipe network facilities within the area of the boilers and the connection with the main urban pipeline beyond such boundary, etc.; and
3. the supply and installation of heat station facilities, power distribution and control system, and the installation of secondary heating pipelines in the 1-metre area surrounding the heat stations.

Capital Urbanization shall be responsible for collecting the construction fees of the Heat Supply Construction from the development and construction units in the Demonstration Zone, and will transfer and pay the fees to the Project Company on a stage by stage basis according to the construction planning. The ownership of the equipment and facilities constructed under the Heat Supply Construction shall belong to the Project Company.

Consideration and basis

The Consideration for the Transaction under the Heat Supply Construction Agreement is RMB843,440,000, subject to the adjustment mechanism as set out in the paragraph headed "Adjustment to the Consideration" below. On the basis of the Heat Supply Construction Agreement, Capital Urbanization and the Project Company shall enter into specific implementation contracts according to specific circumstances of the Heat Supply Construction, and the Consideration shall be paid by Capital Urbanization to the Project Company in installments according to the progress of the specific implementation contracts in the following manner:

1. within 60 days after the completion and acceptance inspection of each of the boiler room, supporting heat station, heat dispatching centre, boiler room fire pumping station etc., Capital Urbanization shall pay the corresponding construction fees according to the actual amount of construction in different development cycles; and

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1. the heating pipeline shall be constructed in phases in conjunction with the road works, and after completion and acceptance inspection, Capital Urbanization shall pay the corresponding construction fees within 60 days according to the completed project quantity confirmed by both parties.

The Consideration was determined based on assessment of the construction fees, other construction costs, reserve fees, as well as the policies and market risks to be borne by the Project Company in relation to the Transaction.

Adjustment to the Consideration

The Heat Supply Construction is intended to span over 10 to 15 years. Due to the long construction period of the Heat Supply Construction and fluctuation risk of the market price, the Project Company and Capital Urbanization agreed to the following price adjustment mechanism:

1. the Consideration is set with reference to the cost index of the "Tianjian Construction Project Budget Base Price"《天津市建築工程預算基價》(the "Index") promulgated in 2016 and such index is updated every four years;
2. no adjustment to the Consideration will be made if changes to the Index amounts to an increase of not more than 10% or a decrease of not more than 5%;
3. adjustment to the Consideration will be made if changes to the Index amounts to an increase of more than 10% or a decrease of more than 5% and the portion beyond such threshold will be adjusted accordingly;

The Project Company and Capital Urbanization have estimated that:-

1. for phases 1 and 2 of the Heat Supply Construction which will be completed by 2025, Capital Urbanization will pay the corresponding construction fees on the basis under the Heat Supply Construction Agreement and no adjustment will be made;
2. for phase 3 of the Heat Supply Construction which will be carried out after 2025, the maximum amount of increase adjustment to the Consideration will be approximately RMB32,660,000.

Rights and obligations of the parties

1. Capital Urbanization shall have the following rights and obligations:
2. 1. to provide the Project Company with planning approval documents and relevant materials of the Demonstration Zone, and assist the Project Company to be listed on the enterprise list of heat supply supporting facilities in Tianjin such that it can benefit from the government subsidy on gas heating;

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1. 1. prior to the commencement of the Heat Supply Construction, to assist the Project Company in resolving and handling any relevant government procedures in relation to planning, territory, transport, etc. to ensure that the construction site has the necessary conditions for the commencement of construction;
   2. i) to provide the Project Company with the underground pipeline network graph, buildings conditions on the ground in the Demonstration Zone, etc. and ii) to coordinate the planning and construction progress of all the works under and on the ground in the Demonstration Zone to ensure the smooth commencement of all works in an orderly manner; and
   3. during the development and construction of the Demonstration Zone, if there is a major adjustment on the specific heat supply planning in the Demonstration Zone due to factors such as the promulgation and adjustment of relevant policies of the PRC or Tianjin, new technology or implementation of new standards and new regulations, the Project Company and Capital Urbanization may negotiate for the continuation of cooperation on the same conditions. If the negotiation fails, Capital Urbanization has the right to terminate the Heat Supply Construction Agreement and choose another partner to be responsible for the investment, development and operation of the heat supply facilities in the incomplete areas. Capital Urbanization and the Project Company shall settle payment pursuant to the jointly confirmed amount of construction works actually completed by the Project Company, and the Project Company shall continue to enjoy the rights to operate and maintain the heat supply facilities in the completed area, in order to ensure the quality of heat supply is not affected.
2. The Project Company shall have the following rights and obligations:
3. 1. i) to commence operation pursuant to the relevant provisions and implementation rules of the "Tianjin Heat Management Regulations"（天津市供熱管理條例）and strictly implement relevant national technical standards and norms in the design, construction and operation of heat supply facilities and ii) actively adopt domestic and foreign advanced technologies to improve the quality of heat supply and service;
   2. i) commence the design of the Heat Supply Construction pursuant to the planning of the Demonstration Zone and the development construction plan of Capital Urbanization; ii) coordinate with the relevant government authorities to timely organize construction works to be done at the site and conduct acceptance inspection of the Heat Supply Construction;
   3. 1. be responsible for the quality of construction and iv) monitor the progress and implementation of the plan and be accountable to Capital Urbanization;
   4. be responsible for all the works such as the collection of payment for and maintenance of the daily heat supply, and also the maintenance, operation and emergency repair work of the heat supply facilities relevant to the municipal roads in the Demonstration Zone;

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