China Boqi Environmental : CONTINUING CONNECTED TRANSACTIONS AND PROPOSED ADOPTION OF THE SHARE OPTION SCH

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China Boqi Environmental (Holding) Co., Ltd.

中 國 博 奇 環 保（ 控 股 ）有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2377)

CONTINUING CONNECTED TRANSACTIONS

AND

PROPOSED ADOPTION OF THE SHARE OPTION SCHEME

CONTINUING CONNECTED TRANSACTIONS

The Board hereby announces that, after negotiation between Beijing Boqi, Guangdong Huaxia Electric and Yangxi Electric on arm's length, the parties entered into a supplemental agreement on 30 November 2020, pursuant to which the parties agreed to amend and supplement certain terms in relation to pricing terms for the provision of O&M services and Ancillary Charges in accordance with the market-based pricing mechanism. On the same day, the Board also proposed to renew the annual caps for the continuing connected transactions under the Yangxi Agreements and the 2020 Supplemental Agreement for the three years ending 2023.

Reference is made to the section headed "Connected Transactions" and "Waivers from Compliance with the Listing Rules and Exemption from Compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance" in the Prospectus containing details regarding, among other things, continuing connected transactions under the Yangxi Agreements and a waiver from strict compliance with the three-year term requirement for continuing connected transactions under the Yangxi Agreements granted by the Stock Exchange.

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Pursuant to Rule 14A.54 of the Listing Rules, before a material change to terms of agreement for continuing connected transaction, the Company is required to recomply with the requirements under Chapter 14A of the Listing Rules. As the 2020 Supplemental Agreement constitutes a material change to the terms of Yangxi Agreements, the 2020 Supplemental Agreement is subject to the announcement and Independent Shareholders' approval requirements under chapter 14A of the Listing Rules and Gram Capital has been appointed as the independent financial adviser to analyze the term of Yangxi Agreements.

In addition, as the highest applicable percentage ratio in respect of annual caps for the continuing connected transactions under the Yangxi Agreements and the 2020 Supplemental Agreement for the three years ending 2023 is expected to exceed 5%, accordingly the transactions under the Yangxi Agreements and the 2020 Supplemental Agreement with Guangdong Huaxia Electric and Yangxi Electric are subject to the reporting, annual review, announcement and Independent Shareholders' approval requirements under chapter 14A of the Listing Rules.

PROPOSED ADOPTION OF THE SHARE OPTION SCHEME

The Board further announces that, on 30 November 2020, the Board resolved to propose the adoption of the Share Option Scheme to be approved by the Shareholders. The purpose of the Share Option Scheme is to enable the Company to grant Options to Eligible Participants as incentives or rewards for their contribution to the Group.

The Company proposes to seek approval of the Shareholders to adopt the Share Option Scheme at the EGM, the provisions of which will comply with the requirements of Chapter 17 of the Listing Rules.

SHAREHOLDERS' CIRCULAR

A circular containing, among other matters, (i) the 2020 Supplemental Agreement; (ii) the Proposed Annual Caps; (iii) the proposed adoption of the Share Option Scheme and authorising the Board to grant the Options pursuant to the Share Option Scheme and to allot and issue the Shares pursuant to the exercise of the Options; (iv) the letter of recommendation from the Independent Board Committee in respect of the continuing connected transactions under the Yangxi Agreements and the 2020 Supplemental Agreement; (v) the letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders in respect of the continuing connected transactions under the Yangxi Agreements and the 2020 Supplemental Agreement; and (vi) a notice convening the EGM, is expected to be despatched to the Shareholders in due course in accordance with the Listing Rules.

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1. CONTINUING CONNECTED TRANSACTIONS 1. Introduction

Reference is made to the section headed "Connected Transactions" in the Prospectus containing details regarding, among other things, continuing connected transactions under the Yangxi Agreements with Guangdong Huaxia Electric and Yangxi Electric.

Major terms of the Yangxi Agreements are set out below:

Parties:	(1) Beijing Boqi (operator)
	(2) Guangdong Huaxia Electric and Yangxi Electric (site
	owner)
Subject:	the provision of operation, daily maintenance and repair
	services in respect of the Yangxi Facilities prior to the
	completion of the acquisition of the Yangxi Facilities
Scope of service:	Beijing Boqi is mainly responsible for the O&M operation in
	relation to the desulfurization and denitrification systems of
	the #1-4 units of Yangxi Electric. Specifically, it acts as an
	operator of the desulfurization and denitrification systems of
	the #1-4 units of Yangxi Electric to provide major services
	such as the operation, maintenance, examination and repair
	and technical improvement; the disposal of waste; the
	replacement of catalysts; the management and maintenance
	of the ancillary equipment of the underground pipe network
	of the desulfurization and denitrification systems, the
	drainage system in the desulfurization and denitrification
	areas, the firefighting system of the desulfurization
	and denitrification systems and the framework of the
	desulfurization and denitrification systems; and the
	waterproof/closed recirculation cooling water/waste water
	and sludge treatment.
Term:	From 1 January 2017 to 31 December 2025
Service fees for the	The service fees under the Yangxi Agreements are calculated
provision of O&M	based on the on-grid power generation multiplied by the
services:	applicable fixed rates which were determined with reference
	to (i) the relevant subsidies with respect to desulfurization
	and denitrification; and (ii) the fees and expenses in
	respect of the O&M services of the desulfurization and
	denitrification facilities.

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Ancillary charges:	Ancillary charges are paid by Beijing Boqi to Yangxi
	Electric, based on the actual operation costs incurred in
	the daily operation of the O&M services, such as water,
	electricity, vapor and pollution tax fees and other relevant
	operational charges.
Payment Obligations:	Yangxi Electric shall pay to Beijing Boqi the service fee
	within 15 days of Yangxi Electric receiving the electricity
	fee from the State Power Grid.
	Beijing Boqi shall pay the ancillary charges to Yangxi
	Electric before 10th day of each month.

Further Details of the Yangxi Agreements are set out in the Prospectus on pages 222 to 231.

The chart below sets forth the flow chart of the current arrangement among Beijing Boqi, Guangdong Huaxia Yangxi power plant and the State Power Grid:

						On-grid power
		O&M services			generation
	Guangdong
Beijing Boqi				Huaxia Yangxi				State Power
(operator)		Service fees	power plant				Grid
		(project site)
		Ancillary charges		Electricity fees
				with subsidies

2. Proposed Alteration to Terms of Yangxi Agreements

Following the issue of The Implementation Plan for Deepening the Reform of the

Feed-inTariff Mechanism for Coal-firedPower Generation by Guangdong Development and Reform Commission (廣東省發展改革委關於深化燃煤發電上網電價形成機制改 革的實施方案) with effect from 1 January 2020, benchmark on-gridtariffs of coal-firedpower generation has been replaced by a market-basedpricing mechanism which includes a "benchmark on-gridtariff" that sets at the same level as the benchmark on-gridtariff it replaces, and a "float" so that it can deviate up to 10% higher or 15% lower. The above-mentionedpricing mechanism had certain impact on overall operation results of Yangxi Electric. Beijing Boqi, as the service provider of Yangxi Electric, and Yangxi Electric proposed to re-adjustthe calculation method of the O&M services rate under the Yangxi Agreements simultaneously with the above marked-basedpricing mechanism after arm's length negotiation for commercial transactions.

After negotiation between Beijing Boqi, Guangdong Huaxia Electric and Yangxi Electric on arm's length, the parties entered into a supplemental agreement on 30 November 2020 pursuant to which the parties agreed to amend and supplement certain terms in relation to the pricing terms for the provision of O&M services and the Ancillary Charges in accordance with the market-based pricing mechanism (the "2020 Supplemental Agreement"). Major terms of the 2020 Supplemental Agreement are set out below:

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