China Energy Engineering : DISCLOSEABLE TRANSACTION ESTABLISHMENT OF PROJECT COMPANY

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CHINA ENERGY ENGINEERING CORPORATION LIMITED*

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

(Stock Code: 3996)

DISCLOSEABLE TRANSACTION

ESTABLISHMENT OF PROJECT COMPANY

The board of directors (the "Board") of China Energy Engineering Corporation Limited (the "Company") is pleased to announce that, on 26 April 2021, China Gezhouba Group Stock Company Limited (中國葛洲霸集團股份有限公司) ("CGGC") and China Energy Engineering Group Guangdong Electric Power Design Institute Co., Ltd.（* 中國能源建設集團廣東省電力設計研究院 有限公司）("Guangdong Institute"), the subsidiaries of the Company, entered into the Project Cooperation Contract with Central-South Architectural Design Institute Co., Ltd.* (中南建築設計院 股份有限公司) ("Central-SouthArchitectural Design Institute") and Baoding Guokong Group Company Limited* (保定市國控集團有限責任公司) ("Baoding Guokong Group") in relation to 11 urban village transformation projects in Lianchi District, Baoding (the "Project"). Meanwhile, CGGC and Baoding Guokong Group entered into the Shareholders' Agreement and the Supplemental Agreement to the Shareholders' Agreement, both of which were signed and became effective at the same time. The principal terms are set out below:

1. PROJECT COOPERATION CONTRACT

Parties

Party A: Baoding Guokong Group

Party B: CGGC ("Party B1")

Guangdong Institute

Central-South Architectural Design Institute

• For identification purpose only

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To the best of the directors' knowledge, information and belief of the Company having made all reasonable enquiries, other parties and their ultimate beneficial owners, in addition to CGGC and Guangdong Institute, are third parties independent of the Company and its connected persons.

Content of Cooperation

In order to promote regional economic development, improve the living conditions of the people, improve the quality of urban development, and increase the intensity of urban renewal and transformation, Baoding Municipal People's Government authorized Baoding Guokong Group as the implementing entity of the Project. Baoding Guokong Group introduced investment partners to jointly fund and set up a project company to be responsible for the investment, financing, construction, operation and maintenance of 11 urban village transformation projects in Lianchi District, Baoding.

Content of Construction

The content of construction mainly includes land acquisition, demolition and compensation services, resettlement housing and supporting infrastructure construction involved in 11 urban village transformation projects in Lianchi District. The final actual construction content is subject to the approved feasibility study report and design documents. The project shall be surveyed, designed and constructed by consortium members with corresponding qualifications of Party B.

Term of Cooperation

The cooperation period of the Project is 10 years, the construction period of resettlement houses is 18 months from the date of construction, the construction period of other construction projects is 3 years, and the operation period is tentatively scheduled for 7 years (the specific cooperation period will be adjusted according to the progress of the Project).

Establishment of Project Company

Party A and Party B1 will jointly fund the establishment of the project company within 30 days after the Project Cooperation Contract becomes effective. The project company is a legal person legally established by both parties for the implementation of investment, financing, construction and operation projects, and is responsible for investment, financing, construction, operation and maintenance of all the work content of the Project.

Before the establishment of the project company, both parties A and B entered into the Project Cooperation Contract, and performed their rights and obligations in accordance with the Project Cooperation Contract. Both parties of the Project Cooperation Contract agree that the rights and

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obligations of Party B under the Project Cooperation Contract will be transferred to the project company, except for the rights and obligations specifically exclusive to Party A and Party B in the Project Cooperation Contract.

The Project will be carried out in phases, and upon the written approval of Party A, Party B may introduce qualified third-party investors.

During the cooperation period, the project company shall not reduce its registered capital. Due to changes in the total investment, the increase in registered capital (shareholding proportion remains unchanged), if necessary, requires the approval of both parties and the implementation of relevant legal procedures.

Structure of Project Company

Party A and Party B1 jointly set up the project company. The registered capital of the project company is RMB100 million, 5% of which is contributed by Party A, i.e., RMB5 million, and 95% of which is contributed by Party B, i.e., RMB95 million. The contributions of both parties are paid up in such proportion on time and in accordance with the actual implementation schedule requirements on site. The capital contribution arrangement of the project company is supplemented by the Supplemental Agreement to the Shareholders' Agreement, as detailed below.

Restrictions on Equity Transfer

1. During the cooperation period, the equity structure of Party A in the project company shall not be changed without the written approval of Baoding Municipal People's Government.
2. During the construction period, equity structure of Party B in the project company shall not be changed without the written approval of Party A, except for equity changes or withdrawals arising from the compliant industry funds introduced by Party B for project financing.

Governance Structure of Project Company

1. The project company adopts the modern corporate governance structure, and the shareholders' general meeting, the board of directors and other relevant institutions will be established in accordance with the Company Law of the People's Republic of China (the "Company Law") to ensure smooth operation of the project company.
2. As the highest authority of the project company, the shareholders' general meeting shall exercise its functions and powers in accordance with the Company Law and the articles of association. The shareholders' general meeting is the highest authority of the project company.

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1. The board of directors will be established in the project company. The specific composition of the board of directors shall be determined according to the Company Law and the articles of association.
2. The project company has 1 chief financial officer, delegated by Party B.
3. A supervisory committee will be established in the project company. The specific composition of the supervisory committee shall be determined according to the Company Law and the articles of association.

Total Investment of the Project

The preparation of estimates and budget of Project investment follows the current national and industry regulations. The total investment estimate of the Project is RMB23.59 billion (the final estimate is subject to the feasibility study report of sub-projects approved by the government).

The project capital accounts for approximately 30% of the total estimated investment of the Project in the implementation plan, with the upper limit of RMB7 billion; the financing amount is part of the total investment after deducting the capital.

The investment amount of the Project is subject to the audit results after the completion acceptance of the Project and audited by the third-party organization.

Financing Plan

The project capital accounts for approximately 30% of the total estimated investment of the Project in the implementation plan, with the upper limit of RMB7 billion. Both parties shall pay the capital of subprojects in installments, in the same proportion and on timely and fully basis according to the implementation schedule requirements of the Project proposed by Party A, and shall strictly implement the Project Cooperation Contract, the articles of association and other provisions, and at the same time meet the requirements of financial institutions for the payment of project capital. The shareholders shall pay the capital of sub-projects in currency in proportion to the equity.

The financing amount of the Project is part of the total investment after deducting the capital. Party A actively assists the project company to raise funds through various legal financing channels and handle relevant procedures, and is responsible for providing financial institutions with relevant materials that need to be provided or issued by Party A or the government in the financing plan. The project company is the implementing entity of project financing, and each financing is in place in consideration of the progress of the Project. The project company should give priority to financial institutions with low financing cost and long term when financing.

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Subject to the approval of Party A, the project company can pledge externally the income rights of the Project for financing. Otherwise, the project company (including its shareholders) shall not externally mortgage or pledge the assets and land use rights of the Project for any purpose.

Default of Investment and Financing and Liabilities of Defaults

Party A and Party B have made sufficient preparations for the performance of the Project Cooperation Contract, and proactively assisted the project company to carry out financing according to the construction progress of the Project.

The registered capital of the project company shall be contributed by Party A and Party B according to the actual on-site progress of the Project. Party A and Party B shall assist the project company in financing to ensure that the source of funds is legal, and the project company shall have complete control over and right of using the funds.

It shall be deemed as Party A's default provided that Party A fails to pay the project company's service fee (representing the total investment and investment income of the Project) as agreed due to the adjustment of policy and budget mechanism.

Exit Mechanism

Exit upon Expiration of Cooperation Period

After the expiration of the cooperation period of the Project, Party B shall hand over the Project to Party A or designated institution by the government for nil consideration.

Exit at Early Termination

1. If the Project is terminated in advance due to the governmental party's default and policy adjustment and other reasons arising from the governmental party, Party A shall bear the obligation of share repurchase, settle the total investment and investment income of the Project that Party B has already incurred, and make appropriate compensation to the project company.
2. If Party B fails to carry out the project construction in accordance with the Project Cooperation Contract, the construction period is seriously delayed due to major construction accidents, and it has not been performed after Party A has procured, or there occurs major safety and quality liability accidents, resulted in impossibility of performance of the Project Cooperation Contract, Party A shall have the right to terminate the Project Cooperation Contract.

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1. Both parties agree to terminate the cooperation of the Project in advance or the status of force majeure event lasts or accumulatively lasts 6 months. Either party of the government or the project company may propose to terminate the Project in advance. Both parties shall agree on the termination of cooperation separately.
2. Other early termination circumstances as stipulated in the Project Cooperation Contract.

Exit Mode

After the expiration or early termination of the Project, the Project shall be handed over in the way of equity transfer, and the cooperation between Party A and Party B has come to a successful conclusion.

Equity transfer represents that after the expiration of the cooperation period or the conclusion of the construction period of the Project, with the consent of Party A and the shareholders' general meeting, a third party could purchase its equity interest in accordance with the legal procedures for the disposal of state-owned assets, and other shareholders have the pre-emptive right.

Defaults and Compensation

Provided that the service fee cannot be paid in full and on time as agreed, if the payment is delayed for more than 20 working days, liquidated damages shall be paid at the rate of 0.05% per day. Meanwhile, provided that the service fee cannot be paid for more than half a year, Party B shall have the right to withdraw from the Project, and Party A shall purchase the equity interest of Party B and pay Party B the total investment and investment income occurred by Party B for the Project.

If the Project is unable to be commenced on or before the commencement date specified in the Project Cooperation Contract due to reasons of Party B, and the delay exceeds 20 working days, Party B shall pay Party A liquidated damages of RMB50,000 per day for each overdue day, and the delay shall not exceed 6 months. If exceeding more than 6 months, Party A shall have the right to terminate the contract, and Party B shall make certain compensation to Party A.

If either party suffers or may suffer losses due to the other party's default, it shall take reasonable measures to prevent further losses or reduce losses. If it fails to take such measures, the defaulting party may claim to deduct the amount of losses that could be reduced from the compensation amount. The non-defaulting party shall be entitled to receive from the other party any expenses incurred in attempting to mitigate and reduce the loss.

If part of the loss is caused by the act or omission of the non-defaulting party, or part of the loss should be borne by the non-defaulting party, such part of the loss shall be deducted from the amount of compensation.

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2. SHAREHOLDERS' AGREEMENT AND SUPPLEMENTAL AGREEMENT TO THE SHAREHOLDERS' AGREEMENT

Parties

Party A: Baoding Guokong Group

Party B: CGGC

Establishment of Project Company

Both parties have registered and established the project company in Baoding City, Hebei Province. The date when the registration authority issues the business license to the project company is the date of establishment of the project company.

Organizational Form of Project Company

The organizational form of the project company is limited liability company. The project company shall assume the debts and responsibilities of the project company to the extent of all its own assets. From the date of the establishment of the project company, all shareholders shall be responsible for the project company to the extent of their respective capital contributions.

Business Scope

Land acquisition, demolition and land preparation services; building demolition services (excluding blasting); real estate development and operation; construction project management services; resettlement housing construction (including construction of neighbourhood centre and elevator advertising space, etc.); road infrastructure construction (including construction of smart parking, advertising space and charging pile, etc.); construction of urban infrastructure, public service facilities, water conservancy and water affairs facilities; urban greening services; engineering and technical consulting services; river treatment; property services; parking lot services; conference services; exhibition and displaying; self-owned housing rental services; operating facilities operation (including but not limited to neighbourhood centre leasing, advertising fees, smart parking, charging pile leasing, property service fees, etc.). (for items that are subject to approval according to law, business activities can only be carried out after being approved by competent authorities) (subject to the approval of the registration authority)

Operation Period and Extension

Except for the early termination or extension of the project contract or this agreement, the operation period of the project company shall be 11 years from the date of obtaining the business license.

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Registered Capital and Shareholding Percentage

The registered capital of the project company is RMB100 million.

Party A agrees that Party B shall introduce a third-party financial investor after the establishment of the project company but before the paid-up contribution by shareholders, and Party B shall transfer 47.5% equity interests of the project company held by it to the financial investor.

The registered capital of the project company is as follows:

1. The registered capital contributed by Party A is RMB5 million, representing five percent (5%) of the total registered capital of the project company, and the registered capital shall be in place by 31 May 2021.
2. The registered capital contributed by Party B is RMB47.5 million, representing forty- seven point five percent (47.5%) of the total registered capital of the project company. The registered capital shall be in place by 31 May 2021.
3. The registered capital contributed by the third-party financial investor who is introduced by Party B is RMB47.5 million, representing forty-seven point five percent (47.5%) of the total registered capital of the project company. The registered capital shall be further put in place according to the fund raising of the third-party financial investor.

Project Capital

The project capital is RMB7 billion, and the capital of the difference between the registered capital and the project capital shall be contributed by Party A, Party B and the third-party financial investors introduced by Party B in accordance with their respective proportion of shareholding.

Party A and Party B shall gradually put in place the capital according to the requirement of implementation schedule of the Project proposed by Party A, and the third-party financial investors introduced by Party B shall put in place capital according to its actual fund raising condition. Before the capital of the third-party financial investor introduced by Party B is in place, if there is a gap in the construction funds of the project company, Party B shall provide temporary financial support through shareholder loans and other feasible ways with the amount not exceed the total capital contribution of the third-party financial investor introduced by Party B and replace and return of which after the capital contribution of the third-party financial investor is in place. Then the Company will further perform the information disclosure obligations (if applicable) under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). Party B shall not be liable for the contribution of the amount of investment of the third-party financial investor.

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The details of all shareholders' contribution are as follows:

			(Unit: RMB0'000)
			Project
			capital
			contribution
	Percentage	Registered	(including
	of	capital	registered	Contribution
Name of shareholder	Shareholding	contribution	capital)	method
Baoding Guokong Group	5%	500	35,000	Monetary
CGGC	47.5%	4,750	332,500	Monetary
Third-party financial investor	47.5%	4,750	332,500	Monetary

As of the date of this announcement, the third-party financial investors have not yet been determined, and the Company will make further announcements on the progress of this Project in due course. If the third-party financial investor is a connected person of the Company, the Company will comply with the requirements of Chapter 14A of the Listing Rules, including the requirements for announcements, reporting and requirements for independent shareholders' approval (if applicable).

The capital contribution of the project company was determined by the shareholders after fair negotiation in accordance with the requirements of the project bidding documents on the amount of registered capital contribution and based on the shareholders' rights and interests in the project company.

Methods of Capital Contributions

All shareholders shall make capital contributions in currency, and each shareholder shall commit to pay the registered capital in accordance with applicable laws and regulations of the authorities and the provisions of the Agreement.

Composition of the Board of Shareholders

The project company shall set up the Board of Shareholders consisting of all shareholders. The Board of Shareholders is the highest authority of the project company.

Composition of the Board of Directors

The project company shall set up the Board of Directors consisting of five directors, one of which shall be recommended by Party A, three shall be recommended by Party B, and one shall be employee director.

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Composition of the Board of Supervisors

The project company shall set up the Board of Supervisors consisting of 3 supervisors, one of which shall be appointed by Baoding Guokong Group; one shall be appointed by the bid- winning social capital party; the employees of the project company shall elect one employee representative supervisor. The Board of Supervisors has a chairman who is elected by more than half of all supervisors. The personnel serving as supervisor positions must comply with the provisions of the Company Law, and directors and senior management shall not concurrently serve as supervisors.

Management Authority

The project company implements the general manager responsibility system under the leadership of the Board of Directors, and the general manager is responsible for the daily operation and management of the project company.

Senior Management

The project company shall have one general manager appointed by the bid-winning social capital party (a consortium composed of CGGC as the leader) and several deputy general managers.

The project company shall have one chief financial officer appointed by the bid-winning social capital party (a consortium composed of CGGC as the leader).

Profit Distribution

The remaining after-tax profits after making up for the loss and withdrawing the provident fund can be distributed to each shareholder according to the proportion of their paid-in capital.

Circumstances of Termination and Dissolution

The project company can be dissolved in any of the following circumstances:

1. The business period stipulated in the company's articles of association has expired;
2. Any party to the agreement fails to perform its obligations stipulated in the project company's shareholder agreement and articles of association, resulting in the project company's inability to continue operations;
3. The project contract is terminated early;
4. The Board of Shareholders resolves to dissolve the company;

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1. The project company needs to be dissolved due to merger or division;
2. The project company has its business license been revoked, or it has been ordered to close down or revoked according to law;
3. The People's Court dissolves the project company in accordance with the law.

Shareholders holding more than 10% of all voting rights of the project company may request the People's Court to dissolve the project company if it encounters serious difficulties in operation and management, and its continued existence will cause material losses to the shareholders' interests, which cannot be resolved through other means.

Liquidation

If the project company is dissolved in accordance with the provisions of the Shareholders Agreement, it shall establish a liquidation team and start liquidation within 15 days from the date when the cause of dissolution appears.

The remaining assets of the project company, after the payment of liquidation expenses, employee salaries, social insurance expenses and statutory compensation, taxes and debts, can be distributed to shareholders in proportion to their capital contribution.

1. REASONS FOR AND BENEFITS OF THE ESTABLISHMENT OF THE PROJECT COMPANY
   Hebei Baoding is the strategic development area of the Company. Participating in the Project will help the Company to develop the Hebei market, lay the foundation for further development of the regional markets in Xiongan New Area, Beijing-Tianjin-Hebei and northern China, and achieve rolling development. It will also help the Company accumulate the performance of participating in the comprehensive development of urban areas and lay the foundation for further market development. The Project is a regional development project with strong strategy, large volume, combined sectors, and obvious synergy benefits. The cooperation model has strong reproducibility, which is in line with the strategic development direction of the Company.
   The directors of the Company believe that the establishment of the project company is carried out on normal commercial terms, which is fair and reasonable and in the interests of the Company and its shareholders as a whole.
2. IMPLICATIONS OF THE LISTING RULES
   As the applicable percentage rate of transactions under the Project Cooperation Contract, the Shareholders' Agreement and the Supplemental Agreement to the Shareholders' Agreement, exceeds 5% but is less than 25%, in accordance with the provisions of Chapter 14 of the Listing

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Rules, the relevant transaction constitutes a discloseable transaction of the Company and is subject to the notice and announcement requirements under Chapter 14 of the Listing Rules, but is exempt from the requirements for shareholders' approval.

5. GENERAL INFORMATION

Information of the Company

The Company is a large comprehensive enterprise that provides overall solutions and full industry chain services to industries such as energy and power, infrastructure and real estate in China as well as over the world. Its main businesses cover energy and power, water conservancy and supply, railway and highway, port and sea-routes, civil engineering, municipal transit, ecological environment protection, cement and civil explosives, etc.

Information of CGGC

CGGC is a joint stock limited company established in the PRC on 21 May 1997, its shares are listed on the Shanghai Stock Exchange (Stock Code: 600068), and it is a subsidiary of the Company in which the Company indirectly holds its approximately 42.84% equity interests. Its business scope covers engineering and construction, industrial manufacturing, investment and operation, and comprehensive services, etc. Its ultimate beneficial owner is the State-owned Assets Supervision and Administration Commission of the State Council (the "SASAC").

Information of Guangdong Institute

Guangdong Institute is a wholly-owned subsidiary of the Company. It was established in 1958. It is an international engineering company with comprehensive grade A qualifications in national engineering design. It mainly engages in the four core businesses of consulting and planning, survey and design, general engineering contracting, and investment and operation. It provides customers with one-stop integrated solutions and full life cycle management services in the fields of power, nuclear industry, construction, network communications, municipal transportation, water conservancy, environmental protection, marine and other energy and infrastructure construction. Its ultimate beneficial owner is the SASAC.

Information of Central-South Architectural Design Institute

Founded in 1952, the company is one of the first six comprehensive architectural design institutes established in China, and is one of the "Top 100 Enterprises in the National Survey and Design Industry" and "Top 100 Contemporary Chinese Architectural Design Institutes". Central-South Architectural Design Institute takes architecture and planning design as the core, and strives to provide customers with full-process technology and management services for construction projects. It provides special and full-process engineering technology and management services, including special design and consulting for architectural design, urban planning, municipal engineering and various engineering, BIM design and consulting, green

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technology design and consulting, engineering survey and geotechnical engineering, engineering consulting and project planning, project management and project supervision, integration of special design and construction, and general project contracting, etc. Central-Southern China Engineering Consulting and Design Group Company Limited* (中南工程諮詢設計集團有限公 司) holds approximately 78.73% of the shares of Central-South Architectural Design Institute. Other shareholders of Central-South Architectural Design Institute are certain natural persons, and the ultimate beneficial owner of Central-South Architectural Design Institute is the State- owned Assets Supervision and Administration Commission of the People's Government of Hubei Province.

Information of Baoding Guokong Group

It is the implementing enterprise of the Project. It is 100% owned by Finance Bureau of Baoding municipality. Its business scope includes investment and assets management, project investment and development, property development and operation, housing construction, civil engineering construction, municipal engineering construction, railway and road transportation, water pollution control, solid waste treatment, environmental inspection and management; land development and land consolidation services. As of September 2020, its total assets amounted to approximately RMB22 billion and the debt-to-asset ratio was 52.27%. Its long-term credit rating is AA+ with stable rating outlook. Its ultimate beneficial owner is Finance Bureau of Baoding municipality.

By order of the Board

CHINA ENERGY ENGINEERING CORPORATION LIMITED*

Song Hailiang

Chairman

Beijing, the PRC

26 April 2021

As at the date of this announcement, the executive directors of the Company are Mr. Song Hailiang, Mr. Sun Hongshui and Mr. Ma Mingwei; the non-executive directors are Mr. Li Shulei, Mr. Liu Xueshi and Mr. Si Xinbo; and the independent non-executive directors are Mr. Zhao Lixin, Mr. Cheng Niangao and Dr. Ngai Wai Fung.

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