Guangdong Investment : Continuing Connected Transaction on the Supply of Electricity

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 0270) CONTINUING CONNECTED TRANSACTION ON THE SUPPLY OF ELECTRICITY

On 2 November 2017, Zhongshan Energy, a subsidiary of the Company, entered into the Electricity Transaction Agreement with Zhongyue Tinplate, a wholly-owned subsidiary of Guangnan, pursuant to which and subject to the entering into of the Tripartite Agreement, Zhongshan Energy agreed to supply, and Zhongyue Tinplate agreed to purchase, electricity through the power grid operated by Guangdong Power Grid on a continuing basis for the period commencing on 1 January 2018 to 31 December 2018.

GDH is holding approximately 56.49% and 59.19% of the issued shares of the Company and Guangnan, respectively. By virtue of the above shareholding interests, Guangnan (being a subsidiary and thus an associate of GDH as defined in the Listing Rules) is a connected person of the Company. Therefore, the Transaction constitutes a continuing connected transaction of the Company under the Listing Rules.

Based on the estimated revenue to be received by the Group under the Transaction, the Annual Cap for the financial year ending 31 December 2018 is set at RMB32,000,000 (equivalent to approximately HK$37,590,400). Since the highest applicable percentage ratio for the purpose of Chapter 14A of the Listing Rules in respect of the Annual Cap exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement requirements, but is exempt from the independent shareholders' approval requirement under Rule 14A.76(2) of the Listing Rules.

The Company will comply with the annual review requirements under Rules 14A.55 to 14A.57 of the Listing Rules in relation to the Transaction.

THE ELECTRICITY TRANSACTION AGREEMENT

On 2 November 2017, Zhongshan Energy, a subsidiary of the Company, entered into the Electricity Transaction Agreement with Zhongyue Tinplate, a wholly-owned subsidiary of Guangnan, pursuant to which and subject to the entering into of the Tripartite Agreement, Zhongshan Energy agreed to supply, and Zhongyue Tinplate agreed to purchase, electricity through the power grid operated by Guangdong Power Grid on a continuing basis on the following terms:-

Parties: Zhongshan Energy Zhongyue Tinplate Term: 1 January 2018 to 31 December 2018 Volume: Not exceeding 76,960,000 kWh and the amount of electricity transacted shall be the actual volume of electricity consumed by Zhongyue Tinplate Unit price: Zhongshan Energy shall supply, and Zhongyue Tinplate shall purchase, electricity at a unit price which is calculated based on the government prescribed tariff at a discount rate of RMB0.06 per kWh (tax inclusive) determined after arm's length negotiation.

The government prescribed tariff on the sale of electricity is determined by the Development and Reform Commission of Guangdong Province, which is subject to adjustment from time to time. The discount rate of RMB0.06 per kWh (tax inclusive) is subject to adjustment at the end of the contract term with reference to

the weighted average of the unified monthly centralized bidding price spread at the Guangdong Power Exchange Market (廣東電力交易市場) in the year 2018.

Payment terms:

The fees for electricity payable by Zhongyue Tinplate shall be settled on a monthly basis and shall be paid to the Group subject to deduction of Power Grid Fee by Guangdong Power Grid. The revenue to be received by the Group under the Transaction shall therefore be subject to deduction of Power Grid Fee by Guangdong Power Grid.

Zhongshan Energy will source electricity from Zhongshan Power, which is also a subsidiary of the Company as well as a holding company of Zhongshan Energy and is principally engaged in the operation of power plants, and if necessary, also from other independent electricity suppliers. The Tripartite Agreement, being an agreement in a prescribed form by the PRC government to be entered into between Zhongshan Energy, Zhongyue Tinplate and Guangdong Power Grid, shall, among others, reflect the terms of the Electricity Transaction Agreement.

BASIS AND REASONS FOR THE TRANSACTION AND THE ANNUAL CAP

The Annual Cap for the revenue to be received by the Group under the Transaction for the period commencing on 1 January 2018 to 31 December 2018 is expected to be RMB32,000,000 (equivalent to approximately HK$37,590,400).

The Annual Cap was determined after arm's length negotiation based on (i) electricity consumption of Zhongyue Tinplate; (ii) the amount of electricity to be transacted between Zhongyue Tinplate and Zhongshan Energy during the term of the Electricity Transaction Agreement; (iii) the estimated applicable unit price of electricity to be supplied under the Electricity Transaction Agreement; and (iv) the estimated amount of Power Grid Fee to be deducted by Guangdong Power Grid under the Transaction.

The Transaction will enable the Group to secure purchase of electricity from large consumption user, which will in turn help enhance our profitability. Further, the Transaction will enable Zhongshan Power to increase the utilization rate of its power plants, which will in turn maximize the plants' turnover and improve the plants' operating efficiency. The terms of the Transaction were negotiated on an arm's length basis between the parties.

In view of the above, the Directors (including the independent non-executive Directors) are of the view that the Electricity Transaction Agreement was entered into, and the Tripartite Agreement will be entered into, in the ordinary and usual course of business of the Group and on normal commercial terms or better, and that the terms of the Transaction are fair and reasonable and are in the interests of the Company and its shareholders as a whole.

Mr. Huang Xiaofeng, Mr. Cai Yong, Mr. Zhang Hui, Ms. Zhao Chunxiao, Mr. Lan Runing and Mr. Li Wai Keung, Directors of the Company, are directors of GDH. All of the abovementioned Directors present at the board meeting of the Company were not counted in the quorum and they did not vote on the relevant Directors' resolutions approving, among others, the entering into of the Electricity Transaction Agreement, the Tripartite Agreement and the Annual Cap. Save as disclosed above, no other Directors have any material interest in the Transaction.

CONNECTED PERSONS

GDH is holding approximately 56.49% and 59.19% of the issued shares of the Company and Guangnan, respectively. By virtue of the above shareholding interests, Guangnan (being a subsidiary and thus an associate of GDH as defined in the Listing Rules) is a connected person of the Company. Therefore, the Transaction constitutes a continuing connected transaction of the Company under the Listing Rules.

LISTING RULES IMPLICATIONS

Based on the estimated revenue to be received by the Group under the Transaction, the Annual Cap for the financial year ending 31 December 2018 is set at RMB32,000,000 (equivalent to approximately HK$37,590,400). Since the highest applicable percentage ratio for the purpose of Chapter 14A of the Listing Rules in respect of the Annual Cap exceeds 0.1% but is less than 5%, the Transaction is subject to the reporting and announcement requirements, but is exempt from the independent shareholders' approval requirement under Rule 14A.76(2) of the Listing Rules.

The Company will comply with the annual review requirements under Rules 14A.55 to 14A.57 of the Listing Rules in relation to the Transaction.

PRINCIPAL BUSINESSES OF THE COMPANY, THE CONNECTED PERSONS AND GUANGDONG POWER GRID

The Group is principally engaged in investment holding, water resources, property holding and investment, hotel ownership and operations, hotel management, department stores operation, and investments in other infrastructure projects.

The principal business of GDH is investment holding. The principal business of Zhongshan Power is power plant operation providing electricity and steam supply. The principal businesses of Zhongshan Energy are power supply and sale and supply of heat energy.

The principal business of Guangnan is investment holding. The subsidiaries of Guangnan are primarily engaged in manufacturing and sales of tinplates and related products, leasing of properties, distribution and sales of fresh and live foodstuffs and food stuffs trading.

The principal business of Zhongyue Tinplate is engaged in the production and sale of tinplate products.

The principal business of Guangdong Power Grid is the construction and operation of power networks within the Guangdong Province (excluding Guangzhou and Shenzhen) in the PRC. To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, Guangdong Power Grid and its ultimate beneficial owners are third parties independent of the Company and its connected persons.

DEFINITIONS

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