Shanghai Electric : VOLUNTARY ANNOUNCEMENT

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SHANGHAI ELECTRIC GROUP COMPANY LIMITED

上海電氣集團股份有限公司

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

(Stock Code: 02727)

VOLUNTARY ANNOUNCEMENT

ANNOUNCEMENT ON MATERIAL ARBITRATION

I. General Information on the Significant Arbitration Application

Recently, Shanghai Electric Group Company Limited (the "Company") filed to the Singapore International Arbitration Centre for arbitration against an Indian company, RELIANCE INFRASTRUCTURE LIMITED (the "Respondent"), requiring its payment for equipment purchased and other relevant payables in the amount of at least USD135,320,728.42. As of the date of this announcement, the Company has received the notice on acceptance from the Singapore International Arbitration Centre.

II. Facts of the Case, Requests and Reasons under the Arbitration

In June 2008, the Company and Reliance Infra Projects (UK) Limited (the "Purchaser") entered into the Equipment Supply and Service Contract with a contracted amount of USD1,311,000,000, pursuant to which, the Company (as the supplier) shall provide major equipment and relevant services to the Sasan 6*660MW Ultra Large Supercritical Coal-fired Power Station Project in India (the "Project"). The Respondent issued the letter of guarantee to the Company for the obligation performance of the Purchaser (including the obligation of the Purchaser's payment in full and on time) under the Equipment Supply and Service Contract. According to the contract, the Purchaser shall issue a final completion certificate and pay the outstanding amount for equipment of the Project to the Company within 3 months after the unit was actually put into use. As of the date of this announcement, despite that the Project has been under commercial operation for nearly five years, the Purchaser has yet issued the final completion certificate, nor did it pay for the equipment purchased and other relevant payables in the amount of at least USD135,320,728.42 in arrears to the Company. Hence, the Company filed an arbitration against the Respondent as prescribed under the contract.

1. Impact of the Arbitration on the Profit of the Company for the Current or Subsequent Periods

As at 30 September 2019, the Company has accounted the above project receivables as accounts receivable and contract assets, respectively, of which the balance of the accounts receivable was USD25,202,848.78 and the Company has made total provisions for bad debts

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in the amount equivalent to RMB177,170,986.48 adopting the aging method. The balance of contract assets was USD110,117,879.64, of which the corresponding guarantee amount of the project for which the final completion certificate has yet to be issued by the Purchaser was USD97,516,455.25 and no bad debt provision has been made because the aging has not expired. The remaining contract assets were in the amount of USD12,601,424.39, for which the Company has made total provisions for bad debts in the amount equivalent to RMB 3,459,443.83 adopting the aging method. The submission of the arbitration application to the Singapore International Arbitration Centre by the Company will not influence the Company's accounting policies for the above project receivables. The Company will conduct corresponding accounting treatment according to the requirements of relevant accounting standards and actual conditions based on the trial progress and results. As the case has not been brought to trial in tribunal, the impact of this arbitration on the profit of the Company for the current or subsequent periods is subject to uncertainties. The Company will perform its obligation of information disclosure and make timely announcement on the progress of the case based on the arbitration progress.

Shareholders and potential investors of the Company are advised to exercise caution when dealing in the securities of the Company.

By order of the Board

Shanghai Electric Group Company Limited

ZHENG Jianhua

Chairman of the Board

Shanghai, the PRC, 17 December 2019

As at the date of this announcement, the executive directors of the Company are Mr. ZHENG Jianhua, Mr. HUANG Ou, Mr. ZHU Zhaokai and Mr. ZHU Bin; the non-executive directors of the Company are Ms. YAO Minfang and Ms. LI An; and the independent non-executive directors of the Company are Dr. CHU Junhao, Dr. XI Juntong and Dr. XU Jianxin.

* For identification purpose only

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