Shanghai Electric : ANNOUNCEMENT ON CHANGE IN USE OF PROCEEDS AND UTILIZATION OF THE REMAINING PROCEEDS FOR PERMANENT REPLENISHMENT OF WORKING CAPITAL

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.

*

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)

ANNOUNCEMENT ON CHANGE IN USE OF PROCEEDS AND UTILIZATION OF THE REMAINING PROCEEDS FOR PERMANENT REPLENISHMENT OF WORKING CAPITAL

References are made to the circular dated 23 March 2017 of Shanghai Electric Group Company Limited (the "Company" or "Shanghai Electric") in relation to, among other things, the proposal of the Company's fundraising of not more than RMB3,000,000,000 by the Non-Public Issuance (the "Non-PublicIssuance") and the proposed use of proceeds, the announcement of the Company dated 8 May 2017 in relation to the poll results of the extraordinary general meeting in respect of the Non-Public Issuance, the announcement of the Company dated 7 November 2017 in relation to the completion of fundraising through the Non-Public Issuance and the subsequent changes in shareholdings, the announcement of the Company dated 22 October 2018 and the circular published by the Company on 16 November 2018 in relation to, among other things, the proposed change in use of proceeds, the poll voting results announcement of the Company dated 10 December 2018, in relation to, among other things, the approval of the resolution in respect of the proposed change in use of proceeds, the announcement of the Company dated 16 November 2018 and the circular of the Company dated 11 April 2019, in relation to the proposed change in use of proceeds and additional capital injection into Shanghai Electric Investment Company Limited ("SEI") for its acquisition of the 100% equity interests in Wujiang Taihu Industrial Wastes Treatment Company Limited (吳江市太湖工業廢棄物處理有限公司) ("Taihu Company") and Ningbo Hi- Firm Environmental Protection Company Limited ("Ningbo Hi-Firm"), and the poll voting results announcement of the Company dated 6 May 2019, in relation to, among other things, the approval of the resolution in respect of the proposed change in use of proceeds and additional capital injection into SEI for its acquisition of the 100% equity

1

interests in Taihu Company and Ningbo Hi-Firm. Terms defined in the abovementioned circulars and announcements shall have the same meaning when used herein unless the context herein requires otherwise.

1. GENREAL INFORMATION OF THE PROCEEDS

(I) Basic Information of the Proceeds

As approved by the China Securities Regulatory Commission with the "Approval for Issuance of Shares by Shanghai Electric Group Company Limited to Shanghai Electric (Group) Corporation for Assets Acquisition as well as Supporting Funds Raising" (Zheng Jian Xu Ke [2017] No. 1390), the Company issued 416,088,765 RMB- denominated ordinary shares (A shares) through non-public issuance at the price of RMB7.21 per share and raised proceeds in an aggregate amount of RMB2,999,999,995.65. After deduction of underwriting fees of RMB14,999,999.98 (tax inclusive), the net proceeds from the Non-Public Issuance amounted to RMB2,984,999,995.67.

After deduction of underwriting fees, the net proceeds from the Non-Public Issuance were deposited into the Company's special account for proceeds maintained with Industrial and Commercial Bank of China Limited, Waitan Sub-Branch, Shanghai (account number: 1001262129040525666) on 19 October 2017. PricewaterhouseCoopers Zhong Tian LLP issued the "Capital Verification Report on the Non-public Issuance of RMB-denominated Ordinary Shares (A Shares) by Shanghai Electric Group Company Limited in 2017" (PwC Zhong Tian Yan Zi (2017) No. 968) in relation to the receipt of the abovementioned proceeds.

For the purposes of regulating the management of the proceeds and protecting the interests of investors, on 15 November 2017, the Company, Industrial and Commercial Bank of China Limited, Waitan Sub-Branch, Shanghai and Guotai Junan Securities Co., Ltd., the financial adviser of the Company, entered into the Tripartite Custodian Agreement on the Designated Saving Account for Proceeds Raised (《募集資金專戶存 儲三方監管協議》) in respect of the Company's special account for proceeds (account number: 100126212904052566) in Shanghai according to relevant laws and regulations.

(II) Use and Balance of the Proceeds

As at 27 September 2019, RMB225 million (including relevant issuance fees of RMB15 million) out of the proceeds had been used by the Company, and RMB2,500 million had been used for temporary replenishment of working capital. The remaining balance of the proceeds amounts to RMB281 million (including interest income of RMB6 million).

2

II. THE PROCEEDS-FUNDED PROJECTS AND THE CHANGES THEREOF

(I) Proceeds-funded Projects

According to use of supporting funds as disclosed in the Report for Assets Acquisition by Issuance of Shares and Supporting Funds Raising (Related-party Transaction) by Shanghai Electric Group Company Limited (Revised) (《上海電氣集團

股份有限公司發行股份購買資產並募集配套資金暨關聯交易報告書（修訂稿）》),

the proceeds-funded projects of the Company are as follows:

Unit: RMB 100 million

				Total	Amount	of
No.	Use of proceeds		proceeds to be
	investment
				used
1	Emerging Industrial Park Development Project	18.15		10.55
at Gonghe New Road
2	Innovative Industry Park Reformation Project at	2.65		2.26
Beinei Road
3	Technology	Innovation	Park Reformation	3.85		3.28
Project at Jinshajiang Branch Road
	Industrial Research, Development and Design
4	and High-end Equipment Manufacturing Base	13.70		11.66
	Project at Jungong Road
5	Taxes and	Other Expenses related to the	2.25		2.25
Reorganization
Total				40.60		30.00

Note: As the net proceeds raised by the Company after deduction of issuance fees amounted to RMB2,985 million, the amount of "Taxes and Other Expenses related to the Reorganization" paid out of the proceeds was adjusted from RMB225 million to RMB210 million.

(II) Change in Use of Proceeds

1. Change in Use of Proceeds as Approved at the Meeting of the Board on 22 October 2018

3

As considered and approved at the meeting of the Board held on 22 October 2018, and the 2018 third extraordinary general meeting, the 2018 first A share class meeting and the 2018 first H share class meeting of the Company held on 10 December 2018, the Company will no longer use any of the proceeds of RMB2,554 million (including interest income and the actual amount is subject to the balance after interest settlement of the bank on the date when the funds are transferred out) to finance the Emerging Industrial Park Development Project at Gonghe New Road, the Technology Innovation Park Reformation Project at Jinshajiang Branch Road and the Industrial Research, Development and Design and High-end Equipment Manufacturing Base Project at Jungong Road, including proceeds of RMB2,549 million and interest income on the proceeds of RMB5 million.

Proposed proceeds-funded projects after the above change are as follows:

Unit: RMB 100 million

				Total	Amount	of
No.	Name of proceeds-funded projects		proceeds	proposed
	investment
				to be used
1	Innovative Industry	Park Reformation	2.65	2.26
Project at Beinei Road
2	Taxes and Other Expenses related to the	2.25	2.25
Reorganization
-	Proceeds-funded	projects	under	-	25.49
investigation yet pending for confirmation
Total				4.90	30.00

2. Change in Use of Proceeds as Approved at the Meeting of the Board on 16 November 2018

As considered and approved at the meeting of the Board held on 16 November 2018, the Company planned to use RMB342 million out of the proceeds to acquire, through SEI, a wholly-ownedsubsidiary of the Company, the 100% equity interests of Taihu Company from Orient Landscape Group Environmental Protection Company Limited (東方園林集 團 環 保 有 限 公 司 ) ("Orient Landscape") and Taizhou Zongze Equity Investment Management LP ( 台 州 宗 澤 股 權 投 資 管 理 合 夥 企 業 （ 有 限 合 夥 ） ) ("Taizhou Zongze"); and use RMB756 million out of the proceeds to acquire, through SEI, the 100% equity interests of Ningbo Hi-Firm.The Company intended to proceed with the aforesaid

4

acquisitions with its self-owned funds through SEI. Then, upon consideration and approval of the resolutions in relation to the proposed change in use of proceeds at the shareholders' general meeting of the Company, it would supplement the self-owned funds with the proceeds. The above-mentioned matters had been considered and approved at each of the 2019 first extraordinary general meeting, the 2019 first A share class meeting and the 2019 first H share class meeting of the Company held on 6 May 2019.

Proposed proceeds-funded projects after the above change are as follows:

Unit: RMB 100 million

								Amount	of
No.	Name of proposed proceeds-	Total investment	proceeds
funded projects				proposed	to be
								used
	Innovative		Industry	Park
1	Reformation	Project	at	Beinei	2.65	2.26
	Road
2	Taxes and Other Expenses related	2.25	2.25
to the Reorganization
	Acquisition	of	100%	Equity
3	Interests	in	Wujiang	Taihu	3.42	3.42
Industrial	Wastes	Treatment
	Company Limited
	Acquisition	of	100%	Equity
4	Interests	in	Ningbo	Hi-Firm	7.56	7.56
Environmental		Protection
	Company Limited
	Proceeds-funded	projects	under
-	investigation	yet	pending for	-	14.51
	confirmation
Total							15.88	30.00

The Company has proceeded with the aforesaid acquisitions with its self-owned funds through SEI, and will use the proceeds to supplement the self-owned funds after the final payments for the acquisitions are made.

5

1. REASONS FOR THE PREVIOUS CHANGE IN USE OF PROCEEDS AND THE ACTUAL PROGRESS THEREOF

(I) Emerging Industrial Park Development Project at Gonghe New Road

The Gonghe New Road Project is located at the intersection of Gonghe New Road and Jiangchang Road, Jing'an District, stretching north-to-south from Jiangchang Road to Pengpu Machinery Factory and west-to-east from Gonghe New Road to Beilong Business Building, and covering a total site area of 55,800 square metres. The project will mainly comprise six five-storey scientific research buildings and auxiliary service structures. Upon completion, the project will have a total gross floor area of 119,900 square metres. The total investment in the project is RMB1,815.3 million. Upon completion, the project will serve as a scientific research platform for emerging industries including intelligent equipment, software and information services. In March 2017, the project was approved by the Development and Reform Commission of Jing'an District, Shanghai which issued the Opinions on the Filing of Projects to be Invested by Enterprises of Shanghai (上海市企業投資項目備案意見) (Jing Fa Gai Wei Bei [2017] No. 37).

In September 2018, the government adjusted the planning parametres for the area where the project is located, which resulted in fundamental changes in the planning, investment conditions, investment intensity, unit tax output and other conditions of the project and thus makes it impossible to implement the project according to the original plan and the change of investment projects. As considered and approved at the meeting of the Board of the Company held on 22 October 2018 and the 2018 third extraordinary general meeting, 2018 first A share class meeting and 2018 first H share class meeting of the Company held on 10 December 2018, the Gonghe New Road Project no longer qualifies as a proceeds-funded project and will not be financed by the proceeds. The Company proposed to use its own funds or project loans to finance the development and construction of the project.

During the advancement of the project, as the project is located in Shibei High-tech Park in Jing'an District, Shanghai, the relevant government authorities suggested that the state-owned enterprises of the district and the Company should jointly participate in the development of the project. As of now, Shanghai Yun Zhong Xin Enterprise Development Co., Ltd. (上海雲中芯企業發展有限公司) has been established as the project company for the project with the registered capital of RMB1.2 billion, of which, Shanghai Electric Group Property Company Limited (上海電氣集團置業有限公司) ("SEC Property") contributed RMB660 million, representing 55% of equity interests, Shanghai Shibei Hi-Tech Co., Ltd. (上海市北高新股份有限公司) contributed RMB360

6

million, representing 30% of equity interests, and Shanghai Shibei Hi-Tech (Group) Co., Ltd. (上海市北高新（集團）有限公司) contributed RMB180 million, representing 15% of equity interests. In October 2018, the land use rights involved in the project construction were obtained, and the commencement ceremony for construction of the project is expected to take place on 28 September 2019.

(II) Technology Innovation Park Reformation Project at Jinshajiang Branch Road

The Jinshajiang Branch Road Project stretches north-to-south from Jinsha 3131 Creativity Park in Shanghai to Wusong River and west-to-east from the green belt on the east side of the outer ring expressway to the existing watercourse, covering a total site area of 126,500 square metres. The project will mainly comprise 14 single-storey buildings and 2 two-storey buildings, with a total gross floor area of 76,900 square metres. The project will be developed into a technology innovation park, which will serve as the Group's base for industrial R&D, design and information services focusing on research and development, design, trial production of high-efficiency photovoltaic, biomass power generation and factory energy-saving systems, as well as system integration services. In March 2017, the project was approved by the Development and Reform Commission of Jiading District, Shanghai which issued the Reply on the Project of Intelligent Transportation and Technology Innovation Park at Jinshajiang Branch Road (關於金沙

江支路智能交通科技創新園區改造項目的覆函).

As the region is the confluence of the land parcels owned by each of the three state- owned conglomerates, i.e., the Company, Shanghai Jiaoyun Group Co., Ltd. (上海交運 （集團）有限公司) ("Shanghai Jiaoyun") and Shangtex Holding Co., Ltd. (上海紡織

（集團）有限公司) ("Shangtex Holding"), pursuant to the new planning adjustments and the principle of intensive utilization of land resources, the government of Jiading District requests the land in the "Nansikuai" region be subject to transformational development in an intensive manner and be jointly developed and utilised by the three land right holders in such region through cooperation. However, given that the three parties have different interest pursuits and other shareholders are unable to make pro-rata contributions to the project, the Jinshajiang Branch Project does not qualify as a proceeds-funded project and was thus ceased to be implemented as a proceeds-funded project upon consideration and approval at the Board meeting of the Company held on 22 October 2018 and the 2018 third extraordinary general meeting, the 2018 first A share class meeting and 2018 first H share class meeting of the Company held on 10 December 2018.

So far, the project company Shanghai Jinshajiang Asset Management Company Limited ( 上 海 金 沙 江 資 產 管 理 有 限 公 司 ) has been established for the project. Registered capital of the project company amounts to RMB50 million, of which,

7

RMB27,045,000, RMB13,940,000 and RMB9,015,000 was contributed by each of the Company, Shanghai Jiaoyun and Shangtex Holding, representing 54.09%, 27.88% and 18.03% of the equity interests, respectively. The conceptual scheme for the project has been preliminarily composed and submitted to the government for approval. It is expected that land planning adjustments will be completed by the end of 2019 and development and construction of the project will commence in 2020.

1. Construction of Industrial R&D, Design and High-end Equipment Manufacturing Base at Jungong Road

The Jungong Road Project is located in Yangpu District, Shanghai and stretches west-to-east from Jungong Road to Fuxing Island Canal and north-to-south from the University of Shanghai for Science and Technology to Chunjiang Road, covering a total site area of 35,900 square metres. The project will mainly comprise 12 two-storey buildings and one single-storey plant, with a total gross floor area of 274,100 square metres after the construction. The project will be developed into the R&D, design and high-end equipment manufacturing base of Shanghai Electric, mainly focusing on the R&D, manufacturing and sales of high-voltage cables, special cables and submarine cables, as well as the R&D, testing and sales of 3D printing equipment systems used in the intelligent manufacturing industry. Moreover, the base can also serve as a scientific research service platform for the energy-saving transformation of traditional mechanical and electrical equipment and the R&D, production and sales of efficient and clean energy systems such as smart grids and distributed energy sources. In November 2016, the project was approved by the Development and Reform Commission of Yangpu District, Shanghai which issued the Reply on the Construction of Industrial R&D, Design and High-end Equipment Manufacturing Base at No. 1076 Jungong Road (關於軍工路 1076

號實施工業研發設計和高端裝備製造基地建設項目的意見回函).

The Jungong Road Project, located at the riverside area of the Huangpu River, was originally planned for redevelopment into a "mass entrepreneurship and innovation park" at the time of the design and application for approval. However, with the implementation of the development and construction plans of the North Bund area and the East Bund area, the relevant government authority is in the process of planning the development and construction of the area where the project is located. The government authority has engaged Shanghai Urban Planning and Design Research Institute to study and adjust the planning for the area stretching from riverside of Huangpu River in the north of Dinghai Bridge to Qiujiang section in Yangpu District. Accordingly, the development plan of the Jungong Road Project will be revised in accordance with the adjusted planning of the government. As the adjustment to the planning is still in process, there is uncertainty as to the commencement of the project and whether the original plan would be implemented. In order to avoid the risk that the project cannot be implemented, the Company decides

8

not to use the raised proceeds to finance the project, and ceases to implement the project as a proceeds-funded project upon consideration and approval at each of the Board meeting of the Company held on 22 October 2018 and the 2018 third extraordinary general meeting, the 2018 first A share class meeting and the 2018 first H share class meeting of the Company held on 10 December 2018.

So far, as the planning adjustments along Jungong Road where the project is located have not been completed, the Company will not proceed with the planning and construction of the project until more explicit plan for development along Jungong Road is rolled out.

IV. THE PROPOSED CHANGE IN PROCEEDS-FUNDED PROJECTS

In accordance with the requirements under the "Several Opinions on Accelerating the Innovation and Development of Cultural and Creative Industries in the City" published by Shanghai government ("50 Guidelines for Cultural and Creative Industries")

(《關於加快本市文化創意產業創新發展的若干意見》(「文創五十條」)), upon communication with the relevant competent government authorities, the Company proposes to change the total investment and implementation mode of as well as the amount of proceeds earmarked for the Innovative Industry Park Reformation Project at Beinei Road (the "Beinei Road Project"). In particular, the total investment will be adjusted to RMB130 million; a project company will be jointly established by SEC Property and Shanghai Yuanying Investment Management Co., Ltd. (上海元盈投資管理 有 限 公 司 ) ("Shanghai Yuanying"), a controlled subsidiary of Shanghai Guorun Investment and Development Company Limited ( 上 海 國 潤 投 資 發 展 有 限 公 司 ) ("Guorun Investment") to function as the implementation entity. The project company (the name of which shall be subject to the approved business name) has a registered capital of RMB20 million, and is owned as to 60% by SEC Property through its contribution of self-financedfunds in the amount of RMB12 million; Proceeds earmarked for the project will be reduced from RMB226 million to RMB66 million, which will be provided to SEC Property by the Company through capital contribution, and in turn allocated to the project company by SEC Property by way of entrusted bank loans at an interest of 8% per annum for construction of No. 32 park zone reformation project at Beinei Road.

In addition, upon intensive research and demonstration, the Company proposed to appropriate RMB726 million from the RMB1,451 million previously set apart for proceeds-funded projects yet pending for confirmation to invest in the "Shanghai Electric Nantong Central Research Institute Project", and use the remaining proceeds of RMB891 million (including interest income and the actual amount is subject to the balance after

9

interest settlement of the bank on the date when the funds are transferred out. Such funds comprise proceeds of RMB885 million and interest income therefrom of RMB6 million) to replenish working capital permanently.

Proceeds-funded projects after the change are as follows:

								Unit: RMB 100 million
							Amount of
No.	Name	of	proceeds-	Total	proceeds	Note
funded projects			investment	proposed
							to be used
								For the same proceeds-
								funded project,	the	total
								investment was reduced to
	Innovative	Industry			RMB130	million	from
1	Park	Reformation	1.30	0.66	RMB265	million	and the
	Project at Beinei Road			amount	of	proceeds
								proposed to be used was
								reduced to RMB66 million
								from RMB226 million
	Taxes	and	Other
2	Expenses related to the	2.25	2.25	No change was made.
	Reorganization
	Acquisition	of	100%
	Equity	Interests	in
3	Wujiang			Taihu	3.42	3.42	No change was made.
Industrial		Wastes
	Treatment	Company
	Limited
	Acquisition	of	100%
	Equity	Interests	in
4	Ningbo		Hi-Firm	7.56	7.56	No change was made.
	Environmental
	Protection	Company
						10

				Amount of
No.	Name of proceeds-	Total	proceeds	Note
funded projects	investment	proposed
				to be used
	Limited
	Shanghai	Electric
5	Nantong	Central	7.77	7.26	Project	newly	initiated
Research	Institute	after the change.
	Project
	Permanent				Project	newly	initiated
6	replenishment	of	8.85	8.85
after the change.
	working capital
Total			31.15	30.00

V. REASONS FOR THE PROPOSED CHANGE IN USE OF PROCEEDS

(I) The Beinei Road Project

The Beinei Road Project is located at the intersection of Huancheng Road and Wazi Lane, Songjiang District. The project extends to Wazi Lane in the west and connects Huancheng Road in the north, covering a total site area of 107,600 square metres. The project will mainly comprise 14 single-storey buildings and 2 two-storey buildings, with a total gross floor area of 54,000 square metres. The project will be developed into a modern creative industrial park, which will serve as a display window for creative achievements, a trading center for creative industry, an incubation area for creative enterprises, and a training base for creative talents. In March 2017, the project was approved by the Development and Reform Commission of Songjiang District, Shanghai which issued the Reply on the Opinions on the Innovative Industry Park Reformation Project at No. 32 Beinei Road, Songjiang District (《關於松江區北內路 32 號創意產業 園區改造項目建設意見的覆函》) (Song Fa Gai Zi [2017] No. 16).

In accordance with the requirements of the "50 Guidelines for Cultural and Creative Industries" of Shanghai, the Company reapplied for positioning of the Beinei Road Project. Upon communication with the government of Songjiang District, Shanghai, in accordance with the legal requirements for land utilisation, the Company will conduct reformation of the park according to the gross floor area stated in the original permits but will not conduct expansion. Therefore, the Company adjusted the construction plan of the

11

Beinei Road Project including adjustment of the gross floor area from the original 54,000 square metres to 41,600 square metres, reduction of civil engineering and structure fortification projects, and adjustment of interior decoration and heating ventilation engineering of the project to be solely used for public area. Therefore, the total investment in the project will be adjusted from RMB265 million to RMB130 million.

In order to promote the implementation of the proceeds-funded project as soon as possible and in light of the inadequate investment attraction capability of SEC Property, as the implementation entity of the project, in the remote suburbs of Shanghai, SEC Property proposed to select a company with the capabilities in terms of investment attraction and park operation through an open tender process for cooperation with a view to ensuring the project's operating income in the future. Guorun Investment is a company specialized in park building and operation and has experience in park building. It has established sound partnership with the Company thanks to its past cooperation with the Company in 2 park reformation projects, and its project development progress and operation efficiency have been recognized by the Company. Upon appraisal and selection by the bid evaluation panel of SEC Property, Guorun Investment was selected as the partner for the project. SEC Property intends to establish a joint-ventured project company with Shanghai Yuanying, a subsidiary of Guorun Investment, to jointly participate in the project's construction, investment attraction and operation management.

(II) Shanghai Electric Nantong Central Research Institute Project

As considered and approved at the meeting of the Board held on 16 November 2018, the Company used RMB1,098 million out of the proceeds for acquisitions of 100% equity interests in Taihu Company and 100% equity interests in Ningbo Hi-Firm and the remaining proceeds for proceeds-funded projects under investigation yet pending for confirmation amounted to RMB1,451 million. After thorough research and rounds of demonstrations, the Company proposes to use RMB726 million out of the proceeds for proceeds-funded projects under investigation yet pending for confirmation amounting to RMB1,451 million for investment in "Shanghai Electric Nantong Central Research Institute Project".

(III) Remaining proceeds for permanent replenishment of working capital

As at 27 September 2019, the remaining proceeds after the usage under the abovementioned plans amounted to RMB885 million and the interest income arising from the proceeds was RMB6 million. In order to improve the usage efficiency of proceeds, the Company proposes to use the remaining proceeds of RMB891 million (including interest income, the actual amount is subject to the balance after bank interest settlement on the date of transfer, including proceeds of RMB885 million and interest

12

income arising from the proceeds of RMB6 million) for permanent replenishment of working capital to meet the daily production and operation needs of the Company.

VI. DETAILS OF THE PROPOSED CHANGE IN USE / USE OF PROCEEDS FOR PROCEEDS-FUNDED PROJECTS

(I) Beinei Road Project

1. Project Overview

Project name: Innovative Industry Park Reformation Project at Beinei Road

Project implementation entity: The implementation entity is the project company established with the joint contribution by SEC Property and Shanghai Yuanying, a subsidiary of Guorun Investment. The project company has a registered capital of RMB20 million (the name of the project company is subject to approval by the industry and commerce authority) of which SEC Property makes a capital contribution of RMB12 million, representing 60% of equity interests, with the funds raised by itself. The construction funds of the project shall be raised by the parties in proportion on their own and injected into the project company in the form of entrusted loan.

Project construction content: the project is located at the intersection of Huancheng Road and Wazi Lane, Songjiang District and is industrial land with a total site area of 107,600 square metres and a gross floor area of 41,576 square metres. The project company will lease the land and the upper structures thereon for the project from the Company and implement project construction. The project will be offered for lease upon completion.

Total investment in the project: RMB130 million including construction fees of RMB110 million and other fees in an aggregate amount of RMB20 million. The specific investment composition is as follows:

No.	Particulars	Investment	amount	Investment proportion
(RMB'000)		(%)
1	Construction fees		110,000	84.62
2	Other unexpected expenses		5,600	4.31
3	Administrative expenses		5,600	4.31
4	Financial costs during the		8,800	6.77
construction period
	Total		130,000	100.00

13

For the proceeds proposed to be used for the project in an amount of RMB66 million, the Company shall make a capital contribution to SEC Property. SEC Property shall provide funds to the project company in proportion to investment in the form of entrusted loan at the interest rate of 8%. The proceeds will be used for construction fees and the rest will be raised by the construction unit itself.

Project construction period: 12 months

Project income forecast: calculated at 16 years, the project's annual average income is RMB47.51 million, the annual average profit before tax is RMB14.83 million, the financial internal rate of return is 11.18% (before tax) and the investment pay-back period before tax is 8.3 years.

Upon completion, the project will become a leading cultural and creative park in Songjiang District focusing on emerging cultural media, film and television production, VR and game production industry, cultural education, etc., and become a gathering place for cultural media and creative industries while providing cultural display and interaction experience functions.

1. 2. Necessity of project construction

2. The construction of the project is requisite for optimizing the industrial distribution in Songjiang District

The construction of industrial parks and science and technology parks is the current development focus of Songjiang District, Shanghai and there are certain disadvantages in respect of construction of creative industries. The construction of the project is conducive to the rational layout of functional parks in Songjiang District, expansion of the economic growth mode of the parks, enriching the industrial structure of the parks, and promoting the coordinated and sustainable development of Songjiang District. Meanwhile, it is also conducive to achieving the goal of building Shanghai into a cultural and creative center and a global city by revitalizing the urban brownfield with cultural and creative industries and revitalizing the industrial heritage with innovative design.

1. The construction of the project is necessary for enhancing the comprehensive competitiveness of the Company

The construction of the project fulfills the needs of the Company to revitalize the existing assets and improve the utilization efficiency of land resources, and at the same time meet the planning needs of regional development and industrial upgrading. The construction of this project will also help to improve the economic benefits of the development of the parks in this project and enhance the competitiveness of the Company in the service field..

3. Rationality of project construction

14

1. The construction of the project is in line with the relevant national requirements for the development of creative industries.

During the shift from "Made in China" to "Created in China", core creative industrial parks, serving as boosters and incubators, are in line with the national industrial development policy. In the report of the 16th National Congress of the CPC, the state has made the development of cultural industry a key strategy, proposing to improve the cultural industry policy, support the development of cultural industry, and enhance the overall strength and competitiveness of China's cultural industry. The construction of creative industrial parks is necessary for boosting the competitiveness of China's cultural industries and accords with the national policy orientation. The construction of the project will give rise to the cluster effect of regional creative industries, facilitate the integration and development of creative industries and related traditional industries, accelerate the transformation and upgrading of traditional industries towards creative industries, and enhance urban innovation and competitiveness, which is consistent with the national requirements for the development of creative industries.

1. The construction of the project is conducive to improving the efficiency of resource utilization.

The construction of the project takes creative industries as an entry point to help, on one hand, strengthen the intensive and economical use of land resources by changing the existing inefficient land-use patterns and promoting the efficiency and optimization of urban industrial land, and on the other hand, to improve the economic benefits of the development of the parks in this project.

4. Market prospects and risk warnings of the project

1. Risks relating to changes in land policies

The renovation of cultural and creative parks is highly susceptible to land policies. During the subsequent operation period of these parks, there may be policy changes in relation to effectiveness and regulatory compliance of land use, and governmental authorities may put forward some necessary requirements for the rational use of land. As such, the Company will keep a close eye on any changes in land policies, maintain good communication with the local competent authorities in the place where the project is located, and timely formulate response plans according to policy changes to ensure the smooth implementation and operation of the project.

(2) Risks relating to intensified market competition

In recent years, cultural and creative parks have been emerging one after another and are in the process of steady development in Shanghai. With the continued substantial supply of commercial land in Shanghai, there will be plenty of commercial property in

15

the market in coming years. Given the oversupply of commercial property in general at the present stage, the continuous increase of new commercial property will inevitably lead to further intensified market competition. As a result, in the process of urban renewal and revitalization of industrial land, the operation of R&D offices and cultural and creative parks is facing intense competitive pressure. Therefore, the Company has selected, through an open tender process, Guorun Investment, a company with capabilities in investment attraction and park operation, as its partner for the project, so as to boost the capabilities for investment attraction and park operation and enhance the market competitiveness of the project.

(3) Risks relating to less-than-expected economic growth

The operation of the project is susceptible to the overall economic development of Shanghai. If the overall economic development of Shanghai falls short of expectations in the future, it may affect the operating income of the project. In this regard, the Company will formulate an effective investment attraction strategy and set up a high-calibre team to take charge of investment attraction, so as to achieve the expected investment attraction goals and reduce risks relating to the operation of the project.

5. Project approval documents

Relevant land certificates have been obtained for the project, and applications have been made for other construction related qualification documents.

(II) Shanghai Electric Nantong Central Research Institute Project

1. Project overview

Project name: Shanghai Electric Nantong Central Research Institute Project

Project implementation entity: Shanghai Electric (Nantong) Technology Innovation Center Co. Ltd. (上海電氣（南通）科創中心有限公司), a wholly-owned subsidiary of the Company

Project construction content: The construction land of the project is located in plot 87, southeast corner of Zilang Lake, Central Innovation District, Nantong, Jiangsu Province, for research and commercial use. It covers an area of approximately 31,100 square meters (approximately 46.6 mu), approximating the shape of a rectangle. The project enjoys a perfect location, with No. 2 road in the east, Sixu River in the south, Huanhu Road in the west and north where Zilang Lake lies in the west. The project is mainly used for research and development, office and commercial service purposes. The project intends to build no.1 and no. 2 building and basement with various ancillary facilities. The new buildings occupy a site area of 12,440 square meters, with a floor area

16

of 96,815 square meters, including ground building areas of 50,892 square meters and underground building areas of 45,923 square meters.

Total investment in the project: RMB777 million, including construction investment of RMB726 million and land premium of RMB51 million. The specific investment composition is as follows:

No.	Name	Investment	amount	Investment proportion
(RMB'000)		(%)
1	Construction works		673,610	86.69
2	Engineering construction		52,390	6.74
related expenses
	Sub-total		726,000	93.44
3	Land premium		51,000	6.56
	Total		777,000	100.00

The project is expected to cost RMB726 million of proceeds. To this end, the Company plans to make an additional contribution to Shanghai Electric (Nantong) Technology Innovation Center Co. Ltd. to fund the construction works and engineering construction related expenses, while the rest will be raised by the construction unit itself.

Project construction period: 32 months

Project income forecast: calculated at 20 years, the project's annual average income is RMB120.49 million, the annual average profit before tax is RMB57.12 million, the financial internal rate of return is 8.54% (before tax) and the investment pay-back period before tax is 11.9 years.

Upon completion, the project will become a service-oriented industry platform for Jiangsu manufacturing segment established by the Company, with "enterprises headquarter, research & development center, information center and service center" as its four main functions. It will focus on the development of "new energy and environmental protection equipment industry, construction assembly industry, new energy battery industry and heavy equipment industry" as four core development industries, work one step at a time and eventually develop four core segments of "research segment, information segment, sales segments and service segment". The direct income of the project will come from the leasing and property revenue upon the completion of the project.

2. Necessity of project construction

17

1. The construction of the project is necessary for the Company to be integrated in the integrated development of the Yangtze River Delta

The Outline on the Integrated Regional Development of the Yangtze River Delta (the "Outline") set out the strategic positioning of the Yangtze River Delta as "one pole, three zones and one highland", namely building the Yangtze River Delta into the national growth pole for strong and active development, the sample zone for high-quality development, the leading zone for firstly achieving modernization on the whole and the demonstration zone for regional integration as well as the highland for reform and opening in new times.

Through the implementation of the project, the Company will take the opportunity of the integrated development of the Yangtze River Delta. Through the platform and channel of the Yangtze River Delta, the Company will fully leverage on domestic and overseas resources and attract capitals, technology and talents to a larger extent to enhance the industrial upgrading and the core competitiveness of the Company on the whole, achieve higher-quality development of the Company and facilitate its participation in domestic and international competition and cooperation.

1. The construction of the project is necessary for the implementation of the
   Company's strategy on sustainable development

With the implementation of the Company's strategy on sustainable development, the Company has been actively seeking the destination of production capacities exportation in recent years. According to the Outline, Nantong enjoys significant regional advantages, supplementary advantages in industrial chains and cost advantages, which is an optimal choice for the Company to conduct industrial cooperation.

Upon completion, Shanghai Electric Nantong Central Research Institute Project will, with "regional headquarter, research & development center, information center and service center" as its four main functions and the development of "new energy and environmental protection equipment industry, construction assembly industry, new energy battery industry and heavy equipment industry" as four core development industries, work one step at a time and eventually develop four core segments of "research segment, information segment, sales segments and service segment", which is conducive to integrating the corporate and project resources of the Company in Nantong and its surrounding cities to the utmost.

1. 3. Rationality of project construction

2. The construction of the project is in compliance with the Outline and conducive to the sustainable development of the Company

18

Nantong enjoys significant opportunities arising from the integrated development of the Yangtze River Delta, the Yangtze River Economic Belt and other strategies. The planning on the construction of Nantong New Airport and the high-speed railway along the north bank of the Yangtze River are included in the Outline. Nantong has become the gateway city of the north-wing of Shanghai metropolis with the implementation of the construction of Nantong New Airport and the high-speed railway along the north bank of the Yangtze River. It has taken the initiative to benefit from the influence of Shanghai and integrate itself into the half-hour economy circle of Shanghai, bringing such advantages as promoting transportation connectivity, industrial collaboration and regional coordination and innovation. The implementation of this project represents an opportunity for the Company to capture the integration of Yangtze River Delta. In the future, the Company will create conditions to gradually transfer some R&D projects and manufacturing bases to Nantong and promote the faster and better development of industries such as new energy and environmental protection in Nantong.

1. The construction of the project is conducive to guaranteeing talents for the development of the Company

The sustainable development and R&D capacity building of the Company require a large number of high-caliber talents. However, the high cost of living, high housing prices and difficulties in setting up households in Shanghai have also increased the cost and difficulty in attracting talents. With the Central Innovation Zone as the carrier, Nantong City has introduced policies like "Double Hundred Policy" to attract talents, which has enhanced the attractiveness to talents. Through the construction of this project, the Company selects to build its regional headquarter in a region with relatively rich scientific and technological talents as well as appropriate environmental and living costs, attracting talents for the Company with its regional advantages and excellent living environment conditions. It will become an important talent training base for the Company to meet its demands in the talent development strategy.

4. Market prospects and risk warnings of the project

1. Risks on the construction of the project

During the construction of this project, there may be risks due to factors such as geological conditions, rising raw material prices and labour costs, and changes in construction works and safety production. For this project, the Company will invite tenders for the design, construction and supervision of buildings, select the partners with high strength, high qualifications and high credibility, strictly control the progress and quality of the project construction, and endeavour to minimize the risks during the construction of the project.

(2) Risks on failing to advance the project construction as scheduled

19

During the construction of this project, if the construction land cannot be granted on time, or it cannot commence construction on time due to approval, planning adjustment of the project or other reasons after the construction land is granted, it may result in risks that the project cannot be completed as scheduled due to the delay in project construction. At present, the Company has made relevant preparations and maintained good communication with the relevant competent authorities on the construction land for the project. The Company guarantees that it will actively invest resources in all aspects and make full use of external favourable conditions to ensure the smooth progress of the project.

(3) Risks on the operation of the project

The project is subject to the economic development and supporting policies of Nantong during its operation. The actual economic returns of the proceeds-funded project may underperform the expectation in case of insufficient resource integration by Shanghai Electric Nantong Central Research Institute, resulting in poor investment attraction and benefits of properties and lease below expectations. The Company will conduct a detailed investigation on the lease of properties surrounding the project, determine the project's operation orientation based on the development plan of the Company, formulate an effective investment attraction strategy, and establish a high- quality investment attraction team to achieve the expected investment attraction target and reduce the project operation risk. At the same time, the Company will improve the synergy within the Group and give further rein to the competitive edges of Shanghai Electric Nantong Central Research Institute so as to ensure the effectuation of the expected economic benefits.

5. Project approval documents

Relevant land certificates have been obtained for the project, and applications have been made for other construction related qualification documents.

VII. THE EFFECTS OF THE CHANGE IN USE OF PROCEEDS AND UTILIZATION OF THE REMAINING PROCEEDS FOR PERMANENT REPLENISHMENT OF WORKING CAPITAL ON THE COMPANY

The change in use of proceeds is the optimization adjustment made by the Company according to the actual development of the project construction and will not adversely affect the normal production and operation of the Company. The change in use of proceeds and utilization of the remaining proceeds for permanent replenishment of working capital can help to increase the utilization efficiency of the raised funds, reduce the financial expenses, promote the sustainable and stable development of the Company's business, and create greater benefits for shareholders.

20

VIII. OPINIONS OF INDEPENDENT DIRECTORS, THE SUPERVISORY COMMITTEE AND THE FINANCIAL ADVISER REGARDING THE PROPOSED CHANGES IN USE OF PROCEEDS

1. Opinion of Independent Directors Independent directors are of the view that:

"Upon review over the Resolution in Relation to Change in Use of Proceeds and Utilization of the Remaining Proceeds for Permanent Replenishment of Working Capital , we did not identify any situations that would violate any requirements or jeopardize the interests of the shareholders of the Company. According to the resolution, change is to be made to the use of proceeds under the issuance of shares by the Company to its controlling shareholder for funds raising which constitutes a related-party transaction. The voting procedures regarding the abovementioned related-party transaction are in compliance with the requirements of relevant laws, regulations and the articles of association of the Company. Mr. Zheng Jianhua and Mr. Zhu Bin, being related directors, have abstained from voting, while all of the other directors have voted in favor of the resolution. The related-party transaction will not prejudice the interests of the Company and its shareholders. The voting procedures regarding the related-party transaction conducted by the Board are in compliance with relevant requirements and in line with the principles of openness, fairness and equality. We agree to present the abovementioned related-party transaction at the general meeting of the Company for consideration and related persons interested in such transaction shall abstain from voting on the transaction at the general meeting."

1. Opinion of the Supervisory Committee
2. 1. 
      Upon verification, the Supervisory Committee is of the view that:
      "Approve the following changes to the Beinei Road Project:
   2. The total investment in the Beinei Road Project will be adjusted from RMB265 million to RMB130 million; the amount of proceeds to be used for the Beinei Road Project will be reduced from RMB226 million to RMB66 million;
   3. The implementation entity of the Beinei Road Project will be changed from SEC Property, a wholly-owned subsidiary of the Company, to the project company (the name of which shall be subject to the approved business name) established by SEC Property and Shanghai Yuanying Investment Management Co., Ltd. The project company has a registered capital of RMB20 million and is held as to 60% by SEC Property which contributed RMB12 million with the funds raised by itself;

21

3. The Company will use proceeds to make a capital contribution to SEC Property in an amount of RMB66 million and the proceeds will be provided by SEC Property to the project company in the form of entrusted bank loan at an interest rate of 8% per annum for the construction of the Beinei Road Project.

Approve the Company to use proceeds for a capital contribution to Shanghai Electric (Nantong) Technology Innovation Center Co. Ltd., a wholly-owned subsidiary of the Company, in an amount of RMB726 million which will be used as the construction costs of Shanghai Electric Nantong Central Research Institute Project.

Approve the Company to use the remaining proceeds of RMB891 million (including interest income and the actual amount is subject to the balance after interest settlement of the bank on the date when the funds are transferred out. Such funds comprise proceeds of RMB885 million and interest income therefrom of RMB6 million) to replenish working capital permanently to satisfy the needs of daily production and operation of the Company.

Approve the submission of the above matters to the general meeting for approval."

(III) Opinion of Independent Financial Adviser

Upon verification, the independent financial adviser is of the view that:

"1. The change in use of proceeds and utilization of the remaining proceeds for permanent replenishment of working capital have been considered and approved at the 20th meeting of the fifth session of the board of directors and the 18th meeting of the fifth session of the supervisory committee of Shanghai Electric, and the independent directors of Shanghai Electric have issued their independent opinions on approval of the change in use of proceeds and utilization of the remaining proceeds for permanent replenishment of working capital and performed necessary review and decision-making procedures, which is in compliance with the relevant requirements under the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (Revised in 2018).

2. Shanghai Electric's change in use of proceeds and utilization of the remaining proceeds for permanent replenishment of working capital have been made by the listed company based on the objective changes in the implementation of the proceeds-funded projects, and will not prejudice the interests of shareholders. The change in use of proceeds and utilization of the remaining proceeds for permanent replenishment of working capital are in compliance with the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (Revised in 2018), the Guidelines for the Supervision and Administration on Listed Companies No. 2 - Supervision and Administration Requirements for Listed Companies on the Management and Use of Funds Raised and the requirements of relevant laws and regulations.

22

3. The plan is subject to approval by shareholders in general meeting of Shanghai Electric.

To sum up, we, as independent financial adviser, have no objection to Shanghai Electric's change in use of proceeds and utilization of the remaining proceeds for permanent replenishment of working capital."

By order of the Board

Shanghai Electric Group Company Limited

ZHENG Jianhua

Chairman of the Board

Shanghai, the PRC, 27 September 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 Mr. KAN Shun Ming, Dr. CHU Junhao and Dr. XI Juntong.

* For identification purpose only

23