TOWNGAS SMART ENERGY COMPANY LIMITED 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.
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1083)
On 3 December 2015, the Company and HKCG entered into:
the Gas Purchase Master Agreement with respect to the Gas Purchase Transactions; and
the Pipeline Materials Purchase Master Agreement with respect to the Pipeline Materials Purchase Transactions.
As HKCG is a controlling shareholder of the Company, members of the HKCG Group are connected persons of the Company under the Listing Rules. The entering into of the CCT Master Agreements and the Non-Exempt Continuing Connected Transactions contemplated thereunder, which are to be carried out in the ordinary and usual course of business of the Group and expected to continue and extend over a period of time, will therefore constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.
Since all of the Annual Cap Amounts for each of the Non-Exempt Continuing Connected Transactions exceed HK$3,000,000 but the relevant applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the Annual Cap Amounts under each of the Non-Exempt Continuing Connected Transactions are greater than 0.1% but less than 5%, each of the Non-Exempt Continuing Connected Transactions is only subject to the reporting, announcement and annual review requirements but is exempted from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
Members of the Group had from time to time purchased various types of fuel gas (including but not limited to liquefied coalbed methane, compressed natural gas and liquefied natural gas) from members of the HKCG Group pursuant to the 2013 Gas Purchase Master Agreement, which term will expire on 31 December 2015. Whilst the occurrence of the Gas Purchase Transactions will depend on the business requirements of the Group and the HKCG Group, it is anticipated that the Group will continue to enter into the Gas Purchase Transactions with the HKCG Group in its ordinary and usual course of business from time to time after the expiration of the 2013 Gas Purchase Master Agreement. The Company had therefore on 3 December 2015 entered into the Gas Purchase Master Agreement with HKCG with respect to the Gas Purchase Transactions containing, inter alia, the following terms:
Date : 3 December 2015
Parties : (i) the Company; and
(ii) HKCG, the controlling shareholder of the Company
Term : The Gas Purchase Master Agreement shall be for a term commencing from 1 January 2016 to 31 December 2018 (both days inclusive) unless terminated earlier by agreement signed by the parties thereto.
Transaction nature : HKCG agrees to, or to procure members of the HKCG Group to, enter into the Gas Purchase Transactions with members of the Group to sell various types of fuel gas (including but not limited to liquefied coalbed methane, compressed natural gas and liquefied natural gas) to members of the Group during the term of the Gas Purchase Master Agreement. Each Gas Purchase Transaction will be effected and governed by the relevant purchase contract or purchase order to be entered into between the relevant member of the Group and the relevant member of the HKCG Group.
Pricing and other terms
: The terms of each Gas Purchase Transaction (including the amount of consideration payable by the Group and the payment terms) shall be on normal commercial terms, negotiated on an arm's length basis and be on similar basis as the relevant member of the Group transacts business with other independent third party suppliers and shall be on terms which from the Group's perspective are no less favourable to the Group than those which the Group could obtain from other independent third party suppliers.
The relevant member of the Group will, before placing any purchase order or entering into any purchase contracts with the HKCG Group, obtain pricing information from the open market and then shortlist at least two suppliers via tendering or other process (including requesting for fee quotations). It will then make evaluation taking into account the prevailing market price of the liquefied natural gas and pipeline natural gas, transportation cost, production cost and other costs. Under normal circumstances, the relevant member of the Group will first consider the supplier with the lowest costs but it will also take into consideration other non-cost factors, such as the demand and supply of gas, as appropriate. If the demand exceeds supply, the delivery capability of the supplier will be the priority consideration, but if the supply exceeds demand, the cost factor will be the priority consideration. After reviewing and considering the above factors, the management of the relevant member of the Group will then decide on whether to place a purchase order or enter into a purchase contract with the relevant member of the HKCG Group.
Reasons for and Benefits of the Gas Purchase TransactionsIt is believed that the Gas Purchase Transactions will benefit the Group for the following reasons:
the members of the Group will be able to obtain more gas supplies to promote market development;
purchasing from the HKCG Group can ensure a steady and continuous gas supply, thereby guaranteeing a steady provision of gas to the Group's customers; and
it will minimize the Group's purchasing costs, thus enhancing the gross profit.
Members of the Group had from time to time purchased various pipeline construction materials and tools (including but not limited to gas meters) from members of the HKCG Group pursuant to the 2013 Pipeline Materials Purchase Master Agreement, which term will expire on 31 December 2015. Whilst the occurrence of the Pipeline Materials Purchase Transactions will depend on the business requirements of the respective parties, it is anticipated that the Group will continue to enter into the Pipeline Materials Purchase Transactions with the HKCG Group in its ordinary and usual course of business from time to time after the expiration of the 2013 Pipeline Materials Purchase Master Agreement. The Company had therefore on 3 December 2015 entered into the Pipeline Materials Purchase Master Agreement with HKCG with respect to the Pipeline Materials Purchase Transactions containing, inter alia, the following terms:
Date : 3 December 2015
Parties : (i) the Company; and
(ii) HKCG, the controlling shareholder of the Company
Term : The Pipeline Materials Purchase Master Agreement shall be for a term commencing from 1 January 2016 to 31 December 2018 (both days inclusive) unless terminated earlier by agreement signed by the parties thereto.
Transaction nature : HKCG agrees to, or to procure members of the HKCG
Group to, enter into the Pipeline Materials Purchase Transactions with members of the Group to sell various pipeline construction materials and tools (including but not limited to gas meters) to members of the Group during the term of the Pipeline Materials Purchase Master Agreement. Each Pipeline Materials Purchase Transaction will be effected and governed by the relevant purchase contract or purchase order to be entered into between the relevant member of the Group and the relevant member of the HKCG Group.
Pricing and other terms
: The terms of each Pipeline Materials Purchase Transaction (including the amount of consideration payable by the Group and the payment terms) shall be on normal commercial terms, negotiated on an arm's length basis and be on similar basis as the relevant member of the Group transacts business with other independent third party suppliers and shall be on terms which from the Group's perspective are no less favourable to the Group than those which the Group could obtain from other independent third party suppliers.
The relevant member of the Group will, before placing any purchase order or entering into any purchase contracts with the HKCG Group, invite suppliers which are in the Group's list of approved suppliers for pipeline construction materials and tools with the relevant production and delivery capability as well as quality assurance to submit tenders or fee quotations in respect of the sale of pipeline construction materials and tools to the relevant member of the Group. The management of the relevant member of the Group will then consider and evaluate each of such supplier's pricing proposal, relevant reputation, experience, delivery capability, historical performance (if applicable) and compare them with those of the HKCG Group and thereafter decide on whether to place a purchase order or enter into a purchase contract with the relevant member of the HKCG Group.
It is believed that the Pipeline Materials Purchase Transactions will benefit the Group for the following reasons:
the members of the Group will be able to maintain a consistent supply of high quality pipeline construction materials and tools to satisfy the needs of its pipeline construction works;
it will minimize the Group's purchasing costs thus contributing to reduction of capital expenditure for pipelines construction; and
it will enhance the accuracy of gas measurement thus reducing the difference between supply and demand and increase the sales revenue of the Group.
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