United Strength Power : CONTINUING CONNECTED TRANSACTION RELATING TO THE PROVISION OF PETROLEUM AND LIQUEFIED GAS TRANSPORTATION SERVICE

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UNITED STRENGTH POWER HOLDINGS LIMITED

眾 誠 能 源 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2337)

CONTINUING CONNECTED TRANSACTION

RELATING TO THE PROVISION OF PETROLEUM

AND LIQUEFIED GAS TRANSPORTATION SERVICE

PROVISION OF PETROLEUM AND LIQUEFIED GAS TRANSPORTATION SERVICE

The Board announces that, on 11 June 2021 (after trading hours), Jieli Logistics as service provider and Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) as service recipient entered into the Petroleum and Liquefied Gas Transportation Service Agreement, pursuant to which Jieli Logistics will provide petroleum and liquefied gas transportation service through the transportation vehicles owned by Jieli Logistics at such time and to such petroleum and liquefied gas refineries or facilities locations as requested by the relevant service recipient in consideration of the transportation service fee for a term of not more than three years from the effective date of the Petroleum and Liquefied Gas Transportation Service Agreement to 31 December 2023.

LISTING RULES IMPLICATIONS

Mr. Zhao, one of the Controlling Shareholders, owned more than 30% of the registered capital in Changchun Yitonghe. Hence, Changchun Yitonghe is regarded as an associate of Mr. Zhao, and hence a connected person of the Company pursuant to Rule 14A.12(1)(c) of the Listing Rules.

As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the annual transportation service fee regarding the Provision of Petroleum and Liquefied Gas Transportation Service is more than 0.1% but less than 5%, the Provision of Petroleum and Liquefied Gas Transportation Service is subject to the compliance with the announcement, reporting and annual review (for continuing connected transactions) requirements but exempted from circular (including the independent financial advice) and independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

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PROVISION OF PETROLEUM AND LIQUEFIED GAS TRANSPORTATION SERVICE

The Board announces that, on 11 June 2021 (after trading hours), Jieli Logistics as service provider and Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) as service recipient entered into the Petroleum and Liquefied Gas Transportation Service Agreement, pursuant to which Jieli Logistics will provide petroleum and liquefied gas transportation service through the transportation vehicles owned by Jieli Logistics at such time and to such petroleum and liquefied gas refineries or facilities locations as requested by the relevant service recipient in consideration of the transportation service fee for a term of not more than three years from the effective date of the Petroleum and Liquefied Gas Transportation Service Agreement to 31 December 2023.

Principal terms of the Petroleum and Liquefied Gas Transportation Service Agreement are summarised as follows:

PETROLEUM AND LIQUEFIED GAS TRANSPORTATION SERVICE AGREEMENT

Date	:	11 June 2021
Parties	:	(1) Jieli Logistics (as service provider); and
		(2) Changchun Yitonghe (on behalf of the Changchun
		Yitonghe Related Companies) (as service recipient).
Term	:	From 11 June 2021 (the effective date of the Petroleum
		and Liquefied Gas Transportation Service Agreement) to
		31 December 2023.
Major terms	:	Jieli Logistics will provide petroleum and liquefied
		gas transportation service through the transportation
		vehicles owned by Jieli Logistics at such time and to
		such petroleum and liquefied gas refineries or facilities
		location as requested by the relevant service recipient
		in consideration of the transportation service fee to Jieli
		Logistics by the service recipient.

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Determination of	:	The service fee for the petroleum and liquefied gas
service fee		transportation service is determined and measured by the
		actual weight of the petroleum or liquefied gas and the
		actual travelling distance.
		The service fee will be negotiated by the parties (on
		arm's length basis and in good faith) with reference to the
		prevailing market prices of similar services provided by
		Jieli Logistics to other Independent Third Parties and the
		service fee and other transaction terms shall not be less
		favourable than those Jieli Logistics can obtain from other
		Independent Third Parties. For details of the Group's
		internal control measures to ensure this, please refer to
		the section headed "Internal Control Measures" in this
		announcement.
Payment term	:	Balance will be calculated on the following month and
		the invoice will be issued by Jieli Logistics to Changchun
		Yitonghe Related Companies by the end of each month
		and payment shall be settled within one month from the
		date of invoice.
Historical Amount

The below sets out the aggregated historical transaction amounts for the transportation service fee incurred by the petroleum and liquefied gas refineries or facilities of the Changchun Yitonghe Related Companies from other Independent Third Parties for the three years ended

31 December 2018, 2019 and 2020:

Year ended 31 December

2018 2019 2020

RMB'000 RMB'000 RMB'000

Transportation service fee

9,745

9,020

13,105

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As Changchun Yitonghe Related Companies have been engaging other Independent Third Parties as petroleum and liquefied gas transportation service providers for the three years ended 31 December 2020, no transportation service fee in respect of the provision of such petroleum and liquefied gas transportation service was paid by Changchun Yitonghe Related Companies to Jieli Logistics for the same period. Based on the aggregated unaudited figures for the four months ended 30 April 2021, such transportation service fee paid by Changchun Yitonghe Related Companies to Jieli Logistics amounted to approximately RMB1.7 million(Note).

Note: The historical transaction amount for the four months ended 30 April 2021 includes the amount of transportation service fee in respect of the provision of petroleum and liquefied gas transportation service paid by Jilin Chinese Petroleum Clean Energy Storage and Transportation Company Limited* (吉林中油潔能儲運有限公司) ("Jilin Storage and Transportation"). Based on publicly available information, Jilin Storage and Transportation was wholly-owned by Changchun United Strength Gas Storage and Transportation Company* (長春眾誠燃氣儲運有限公司) ("United Strength Storage and Transportation"), whose registered capital was wholly-owned by Changchun Yitonghe prior to 23 April 2021. Based on publicly available information as at the date of this announcement, Changchun Yitonghe has transferred all of its interests in United Strength Storage and Transportation on 23 April 2021 to Changchun Huize Gas Company Limited* (長春匯澤燃氣有限公司), whose registered capital was owned as to approximately 60% by Ma Wenji (馬文紀) and as to approximately 40% by Lu Tong (盧彤). Since then, Jilin Storage and Transportation became an Independent Third Party.

Annual caps and basis of determination

The Board estimates that the aggregated annual transportation service fee under the Petroleum and Liquefied Gas Transportation Service Agreement for the three years ending 31 December

2023 will not exceed the following annual caps set forth in the table below:

Year ending 31 December

2021 2022 2023

RMB'000 RMB'000 RMB'000

Transportation service fee (unaudited)

14,000

19,000

21,000

In determining the above aggregated annual caps, the Directors have considered generally:

1. the historical amount of the transportation service fee of the petroleum and liquefied gas transportation service;
2. the aggregated demand from the Changchun Yitonghe Related Companies for the petroleum and liquefied gas transportation service from other petroleum and liquefied gas transportation service providers during the three years ended 31 December 2020 and the aggregated anticipated demand for the three years ending 31 December 2023;
3. the expected increase of transportation service fee per ride as a result of the anticipated rising demand of long-distance transportation service to be procured by Changchun Yitonghe Related Companies; and
4. the anticipated market prices of petroleum and liquefied gas transportation service for the three years ending 31 December 2023.

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INTERNAL CONTROL MEASURES

To ensure that the transactions will be conducted on normal commercial terms and not prejudice to the interests of the Company and the Shareholders, the Group will take the following actions on a biweekly basis:

1. In the situation that Changchun Yitonghe Related Companies are Jieli Logistics' only customer in respect of petroleum and liquefied gas transportation service
2. 1. Jieli Logistics will through its marketing department, on weekly basis, research on the prevailing market prices of similar services (the "Market Price"):
   2. 1. received at least 2 independent petroleum and liquefied gas refineries or refuelling station operators through its preliminary marketing phone call with those petroleum and liquefied gas refineries or refuelling station operators to ascertain the normal market price acceptable to them; and
      2. provided by at least 2 independent transportation service providers by making general enquiry about their petroleum and liquefied gas transportation service and obtaining fee quotes from them via the phone;
   3. based on the Market Price, the marketing staff will adopt the highest applicable Market Price to estimate the proposed transportation service fee of Jieli Logistics (the "Proposed Price") and report the same together with the Market Price to the general manager of Jieli Logistics;
   4. the general manager of Jieli Logistics will review the Proposed Price and compare the same with the Market Price, and will then approve the Proposed Price if it is no less favourable than the Market Price.
3. In the situation that Jieli Logistics has independent third party customer(s) other than the Changchun Yitonghe Related Companies in respect of petroleum and liquefied gas transportation service
4. 1. Jieli Logistics will take all the actions mentioned in part A above;
   2. on top of that, when the marketing staff conducts the price estimation and the general manager of Jieli Logistics reviews the Proposed Price, both of them will take into account the transportation service fees (the "Independent Customer Price") received by Jieli Logistics from its independent third party customer(s); and
   3. the general manager of Jieli Logistics will approve the Proposed Price if it is no less favourable than the Market Price and the Independent Customer Price.

The service fee must be agreed by the parties to the Petroleum and Liquefied Gas Transportation Service Agreement before the Provision of Petroleum and Liquefied Gas Transportation Service and the Group will follow the above-mentioned procedures not less than twice a month to ensure the service fee shall not be less favourable than the Market Price and the Independent Customer Price (if any).

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