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    2337   KYG9354A1031

UNITED STRENGTH POWER HOLDINGS LIMITED

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United Strength Power : CONTINUING CONNECTED TRANSACTION REVISION OF ANNUAL CAPS FOR THE PROVISION OF PETROLEUM AND LIQUEFIED GAS TRANSPORTATION SERVICE

12/08/2021 | 01:32am EDT

Hong Kong Exchanges and Clearing Limited and the Stock Exchange 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.

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

REVISION OF ANNUAL CAPS FOR

THE PROVISION OF PETROLEUM AND

LIQUEFIED GAS TRANSPORTATION SERVICE

BACKGROUND

Reference is made to the Announcement in relation to, among others, Jieli Logistics as service provider and Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) as service recipient entering into the Petroleum and Liquefied Gas Transportation Service Agreement, pursuant to which Jieli Logistics provides 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 from 11 June 2021 to 31 December 2023.

REVISED ANNUAL CAPS

Since August 2021, the sales generated from the Provision of Petroleum and Liquefied Gas Transportation Service has increased. Based on estimates of demand and operating conditions, the Directors expect that the existing annual caps in respect of the Provision of Petroleum and Liquefied Gas Transportation Service provided by Jieli Logistics to Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) for the years ending 2021, 2022 and 2023 will not be sufficient for the Group's business growth. Accordingly, the Company proposed to revise the annual caps for the Provision of Petroleum and Liquefied Gas Transportation Service. Save for the proposed revision of annual caps, all terms and conditions as stipulated under the Petroleum and Liquefied Gas Transportation Service Agreement remain unchanged.

- 1 -

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 proposed revision of annual caps for 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.

BACKGROUND

Reference is made to the Announcement in relation to, among others, Jieli Logistics as service provider and Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) as service recipient entering into the Petroleum and Liquefied Gas Transportation Service Agreement, pursuant to which Jieli Logistics provides 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 from 11 June 2021 to 31 December 2023. Salient terms of the current Petroleum and Liquefied Gas Transportation Service Agreement are set out as follows:

CURRENT PETROLEUM AND LIQUEFIED GAS TRANSPORTATION SERVICE AGREEMENT

Date

:

11 June 2021

Parties

:

(1) Jieli Logistics (as service provider); and

  1. Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) (as service recipient).

Term

: From 11 June 2021 to 31 December 2023.

Major terms

: Jieli Logistics agreed to 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.

- 2 -

Determination

: The service fee for the petroleum and liquefied gas transportation

of service fee

service is determined and measured by the actual weight of the

petroleum or liquefied gas and the actual travelling distance.

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.

REVISED ANNUAL CAPS

The Changchun Yitonghe Related Companies have started to engage Jieli Logistics since 2021. Since August 2021, the sales generated from the Provision of Petroleum and Liquefied Gas Transportation Service has increased. As the business development and relationship between the Changchun Yitonghe Related Companies and Jieli Logistics have outperformed the Group's expectations, based on estimates of demand and operating conditions, the Directors expect that the existing annual caps in respect of the Provision of Petroleum and Liquefied Gas Transportation Service provided by Jieli Logistics to Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) for the years ending 2021, 2022 and 2023 will not be sufficient for the Group's business growth. Accordingly, the Company proposed to revise the annual caps for the Provision of Petroleum and Liquefied Gas Transportation Service. Save for the proposed revision of annual caps, all terms and conditions as stipulated under the Petroleum and Liquefied Gas Transportation Service Agreement remain unchanged.

As Changchun Yitonghe Related Companies have been engaging other Independent Third Parties as petroleum and liquefied gas transportation service providers for the two 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 ten months ended 31 October 2021, such transportation service fee paid by Changchun Yitonghe Related Companies to Jieli Logistics amounted to approximately RMB13.3 million. As disclosed in the Announcement, the annual cap of the transactions under the Petroleum and Liquefied Gas Transportation Service Agreement for the year ending 31 December 2021 was RMB14 million. As at the date of this announcement, the relevant transaction amount did not exceed the annual cap.

The proposed revised annual caps for the years ending 31 December 2021, 2022 and 2023 are set out below:

Year ending 31 December

2021 2022 2023

RMB'000 RMB'000 RMB'000

Existing annual caps in respect of the

transportation service fee

14,000

19,000

21,000

Revised annual caps in respect of the

transportation service fee

20,000

32,000

38,000

- 3 -

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

  1. the increasing historical amount of the transportation service fee of the petroleum and liquefied gas transportation service;
  2. the aggregated rising demand from the Changchun Yitonghe Related Companies for the petroleum and liquefied gas transportation service during the ten months ended 31 October 2021 and the aggregated anticipated rising demand for the three years ending 31 December 2023;
  3. the expected further 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 rising market prices of petroleum and liquefied gas transportation service for the three years ending 31 December 2023.

REASONS FOR AND BENEFITS OF THE PETROLEUM AND LIQUEFIED GAS TRANSPORTATION SERVICE AGREEMENT AND THE REVISED ANNUAL CAPS

According to the Announcement, Jieli Logistics has been providing transportation service to the refineries and facilities of the Changchun Yitonghe Related Companies since 1 January 2021 and Jieli Logistics was expected to generate stable revenue streams from the Provision of Petroleum and Liquefied Gas Transportation Service.

With the increase in product demand and customer coverage by the customers of oil refineries, there has been an increase in transportation volume of petroleum and liquefied gas provided by Jieli Logistics. Jieli Logistics has been providing Petroleum and Liquefied Gas Transportation Service to the Changchun Yitonghe Related Companies by delivering petroleum and liquefied gas to, among others, Songyuan and Changchun in Jilin Province, Shenyang and Kuandian Manchu Autonomous County in Liaoning Province and Daqing in Heilongjiang Province, the PRC. The business development and relationship between the Changchun Yitonghe Related Companies and Jieli Logistics have outperformed the Group's expectations. In particular, (i) the demand for petroleum and liquefied gas has increased in Songyuan, leading to higher demand for transportation services; and (ii) there has been an increase in the number of customers at Songyuan, leading to more destination points and higher distance travelled. Based on the increasing historical amount, the Directors expect that the sales generated from the Provision of Petroleum and Liquefied Gas Transportation Service will be increased on a year-over-year basis for the two years ending 2023. Based on estimates of demand and operating conditions, the Directors expect that the existing annual caps in respect of the Provision of Petroleum and Liquefied Gas Transportation Service provided by Jieli Logistics to Changchun Yitonghe (on behalf of the Changchun Yitonghe Related Companies) for the years ending 31 December 2021, 2022 and 2023 will not be sufficient for the Group's business growth. In light of the increase in sales generated from the Provision of Petroleum and Liquefied Gas Transportation Service, the Directors are of the view that an increase in the revision of annual caps for the Provision of Petroleum and Liquefied Gas Transportation Service enables the Group to capture more sales from this transaction. Accordingly, the Company proposed to revise the annual caps for the Provision of Petroleum and Liquefied Gas Transportation Service.

- 4 -

The Directors, after reviewing the terms of the Petroleum and Liquefied Gas Transportation Service Agreement, are of the view that the Petroleum and Liquefied Gas Transportation Service Agreement and the transactions contemplated thereunder have been entered into on normal commercial terms (or on terms which are no less favourable to the Group), in the ordinary and usual course of business of the Group and the terms of the Petroleum and Liquefied Gas Transportation Service Agreement as well as the proposed revision of annual caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As Mr. Zhao, one of the Controlling Shareholders, owned more than 30% of the registered capital in Changchun Yitonghe, and Mr. Liu, one of the executive Directors, owned as to approximately 8.23% of Changchun Yitonghe, hence Mr. Zhao and Mr. Liu are regarded as having a material interest in the Provision of Petroleum and Liquefied Gas Transportation Service, and therefore have abstained from voting in the relevant board meeting of the Company.

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.

In respect of the revised annual caps for the Provision of Petroleum and Liquefied Gas Transportation Service under the Petroleum and Liquefied Gas Transportation Service Agreement, as one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of 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 and the revised annual caps are 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.

GENERAL

INFORMATION OF CHANGCHUN YITONGHE

Changchun Yitonghe and its subsidiaries are principally engaged in petroleum exploitation and refining, upstream petroleum supplies and research and development of petroleum products.

Based on publicly available information, Changchun Yitonghe is owned as to approximately 60.90% by Mr. Zhao, as to approximately 12.34% by Ms. Xu, as to approximately 8.23% by Mr. Liu, as to approximately 0.82% by Mr. Wang Qingguo, as to approximately 7.63% by Changchun Rundeshidai Investment Consulting Centre (Limited Partnership) (長春潤德 時代投資諮詢中心(有限合夥)), as to approximately 6.30% by Changchun Shenglongshidai Investment Consulting Centre (Limited Partnership) (長春盛隆時代投資諮詢中心(有限合 夥)), and as to approximately 3.78% by Changchun Huizhongshidai Investment Consulting Centre (Limited Partnership) (長春滙眾時代投資諮詢中心(有限合夥)) as at the date of this announcement.

- 5 -

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

United Strength Power Holdings Ltd. published this content on 07 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 December 2021 06:31:05 UTC.


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Capitalization 3 095 M 462 M 462 M
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Nbr of Employees 1 768
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