Yunnan Water Investment : POTENTIAL DISCLOSEABLE TRANSACTION THROUGH PUBLIC TENDER

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雲南水務投資股份有限公司

Yunnan Water Investment Co., Limited*

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

(Stock code: 6839)

POTENTIAL DISCLOSEABLE TRANSACTION

THROUGH PUBLIC TENDER

This announcement is made by the Company pursuant to the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance and Rule 13.09 of the Listing Rules.

THE POTENTIAL DISPOSAL

The Board has resolved to dispose of the Disposal Interest, being the 40% equity interest held by the Company in Fujian Dongfei. Since the Company is a State-owned enterprise, the Disposal Interest constitutes a State-owned asset and the disposal of which is required to undergo the process of Public Tender through an approved equity exchange in accordance with the relevant PRC laws and regulations governing the disposal of State-controlled assets. The Potential Disposal will be carried out through YNEX and the successful bidder will enter into the Equity Transaction Agreement with the Company according to the relevant rules and regulations of YNEX.

The Minimum Consideration, being the initial bidding price for the Disposal Interest, is RMB374,400,000, which was determined based on the appraised value of the Disposal Interest on 31 December 2019. The final Consideration will depend on the final bid price of the Public Tender, but will not be less than the Minimum Consideration in any event.

IMPLICATIONS UNDER THE LISTING RULES

Using the Minimum Consideration as the basis of calculation, the highest applicable percentage ratio (as defined in the Listing Rules) in respect of the Potential Disposal is more than 5% but all less than 25%. Therefore, the Potential Disposal, if materialized, is expected to constitute a discloseable transaction of the Company subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

As the Potential Disposal may or may not proceed, Shareholders and potential investors should exercise caution when dealing in the Shares.

*  For identification purposes only

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BACKGROUND

The Board has resolved to dispose of the Disposal Interest, being the 40% equity interest held by the Company in Fujian Dongfei. Since the Company is a State-owned enterprise, the Disposal Interest constitutes a State-owned asset and the disposal of which is required to undergo the process of Public Tender through an approved equity exchange in accordance with the relevant PRC laws and regulations governing the disposal of State-controlled assets. The Potential Disposal will be carried out through YNEX and the successful bidder will enter into the Equity Transaction Agreement with the Company according to the relevant rules and regulations of YNEX.

THE POTENTIAL DISPOSAL THROUGH THE PUBLIC TENDER

1. The Disposal Interest

Fujian Dongfei was incorporated in PRC in January 2013 and is principally engaged in the entire industrial chain of urban and rural environmental services covering road sweeping and cleaning, the collection and transportation of household waste, the construction and operation of waste transfer stations, watercourse management and maintenance, virescence maintenance, and investment and operation of rural-urban sanitation integration projects. As at the date of this announcement, it is held as to 40% by the Company.

Set out below is the key audited financial information of Fujian Dongfei for the two financial years ended 31 December 2018 and 31 December 2019 prepared according to the PRC accounting standards.

	For the year ended
	31 December	31 December
	2018	2019
	RMB	RMB
	(audited)	(audited)
Profit before tax	85,107,222.14	131,428,178.72
Profit after tax	63,030,370.04	101,621,676.48

The audited equity of owners of Fujian Dongfei as at 31 December 2019 amounted to RMB478,163,922.61. The entire equity interest of Fujian Dongfei as at 31 December 2019 as appraised by the PRC Valuer amounted to RMB936,000,000. The Company holds 40% equity interest in Fujian Dongfei, which amounted to RMB374,400,000.

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2. Major terms of the Potential Disposal

1. Qualifications of the Potential Bidders
   The potential bidders shall satisfy, including but not limited to, the following descriptions and qualifications:
2. 1. the potential bidder must be a validly existing enterprise incorporated in the PRC; and
   2. the potential bidder must not be a connected person (as defined in Chapter 14A of the Listing Rules) of the Group.
3. Date and Procedures of the Public Tender
   In order to commence the formal process of the Public Tender, the Company will have to submit to YNEX the tender notice setting out, inter alia, (i) the Minimum Consideration; (ii) the principal terms of the bidding; and (iii) descriptions and qualifications of the potential bidders. The Company will submit the tender notice to YNEX as soon as practicable.
   The Publication Period will be 20 Working Days from the date of the tender notice. During the Publication Period, qualified bidders may indicate their intention to purchase the Disposal Interest and register themselves as interested bidders. Upon the expiry of the Publication Period, YNEX will notify the Company of the identity of the successful bidder. Upon the notification of the successful bidder (being the highest bidder) by YNEX, the Company is required to enter into the Equity Transaction Agreement with such successful bidder.
   As at the date of this announcement, material information of the Equity Transaction Agreement including the bidder(s), final Consideration, payment, delivery and transfer time have not been determined. The Company will enter into the Equity Transaction Agreement upon confirmation of the successful bidder and perform its relevant approval procedures and information disclosure obligations. As at the date of this announcement, no agreement has been entered into between the Group and any other party in relation to the Potential Disposal.
4. Consideration
   The Minimum Consideration, being the initial bidding price for the Disposal Interest, is RMB374,400,000, which was determined based on the appraised value of the Disposal Interest on 31 December 2019 using the income approach in the Valuation Report issued by the PRC Valuer.
   The final Consideration will depend on the final bid price of the Public Tender, but will not be less than the Minimum Consideration in any event.
   The Consideration shall be made in accordance with the time and method agreed in the Equity Transaction Agreement in the manner determined by the transferor and transferee of the Disposal Interest.

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1. Profit and loss during transitional period
   The transitional period is the period from the valuation benchmark date, being 31 December 2019, to (and including) the date of completion of the business registration procedures in relation to the Potential Disposal. The profit and loss of Fujian Dongfei during the transitional period will be audited by a firm engaged by the transferor. The transferor will be entitled to such audited net profit whereas the audited loss will be borne by the transferee. The transferee shall, within 5 Working Days after the issue of the audit report, pay the transferor an amount equal to the portion of the audited net profit to which the transferor is entitled in accordance with its shareholding as compensation. The specific payment and settlement details will be determined by the parties in the Equity Transaction Agreement.

REASONS FOR AND BENEFITS OF THE POTENTIAL DISPOSAL

Based on the strategic development and the internal management needs of the Company, the Company decides to proceed the Potential Disposal.

The Directors are of the view that the Potential Disposal and the transactions contemplated thereunder will be on normal commercial terms which are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

INFORMATION ABOUT THE GROUP

The Group is one of the leading integrated service providers in the municipal wastewater treatment and water supply industries in the PRC. The major business of the Group include investment, construction and management services for urban water supply, wastewater treatment, solid waste treatment and environmental governance projects; sales of equipment and other environmental protection related services.

IMPLICATIONS UNDER THE LISTING RULES

Using the Minimum Consideration as the basis of calculation, the highest applicable percentage ratio (as defined in the Listing Rules) in respect of the Potential Disposal is more than 5% but all less than 25%. Therefore, the Potential Disposal, if materialized, is expected to constitute a discloseable transaction of the Company subject to the notification and announcement requirements under Chapter 14 of the Listing Rules.

As the Potential Disposal may or may not proceed, Shareholders and potential investors should exercise caution when dealing in the Shares.

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DEFINITIONS

Unless the context otherwise requires, the following expressions shall have the following meanings in this announcement:

"Board"	the board of Directors;
"Company"	Yunnan Water Investment Co., Limited* ( 雲南水務投資股份有限
	公司 ), a joint stock limited liability company incorporated in the
	PRC, whose H Shares are listed on the Main Board of the Stock
	Exchange (stock code: 6839);
"Consideration"	the consideration for the Disposal Interest payable by the transferee
	under the Equity Transaction Agreement;
"Director(s)"	the director(s) of the Company;
"Disposal Interest"	the 40% equity interest in Fujian Dongfei held by the Company;
"Equity Transaction	an equity transaction agreement to be entered into between the
Agreement"	Company and the successful bidder of the Public Tender in respect
	of the Disposal Interest according to the rules and regulations of
	YNEX;
"Fujian Dongfei"	Fujian Dongfei Environment Group Co., Ltd* ( 福建東飛環境集
	團有限公司 ), a company incorporated in the PRC with limited
	liability and is owned as to 40% by the Company as at the date of
	this announcement;
"Group"	the Company and its subsidiaries;
"Hong Kong"	Hong Kong Special Administrative Region of the PRC;
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange;
"Minimum Consideration"	the minimum consideration for the Disposal Interest, being the
	initial bidding price of RMB374,400,000, which was determined
	based on the Valuation Report;
"Potential Disposal"	the potential disposal of the Disposal Interest by the Group;

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"PRC"or "State"	the People's Republic of China, for the purpose of this
	announcement only, excluding Hong Kong, Macau Special
	Administrative Region and Taiwan;
"PRC Valuer"	Zhongwei Zhengxin (Beijing) Assets Appraisal Co., Ltd., an independent
	PRC asset appraisal company;
"Public Tender"	the public tender for the Potential Disposal through YNEX;
"Publication Period"	the publication period for the Public Tender during which qualified
	bidders may indicate their intention to purchase the Disposal
	Interest and register themselves as interested bidders;
"RMB"	Renminbi, the lawful currency of the PRC;
"Stock Exchange"	The Stock Exchange of Hong Kong Limited;
"Valuation Report"	the asset valuation report on the equity attributable to owners of
	Fujian Dongfei dated 30 June 2020 issued by the PRC Valuer;
"Working Day(s)"	a day other than Saturday, Sunday and statutory holiday in the
	PRC, on which commercial banks in the PRC are open for normal
	business;
"YNEX"	Yunnan Equity Exchange Co. Ltd.* ( 雲南產權交易所有限公司 ),
	an institution authorised by the Yunnan Provincial State-owned
	Assets Supervision and Administration Commission to transact
	assets and equity of State-owned enterprises under the Yunnan
	Provincial Government; and
"%"	per cent.

On behalf of the Board

Yunnan Water Investment Co., Limited*

Li Jialong

Chairman

Kunming, the PRC

31 July 2020

As at the date of this announcement, the executive Director are Mr. Yu Long (Vice Chairman) and Mr. Yang Fang, the non-executive Directors are Mr. Li Jialong (Chairman), Ms. Li Bo, Mr. He Yuanping and Mr. Chen Yong, and the independent non-executive Directors are Mr. Liu Shuen Kong and Mr. Ma Shihao.

*  For identification purposes only

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