CF Energy Corp. — Interim / Quarterly Report 2023

Aug 29, 2023

CF ENERGY CORP. Management’s Discussion and Analysis for the three-month and six-month periods ended June 30, 2023 and 2022

Dated August 28, 2023

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

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Advisory

This Management’s Discussion and Analysis (“MD&A”) provides an analysis to enable readers to understand the financial position and operations of CF Energy Corp. (hereafter referred to as “CF Energy”, “we” or the “Company”) and its subsidiaries (collectively referred to as the “Group” or “our Group”) as at and for the threemonth and six-month periods ended June 30, 2023. This information should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and related notes for the threemonth and six-month periods ended June 30, 2023 and 2022 and the audited consolidated financial statements and related notes for the year ended December 31, 2022. “CF Energy " includes CF Energy Corp. and its subsidiaries, unless otherwise indicated. Additional information related to CF Energy is available on SEDAR at www.sedar.com or on its website at http://www.cfenergy.com.

The preparation of the audited consolidated financial statements in conformity with International Financial Reporting Standards (“IFRS”) or Generally Accepted Accounting Practices (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosed contingent assets and liabilities at the date of the financial statements, and reported amounts of sales and expenses during the reporting period. CF Energy bases its estimates on historical experience, current trends and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

This MD&A contains certain non-IFRS financial measures to assist users in assessing the Company's performance. Non-IFRS financial measures do not have any standard meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. These measures are identified and described under the section “Non-IFRS Financial Measures”.

Amounts are stated in Renminbi (RMB), the official currency of the People’s Republic of China (the “PRC” or “China”) and the functional currency of the principal operating subsidiaries of the Company in the PRC, and Canadian dollars (CAD) unless otherwise indicated.

- Caution Regarding Forward Looking Information

Certain statements in this MD&A may constitute “forward looking” statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Group, or the industry in which they operate, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this MD&A, the words “estimate”, “believe”, “anticipate”, “intend”, “expect”, “plan”, “may”, “should”, “will”, the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements. Such forward looking statements reflect the current expectations of the management of the Company with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed or implied by those forward looking statements, such as significant changes in market conditions, the inability of the Company to realize sales and the inability of the Company to attract sufficient financing and the risk factors summarized below under the heading “Risks and Uncertainties”. New risk factors may arise from time to time and it is not possible for management of the Company to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance or achievements of the Company to be materially different from those expressed or implied in such forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this MD&A are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained in this MD&A speak only as of the date hereof. The Company does not undertake or assume any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

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Overview

CF Energy is a Canadian public company currently listed on the TSX Venture Exchange (“TSX-V”) under the stock symbol “CFY”. CF Energy is primarily involved in natural gas distribution and sustainable energy utilization, serving residential, commercial and industrial users as well as electric vehicle battery swap service in the PRC.

Our existing business model comprises three main segments:

• (i) Gas distribution utility segment, which comprises natural gas transmission and sales, including:

• (a) Pipeline Natural Gas (“PNG”) sales and Liquified Natural Gas (“LNG”) supply distribution sales and related service pipeline installation and connection sub-segments;

• (b) Compressed natural gas (“CNG”) vehicle refueling stations; and

• (c) Natural gas direct transmission;

• (ii) Integrated smart energy segment, which comprises the integrated smart energy system and integrated district energy distribution; and

• (iii) Smart mobility segment, which comprises the operation of electric vehicle (“EV”) battery swap stations.

Gas Distribution Utility Segment

Pipeline PNG Sales and LNG Supply Distribution Sales

Major pipeline PNG sales projects are based in Sanya City, Hainan Province, and Pingxiang City, Jiangxi Province. The Company has been granted a 30-year exclusive concession right (2007 to 2037) in Sanya City to operate the PNG sales as well as the construction and maintenance of the required facilities and pipelines which makes the Company the dominant participant in the Sanya PNG gas distribution market. The Company also distributes PNG to users in the ceramic industry base of Xiangdong District, Pingxiang City, Jiangxi Province under a 30-year distribution right (2010 to 2040) granted to its 40% owned associate.

CNG Vehicle Refueling

The Company operates two refueling stations respectively in Sanya City, Hainan Province, and Changsha City, Hunan Province which provide refueling services for vehicles such as household cars, taxicabs, buses and trucks. The Company offers two types of natural gas to customers for vehicle refueling: CNG and LNG.

Natural Gas Direct Transmission

This is the transportation of natural gas via the Company’s 2.0 kilometers (1.4 miles) pipeline connecting the provincial natural gas trunk lines to the Gaoyao Combined Heat, Power and Cold Natural Gas Power Plant owned by Guangdong Datang International Zhaoqing Heat & Power Co., Ltd. in Zhaoqing City, Guangdong Province.

Integrated Smart Energy Segment

Currently, there are two projects under this segment, namely the integrated smart energy project (the “Haitang Bay Integrated Smart Energy Project”) and the integrated district energy distribution project (the “Meishan Project”).

The Haitang Bay Integrated Smart Energy Project

The Haitang Bay Integrated Smart Energy Project, which combines the use of multiple clean energy sources, including solar, hydro, electricity and natural gas (CCHP/Co-Gen), is to supply cooling, heating, as well as hot water to the hotels, shopping centers and households in the Haitang Bay area of Sanya City, Hainan Province, the PRC. This project is conducted through the Group’s 70% held (30% held by the EDF Group) subsidiary company, EDF Changfeng (Sanya) Energy Co., Ltd. (“EDF CF”) with an authorized capital of RMB119.1 million fully paid up in 2021. Under a 30-year concession right agreement (2017 to 2047), EDF CF has the right to build, own and operate the project in Haitang Bay, Hainan Province.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

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The Project has been recognized as a low-carbon energy utilization project in the tropical resort city of Sanya, Hainan Province, to provide air-conditioning with reduced emissions for public facilities in the Haitang Bay area. The Project will have four (4) central energy stations with 30km of district cooling and heating distribution networks when fully developed. Once fully implemented, the system will distribute cooling, heating and hot water to serve 3.5 million square meters of cooling space for commercial customers, including large-scale hotels, shopping malls, entertainment parks and buildings, hospitals and other commercial complexes. The Project uses an optimized multi-energy integration program to distribute cooling, heating and hot water to customers. The system will apply many advanced technologies, i.e. multi-level compressed high-efficient refrigeration units, “ice battery” technology, hydro heat pump technology, distributed photovoltaic technology and AI data management to provide a more efficient energy supply. The Project integrates advanced energy-saving technologies, such as ice storage and water-source heating pumping. It is expected to save about 30,000 tons of standard coal and reduce about 100,000 tons of carbon dioxide, sulfur dioxide and nitrogen oxide emissions every year once fully implemented.

Construction of the first energy station and the 31.318km of a doubled-lined pipeline for the integrated smart energy network has been completed and commenced commercial operation in September 2021. The first group of commercial customers includes the Sanya Edition Hotel, Fairmont Sanya Haitang Bay, Westin Sanya Haitang Bay Resort and China Taiping Qube Hotel. The Company has signed up ten (10) commercial customers in Haitang Bay as of the date of this MD&A. The first phase of the first energy station can provide services to 400,000 square meters of cooling space.

The Meishan Project

The Meishan Project is a joint investment, construction and operation of an integrated district energy distribution project in the New Economic Development Zone of Meishan City, Sichuan Province (the “Meishan New Economic Development Zone”) to be operated by Meishan Hengtai Tianzhiyuan Energy Limited (“Meishan Hengtai”), a company which the Group holds an effective interest of 72%. The Meishan New Economic Development Zone, situated next to the central urban area of Meishan City, Sichuan Province, with a planned development area of 50.5 square kilometers, is to be the hub for manufacturers of drugs, supplements, medical equipment and other medical-related supplies. The year-round constant demand for steam is necessary to produce drugs which makes the Meishan New Economic Development Zone an ideal platform for integrated district energy distribution.

The project commenced trial operation in April 2021 and commercial operation officially in mid-May 2021 and has signed up seven (7) commercial customers with four (4) customers under service as of the date of this MD&A. Pipeline construction for the remaining three (3) customers have been completed and pending completion of installing of their own equipment. Trial operation is expected to commence in 2023. Eight (8) potential new customers are under negotiation and expected to commence operations in 2024.

The project is expected to significantly improve the district’s energy consumption efficiency and reduce local air pollution in line with state policy as more customers connect to the program.

Smart Mobility Segment

EV Battery Swap Station

The EV battery swap station business is a segment of the Group to build and operate battery swap service for electric vehicles. Two (2) EV battery swap stations in Sanya City commenced operation in August 2020 and January 2021 respectively to serve BAIC Qingxiang Technology Co., Ltd.’s (“BAIC QX”) 200 swap-battery EVs for its network taxi hiring business (the “Network Taxis”) currently operating in Sanya City and additional 200 EV Network Taxis planned for Hainan Province in the near term with Blue Valley Smart (Beijing) Energy Technology Co., Ltd. (“Blue Valley”). In September 2020, the Company and EDF (China) Holding Ltd. (“EDF (China)”) jointly established Hainan EDF Huapu Smart Mobility Company Limited (“Huapu SM”), a 70% owned company of the Group which signed an 8-year exclusive co-operating agreement with BAIC QX and Blue Valley to provide EV battery swap services in Haikou City, the provincial capital of Hainan Province. The first battery swap station in Haikou City commenced operation in August 2021 and the second station commenced operation in January 2022. Concurrently, a memorandum of understanding was also signed among the Company, EDF (China) and Blue Valley to jointly develop the battery swap project in Zhuhai City, Guangdong Province. The first battery swap station of Zhuhai City officially commenced operation in March 2022. The second station of Haikou City was relocated to Sanya City in April 2023 as the third station there to cope with the additional traffic of EV taxis in the city.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

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Following the acquisition of a 70% equity stake in the local Beihai City EV battery swap station operator, Beihai Brighton Road New Energy Ltd. (the “Beihai Company”) in Beihai City, Gangxi Province in October 2022. The Beihai Company currently operates two (2) EV battery swap stations and has 344 registered active taxis as its EV battery swap users with an estimated 87 more battery swap EV taxis expected to be added in 2023 to a total of 431 taxis. There is a total of 600 taxis in Beihai City and our clientele accounts for approximately 72% of the market. All of the taxis in Beihai City are battery swap cars, only Beijing Electric Vehicle Co., Ltd. and Dongfeng Electric Vehicle Co., Ltd. are within the government’s supplier list for taxis.

Results for the three-month and six-month periods ended June 30, 2023

For the three-month period ended June 30, 2023, the Group reported a net profit from continuing operations of RMB16.5 million, an increase of RMB16.4 million from RMB0.1 million for the three-month period ended June 30, 2022. On a comparable basis, after excluding the fair value gain of RMB2.7 million (Q2 2022 gain: RMB4.5 million) on the derivative financial instrument of the loan discharge agreement (see “Related Party Transactions” section on pages 20 and 21 of this MD&A) and the recognition of share-based payment expenses RMB nil (Q2 2022: RMB0.2 million), the non-IFRS adjusted net profit from continuing operations for the three-month period ended June 30, 2023 was RMB13.8 million, an increase of RMB18.0 million, or 425% from an adjusted net loss of RMB4.2 million as reported for the three-month period ended June 30, 2022.

For the six-month period ended June 30, 2023, the Group reported net profit from continuing operations of RMB20.0 million, an increase of RMB8.6 million, or 75%, from RMB11.4 million for the six-month period ended June 30, 2022. On a comparable basis, after excluding fair value gain of RMB4.7 million (1H 2022 gain: RMB10.8 million) on derivative financial instrument of loan discharge agreement (see “Related Party Transactions” section on pages 20 and 21 of this MD&A), recognition of share-based payments of RMB nil (1H 2022: RMB0.4 million), and a non-recurring government financial assistance of RMB0.8 million (1H 2022: RMB nil) from the local government of Haikou City to subsidize infrastructure of EV station in the city, the non-IFRS adjusted net gain from continuing operations for the six-month period ended June 30, 2023 was RMB14.5 million, an increase of RMB13.5 million from RMB1.0 million as reported for the six-month period ended June 30, 2022.

- Major Highlight for the three month period ended June 30, 2023 and up to the date of this MD&A

Gas Selling Price Adjustment

The Group’s natural gas business is a price-regulated industry in China, where its business and operations are susceptible to risks associated with government pricing policy and regulation changes. The Group needs to enter into discussions and negotiations with local governments on pricing from time to time. Over the past years, the Group had been able to increase the selling price several times. In July 2020, as the government natural gas price regulating body in Sanya City, the Sanya City Development and Reform Commission (“SYDRC”) finalized the City’s natural gas utility pricing formula adjustment (the “Pricing Formula”), which is based on and adjusted with reference to the pricing formula adjustment of the gas purchase price (the “Gas Purchasing Price”) plus gas distribution cost became the guideline for the Group to follow on its gas selling prices starting from August 1, 2020 (the “2020 Gas Selling Price”) for both residential and commercial customers. The Pricing Formula is part of the pricing control strategy of the SYDRC for the whole of China.

With effect from May 1, 2022, the 2020 Gas Selling Price per m[3] to commercial customers in Sanya City has been adjusted from RMB3.83 to RMB4.12 (the “2022 Gas Selling Price”) while the price to social welfare units such as schools, government facilities, and other not-for-profit organizations which are classified under commercial customers remain unchanged at RMB3.23. The 2022 Gas Selling Price per m[3 ] to residential customers is based on three (3) levels of consumption, with the third level price to be adjusted from RMB3.82 to RMB4.10 while the first and second level prices remain unchanged at RMB2.94 and RMB3.53 respectively.

On April 11, 2023, SYDRC informed the Company by way of a notification letter that the 2022 Gas Selling Price for commercial and third level price for residential customers have been recalculated according to the previously adopted Pricing formula (the “2023 Gas Selling Price”). With effect from the April 2023 meter reading cycle, the 2023 Gas Selling Price per m[3] to commercial customers will increase from RMB4.12 in 2022 to RMB4.31 and third level price to residential customers will increase from RMB4.10 in 2022 to RMB4.30, while the gas selling price for the remaining categories of customers remains unchanged.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

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Going forward, as the pricing control policy is being further implemented by the SYDRC, the Group expects the New Gas Selling Price would significantly and adversely impact the profitability of its natural gas distribution business segment.

Sanya EV Battery Swap Stations

In June 2023, Sanya Public Transport Feima Taxi Co. called for the biding from EV battery swap service providers to serve the 103 EV taxis which services were due to expire, and Huapu SM won the bid for this batch of taxis. Including the 232 taxis which we have been servicing since 2022, our Sanya EV battery swap stations are now serving a total of 335 EV taxis.

Outlook

Following the relaxation of COVID-19 restriction policy at the turn of 2023 in China, we are very pleased to report that both business and economic recovery had picked up greater momentum in the 2[nd] quarter of 2023 which saw a 40% period-to-period increase in revenue for that period with an overall increase of 21% for the interim period of 2023. Bottom line profit also improved significantly as a result with adjusted net profit (nonIFRS) of RMB13.8 million for the 2[nd] quarter of 2023 and RMB14.5 million for the interim period of 2023. Going forward, we will continue to focus on the integrated smart energy and the smart mobility segments of the Company and continue to expand the businesses in China and transition clean energy business as an integrated energy player.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

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Selected quarterly Financial Information

The following tables provide selected financial information for the three-months periods ended June 30, 2023 and 2022 in Chinese RMB. Presentation in Canadian dollars is for information purposes only.

In thousands of Chinese RMB except percentages and per share amounts 2023 2022 Change % Three months ended June 30,	Six months ended June 30,
	2023 2022 Change %
Continuing Operations
Revenue 117,386 84,000 33,386 40% Gross profit 34,929 23,194 11,735 51%	217,503 179,379 38,124 21%
	63,450 60,543 2,907 5%
% of revenue 29.8% 27.6% 2.2%	29.2% 33.8% -4.6%
Other income 664 860 (196) -23% Other losses, net 240 (32) 272 -850%	1,681 1,309 372 28%
	(18) (93) 75 -81%
Impairment losses reversed (recognized) under expected credit loss model, net 460 (530) 990 -187%	924 (832) 1,756 -211%
Fair value change on derivative financial instrument 2,734 4,520 (1,786) -40% Selling and marketing expenses (8,599) (6,839) (1,760) 26%	4,717 10,750 (6,033) -56%
	(18,013) (14,967) (3,046) 20%
% of revenue 7.3% 8.1% -0.8%	8.3% 8.3% -0.2%
General and administrative expenses (11,058) (10,720) (338) 3%	(20,862) (21,575) 713 -3%
% of revenue 9.4% 12.8% -3.4%	9.6% 12.0% -2.4%
Share of results of associates 3,637 (2,475) 6,112 -247% Finance costs (2,026) (5,155) 3,129 -61% Profit before tax 20,981 2,823 18,158 643%	3,006 (5,630) 8,636 -153%
	(6,248) (9,965) 3,717 -37%
	28,637 19,540 9,097 47%
% of revenue 17.9% 3.4% 14.5%	13.2% 10.9% 2.3%
Income tax expense (4,458) (2,733) (1,725) 63%	(8,651) (8,113) (538) 7%
% of revenue 3.8% 3.3% 0.5%	4.0% 4.5% -0.5%
Profit for the period from continuing operations 16,523 90 16,433 >999%	19,986 11,427 8,559 75%
% of revenue 14.1% 0.1% 14.0% Discontinued operation (note 1)	9.2% 6.4% 2.8%
Profit (loss) for the period from a discontinued operation (19) 352 (371) -105%	18 344 (326) -95%
Profit for the period 16,504 442 16,062 >999%	20,004 11,771 8,233 70%
Profit and total comprehensive income for the period 16,504 442 16,062 >999%	20,004 11,771 8,233 70%
Profit (loss) for the period attributed to owner of the Company
-from continuing operations 17,780 2,688 15,092 561%	23,626 16,567 7,059 43%
-from discontinued operation (11) 212 (223) -105%	11 207 (196) -95%
17,769 2,900 14,869 513%	23,637 16,774 6,863 41%
Profit (loss) for the period attributed to non-controlling interests
-from continuing operations (1,257) (2,598) 1,341 -52%	(3,640) (5,140) 1,500 -29%
-from discontinued operation (8) 140 (148) -106%	7 137 (130) -95%
(1,265) (2,458) 1,193 -49%	(3,633) (5,003) 1,370 -27%
16,504 442 16,062 >999%	20,004 11,771 8,233 70%
Total comprehensive income (expense) attributable to
- Owners of the Company 17,769 2,900 14,869 513%	23,637 16,774 6,863 41%
-Non-controlling interests (1,265) (2,458) 1,193 -49%	(3,633) (5,003) 1,370 -27%
16,504 442 16,062 >999%	20,004 11,771 8,233 70%
EBITDA from continuing operations (note 2) 32,171 16,434 15,737 96% % of revenue 27.4% 19.6% From continuing and discontinued operations RMB RMB Basic EPS 0.27 0.04 Diluted EPS 0.27 0.04 From continuing operations Basic EPS 0.27 0.04 Diluted EPS 0.27 0.04	52,153 47,084 5,069 11%
	24.0% 26.2%
	RMB RMB
	0.36 0.25
	0.36 0.25
	0.36 0.25
	0.36 0.25

Note 1: Discontinued operation is in respect of the termination of the operation of Hebei Riheng Clean Energy Co., Ltd. (“Riheng”)

Note 2: EBITDA is identified and defined under the section “Non-IFRS Financial Measures”.

Note 3: Recognition of share-based expense of RMB nil are included in general administrative expenses for the purpose of presentation in the unaudited condensed interim consolidated financial statements for the three-month period ended June 30, 2023 (Q2 2022: RMB0.2 million).

Note 4: Canadian dollars were converted from RMB at the respective average rates of RMB1.000 to CAD0.1946 and RMB1.000 to CAD 0.1963 for the six-month periods ended 2023 and 2022 respectively.

CF Energy Corp. Management’s Discussion and Analysis

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For the three-month and six-month periods ended June 30, 2023 and 2022

In thousands of of Canadian Dollars except percentages andper share amounts 2023 2022 Change % Continuing Operations Revenue 22,843 16,489 6,354 39% Grossprofit 6,797 4,553 2,244 49% % of revenue 29.8% 27.6% 2.1% Other income 129 169 (40) -24% Other losses,net 47 (6) 53 -883% Impairment losses reversed(recognized)under expected credit loss model,net 90 (104) 194 -187% Fair value change on derivative financial instrument 532 887 (355) -40% Sellingand marketingexpenses (1,673) (1,342) (331) 25% % of revenue 7.3% 8.1% -0.8% General and administrative expenses (2,152) (2,104) (48) 2% % of revenue 9.4% 12.8% -3.4% Share of results of associates 708 (486) 1,194 -246% Finance costs (394) (1,012) 618 -61% Profit before tax 4,084 555 3,529 636% % of revenue 17.9% 3.4% 14.5% Income tax expense (868) (536) (332) 62% % of revenue 3.8% 3.3% 0.5% Profit for theperiod from continuing operations 3,216 19 3,197 >999% % of revenue 14.1% 0.1% 14.0% Discontinued operation(note 1) Profit(loss)for theperiod from a discontinued operation (5) 69 (74) -107% Profit for theperiod 3,211 88 3,123 >999% Profit and total comprehensive income for theperiod 3,212 88 3,124 >999% Profit(loss) for theperiod attributed to owner of the Company - from continuingoperations 3,460 528 2,932 555% - from discontinued operation (2) 43 (45) -105% 3,458 571 2,887 506% Profit (loss) for the period attributed to non-controlling interests - from continuingoperations (245) (510) 265 -52% - from discontinued operation (2) 27 (29) -107% (247) (483) 236 -49% 3,211 88 3,123 >999% Total comprehensive income (expense) attributable to - Owners of the Company 3,458 571 2,887 506% - Non-controllinginterests (247) (483) 236 -49% 3,211 88 3,123 >999% EBITDA from continuing operations(note 2) 6,260 3,226 15,737 96% % of revenue 27.4% 19.6% From continuing and discontinued operations CAD CAD Basic EPS 0.01 0.04 Diluted EPS 0.01 0.04 From continuing operations Basic EPS 0.01 0.04 Diluted EPS 0.01 0.04 Three months ended June 30,	2023 2022 Change % Six months ended June 30,
	42,326 35,212 7,114 20%
	12,347 11,885 462 4%
	29.2% 33.8% -4.6%
	327 257 70 27%
	(4) (18) 14 -78%
	180 (163) 343 -210%
	918 2,110 (1,192) -56%
	(3,505) (2,938) (567) 19%
	8.3% 8.3% -0.2%
	(4,060) (4,235) 175 -4%
	9.6% 12.0% -2.4%
	585 (1,105) 1,690 -153%
	(1,216) (1,956) 740 -38%
	5,572 3,837 1,735 45%
	13.2% 10.9% 2.3%
	(1,683) (1,593) (90) 6%
	4.0% 4.5% -0.5%
	3,889 2,244 1,645 73%
	9.2% 6.4% 2.8%
	4 68 (64) -94%
	3,893 2,311 1,582 68%
	3,893 2,311 1,582 68%
	4,598 3,252 1,346 41%
	3 40 (37) -93%
	4,601 3,292 1,309 40%
	(708) (1,009) 301 -30%
	1 28 (27) -96%
	(707) (981) 274 -28%
	3,894 2,311 1,583 68%
	4,601 3,292 1,309 40%
	(707) (981) 274 -28%
	3,894 2,311 1,583 68%
	10,149 9,243 906 10%
	24.0% 26.2%
	CAD CAD
	0.05 0.05
	0.05 0.05
	0.05 0.05
	0.05 0.05

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

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Result of Operations

Total Revenue and Sales Volume sold

Continuing Operations

Revenue (Summary table)
Total Revenue	Three months	ended June 30,			Six months	ended June	30,
(in RMB'000)	2023	2022	Change	%	2023	2022	Change	%
Gas Distribution Utility
- Gas supply	58,638	30,349	28,289	93%	119,925	84,631	35,294	42%
- Pipeline installation and connection	42,920	43,916	(996)	-2%	70,704	73,107	(2,403)	-3%
- CNG vechicle refueling	8,069	6,803	1,266	19%	14,361	14,764	(403)	-3%
Integrated Smart Energy	4,668	2,690	1,978	74%	6,965	6,444	521	8%
Smart Mobility	3,091	242	2,849	>999%	5,548	433	5,115	>999%
Total Revenue in RMB'000	117,386	84,000	33,386	40%	217,503	179,379	38,124	21%
Total Revenue in CAD'000	22,843	16,489	6,354	39%	42,326	35,212	7,114	20%

Located in an international tourist destination in the PRC's only tropical province, Sanya City, our business is affected by the demand for natural gas generated by tourists in hotel stays and traveling activities such as catering in restaurants.

Total revenue from continuing operations for the three-month period ended June 30, 2023 (“Q2 2023”) was RMB117.4 million, an increase of RMB33.4 million, or 40%, from RMB84.0 million for the three-month period ended June 30, 2022 (“Q2 2022”). Revenue from gas supply in Q2 2023 was RMB58.6 million, an increase of RMB28.3 million, or 93% as compared to RMB30.3 million in Q2 2022. Revenue from pipeline installation and connection in Q2 2023 was RMB42.9 million, a decrease of RMB1.0 million, or 2% as compared to RMB43.9 million in Q2 2022. CNG vehicle refueling revenue in Q2 2023 was RMB8.1 million, an increase of RMB1.3 million, or 19% as compared to RMB6.8 million in Q2 2022.

Total revenue from continuing operations for the six-month period ended June 30, 2023 (“1H 2023”) was RMB217.5 million, an increase of RMB38.1 million, or 21%, from RMB179.4 million for the six-month period ended June 30, 2022 (“1H 2022”). Revenue from gas supply in 1H 2023 was RMB119.9 million, an increase of RMB35.3 million, or 42% as compared to RMB84.6 million in 1H 2022. Revenue from pipeline installation and connection in 1H 2023 was RMB70.7 million, a decrease of RMB2.4 million, or 3% as compared to RMB73.1 million in 1H 2022. CNG vehicle refueling revenue in 1H 2023 was RMB14.4 million, a decrease of RMB0.4 million, or 3% as compared to RMB14.8 million in 1H 2022.

Haitang Bay Smart Energy Project alongside the Meishan Project contributed revenue of RMB4.7 million to the Integrated Smart Energy segment in Q2 2023, an increase of RMB2.0 million, or 74% as compared to RMB2.7 million in Q2 2022. Revenue in 1H 2023 was RMB7.0 million, an increase of RMB0.5 million, or 8% as compared to RMB6.5 million in 1H 2022.

Smart mobility segment comprises the EV battery swap business in various cities. Revenue from the smart mobility segment in Q2 2023 was RMB3.1 million, an increase of RMB2.8 million, a significant increase as compared to Q2 2022. Revenue from the smart mobility segment in 1H 2023 was RMB5.5 million, an increase of RMB5.1 million, a significant increase as compared to RMB0.4 million in 1H 2022.

	Sales volume sold
	Gas sales	Three months ended		June 30,		Six months ended June 30,
	Sales volume sold (m³)	2023	2022	Change	%	2023	2022	Change	%
	Sanya City, Hainan Province	12,445,020	9,398,355	3,046,665	32%	30,620,045	26,412,297	4,207,748	16%
	Other cities	4,400,000	-	4,400,000	100%	4,400,000	-	4,400,000	100%
	Totalgas sales volume(m³)	16,845,020	9,398,355	7,446,665	79%	35,020,045	26,412,297	8,607,748	33%
	CNG refueling
	Sanya CNG/LNG	1,002,205	838,778	163,427	19%	1,896,479	2,069,599	(173,120)	-8%
	Changsha CNG	579,034	489,975	89,059	18%	888,691	1,000,610	(111,919)	-11%
	Total CNG/LNG volume (m³)	1,581,239	1,328,753	252,486	19%	2,785,170	3,070,209	(285,039)	-9%
	**Total sales volume sold (m³) **	18,426,259	10,727,108	7,699,151	72%	37,805,215	29,482,506	8,322,710	28%

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 10

Total sales volume from continuing operations in Q2 2023 was 18.4 million m[3] , an increase of 7.7 million m3, or 72% as compared to 10.7 million m[3] in Q2 2022. The overall increase in gas sales volume in Sanya City is mainly attributed to the continuing return of normal consumption in gas supply during Q2 2023 following the release of COVID restrictions policies and control measures at the end of 2022. The increase in gas sales volume to other cities in Q2 2023 included a 4.4 million m[3] of pipeline gas to a new commercial customer in Guangdong Province.

The increase in consumption of CNG in both Sanya and Changsha City was attributed to the resumption of business activities in Q2 2023 as compared to the decrease in demand in Q2 2022 due to lockdown and containment measures and travel restrictions under COVID.

Gas Sales volume by nature of customers

Gas sales
	Three months ended		June 30,		Six months ended June 30,
Sanya City, Hainan Province	2023	2022	Change	%	2023	2022	Change	%
Gasvolume sold (m³)
Residential customers	4,036,375	4,456,106	(419,731)	-9%	10,857,724	11,868,085	(1,010,361)	-9%
Commercial customers	8,408,645	4,942,249	3,466,396	70%	19,762,321	14,544,212	5,218,109	36%
	12,445,020	9,398,355	3,046,665	32%	30,620,045	26,412,297	4,207,748	16%
Other cities
Gas volume sold (m³)
Commercialcustomers	4,400,000	-	4,400,000	100%	4,400,000	-	4,400,000	100%
Total	16,845,020	9,398,355	7,446,665	79%	35,020,045	26,412,297	8,607,748	33%

Gas sales volume of residential customers in Q2 2023 was 4.0 million m[3] , a decrease of 0.4 million m[3] , or 9% as compared to 4.4 million m[3] in Q2 2022. Following the Government’s policy to remove all COVID restrictions and control measures at the end of 2022, people returned to their normal daily activities and reduced time spent at homestay which attributed to the decrease in demand of gas supply from residential customers.

Gas sales volume for commercial customers in Sanya City in Q2 2023 was 8.4 million m[3] , an increase of 3.5 million m[3] , or 70% as compared to 4.9 million m[3] in Q2 2022. The positive effect of recovery in business was obvious and evidenced by the Sanya City Bureau of Statistics which showed a significant increase in overnight visitors to Sanya City in first quarter of 2023 which carried on into Q2 2023. Both the number of overnight visitors to Sanya City and hotel occupancy rates in Q2 2023 have returned to pre-COVID level in 2019. According to the Sanya City Bureau of Statistics, the average hotel occupancy rates in Sanya City followed the increasing trend of overnight visitors reached between 56.47% to 71.29% in Q2 2023, a significant increase from 19.72% to 39.40% in Q2 2022 at the height of COVID.

Gas sales volume of residential customers in 1H 2023 was 10.9 million m[3] , a decrease of 1.0 million m[3] , or 9% as compared to 11.9 million m[3] in 1H 2022. Gas sales volume for commercial customers in 1H 2023 was 19.7 million m[3] , an increase of 5.2 million m[3] , or 36% as compared to 14.5 million m[3] in 1H 2022.

As an international tourist destination and the only tropical province in the PRC, Sanya City’s traveling activities have a direct impact on gas revenue from commercial customers with traveling activities as a large portion of gas revenue was generated from this sub-segment.

Commercial customers in Sanya City include non-residential customers such as hotels, resorts and restaurants and attributed to approximately 85.0 % of the total volume from commercial customers, whereas social welfare units such as schools, government facilities, and other not-for-profit organizations attributed to approximately 15.0% of the total volume from commercial customers.

Customers outside of Sanya City are sales to a new commercial customer in the Guangdong Province in Q2 2023.

CF Energy Corp. Management’s Discussion and Analysis

Page 11

For the three-month and six-month periods ended June 30, 2023 and 2022

Gas sales by number of customers
	Three months ended June 30,				Six months	ended June	30,
Sanya City, Hainan Province	2023	2022	Change	%	2023	2022	Change	%
Customers newly started gas supply
Residential customers	7,962	5,262	2,700	51%	18,933	11,982	6,951	58%
Commercial customers	20	33	(13)	-39%	43	55	(12)	-22%
Total customers
Residential customers	304,209	274,952	29,257	11%	304,209	274,952	29,257	11%
Commercial customers	1,418	1,348	70	5%	1,418	1,348	70	5%

There was a significant increase in new residential customers in Q2 2023. The residential sector recorded 7,962 new customers in Q2 2023, 2,700 or 51% more as compared to Q2 2022. The increase in new residential customers is attributed to the connection of gas supply to the temporary housing for relocating residences of certain old residential areas in Sanya city under the government policy of city planning and organic growth of residential customers. 20 new commercial customers in Q2 2023 as compared to 33 for Q2 2022.

18,933 and 43 new residential and commercial customers respectively were obtained in 1H 2023, as compared to 11,982 and 55 new residential and commercial customers respectively were obtained in 1H 2022.

There was a total of 304,209 residential customers and 1,418 commercial customers as at June 30, 2023, as compared to 274,952 residential customers and 1,348 commercial customers as at June 30, 2022.

Gas sales revenue by customers

Gas sales
Sanya City, Hainan Province	Three months	ended June 30,			Six months	ended June	30,
Gas sales revenue	2023	2022	Change	%	2023	2022	Change	%
(in RMB'000)
Residential customers	11,542	11,521	21	0%	29,861	31,531	(1,670)	-5%
Commercial customers	32,280	17,669	14,611	83%	74,235	50,987	23,248	46%
	43,822	29,190	14,632	50%	104,096	82,518	21,578	26%
Other cities
Gas sales revenue
(in RMB'000)
Commercial customers	14,816	1,159	13,657	>999%	15,829	2,113	13,716	649%
Total gas sales by customers	58,638	30,349	28,289	93%	119,925	84,631	35,294	42%

Gas sales revenue from residential customers for Sanya City in Q2 2023 was RMB11.5 million, same as that of RMB11.5 million in Q2 2022. Gas sales revenue from commercial customers for Sanya City in Q2 2023 was RMB32.3 million, an increase of RMB14.6 million, or 83%, from RMB17.7 million in Q2 2022.

Gas sales revenue from residential customers in Sanya City in 1H 2023 was RMB29.9 million, a decrease of RMB1.6 million, or 5% from RMB31.5 million in 1H 2022. Gas sales revenue from commercial customers in Sanya City in 1H 2023 was RMB74.2 million, an increase of RMB23.2 million, or 46%, from RMB51.0 million in 1H 2022.

Sales revenue in Sanya City was driven by the sales volume and gas selling price. As mentioned earlier in this MD&A, the 2022 Gas Selling Price impacts the profitability of the Group’s natural gas distribution business segment. The weighted average Gas Selling Price per m[3] for commercial customers in Sanya City was RMB4.31 and RMB4.22 in Q2 and 1H 2023 as compared to RMB4.02 and RMB3.93 in Q2 and 1H 2022 respectively. The positive impact of 2022 Gas Selling Price on commercial customers was 7% for both periods of Q2 and 1H 2023. However, the third level of consumption in residential customers was less than 5% of total sales to residential customers and its effect on selling price was minor.

While the price for social welfare units such as schools, government facilities, and other not-for-profit organizations which are classified under commercial customers remained unchanged at RMB3.23 and the first and second level of consumption in residential customers remained unchanged at RMB2.94 and RMB3.53 respectively in both Q2 2023 and Q2 2022.

Gas sales revenue in other cities included sales of 4.4 million m[3] of pipeline gas to a new commercial customer in the Guangdong Province of RMB 13.1 million which commenced in June 2023 and the gas transmission fee charged for natural gas transmitted to the Datang Gaoyao Plant in Zhaoqing City, Guangdong Province which

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 12

amounted to RMB2.7 million in 1H 2023, an increase of RMB0.6 million, or 28% as compared to RMB2.1 million in 1H 2022.

Pipeline installation and connection

Sanya City, Hainan Province
Pipeline connection	Three months ended June 30,				Six months	ended June	30,
by number of customers	2023	2022	Change	%	2023	2022	Change	%
Customers newly connected
Residential customers	8,426	5,150	3,276	64%	14,929	8,958	5,971	67%
Commercial customers	21	23	(2)	-9%	46	48	(2)	-4%
Total customers connected
Residential customers	378,087	344,939	33,148	10%	378,087	344,939	33,148	10%
Commercial customers	1,521	1,413	108	8%	1,521	1,413	108	8%
Pipeline connection revenue	Three months ended June 30,				Six months	ended June	30,
(in RMB'000)	2023	2022	Change	%	2023	2022	Change	%
Residential customers	35,763	37,451	(1,688)	-5%	59,137	63,314	(4,177)	-7%
Commercial customers	7,157	6,465	692	11%	11,567	9,793	1,774	18%
Total	42,920	43,916	(996)	-2%	70,704	73,107	(2,403)	-3%

Pipeline installation and connection revenue from residential customers in Q2 2023 was RMB35.7 million, a decrease of RMB1.7 million, or 5% from RMB37.4 million in Q2 2022. Pipeline installation and connection revenue from commercial customers in Q2 2023 was RMB7.2 million, an increase of RMB0.7 million, or 11% from RMB6.5 million in Q2 2022.

Pipeline installation and connection revenue from residential customers in 1H 2023 was RMB59.1 million, a decrease of RMB4.2 million, or 7% from RMB63.3 million in 1H 2022. Pipeline installation and connection revenue from commercial customers in 1H 2022 was RMB11.6 million, an increase of RMB1.8 million, or 18% from RMB9.8 million in 1H 2022.

There were 8,426 and 21 new residential and commercial customers in Q2 2023 respectively as compared to 5,150 and 23 new residential and commercial customers in Q2 2022 respectively. There were 378,087 residential customers and 1,521 commercial customers as at June 30, 2023, as compared to 344,939 residential customers and 1,413 commercial customers as at June 30, 2022 respectively. No star-rated hotel was connected in Q2 2023 and the commercial customers connected are all small catering business owners.

Pipeline installation and connection revenue share a similar recovery pattern as gas sales in Sanya City where commercial sector experienced an increase of revenue in Q2 and 1H 2023 while residential sector experienced a decrease of revenue in Q2 and 1H 2023. Such pattern was evidenced by less homestay and recovery of business activities in post-COVID period.

CNG Vehicle refueling

CNG refueling
Vehicles refueling stations
CNG Sales Volume	Three months ended June 30,				Six months ended June		30,
(in m³)	2023	2022	Change	%	2023	2022	Change	%
Sanya CNG/LNG	1,002,205	838,778	163,427	19%	1,896,479	2,069,599	(173,120)	-8%
Changsha CNG	579,034	489,975	89,059	18%	888,691	1,000,610	(111,919)	-11%
Total Sales Volume (m³)	1,581,239	1,328,753	252,486	19%	2,785,170	3,070,209	(285,039)	-9%
Total Revenue	Three months ended June 30,				Six months ended June		30,
(in RMB'000)	2023	2022	Change	%	2023	2022	Change	%
CNG Sales Revenue
Sanya CNG/LNG	4,867	4,272	595	14%	9,446	9,887	(441)	-4%
Changsha CNG	3,202	2,531	671	27%	4,915	4,877	38	1%
Total Revenue (RMB'000)	8,069	6,803	1,266	19%	14,361	14,764	(403)	-3%

Total sales volume of vehicle refueling stations in Sanya and Changsha in Q2 2023 was 1.6 million m[3] , an increase of 0.3 million m[3] , or 19% from 1.3 million m[3] in Q2 2022. Total sales volume of vehicle refueling stations in Sanya and Changsha in 1H 2023 was 2.8 million m[3] , a decrease of 0.2 million m[3] , or 9% from 3.0 million m[3] in 1H 2022.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 13

Although revenue in Sanya CNG/LNG station was in line with the trend of general volume increase, the magnitude is different as only part of the cost of LNG can be transferred to customers during the period. In Q2 2023, LNG purchase cost stopped its increasing trend which led to a decrease in the average selling price of RMB0.3 per m[3] , or 6% from RMB5.1 per m[3] in Q2 2022 to RMB4.8 per m[3] in Q2 2023. Customers switched back to CNG/LNG taxi for daily travel due to the reduction in price in Q2 2023. Sales volume in Changsha City recorded an increase in Q2 2023 due to the increase in travel activities during post-COVID but a decrease in 1H 2023 due to the reduction in consumption of CNG caused by the common usage of EV taxis.

Integrated Smart Energy

Integrated smart Energy
Integrated Smart Energy System	Three months	ended June 30,			Six months	ended June	30,
Sanya City, Hainan Province	2023	2022	Change	%	2023	2022	Change	%
(in RMB'000)
Commerical customers	3,406	1,591	1,815	114%	4,724	4,235	489	12%
Integrated district energy distribution
Meishan City, Sichuan Province
(in RMB'000)
Commerical customers	1,262	1,099	163	15%	2,241	2,209	32	1%
Total	4,668	2,690	1,978	74%	6,965	6,444	521	8%

The integrated smart energy segment comprises the Haitang Bay Integrated Smart Energy Project (integrated smart energy system) which commenced commercial operation in September 2021 and the Meishan Project (integrated district energy distribution project) which commenced commercial operation in May 2021. The Haitang Bay Integrated Smart Energy Project is in its implementation stage. As at June 30, 2023, four of the hotels in Haitang Bay are currently using the system and the connections of three other hotels are under construction.

Along with the recovery of the tourist industry in 2023, the Haitang Bay Smart Energy Project reported revenue of RMB3.4 million in Q2 2023, an increase of RMB1.8 million, or 114% as compared to RMB1.6 million in Q2 2022. Revenue in 1H 2023 was RMB4.7 million, which were similar to that of 1H 2022.

Revenue from Meishan Project in Q2 2023 and 1H 2023 were RMB1.3 million and RMB2.2 million respectively, which were similar to that in Q2 2022 and 1H 2022.

Smart Mobility

Smart Mobility
EV Battery Swap Revenue	Three months	ended June 30,			Six months	ended June	30,
(in RMB'000)	2023	2022	Change	%	2023	2022	Change	%
Sanya and Haikou City, Hainan Pro	1,244	241	1,003	416%	2,127	424	1,703	402%
Beihai City, Guangxi Province	1,543	-	1,543	100%	2,912	-	2,912	100%
Other cities	304	1	303	100%	509	9	500	>999%
Total Revenue (RMB'000)	3,091	242	2,849	>999%	5,548	433	5,115	>999%

The smart mobility segment comprises the EV battery swap business. As at June 30, 2023, there are a total of seven (7) EV battery swap stations currently in operation.

The overall increase in revenue for both the Q2 2023 and 1H 2023 periods reflected mainly the contribution from the new EV battery swap stations in Beihai City of Guanxi Province.

Foreign exchange rates

CF Energy reports its financial results in Renminbi (RMB), its functional currency as it earns all its revenues and incurs most of its expenses in RMB. As the Company is listed in TSX-V Canada, certain financial information and/or comparative analysis are also presented in Canadian dollars (CAD), and fluctuations in the exchange rates between RMB and CAD should also be considered.

The exchange rate between the RMB and the CAD is summarized below.

CF Energy Corp. Management’s Discussion and Analysis

Page 14

For the three-month and six-month periods ended June 30, 2023 and 2022

One Chinese RMB to Canadian dollars	Q2 2023	**Q2 2022 **	% change
Spot rate at the end of theperiod	0.1825	0.1924	-5.1%
Averageratefor the period	0.1946	0.1963	-0.9%

Gross margin

Gross profit from continuing operations in Q2 2023 was RMB34.9 million, an increase of RMB11.7 million, or 51%, from RMB23.2 million in Q2 2022. Gross profit margin in Q2 2023 was 29.8%, an increase of 2.1 percentage points as compared to 27.6% in Q2 2022. The increase in gross profit margin from continuing operations in Q2 2023 as compared to Q2 2022 was attributed to the reduction in LNG purchasing price in Q2 2023.

Gross profit from continuing operations in 1H 2023 was RMB63.4 million, an increase of RMB2.9 million, or 5%, from RMB60.5 million in 1H 2022. Gross profit margin in 1H 2023 was 29.2%, a decrease of 4.6 percentage points as compared to 33.8% in 1H 2022.

In 1H 2023, the drop in overall gross profit margin as compared to 1H 2022 was attributed to the increase in the purchase price of pipeline gas which resulted from the renewal of the two-year gas purchase contracts with China National Offshore Oil Corporation (“CNOOC”) which became effective from April 1, 2022, alongside the negative margin for the Integrated Smart Energy segment while continuing with the effort to procure further hotel users to achieve critical mass.

The negative gross profit margin for the Integrated Smart Energy segment from continuing operations in 1H 2023 as compared to 1H 2022 was mainly attributable to fixed costs such as depreciation which comprised approximately 50.6% (1H 2022: 46.1%) of cost of sales in the Integrated Smart Energy segment that could not be fully absorbed in the early stage of recovery of business after COVID.

Although average purchase price of LNG experienced a drop in Q2 2023 from RMB5.08 per m[3] in Q2 2023 as compared to RMB4.85 per m[3] in Q2 2022, only Sanya CNG/LNG station consumes LNG which contributed 10.8% on the total cost of gas purchased in the Group in 1H 2023. This positive effect reflected the increase in gross margin ratio in Q2 2023.

Operating expenses

Selling and marketing expenses of continuing operations in Q2 2023 were RMB8.6 million, an increase of RMB1.8 million, or 26% from RMB6.8 million in Q2 2022. Selling and marketing expenses as a percentage of sales in Q2 2023 was 7.3%, a decrease of 0.8 percentage points as compared to 8.1% in Q2 2022. The increase in Q2 2023 was mainly attributable to the increase in selling and marketing activities in Q2 2023 under postCOVID.

Selling and marketing expenses of continuing operations in 1H 2023 were RMB18.0 million, an increase of RMB3.0 million, 20% from RMB15.0 million in 1H 2022. Selling and marketing expenses as a percentage of sales in 1H 2023 was 8.3% in 1H 2023, same as that in 1H 2022. The increase in Q2 and 1H 2023 was mainly attributable to the resumption of selling and marketing activities in Q2 and 1H 2023 after COVID.

General and administrative expenses of continuing operations in Q2 2023 were RMB11.1 million, remained at the similar level as compared to in Q2 2022. General and administrative expenses as a percentage of sales in Q2 2023 was 9.4%, a decrease of 3.4 percentage points as compared to 12.8% in Q2 2022.

General and administrative expenses of continuing operations in 1H 2023 were RMB20.9 million, remained at the similar level as compared to 1H 2022. General and administrative expenses as a percentage of sales in 1H 2023 was 9.6%, a decrease of 2.4 percentage point as compared to 12.0% in 1H 2022.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 15

Finance Costs

Finance costs from continuing operations in Q2 2023 were RMB 2.0 million, a decrease of RMB3.1 million, or 61% from RMB5.1 million in Q2 2022. Finance costs from continuing operations in 1H 2023 were RMB6.2 million, a decrease of RMB3.7 million, or 37 % from RMB9.9 million in 1H 2022. Finance costs reflected interests on lease liabilities, interest on Convertible Debentures, short-term bank borrowings, long-term bank financing and other borrowings for the development of the Group’s projects under development, net of RMB4.4 million (1H 2022: RMB2.0 million) capitalized on projects under development. Borrowing cost for Haitang Bay Integrated Smart Energy Project commenced capitalization on the construction of pipelines in 2023.

Share of results of associates

Share of profit of associates was RMB3.6 million and RMB3.0 million in Q2 2023 and 1H 2023 respectively (Q2 2022: share of loss RMB2.5 million; 1H 2022: share of loss of RMB5.6 million). The share of results of associates mainly represents the share of profit of the Group’s 40% held associate, Pingxiang Xinao Changfeng Gas Co., Ltd. (“Pingxiang Xinao CF”). Business of Pingxiang Xinao CF was heavily impacted by the increasing LNG purchase prices in 2022 which cannot be transferred to customers and resulted a loss in first half of 2022. Commencing from the third quarter of 2022, benefiting from the successful connection of gas pipeline, Pingxiang Xino CF’s reliance on LNG reduced and resulted in a net profit situation.

EBITDA from continuing operations

EBITDA from continuing operations (non-IFRS measure as identified and defined under section “Non-IFRS Measures”) in Q2 2023 was RMB32.2 million, an increase of RMB15.8 million, or 96%, from RMB16.4 million in Q2 2022. EBITDA from continuing operations in 1H 2023 was RMB 52.2 million, an increase of RMB5.1 million, or 11%, from RMB47.1 million in 1H 2022.

EBITDA from continuing operations included a gain of RMB2.7 million in Q2 2023 (Q2 2022: gain of RMB4.5 million) and a gain of RMB4.7 million in 1H 2023 (1H 2022: RMB10.7 million) on fair value change on derivative financial instrument of loan discharge agreement relating to the commitment of the estate of Mr. Huajun Lin to subscribe for the common shares of the Company in the amount of RMB36.0 million (please refer to the section headed “Related Party Transactions” on pages 20 and 21 of the MD&A for more details), which is in line with IFRS, has been classified as a “derivative financial instrument”, subject to periodic fair value assessment and adjustment (as applicable). The derivative financial instrument in question was initially recognized at fair value at the date when the derivative contract was entered into and is subsequently remeasured to its fair value at the end of each reporting period.

The market price of the common shares of the Company was CAD0.26 as at June 30, 2023, CAD0.28 as at March 31, 2023 and CAD0.32 as at December 31, 2022 respectively. A gain of RMB2.7 million in fair value change on derivative financial instrument of loan discharge agreement was recognized in Q2 2023 which arose from a downward difference of RMB0.02 between the market price of the Company between June 30, 2023 and March 31, 2022. In contrast, a gain of RMB4.8 million in fair value change on derivative financial instrument of loan discharge agreement was recognized in 1H 2023 as the market price of the Company as at June 30, 2022 and December 31, 2022 had a downward difference of RMB0.06.

On a comparable basis, after excluding the effects of the above-mentioned fair value change on derivative financial instrument, recognition of share-based payment expenses of RMB nil (Q2 2022: RMB0.2 million), the adjusted EBITDA from continuing operations in Q2 2023 was RMB29.4 million, an increase of RMB17.3 million, or 143%, from RMB12.1 million in Q2 2022. Adjusted EBITDA from continuing operations in 1H 2023 was RMB46.7 million, an increase of RMB10.0 million, or 27 %, from RMB36.7 million in 1H 2022.

Profit for the period from continuing operations

The Group reported a net profit from continuing operations of RMB16.5 million in Q2 2023, an increase of RMB16.4 million from RMB0.1 million in Q2 2022. Net profit from continuing operations in 1H 2023 was RMB20.0 million, an increase of RMB8.6 million, or 75%, from RMB11.4 million in 1H 2022.

Earnings per share (“EPS”) from continuing operations was RMB0.27 (CAD0.04) (basic and diluted) in Q2 2023 as compared to RMB0.04 (CAD0.01) (basic and diluted) per share in Q2 2022. Earnings per share (“EPS”) from continuing operations was RMB0.36 (CAD0.07) (basic and diluted) in 1H 2023 as compared to RMB0.25 (CAD0.05) (basic and diluted) per share in 1H 2022.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 16

Adjusted net profit for the period from continuing operations (non-IFRS)

In RMB thousands (except for % figures)	2023 2022 Change % Three months ended June 30,	2023 2022 Change % Six months ended June 30,
Continuing operations Net profit for the period from continuing operations Non-recurring items Fair value change on derivative financial instrument Recognition of share-based payments Government financial assistance	16,522 90 16,432 >999% (2,734) (4,520) 1,786 40% - 190 (190) -100% - - - 0%	19,985 11,427 8,558 75% (4,717) (10,750) 6,033 56% - 373 (373) -100% (765) - (765) 100%
Adjusted net profit (loss) for the period from continuing operations(non-IFRS)	13,788 (4,240) 18,028 425%	14,503 1,050 13,453 >999%

All non-GAAP measures have been identified. On a comparable basis (please refer to the section headed “EBITDA from continuing operations” above for more details), after excluding the gain in fair value change on derivative financial instrument of loan discharge agreement of RMB2.7 million (Q2 2022: RMB4.7 million), recognition of share-based payment expenses of RMB nil (Q2 2022: RMB 0.2 million), the Company reported an adjusted net profit of RMB13.8 million in Q2 2023, an increase of RMB18.0 million, or 425 % from an adjusted net loss of RMB4.2 million as reported in Q2 2022.

After excluding the gain in fair value change on derivative financial instrument of loan discharge agreement and recognition of share-based payments and one-off government financial assistance of RMB0.8 million (1H 2022: RMB nil), the Company reported an adjusted net profit of RMB14.5 million in 1H 2023, an increase of RMB13.5 million, as compared to RMB1.0 million as reported in 1H 2022.

Adjusted EPS was derived from the adjusted net profit for the period from continuing operations (non-IFRS) divided by the weighted average number of ordinary shares for the purpose of diluted earnings per share. Adjusted EPS from continuing operations was RMB0.21 (CAD0.04) per share (basic and diluted) in Q2 2023 as compared to adjusted loss per share from continuing operations of RMB0.06 (CAD0.01) (basic and diluted) in Q2 2022. Adjusted EPS from continuing operations was RMB0.0.22 (CAD0.04) per share (basic and diluted) in 1H 2023 as compared to adjusted EPS from continuing operations of RMB0.02(CAD0.00) (basic and diluted) in 1H 2022.

Profit (loss) for the period from discontinued operation

Discontinued operation related to the termination of the operation of Riheng as part of the Group's policy to realign its future business strategies with major focus on clean energy solutions with high growth potential. Profit from discontinued operation in 1H 2023 was RMB18,000 (1H 2022: profit of RMB0.3 million) which was attributed to a recovery of the accounts receivable amount that was written off in the previous period.

Selected quarterly results

The following set out the Company’s unaudited consolidated quarterly results for the most recent eight quarters: In thousands of RMB, except per share amounts

Quarterly data (RMB '000) except per share amounts	2023	2023	2022	2022	2022	2022	2021	2021
	Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3
Revenue	117,386	100,117	93,270	61,590	84,000	95,379	105,239	82,612
Gross profit	34,929	28,521	29,260	17,865	23,194	37,349	32,182	33,757
Profit(loss)for theperiod from continuingoperations	16,523	3,463	(6,973)	(426)	90	11,337	(5,689)	9,521
Profit (loss) for the period attributed to owners of the Company from continuing operations	17,780	5,846	(1,513)	1,927	2,688	13,879	(4,151)	9,664
EPS(loss)of continuingand discontinued operations
- basic (RMB) - diluted(RMB)	0.27 0.27	0.09 0.09	(0.02) (0.03)	0.03 0.03	0.04 0.04	0.21 0.21	(0.07) (0.06)	0.15 0.14
EPS (loss)fromcontinuing operations
- basic (RMB) -diluted (RMB)	0.27 0.27	0.09 0.09	(0.02) (0.03)	0.03 0.03	0.04 0.04	0.21 0.21	(0.06) (0.05)	0.15 0.14

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 17

Selected Financial Data

(RMB000's)	**June 30, 2023 **	December 31, 2022
Bank balances and cash and fixed term bank deposit	122,450	115,116
Net current liabilities	(117,422)	(128,171)
Adjusted working capital (note1)	(4,097)	(33,288)
Property and equipment	820,356	805,716
Right-of-use of assets	75,445	74,830
Total assets	1,300,766	1,245,108
Non-current liabilities	446,759	419,766
Shareholders'equity	446,567	434,143

note 1: This financial measure is identified and defined under the section “Non-IFRS Financial Measures”

Bank balance and cash and fixed term bank deposit increased by RMB7.4 million from RMB115.1 million as at December 31, 2022 to RMB122.5 million as at June 30, 2023, primarily resulting from the net effect of the cash from operating activities of RMB2.0 million, cash used for acquisition of property and equipment of RMB31.4 million, and net drawdown of new short-term borrowings and long-term debt of RMB26.6 million and a receipt of government grant relating to assets of RMB12.1 million in 1H 2023.

Adjusted Working Capital

The adjusted working capital (see “Non-IFRS Financial Measures”) was negative RMB4.1 million as at June 30, 2023, a decrease of RMB29.1 million, from the negative adjusted working capital of RMB33.3 million as at December 31, 2022. Adjusted working capital excludes the receipt in advance from customers included in contract liabilities of RMB63.3 million related to receipts received in advance from customers from pipeline installation and connection projects prior to commencement and natural gas sales and short-term bank borrowings of RMB50.0 million.

Liquidity and Capital Resources

The Group’s principal sources of short-term funding are existing bank and cash balances, operating cash flows and borrowings under its lines of credit and long-term funding are bank-term loan facilities provided to the Group which amounted to RMB50.0 million and RMB442.6 million respectively as at June 30, 2023.

In March 2023, the Group entered into an agreement with the Bank of China, Sanya to secure a long-term bank loan facilities of RMB45.0 million in which RMB25.0 million was drawn down up to June 30, 2023 to facilitate the construction of new office building.

The 2-year unsecured convertible debentures (“Convertible Debentures”) in the aggregate principal amount of CAD600,000 matured in May 2023. The Company was informed by the Debenture Holders that they do not intend to exercise the Conversion Right to convert the Convertible Debentures into Shares upon maturity and the Debenture Holders agreed to extend the settlement of the redemption of the Convertible Bonds from maturity date to early June 2023 which was subsequently settled in June 2023.

The Group entered into agreements with a third party leasing company (the “Buyer”) for (i) the disposal of an EV station and certain EV batteries in Beihai City, Guangxi Province at a consideration of RMB12,000,000; and (ii) leasing back of the same assets from the Buyer for a lease period of 5 years at an interest rate of 5-year LPR. The agreement included a repurchase option to buyback the same asset at a consideration equates to the total lease payments in (ii) above plus other charges. The Group considered the consideration received as other borrowings and has initially recognized it as borrowing. The amount is repayable in twenty (20) quarterly equal installments till 2028.

The Company’s principal sources of liquidity are cash provided from operation, including advance payments from residential and commercial and industrial customers related to construction contracts for gas connection included in contract liabilities, refund liabilities and access to credit facilities and capital resources.

The Company’s primary short-term cash requirement is to fund working capital and repay the remainder of its outstanding withdrawal on its lines of credit as they fall due.

The Company’s medium and long-term cash goals are to fund the construction of its pipeline networks and gas distribution facilities and projects under development, to acquire capital and intangible assets for its growth initiatives in China and to repay its long-term loan facilities from banks.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 18

In the short term, management does not expect to face any liquidity problems considering its current bank and cash position, available undrawn bank facilities and continue to generate cash flows from operations in the short and long term. During the period ended and as at June 30, 2023, the Group was in compliance with all of its debt covenants.

The net gearing ratio is calculated by dividing interest-bearing borrowings, convertible debentures and lease liabilities, less cash and cash equivalents, by total equity attributable to equity shareholders of the Company. The Group’s net gearing ratio was approximately 84.5% as at June 20, 2023, an increase of 1.4 percentage points as compared to 83.1% as at December 31, 2022.

Capital Commitments

As at June 30, 2023, capital expenditure in respect of the acquisition of property and equipment and the construction of pipelines under development contracted for but not provided in the unaudited condensed interim consolidated financial statements amounted to RMB67.3 million, a decrease of RMB43.4 million as compared to RMB110.7 million as at December 31, 2022. The decrease in capital commitment was attributable to the cancellation of a purchase contract of RMB 51.0 million in Q2 2023 in relation to the purchase of EV stations in a bundle which will be replaced by single purchase contract instead. Capital commitments as at June 30, 2023 also included a remaining initial investment of RMB0.8 million for the 2% equity interests in Hainan Shanglian Investment Co., Ltd.

Share Capital

As at June 30, 2023, the Company has 65,885,155 common shares and 3,400,000 stock options outstanding. 50,000 share options granted on August 10, 2017 expired/forfeited in the first quarter of 2023. The Company has no warrants outstanding as of the date of this MD&A.

On December 18, 2020, the Company awarded a total of 2,090,000 shares to senior management and employees of the Group under the Employee Stock Award Plan, of which 25% of the Award Shares, 522,500 shares at the price of CAD0.43 per common share which were not subject to any conditions were issued. 547,500 shares award rights expired/forfeited in 2021 as participants failed to satisfy the agreed financial performance condition and service condition for the year ended December 31, 2021. The remaining 1,020,000 shares award rights was forfeited in 2022 as participants failed to satisfy the agreed performance condition for the year ended December 31, 2022.

Non-IFRS Financial Measures

This MD&A contains certain financial measures that do not have any standardized meaning prescribed by IFRS. Therefore, these financial measures may not be comparable to similar measures presented by other companies or issuers. Investors are cautioned that these measures should not be construed as alternatives to net income or to cash provided by operating, investing, and financing activities determined in accordance with IFRS, as indicators of its performance. The Group provides these measures to assist investors in determining its ability to generate income and cash provided by operating activities and to provide additional information on how these cash resources are used. These measures are listed and defined below.

EBITDA from continuing operations

EBITDA is defined herein as earnings before income tax expense, finance costs, depreciation and amortization. EBITDA does not have any standardized meaning prescribed by IFRS and therefore may not conform to the definition used by other companies or issuers. A reconciliation of net profit from continuing operations to EBITDA and adjusted EBITDA are presented in the MD&A as follows:

Page 19

CF Energy Corp.

Management’s Discussion and Analysis

For the three-month and six-month periods ended June 30, 2023 and 2022

In RMB thousands (except for % figures)	Three months ended June 30,	Six months ended June 30,
	2023 2022 Change %	2023 2022 Change %
Continuing operation
Net profit for the period from continuing operations	16,522 90 16,432 >999%	19,985 11,427 8,558 75%
Add: Finance costs Income tax expense Depreciation and amortization
	2,026 5,155 (3,129) -61%	6,248 9,965 (3,717) 37%
	4,458 2,733 1,725 63%	8,651 8,113 538 -7%
	9,164 8,456 708 8%	17,268 17,579 (311) -2%
EBITDA for the period from continuing operations Non-recurring items Fair value change on derivative financial instrument	32,170 16,434 15,736 96%	52,152 47,084 5,068 11%
	(2,734) (4,520) 1,786 -40%	(4,717) (10,750) 6,033 -56%
Recognition of share-based payments Government financial assistance	- 190 (190) -100% - - - 0%	- 373 (373) -100% (765) - (765) 100%
Adjusted EBITDA from continuing operations	29,436 12,104 17,332 143%	46,670 36,707 9,963 27%

Adjusted working capital

Adjusted working capital is calculated as current assets less adjusted current liabilities. Adjusted current liabilities is calculated as current liabilities, excluding the receipts in advance from customers from pipeline installation and connection project prior to commencement and natural gas sales, included in contract liabilities which represented the Group's obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customers. Receipt in advance from customers from pipeline installation and connection will be recognized as income upon the performance obligations are fulfilled and receipt in advance from customers for natural gas sales will be recognized as income upon the consumption of natural gas. Both amounts are deferred income in nature and non-refundable to customers, hence are excluded in the calculation of adjusted current liabilities. Adjusted current liabilities also excluded the short-term bank loan as lines of credit in the PRC are typically renewable when due.

The Group believes that the working capital as a supplemental measure, as adjusted based on the above parameters, provides a more appropriate indication of the Group’s ability to settle its debt obligations as they fall due.

The calculation of adjusted working capital is provided in the table below.

he calculation of adjusted working capital is provided in the table below.	he calculation of adjusted working capital is provided in the table below.
In RMB thousands
As at Note June 30, 2023 December 31, 2022
Current assets Less: Current liabilities Net current liabilities Add: Receipts in advance from customers 1 Add: Short-term bank borrowings	290,018 263,028 (407,440) (391,199)
	(117,422) (128,171) 63,325 52,283 50,000 42,600
Adjusted working capital	(4,097) (33,288)

Note 1: Receipts in advance from customers in respect of pipeline installation and connection projects prior to commencement and natural gas sales are included in contract liabilities.

As at June 30, 2023, the Group’s current liabilities exceeded its current assets by RMB117.4 million, a decrease of RMB10.8 million in net current liabilities as compared to RMB128.2 million as at December 31, 2022 was mainly attributed to the increase of cash and bank balance of RMB7.4 million in 1H 2023 as compared to December 31, 2022.

In view of these circumstances, the management of the Group has given consideration to the future liquidity and performance of the Group and its available sources of finance in assessing whether the Group will have sufficient financial resources to continue as a going concern. Management is satisfied that the Group will have sufficient financial resources to meet its financial obligations including capital commitments. Taking into account the Group's cash flow projections, including the term facilities, unutilized bank facilities, the Group's ability to renew or refinance existing banking facilities upon maturity and the Group's future capital expenditure in respect of its non-cancellable capital commitments, management considers that it has sufficient working capital to meet in full its financial obligations as they fall due for at least the next twelve months from the end of the reporting period and accordingly, the audited consolidated financial statements have been prepared on a going concern basis.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 20

Free Cashflow from continuing operations

Free cash flow is calculated as earnings before interest, net of tax, add/minus non-cash expense and income and reduced/increased by the change in net current liabilities and capital expenditure of the Company.

The calculation of free cash flow is provided in the table below:

In RMB thousands	2023 2022 Six months ended June 30,
Net profit for the period from continuing operations Add: Finance costs Income tax expense EBIT Effective tax rate EBIT net of tax Non-cash income and expense Depreciation and amortization Impairment losses (reversed) recognized under expected loss model, net Share of profit of associates Recognition of share-based payments (Gain) loss on disposals of property and equipment Fair value change on derivative financial instrument	19,986 11,427 6,248 9,965 8,651 8,113 34,885 29,505 30% 42% 24,347 17,255 17,268 17,579 (924) 832 (3,006) 5,630 - 373 39 (170) (4,717) (10,750)
Unrealized exchange loss on monetary items	26 106
Change in net current liabilities Less: Capital expenditures	(10,749) (14,635) (31,800) (33,821)
Free Cash Flow	(9,519) (17,601)

Negative free cash flow from continuing operations in 1H 2023 amounted to RMB9.5 million, a decrease of RMB8.1 million as compared to the negative free cash flow of RMB17.6 million in Q2 2022.

Related Party Transactions

The following balances were outstanding from related parties at the end of the reporting period:

Name of related party Balances Pingxiang Xiao CF	Relationship Terms June 30, Dec 31, 2023 2022 RMB'000 RMB'000 Associate Non-trade, unsecured and interest bearing (Note) 12,423 12,423 _ _ _ _

Note: The balance represented a loan of RMB11.0 million to Pingxiang Xinao CF plus interest accrued until October 16, 2019 when the Group entered a supplemental agreement with Ping Xiang Xinao CF to pay additional interest which had been bearing interest at 4.35% per annum until October 2019.

The loan discharge agreement (the “Loan Discharge Agreement”) dated May 25, 2017 entered among Sanya Changfeng Offshore Natural Gas Distribution Co., Ltd. (“CF China”) and Mr. Lin, provided that if the HKIPO of the Company's common shares on The Stock Exchange of Hong Kong Limited has not been completed on or prior to June 28, 2019, the Group shall have the right for a period of 90 days following June 28, 2019 to require Mr. Lin, directly or indirectly, to subscribe for common shares of the Company on the TSX-V, in the amount of RMB36.0 million or its CAD equivalent.

CF Energy Corp. Management’s Discussion and Analysis For the three-month and six-month periods ended June 30, 2023 and 2022

Page 21

On July 26, 2019, the Company announced that the Board of the Company has determined to exercise the Company’s option pursuant to the Loan Discharge Agreement dated May 25, 2017 among the Company, CF China and Mr. Lin to require the Estate to invest an aggregate amount of RMB36.0 million (approximately CAD6,861,587) in common shares of the Company (the “Investment”). Accordingly, the Estate will make the Investment at a price of CAD0.68 per common share representing a premium of approximately 6.3% over the closing price of the common shares of the Company on July 24, 2019. Following the Investment, based on the prevailing exchange rate, the Estate will hold approximately 44,774,068 common shares or approximately 59.43% of the total outstanding common shares of the Company.

Notices for the Investment (the “Notices”) were sent to the four beneficiaries of the Estate. Among the four beneficiaries of the Estate, Siyin Lin (Ann) and Siqin Lin had provided written statements to the Company, respectively, that they were in full agreement to honor the Investment. The remaining two beneficiaries of the Estate, namely Mingfei He and Zhipei (Trevor) Lin, however, have not agreed to honor the Investment. On June 2, 2021, Ann Lin sent in her letter to the Company and CF China reiterated her consent to honor the Investment. Since the issuance of the Notices, the Board and management of the Company have made a continuous effort of communication with Mingfei He and Trevor Lin requesting and persuading them to honor the Investment. However, given the time that has passed for the Estate to subscribe for shares, the Company is left with no alternative but to take legal action to enforce the Loan Discharge Agreement and the Investment.

On June 21, 2021, the Company together with CF China filed a contract dispute case (the “Claim”) against the Estate in the Sanya Intermediate People’s Court, Sanya City, Hainan Province, the PRC to enforce the execution of the Loan Discharge Agreement and the Investment. Subsequent to the filing of the Claim, on June 23, 2021, Ann Lin sent her letter to the Company and CF China reiterated her consent to honor the Investment, and on June 24, 2021, the Court issued the subpoena requiring all parties related to the Claim to attend the court hearing scheduled to be held on August 31, 2021 in Sanya City, Hainan Province, the PRC. The Claim is now with the High People’s Court of Hainan Province pending appeal.

Risks and Uncertainties

The preparation of unaudited condensed interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. There have been no material revisions to the nature and amount of changes in estimates of amounts reported in the audited consolidated financial statements for the year ended December 31, 2022.

Principal Accounting Policy

Amendments to IFRSs that are mandatorily effective for the current three-month period or after

In the current three-month period, the Group has applied the following amendments to IFRSs issued by the International Accounting Standard Board (''IASB'') for the first time, which are mandatorily effective for the annual period beginning on or after January 1, 2023 for the preparation of the unaudited condensed interim consolidated financial statements:

IFRS 17	Insurance Contracts
Amendments to IAS 1 and IFRS	Disclosure of Accounting Policies
Practice Statement 2
Amendments to IAS 8	Definition of Accounting Estimates
Amendment to IFRS 12	Deferred Tax related to Assets and Liabilities arising from a Single
	Transaction

The adoption of these amended IFRSs had no material impact on how the results and financial position for the current three-month period and prior period have been prepared and presented.