China Energy Development Holdings Limited — Proxy Solicitation & Information Statement 2007

Jan 31, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Energy Development Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, 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 circular.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of China Energy Development Holdings Limited.

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(Incorporated in the Cayman Islands with limited liability)
(Stock code: 228)
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DISCLOSEABLE TRANSACTION RELATING TO ACQUISITION OF ENTIRE EQUITY INTEREST IN AND SHAREHOLDERS’ LOANS DUE BY BRIGHT HORIZON WORLDWIDE INC.

31st January, 2007

* For identification purposes only

CONTENTS

	Pages
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Responsibility Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Information on the Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix I — Major Terms of Concession Contract . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix II — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

— i —

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

• “Achieve Smart” Achieve Smart Finance Limited, a company incorporated in the British Virgin Islands on 2nd January, 2002 with limited liability

• “Acquisition” the proposed acquisition of the Sale Shares and the Sale Loans by the Purchaser as contemplated under the Agreement

• “Agreement” the agreement dated 10th January, 2007 entered into between the Purchaser and the Vendors in relation to the Acquisition

• “associate(s)” has the meaning ascribed thereto under the Listing Rules “Board” the board of Directors

• “Bright Horizon” Bright Horizon Worldwide Inc., a company incorporated in the British Virgin Islands on 31st May, 2000 with limited liability

• “Business Day” a day (excluding Saturdays and Sundays) on which commercial banks are generally open for banking business in Hong Kong

• “Company” China Energy Development Holdings Limited, a company incorporated in the Cayman Islands, the shares of which are listed on the Stock Exchange

• “Completion” the completion of the Acquisition, which shall take place on or before 31st May, 2007 (or such later date as may be agreed between the Parties)

• “Concession Contract” the contract entered into between Sinosky and the government of Macau on 15th December, 2006 in respect of the concession of supplying and transmission of natural gas to Macau for a period of 15 years

• “Consideration” the consideration payable by the Purchaser to the Vendors for the Acquisition

• “Consideration Share(s)” 200,000,000 Shares, credited as fully paid

• “Directors” the directors of the Company

— 1 —

DEFINITIONS

“Group”	the Company and its subsidiaries
“Hong Kong”	The Hong Kong Special Administrative Region of the People’s
	Republic of China
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Independent Third	third party(ies) (including its/their ultimate beneficial owner)
Party/Parties”	which, to the best of the Directors’ knowledge, information
	and belief having made all reasonable enquiry, is/are
	independent of and not connected with the Company and its
	subsidiaries, the directors, chief executive or substantial
	shareholders of the Company or any of its subsidiaries or their
	respective associates as defined in the Listing Rules
“Issue Price”	the issue price of HK$1.00 per Consideration Share
“Latest Practicable Date”	26th January, 2007, being latest practicable date prior to the
	printing of this circular for ascertaining certain information for
	inclusion in this circular
“Listing Rules”	The Rules Governing the Listing of Securities on the Stock
	Exchange
“LNG”	liquefied natural gas
“Macau”	The Macao Special Administrative Region of the People’s
	Republic of China
“MNG”	Macau Natural Gas Company Limited, a company established
	in Macau on 17th December, 2001 with limited liability
“MOP”	Macau Pataca, the lawful currency of Macau
“Mr. Chang”	Mr. Chang Kuo Tien, an Independent Third Party
“Mr. Tong”	Mr. Tong Seak Kan, an Independent Third Party
“Purchaser”	Silverwise Limited, a company incorporated in the British
	Virgin Islands on 25th July, 2006 with limited liability, which
	is wholly-owned by the Company

— 2 —

DEFINITIONS

“Relevant Percentage”	(a) with respect to Mr. Tong, 50%; and (b) with respect to Mr.
	Chang, 50%
“Sale Loans”	the loan granted by the Vendors to Bright Horizon in an
	aggregate amount of HK$26,297,138 as at 30th November, 2006
“Sale Shares”	a total of two ordinary shares of US$1.00 each in the capital of
	Bright Horizon, which are beneficially owned as to one share
	by Mr. Tong and as to one share by Mr. Chang, representing
	the entire issued share capital of Bright Horizon
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.05 each in the issued share capital
	of the Company
“Shareholder(s)”	the shareholders of the Company
“Sinopec”	China Petroleum & Chemical Corporation, a joint-stock limited
	company incorporated in the People’s Republic of China with
	limited liability, the shares of which are listed on the Stock
	Exchange
“Sinosky”	Sinosky Energy (Holdings) Company Limited, a company
	established in Macau on 20th September, 2006 with limited
	liability
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vendors”	Mr. Tong and Mr. Chang
“%”	per cent

Unless otherwise specified, the MOP amounts shown in this circular have been converted into the HK$ amount at an exchange rate of MOP1.00 = HK$0.97 for reference purpose only.

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RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

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LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

(Stock code: 228)

Executive Directors:

Mrs. Cheung Lim Mai Tak, Grace Mr. Chan Shi Yung Mr. Chui Kwong Kau Mr. Chan Wai Keung

Non-Executive Director: Mr. Wang Xiang Jun

Independent Non-Executive Directors:

Mr. Chang Kin Man Mr. Ip Wing Lun Mr. Zhong Yuan

Registered Office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111, Cayman Islands

Head Office and Principal Place of Business: Unit 3607, 36/F, West Tower, Shun Tak Centre, 168-200 Connanght Road Central, Hong Kong

31st January, 2007

To the Shareholders

Dear Sirs or Madams,

DISCLOSEABLE TRANSACTION RELATING TO ACQUISITION OF ENTIRE EQUITY INTEREST IN AND SHAREHOLDERS’ LOANS DUE BY BRIGHT HORIZON WORLDWIDE INC.

I. INTRODUCTION

On 12th January, 2007, the Board announces that the Purchaser, a wholly owned subsidiary of the Company, entered into the Agreement with the Vendors on 10th January, 2007 pursuant to which the Purchaser has agreed to purchase and the Vendors have agreed to sell the Sale Shares and the Sale Loans at a total consideration of HK$280 million (subject to adjustment).

* For identification purposes only

— 5 —

LETTER FROM THE BOARD

On 10th October, 2006, the Purchaser entered into an agreement with Mr. Tong, one of the Vendors, pursuant to which the Purchaser agreed to acquire the entire interest in Achieve Smart at a consideration of HK$10 million (the “Previous Acquisition”). Achieve Smart is an investment holding company with its major asset being a 40% equity interest in MNG. The Previous Acquisition was completed on 20th November, 2006.

The transaction contemplated under the Agreement together with the Previous Acquisition constitute a discloseable transaction for the Company pursuant to Rule 14.22 and Rule 14.23 of the Listing Rules. The purpose of this circular is to give you further information regarding, among other things, the Acquisition.

II. THE AGREEMENT

Date

10th January, 2007

Parties

Purchaser: Silverwise Limited, a wholly owned subsidiary of the Company

Vendors: Mr. Tong and Mr. Chang

Each of the Vendors is an Independent Third Party.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, save for the acquisition of 100% equity interest in Achieve Smart from Mr. Tong, the Company does not have any prior or current business relations with each of the Vendors.

The Acquisition

Assets to be acquired

Pursuant to the terms of the Agreement, the Vendors have agreed to sell and the Purchaser has agreed to purchase the Sale Shares and the Sale Loans.

The Sale Shares represent the entire issued share capital of Bright Horizon while the Sale Loans represent all the obligations, liabilities and debts owing or incurred by Bright Horizon to its shareholders as at 30th November, 2006.

— 6 —

LETTER FROM THE BOARD

Consideration

The consideration payable for the Sale Shares and the Sale Loans shall be HK$280 million (subject to adjustment).

The Consideration shall be satisfied as to HK$80 million in cash and as to HK$200 million by way of the Company allotting and issuing the Consideration Shares (subject to adjustment) to the Vendors or their nominees in their Relevant Percentages.

A refundable deposit in the sum of HK$55 million was paid by the Purchaser to the Vendors on 15th January, 2007. The deposit has not been placed in an escrow account. The deposit shall be immediately refunded and repaid without interests by the Vendors severally to the Purchaser upon the termination of the Agreement or failure of Completion to take place.

The Directors have conducted a background check on the Vendors and are satisfied with their respective personal net worth and social status in Macau as well as in the industry. The Directors are of the view that each of the Vendors will honor their respective obligation to refund the deposit should the Acquisition fail to complete.

The Purchaser shall deliver to the Vendors duly executed interest free promissory notes in the aggregate sum of HK$25 million (subject to adjustment) at Completion. The Purchaser shall settle the promissory notes within 90 days from the date of Completion.

The cash portion of the Consideration shall be satisfied from the Group’s internal resources.

The remaining balance of HK$200 million shall be satisfied by the allotment and issue of 200,000,000 Consideration Shares at the Issue Price of HK$1.00 per Consideration Share by the Company to the Vendors or their nominees (subject to adjustment) on Completion.

The Consideration Shares represent approximately 7.83% of the existing issued share capital of the Company and approximately 7.26% of the enlarged issued share capital of the Company following the issue of the Consideration Shares. The Consideration Shares have a market value of HK$212 million, based on the closing price of HK$1.06 per Share on 10th January, 2007, being the date of the Agreement.

The Issue Price represents (i) a discount of approximately 5.66% to the closing price of the Shares of HK$1.06 on 10th January, 2007, being the date of the Agreement; (ii) a premium of 7.53% of the average closing price of HK$0.93 per Share over the last 10 trading days up to and including 10th January, 2007; and (iii) a discount of approximately 9.91% to the closing price of the Shares of HK$1.11 on the Latest Practicable Date.

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LETTER FROM THE BOARD

The Consideration was arrived at after arm’s length negotiation between the Company and the Vendors with reference to the prospect of the LNG business of MNG and Sinosky and the valuation of Sinosky. Given that Sinosky had entered into the Concession Contract with the government of Macau on 15th December, 2006 and the adjustment mechanism available to the Company on the Consideration if the valuation on Sinosky conducted by an independent valuer to be less than HK$940 million, the Directors are of the view that the Consideration is fair and reasonable and in the interest of Shareholders as a whole.

The Directors have advised that at the time the Purchaser entered into the agreement with Mr. Tong in respect of the Previous Acquisition, Sinosky had only been awarded the tender in respect of the Concession. Due to (i) the uncertainty involved in entering into the Concession Contract with the government of Macau; and (ii) limited information available for conducting a valuation on Sinosky, the consideration of HK$10 million for the Previous Acquisition was arrived at after arm’s length negotiation between the parties. The Directors are of the view that the consideration for the Previous Acquisition is very favorable to the Group.

Consideration Adjustment

The Purchaser shall appoint an independent valuer to conduct a valuation on Sinosky (“Sinosky Valuation”) prior to Completion with the date of the Sinosky Valuation being not later than a date falling 14 days prior to the date of Completion.

In the event that the Sinosky Valuation is less than HK$940 million (the “Target Figure”), the Consideration shall be reduced by an amount equal to the difference between the valuation figure and the Target Figure multiplied by 30% (being the attributable percentage interest of the Company in Sinosky under the Acquisition) (the “Difference”). The Difference payable shall first be deducted from the cash portion of the Consideration and, if necessary, thereafter from the Consideration Shares.

In the event that the amount of the Difference is more than HK$42 million, the Vendors shall be entitled to withhold the sale of the Sale Shares and the Sale Loans to the Purchaser and terminate the Agreement without any liability on their part by giving a written notice to this effect to the Purchaser within seven Business Days after having been notified by the Purchaser of the amount of the Sinosky Valuation and the Difference.

In the event that the Sinosky Valuation is less than HK$940 million and an adjustment on the Consideration is so required, the Company will make announcement disclosing the value of Sinosky as valued by the independent valuer and the adjusted Consideration as appropriate.

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LETTER FROM THE BOARD

Dilution Effect

The table below shows the dilution effect on the Shareholders upon Completion.

Before the issue of the Shareholders Consideration Shares No. of Shares % Ho Po Investment Limited_(Note)_ 76,000,000 2.98 The Vendors or its nominee(s) Mr. Tong 54,008,000 2.11 Mr. Chang — — Public 2,423,892,000 94.91 Total 2,553,900,000 100.00	Immediately after the issue of the Consideration Shares (assuming no adjustment on the Consideration) No. of Shares % 76,000,000 2.76 154,008,000 5.59 100,000,000 3.63 2,423,892,000 88.02 2,753,900,000 100.00	Immediately after the issue of the Consideration Shares (assuming no adjustment on the Consideration) No. of Shares % 76,000,000 2.76 154,008,000 5.59 100,000,000 3.63 2,423,892,000 88.02 2,753,900,000 100.00
		100.00

Note: The issued share capital of Hon Po Investment Limited is beneficially owned as to 10.35% by Mrs. Cheung Lim Mai Tak, Grace, an executive Director and as to 17.51% by Mr. Cheung To Sang, the spouse of Mrs. Cheung Lim Mai Tak, Grace.

Following Completion, the Vendors will not have any seat on the Board and the issue of the Consideration Shares will not result in a change of control of the Company.

Transferability of the Consideration Shares

The Consideration Shares when fully paid and issued, shall be freely transferable.

Ranking of Consideration Shares

The Consideration Shares when allotted and issued, shall rank pari passu in all respects with the existing Shares in issue.

— 9 —

LETTER FROM THE BOARD

Application for listing

Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

Business of Bright Horizon

Bright Horizon is a limited liability company incorporated in the British Virgin Islands on 31st May, 2000 and is an investment holding company without operation since incorporation. At Completion, Bright Horizon will not have any material assets and liabilities except for its 60% equity interest in MNG and an advance of HK$26,297,138 to MNG. Such advance to MNG from Bright Horizon was funded by the shareholders’ loans provided by the Vendors.

MNG is a limited liability company established in Macau on 17th December, 2001 with a fully paid share capital of MOP1 million (equivalent to approximately HK$970,000). MNG is principally engaged in investment in LNG business in Macau and other neighbouring territories as determined by MNG. MNG has formed a consortium with Sinopec, an Independent Third Party, to bid for the tender plan of the Concession in November 2005. The consortium subsequently has been awarded the tender by the government of Macau in July 2006. As a result, MNG has formed a joint venture, Sinosky, with Sinopec for the purpose of carrying out relevant operations in relation to the Concession. On 15th December, 2006, Sinosky entered into the Concession Contract with the government of Macau. Pursuant to the Concession Contract, Sinosky has been granted the Concession of the public service of importation and transportation of natural gas in Macau. As at the Latest Practicable Date, Sinosky does not have any capital commitment under the Concession and on the development of LNG business in Macau. Currently, Sinosky is in the process of preparing the construction of gas pipeline in Macau. Based on the unaudited management accounts of MNG, the unaudited net liability value of MNG as at 30th November, 2006 is approximately HK$3,953,000. Based on the unaudited management accounts of MNG, the unaudited loss before and after tax for the year ended 31st December, 2004 are approximately HK$849,000 and the unaudited loss before and after tax for the year ended 31st December, 2005 are approximately HK$1,536,000.

Sinosky is a limited liability company recently established in Macau on 20th September, 2006 with a fully paid share capital of MOP50 million (equivalent to approximately HK$48.5 million), as the joint venture company of MNG and Sinopec in relation to the Concession. Sinosky is owned by MNG as to 50% and Sinopec as to the remaining 50%. Sinosky will be principally engaged in the operation of LNG supply and transmission in relation to the Concession.

— 10 —

LETTER FROM THE BOARD

At present, neither the Purchaser nor the Group have any capital commitment or obligation to make further investments in respect of Bright Horizon, MNG and Sinosky. Depending on the future development of LNG business of Sinosky, additional funding, the amount of which cannot be ascertained at present, may be required and it is expected Sinosky may carry out project financing on its own for investment in its LNG business if necessary. The expected capital investments by Sinosky on LNG business in Macau to be approximately MOP8,000 million (equivalent to approximately HK$7,760 million) and it is expected that approximately 80% of the capital investments to be financed by Sinosky’s level project financing in a form of loan facility while the remaining 20% to be financed by the shareholders of Sinosky. However, as at the Latest Practicable Date, no concrete financing plan has been decided yet. In addition to Sinosky’s level project financing, Sinosky, and hence, MNG may or may not require additional capital contribution, in equity or debt, from their respective shareholders. Depending on the proposed financing terms, the Directors would then assess if it is reasonable and beneficial to the Group to make further investments in MNG and Sinosky. Should the Group consider the proposed financing terms as not to be in the best interest to the Group, the Group may not make further investment and the Group’s interest may be then diluted. The Group will make announcement and seek relevant shareholders’ approval in accordance with the Listing Rules as appropriate if the Group is to carry out any further investing activities in relation to MNG and Sinosky.

Upon Completion, the Group will hold the entire equity interest in MNG and MNG will become a wholly owned subsidiary of the Company.

The financial results of MNG will be consolidated into the Group’s consolidated financial statements after Completion. Subject to confirmation by the Company’s auditors, upon Completion, Sinosky will become an associated company of the Group and it is expected for the Group to adopt equity method to account for the interests in Sinosky for consolidated financial statement purpose. The Directors considered that the Acquisition, if completed, will increase the value of total assets and total liabilities of the Group but will not give rise to any material effect on the earnings of the Group.

— 11 —

LETTER FROM THE BOARD

The following diagram shows the expected ownership structure of the Group in relation to the Acquisition immediately after Completion.

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The Group
100%
The Purchaser
100% 100%
Achieve Smart Bright Horizon
40% 60%
MNG Sinopec
50% 50%
Sinosky
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Conditions precedent to Completion

Completion is conditional upon the following conditions being fulfilled:

• (i) the Purchaser having obtained a Macanese legal opinion on the legality and ownership of MNG, Sinosky and the Concession;

• (ii) the completion of a valuation by an independent valuer of Sinosky to the satisfaction of the Purchaser in its absolute opinion valuing Sinosky at not less than HK$940 million;

• (iii) the Purchaser having conducted a due diligence investigation in respect of Bright Horizon, MNG and Sinosky including but not limited to the affairs, business, assets, results, legal and financing structure and the Purchaser being in its sole opinion satisfied with the results of such due diligence investigation;

• (iv) all necessary approvals by the Shareholders (if necessary) in respect of the transactions contemplated under the Agreement having been obtained;

• (v) the Stock Exchange granting listing of and permission to deal in the Consideration Shares;

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LETTER FROM THE BOARD

• (vi) there being no material adverse change or development (including a prospective change or development) in the position or condition, financial or otherwise, of the Group;

• (vii) the warranties given by the Vendors remaining true, accurate and not misleading in all respects; and

• (viii) the warranties given by the Purchaser remaining true, accurate and not misleading in all respects.

The Purchaser may waive all or any of the conditions (except conditions (iv) and (v)), but at present, the Purchaser does not have the intention to waive any of such conditions.

The Vendors and the Purchaser shall, within their respective capacities, use all best endeavours to ensure that the conditions precedent be fulfilled (or otherwise waived) by 31st May, 2007.

If the conditions precedent to completion of the Agreement have not been satisfied (or otherwise waived) by Purchaser on or before 31st May, 2007, the Agreement shall, subject to the liability of any party to the others in respect of any breaches of the terms of the Agreement, be null and void and of no effect.

As at the Latest Practicable Date, none of the conditions has been fulfilled or waived.

Completion

Completion shall take place on the seventh Business Day after the Agreement has become unconditional or at such other date as shall be mutually agreed by the parties to the Agreement in writing.

III. INFORMATION ON THE VENDORS

Mr. Tong is a director of MNG. He is also the chairman of the supervisory board of Companhia de Electricidade de Macau — CEM, S.A. and a member of Changchun Committee of the Chinese People’s Political Consultative Conference.

Mr. Chang is a director of MNG. He is also the chairman and the chief executive officer of Tenwin (Holding) Limited. Tenwin (Holding) Limited is an international corporation with diversified investments worldwide.

— 13 —

LETTER FROM THE BOARD

IV. REASONS FOR THE ACQUISITION

The principal activity of the Company is investment holding. The principal activities of the Group involve the operation of a chain of Chinese restaurants in Hong Kong. As revealed in the circular of the Company dated 23rd October, 2006, the Company is diversifying its business into the energy sector.

The Directors are of the view that Macau’s energy consumption has experienced steady increase in recent years as driven by the development of its economy. Taking the booming economy of Macau in recent years into consideration, the Directors considered that LNG business in Macau would have a considerable growth potential and the Acquisition is an attractive investment opportunity for the Group and allows the Group to tap the growing prospect of the Macau market. In addition, having considered the inherent volatility of the Chinese restaurant market which could adversely be affected by extraneous circumstances beyond the Group’s control such as the general economic climate and consumer spending patterns in Hong Kong and the outbreak or perceived risks of spread of infectious diseases, the Directors determined that the Group should consider alternative investments with a view to boosting its income base and spread its business risks over time. The Acquisition is considered as an alternative investment for the Company to boost its income base and spread its business risks, while the Group will continue its existing business of operation of Chinese restaurants in Hong Kong. The Directors considered that the Acquisition, if completed, would represent an attractive investment which is less exposed to the risks faced by its existing restaurant business.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Agreement are fair and reasonable and in the interest of Shareholders as a whole.

— 14 —

LETTER FROM THE BOARD

V. GENERAL

The Consideration Shares shall be allotted and issued under the general mandate granted by the Shareholders to the Company at the annual general meeting held on 29th May, 2006. As at the Latest Practicable Date, the Company has sufficient general mandate for the allotment and issue of new Shares. After the allotment and issue of the Consideration Shares, 310,240,000 Shares will remain unused under the general mandate granted on 29th May, 2006.

The Acquisition together with the Previous Acquisition constitute a discloseable transaction for the Company pursuant to Rule 14.22 and Rule 14.23 of the Listing Rules.

VI. ADDITIONAL INFORMATION

Your attention is also drawn to the appendices to this circular.

Yours faithfully,

By order of the Board

China Energy Development Holdings Limited Chan Wai Keung

Executive Director and Chief Executive Officer

— 15 —

MAJOR TERMS OF CONCESSION CONTRACT

APPENDIX I

The following is a summary of the major terms of the Concession Contract:

SUBJECT OF CONCESSION

The government of Macau has agreed to grant a concession to Sinosky for engaging in the following public service of importation and transmission of natural gas within the areas in Macau as expressly provided for in the Concession Contract (the “Concession”):

• (1) the purchase of natural gas or LNG and the storage of the same in Macau;

• (2) activities relating to the acquisition of natural gas or liquefied natural gas; and

• (3) the transmission, supply and sale of high-pressure and low-pressure natural gas to distribution network operators and direct consumers.

The general development plan of Sinosky comprises of two stages. The first stage involves the short term provision of gas supply from Heng Qin, Zhuhai commencing from October 2007. The second stage, commencing from the end of 2009, involves the importation of LNG from overseas by constructing a LNG receiving terminal in Huang Mao, Zhuhai or over the sea nearby. The gas supply facilities used at the first stage will be reserved for backup and peak-lopping purposes after the implementation of the receiving terminal proposal. This ensures the safety and stability of the natural gas supply in Macau. The investment for the project construction amounts to approximately MOP7.8 billion.

PERIOD

The Concession shall be for a period of fifteen (15) years (the “Concession Period”), commencing from the date of signing of the Concession Contract, without prejudice to the rights of the government of Macau to release, rescind and cancel the Concession Contract or to extend the Concession Period.

The Concession Period may be renewed for a period identical to or shorter than the first Concession if Sinosky makes such an application.

Upon the expiry of the Concession Period, Sinosky shall have the right of first refusal in respect of the granting of the new Concession within the same areas in Macau on the same terms and conditions as provided for in the Concession Contract.

RETURNS

Sinosky shall pay a return in an amount equivalent to one percent (1%) of Sinosky’s revenue generated from its natural gas supply business in Macau to the government of Macau as a return (the “Return”). Payment of the Return shall be made when the nature gas supply business comes into operation in 2010.

— 16 —

MAJOR TERMS OF CONCESSION CONTRACT

APPENDIX I

CAPITAL

Sinosky shall maintain a capital of not less than Fifty Million Macau Pataca (MOP50,000,000.00) and its total liability shall be at a level below eighty percent (80%) of its total assets during the Concession Period to ensure that it is solvent.

PRICE

The price for the supply of natural gas shall be determined by Sinosky and is subject to the approval of the government of Macau as authorised by the Chief Executive of the government of Macau and such authorisation shall be published on the “Official Bulletin of Macau”.

GUARANTEE

Sinosky shall provide a guarantee of Thirty Million Macao Pataca (MOP30,000,000.00) to the government of Macau prior to the signing of the Concession Contract to guarantee the performance of its obligations under the Concession Contract. The guarantee paid shall be forfeited if the Concession is cancelled due to the default of Sinosky. The guarantee shall be used by Sinosky for paying any compensation or penalty payable to the government of Macau. If the aggregate amount of the payable compensation and penalty exceeds the amount of the total guarantee, the excess shall be borne by Sinosky.

RESCISSION AND REDEMPTION OF THE CONCESSION

The government of Macau may rescind the Concession Contract due to the reason of public interest or may, at least after 10 years from the date of commencement of the Concession Period, redeem the Concession by giving at least one year’s prior notice to Sinosky. In such circumstances, Sinosky shall be entitled to a compensation, which shall be calculated based on the audited value of the granted assets as at the vesting date plus an amount equal to the target net profit for a maximum period of the following five years, provided that such period shall not be longer than the remaining years of the Concession Period.

— 17 —

GENERAL INFORMATION

APPENDIX II

1. INFORMATION ABOUT THE SHARE CAPITAL OF THE COMPANY

Before and after Completion, the authorized share capital of the Company is HK$500,000,000 divided into 10,000,000,000 Shares.

Prior to Completion, the issued share capital of the Company amounted to HK$127,695,000, comprising 2,553,900,000 fully paid-up Shares.

Immediately following Completion, 200,000,000 new Shares will have been issued and allotted to the Vendors and the issued share capital of the Company will then become HK$137,695,000, comprising 2,753,900,000 fully paid-up Shares.

2. INTEREST OF DIRECTORS AND CHIEF EXECUTIVE OF THE COMPANY

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executive of the Company and their respective associates in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), as required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or as recorded in the register required to be kept by the Company under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows:

(a) Issued Share

			Approximate
		Number of	% of total
Name of Director	Nature of interest	Shares held	shareholding
		(Note 1)
Mrs. Cheung Lim	Corporate	76,000,000 (L)	2.98%
Mai Tak, Grace	(Note 2)

Notes:

1. “L” denotes a long position.

2. These Shares are beneficially owned by Hon Po Investment Limited, the issued share capital of which is or deemed by virtue of the SFO to be, beneficially owned as to 10.35% by Mrs. Cheung Lim Mai Tak, Grace and as to 17.51% by Mr. Cheung To Sang, the spouse of Mrs. Cheung Lim Mai Tak, Grace.

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GENERAL INFORMATION

APPENDIX II

(b) Options outstanding under the share option scheme of the Company

				Number of
	Date of	Date of	Exercise	Share options
Name of Director	grant	expiry	price	outstanding
			HK$
Mr. Chan Shi Yung	2nd November, 2006	1st November, 2016	1.78	25,000,000
Mr. Chan Wai Keung	2nd November, 2006	1st November, 2016	1.78	25,000,000
Mr. Chui Kwong Kau	2nd November, 2006	1st November, 2016	1.78	25,000,000

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest or short position in any shares, underlying shares or debenture of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under the SFO) or were recorded in the register required to be kept by the Company under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.

3. SUBSTANTIAL SHAREHOLDERS

As far as is known to any Directors or chief executive of the Company, there is no person (other than a Director or chief executive of the Company, as disclosed in this circular) known to the Directors, who, as at the Latest Practicable Date, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of shares carrying rights to vote in all circumstances at general meetings of the Company or any other members of the Group.

4. LITIGATION

As at the Latest Practicable Date, the Company was not engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had a service contract with the Company which was not determinable by the Company within one year without payment of compensation other than statutory compensation.

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GENERAL INFORMATION

APPENDIX II

6. COMPETING BUSINESS

As at the Latest Practicable Date, Mrs. Cheung Lim Mai Tak, Grace, an executive director of the Company, is considered to have interests in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group, as defined in the Listing Rules. Mrs. Cheung Lim Mai Tak, Grace is interested in approximately 74% of the issued share capital of Tabo Development Limited, which in turns is interested in approximately 39.13% of the issued share capital of Golden Jumbo Thai Restaurant Limited (“Golden Jumbo”). Golden Jumbo operates a Thai restaurant in Hong Kong. As (i) Golden Jumbo is principally engaged in the provision of Thai food while the Group is principally engaged in the provision of Chinese food; (ii) the Group and Golden Jumbo target different customer groups; and (iii) apart from Mrs. Cheung Lim Mai Tak, Grace, Golden Jumbo is operated by management different from that of the Group, the Group is capable of carrying out its business independently of, and at arm’s length from, the business of Golden Jumbo.

Except as disclosed above, as at the Latest Practicable Date, none of the Directors or their respective associates had any interests in a business which competes or may compete with the businesses of the Group or had any other conflict of interest with the Group.

7. GENERAL

• (a) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

• (b) The head office and principal place of business of the Company in Hong Kong is Unit 3607, 36/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong.

• (c) The Hong Kong share registrar and transfer office of the Company is Tengis Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (d) The company secretary and qualified accountant of the Company is Mr. Cheung Wai Shing. Mr. Cheung Wai Shing is a fellow member of both the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants.

• (e) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

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