CM Energy Tech Co., Ltd. — Capital/Financing Update 2018

Nov 25, 2018

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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TSC Group Holdings Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 206)

MAJOR AND CONNECTED TRANSACTION FORMATION OF JOINT VENTURE

Financial Advisor to the Company

The Board is pleased to announce that on 23 November 2018 (after trading hours), the Fund, AOG and the JV entered into the Subscription and Joint Venture Agreement, pursuant to which (i) AOG will subscribe for, and the Fund will procure the JV to allot and issue, 50,000,000 shares of US$1.00 each, representing 50% of the enlarged issued share capital of the JV after the Completion, at a total subscription price of US$50 million, (ii) the Fund will contribute the Rig Assets to the JV at the total consideration of US$150 million, out of which US$50 million will be satisfied by the JV by the allotment and issue of 49,999,999 shares of US$1.00 each to the Fund, which together with the one share owned by the Fund will represent 50% of the enlarged share capital of the JV after the Completion, and the balance of the consideration of US$100 million will be satisfied by a shareholder’s loan to be advanced by the Fund to the JV. Pursuant to the Subscription and Joint Venture Agreement, the parties agreed to regulate their respective rights and obligations towards the management and operation of the JV upon completion of the Subscription.

As of the date of this announcement, the JV had no material assets or liabilities.

Prior to the completion of the Subscription, the JV was wholly-owned by the Fund. Immediately after the completion of the Subscription, the JV will be owned as to 50% by the Company and 50% by the Fund.

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LISTING RULES IMPLICATIONS

Since the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the transactions contemplated under the Subscription and Joint Venture Agreement exceed 25% but is less than 100%, the transactions contemplated under the Subscription and Joint Venture Agreement constitute a major transaction of the Company under Chapter 14 of the Listing Rules and are subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

Given the Fund is a controlling shareholder and therefore a connected person of the Company, the transactions contemplated under the Subscription and Joint Venture Agreement also constitute connected transactions of the Company under Chapter 14A of the Listing Rules.

The Fund and its associates (beneficially interested in an aggregate of 765,186,000 Shares, representing approximately 51.94% of the entire issued share capital of the Company as at the date of this announcement) shall abstain from voting on the proposed resolution(s) to approve the Subscription and Joint Venture Agreement and the transactions contemplated thereunder. The Company will in due course appoint an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

It is expected that a circular containing, among other things, (i) further information on the Subscription and Joint Venture Agreement and the transactions contemplated thereunder; (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Subscription and Joint Venture Agreement and the transactions contemplated thereunder; and (iv) a notice of the EGM, will be despatched to the Shareholders on or before 30 November 2018.

INTRODUCTION

The Board is pleased to announce that on 23 November 2018 (after trading hours), the Fund, AOG and the JV entered into the Subscription and Joint Venture Agreement, pursuant to which the parties have conditionally agreed that (i) AOG will subscribe for, and the Fund will procure the JV to allot and issue, 50,000,000 shares of US$1.00 each, representing 50% of the enlarged issued share capital of the JV after the Completion, at a total subscription price of US$50 million, (ii) the Fund will contribute the Rig Assets to the JV at the total consideration of US$150 million, out of which US$50 million will be satisfied by the JV by the allotment and issue of 49,999,999 shares of US$1.00 each to the Fund, which together with the one share of US$1.00 each owned by the Fund will represent 50% of the enlarged share

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capital of the JV after the Completion, and the balance of the consideration of US$100 million will be satisfied by a shareholder’s loan to be advanced by the Fund to the JV. Pursuant to the Subscription and Joint Venture Agreement, the parties agreed to regulate their respective rights and obligations towards the management and operation of the JV upon completion of the Subscription.

As of the date of this announcement, the JV had no material assets or liabilities.

Prior to the completion of the Subscription, the JV was wholly owned by the Fund. Immediately after the completion of the Subscription, the JV will be owned as to 50% by the Company and 50% by the Fund. The JV, SPV1 and SPV2 will each be accounted for as a joint venture company of the Company in the financial statements of the Company.

THE SUBSCRIPTION AND JOINT VENTURE AGREEMENT

Date

23 November 2018 (after trading hours)

Parties

1. AOG;

2. the Fund; and

3. the JV

Subject Matter

Pursuant to the Subscription and Joint Venture Agreement, (i) AOG conditionally agreed to subscribe for, and the Fund will procure the JV to allot and issue, 50,000,000 shares of US$1.00 each, representing 50% of the enlarged issued share capital of the JV after the Completion, at a total subscription price of US$50 million, (ii) the Fund conditionally agreed to contribute the Rig Assets to the JV at the total consideration of US$150 million, out of which US$50 million will be satisfied by the JV by the allotment and issue of 49,999,999 shares of US$1.00 each to the Fund, which together with the one share of US$1.00 each owned by the Fund will represent 50% of the enlarged share capital of the JV after the Completion, and the balance of the consideration of US$100 million will be satisfied by a shareholder’s loan to be advanced by the Fund to the JV. The parties further agreed to regulate their respective rights and obligations towards the management and operation of the JV upon completion of the Subscription.

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The subscription price in the amount of US$50 million shall be paid in cash upon the Completion and was agreed after arm’s length negotiations between the Company and the Fund taking into account the value of the Rig Assets.

Immediately after completion of the Subscription, the JV will be owned as to 50% by AOG and 50% by the Fund.

Conditions Precedent

Completion of the Subscription is conditional on the satisfaction of the following conditions on or before the date of completion:

1. the completion of the acquisitions of the entire issued share capital of SPV1 and SPV2 by the JV and all conditions precedents included therein have been fulfilled;

2. the form of the articles of associations of SPV1, SPV2 and the JV having been agreed by the Fund and AOG and adopted by the relevant shareholder(s) of SPV1, SPV2 and the JV, respectively;

3. the representations and warranties given by the Fund and the JV remaining true and accurate as at the completion of the Subscription;

4. all necessary approvals, consents and waivers or regulatory rules or procedures of relevant government bodies, stock exchange and other regulatory authority having jurisdiction over the transactions contemplated in the Subscription and Joint Venture Agreement and all other transactions in connection therewith and incidental thereto, having been obtained by the parties and the JV, including but not limited to compliance with the requirements under the Listing Rules applicable to the Company, namely, the passing of resolutions by the Independent Shareholders approving the Subscription and Joint Venture Agreement and the transactions contemplated thereunder in accordance with the Listing Rules and all applicable laws at a general meeting of the Company; and

5. the representations and warranties given by AOG remaining true and accurate as at the completion of the Subscription.

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Each of the Fund and the JV shall use its best endeavours to procure that conditions 1 to 4 set out above are satisfied (unless waived by AOG) not later than the Long Stop Date. AOG shall use its best endeavours to procure that condition 5 set out above is satisfied not later than the Long Stop Date. If the conditions set out above are not fulfilled by the Long Stop Date, the provisions of the Subscription and Joint Venture Agreement (other than certain ancillary provisions) shall from Long Stop Date have no effect and no party shall have any liability under such provisions (without prejudice to the rights of any of the parties in respect of antecedent breaches).

Save as condition 3 above which may be waived by AOG before the Long Stop Date, no other conditions as set out above may be waived by the parties.

Management of the JV

The parties agreed that the JV and its subsidiaries shall carry on the business of investing in and managing the Rig Assets and other offshore vessels.

AOG and the Fund shall each have the right to appoint the number of directors in proportion to their respective shareholdings in the JV, and each of them shall procure that, at all times during the continuance of the Subscription and Joint Venture Agreement, there shall be at least two persons appointed by it and maintained in office as directors. Each of AOG and the Fund shall have the right to remove any director appointed by it and appoint another director in his place.

The Subscription and Joint Venture Agreement provides that all references made to the JV in the Subscription and Joint Venture Agreement is deemed to include reference to any subsidiary of the JV and is construed accordingly to apply equally to any subsidiary of the JV.

Both SPV1 and SPV2 are entities formed for the sole purpose of holding registered title to the respective Rig Asset and business activities shall be managed by the JV and the respective board of directors of each of the SPV1 or SPV2.

The JV shall be jointly controlled by AOG and the Fund and all major decisions shall be subject to unanimous agreement of the parties.

Restrictions on Equity Transfers

Neither party shall have the right to transfer any of its shares of the JV unless in accordance with the provisions of the Subscription and Joint Venture Agreement and the articles of association of the JV. In the event that a shareholder of the JV (the “Selling Shareholder”) proposes to transfer its shares of the JV, the other shareholder of the JV shall have a right of first refusal and tag along, while the Selling Shareholder shall have a right of drag along.

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INFORMATION ABOUT THE GROUP AND THE FUND

The Group is currently principally engaged in manufacturing and trading of rig equipment and oilfield expendables. AOG is principally engaged in the business of building, upgrading, chartering, operating and sales of offshore service vessels.

The Fund is an exempted limited partnership registered in the Cayman Islands which primarily focused on making investments in the marine industry.

INFORMATION ABOUT THE JV

As of the date of this announcement, the JV had no material assets or liabilities. In accordance with the Subscription and Joint Venture Agreement, the Fund will procure the transfer of the entire issued share capital of SPV1 and SPV2, each being the owners of a Rig Asset, from CM Industry, the shipbuilder of the Rig Assets, to the JV at the total consideration of US$150 million, out of which (i) US$50 million will be satisfied by the JV allotting and issuing 49,999,999 shares of US$1.00 each to the Fund; and (ii) US$100 million will be satisfied by a shareholder’s loan to be advanced by the Fund to the JV pursuant to a loan agreement to be entered into between the Fund and JV prior to or upon completion of the Asset Injection. The Fund will procure CM Industry to transfer SPV1 and SPV2 to the JV as capital contribution by CM Industry pursuant to its partnership interest in the Fund as a limited partner.

As of the date of this announcement, the JV has not carried out any business since its incorporation on 23 October 2017 save for the dealing with the transfer of SPV1, SPV2 and the Rig Assets from the Fund. No profit/loss before and after taxation was recognised by the JV up to the date of this announcement. The aggregate of the original acquisitions costs of SPV1, SPV2 and the Rig Assets to the Fund amounted to approximately US$150 million.

The capital contribution by AOG is determined after arm’s length negotiation among the Company and the Fund with reference to the estimated capital requirements of the JV and the respective shareholding percentage held by AOG and the Fund in the JV. The capital contribution by AOG will be funded by proceeds from the rights issue of the Company as disclosed in the announcement of the Company dated 8 November 2018 (subject to completion of such rights issue), the internal resources of the Group and/or external debt financing if necessary.

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The Rig Assets

The particulars of the Rig Assets are set out below:

Registered owner SPV1 SPV2 Rig Assets name SMS MARIAM (“Rig 1”) SMS FAITH (“Rig 2”) Nominated Flag State Liberia Liberia Type of Rig Asset CJ46-X100-D CJ46-X100-D Mobile Offshore Drilling Unit Mobile Offshore Drilling Unit Self-Elevating Drilling Unit Self-Elevating Drilling Unit

Each of SPV1 and SPV2 has entered into a bareboat charter agreement with an independent third party charterer (the “Charterer”), pursuant to which Rig 1 and Rig 2, respectively, will be bareboat chartered to the Charterer 45 days from delivery of each of the Rigs to Abu Dhabi or on commencement date of drilling contract whichever is earlier for a period of three years with option to oil company to extend a further 2 years. Rig 1 and Rig 2 are newly built. As at the date of this announcement, Rig 1 and Rig 2 are completed subject only to certain modifications required by the oil company which awarded the drilling contract to the Charterer.

REASON FOR AND BENEFITS OF ENTERING INTO THE SUBSCRIPTION AND JOINT VENTURE AGREEMENT

Overall Oil & Gas Industry Landscape

Four years on from one of the toughest and longest downturn in the oil industry there are signs of recovery in the oil service industry with oil price averaging approximately US$60 per barrel. Both global oil demand and supply are now close to 100 million barrels per day (MMbpd) “and neither show signs of ceasing to grow any time soon,” according to the International Energy Agency (IEA). IEA also reported that market re-balancing is clearly moving ahead with key indicators – supply and demand becoming more closely aligned, OECD stocks falling close to average levels, the forward price curve in backwardation at prices that increasingly appear to be sustainable – pointing in the direction of a recovery. To meet the needs of a 100 MMbpd market is an extraordinary achievement for the global oil industry and the gap between the supply and demand curves is presently down to only days in terms of production or consumption per day. Even though recent production increases come at the expense of spare capacity, this spare capacity is already down to only 2% of global demand and likely to reduce further and would sustain higher levels of oil price. Additionally, petrochemicals are rapidly becoming the largest driver of global oil demand, ahead of transportation and will account for more than one-third of world oil demand growth to 2030 according to the IEA. Similar reports of recovery from other sources in the market

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forecasting the Brent crude to average from US$70 per barrel to US$80 per barrel in 2019, and even to US$100 per barrel through 2020, due to a lack of spare oil capacity.

Rig Market Recovery

Consequently, with the improvement in oil price, utilization rates, charter rates and fixtures of new work contracts for offshore drilling rigs are improving and it is the general opinion of the industry that recovery will continue based on improving fundamentals. In addition to surviving the prolonged period of low prices, the Group has made concerted efforts during the low price period to transform and reposition its business to prepare for the recovery. These efforts and plans included developing prospects for charter or bareboat charter contracts, securing access to new built rigs at favorable terms at the opportune time and providing the capability to bring offshore rigs to market. Eventually as the capital expenditure cycle matures, the Group also stands to benefit from potential capital gains from early investments at the beginning of the recovery.

Developing Opportunities

During the low price period, the oversupply and availability of new built rigs in China added to the glut in supply when drilling activities were down to historically low levels. However, this also presented a unique opportunity for the Group. The jack up rig segment is approximately 43% of the overall rig market and is usually at the forefront of the oil recovery cycle as oil operators prioritize exploration and production activities on shallower offshore continental shelf oil fields.

The Group’s investment in the JV and the Rig Assets is the outcome of the Group’s strategic intent. Such investment will allow the Company to execute its strategy as the key enabler to converting surplus idle inventory into competitive revenue generating assets. The Board therefore considers that the entering into of the Subscription and Joint Venture Agreement is a good opportunity for the Group to execute its long term strategy and expansion into a business which will benefit the Group in the long-run.

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The Directors (excluding the views of the independent non-executive Directors which will be given after considering the views of the independent financial advisers to be appointed) are of the view that the Subscription and Joint Venture Agreement are on normal commercial terms, and that the terms of the Subscription and Joint Venture Agreement are fair and reasonable and in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATION

Since the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the transactions contemplated under the Subscription and Joint Venture Agreement exceed 25% but is less than 100%, the transactions contemplated under the Subscription and Joint Venture Agreement constitute a major transaction of the Company under Chapter 14 of the Listing Rules and are subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

Given the Fund is a controlling shareholder and therefore a connected person of the Company, the transactions contemplated under the Subscription and Joint Venture Agreement also constitute connected transactions of the Company under Chapter 14A of the Listing Rules.

The Fund and its associates (beneficially interested in an aggregate of 765,186,000 Shares, representing approximately 51.94% of the entire issued share capital of the Company as at the date of this announcement) shall abstain from voting on the proposed resolution(s) to approve the Subscription and Joint Venture Agreement and the transactions contemplated thereunder. The Company will in due course appoint an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

It is expected that a circular containing, among other things, (i) further information on the Subscription and Joint Venture Agreement and the transactions contemplated thereunder; (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Subscription and Joint Venture Agreement and the transactions contemplated thereunder; and (iv) a notice of the EGM, will be despatched to the Shareholders on or before 30 November 2018 in accordance with the Listing Rules.

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DEFINITIONS

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

• “AOG”

• Alliance Offshore Group Ltd., a company incorporated in the British Virgin Islands with limited liability and a wholly owned subsidiary of the Company

• “Asset Injection” the acquisition of the entire issued share capital to the JV as procured by the Fund in accordance with the Subscription and Joint Venture Agreement

• “associate” has the meaning ascribed to it in the Listing Rules

• “Board” the board of Directors

• “CM Group”

• China Merchants Group Limited* (招商局集團有限公司), a company incorporated in the PRC with limited liability. It is wholly owned by the State-owned Assets Supervision and Administration Commission of the State Council of the PRC

• “CM Industry” China Merchants Industry Holdings Co., Ltd., a company incorporated in Hong Kong with limited liability and is indirectly wholly owned by CM Group

• “Company” TSC Group Holdings Limited, a company incorporated in Cayman Islands with limited liability and the shares of which are listed on the main board of the Stock Exchange (stock code: 206)

• “Completion” Completion of the subscription of shares by AOG in the JV pursuant to the Subscription and Joint Venture Agreement

• “connected person”

• has the meaning ascribed to it under the Listing Rules

• “controlling shareholder”

• has the meaning ascribed to it under the Listing Rules

• “Director(s)”

• the director(s) of the Company

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“Fund” China Merchants & Great Wall Ocean Strategy & Technology Fund (L.P.), an exempted limited partnership registered in the Cayman Islands “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Board the independent board committee of the Company whose Committee” members comprises all the independent non-executive Directors to advise the Independent Shareholders on the terms of the Subscription and Joint Venture Agreement and the transactions contemplated thereunder

• “Independent Shareholders” Shareholders other than the Fund and its associates

• “JV” Wealthy Marvel Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly owned subsidiary of the Fund as at the date of this announcement

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Long Stop Date” 31 January 2019 or such later date mutually agreed by the Fund and AOG

• “PRC” the People’s Republic of China, and for the purpose of this announcement, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

• “Rig Asset(s)” two units of self-elevating drilling units “Share(s)” ordinary share(s) of HK$0.1 each in the share capital of the Company

• “Shareholder(s)” holder(s) of the Share(s)

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“SPV1” Well Target Five Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly owned subsidiary of JV as at the date of this announcement

• “SPV2” Well Target Six Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly owned subsidiary of JV as at the date of this announcement

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Subscription and Joint the share subscription and joint venture agreement dated 23 Venture Agreement” November 2018 entered into between the JV, the Fund and AOG

• “Subscription” the subscription of 50,000,000 shares of US$1.00 each in the JV pursuant to the Subscription and Joint Venture Agreement

“subsidiary” has the meaning ascribed to it under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong)

• “%” per cent

By order of the Board TSC Group Holdings Limited Wang Hongyuan Executive Chairman

Hong Kong, 25 November 2018

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Wang Hongyuan, Mr. Jiang Bing Hua and Mr. Zhang Menggui, Morgan; three non-executive Directors, namely Mr. Lou Dongyang, Mr. Wang Jianzhong and Ms. Li Rong; and three independent non-executive Directors, namely Mr. Chan Ngai Sang, Kenny, Mr. Zou Zhendong and Mr. Chen Weidong.

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