Datang Environment Industry Group Co., Ltd. — Capital/Financing Update 2017

Dec 18, 2017

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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Datang Environment Industry Group Co., Ltd.* 大唐環境產業集團股份有限公司

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1272)

CONNECTED TRANSACTION ACQUISITION OF 80% EQUITY INTERESTS OF HENGTONG COMPANY

INTRODUCTION

The Board is pleased to announce that on 18 December 2017, the Company entered into the Equity Transfer Agreement with the Technologies & Engineering Company, pursuant to which the Company has agreed to acquire and the Technologies & Engineering Company has agreed to transfer the Target Equity held by it to the Company at a consideration of RMB14,606,630.56, to be payable in cash. Upon the completion of the transaction, Hengtong Company will become a wholly-owned subsidiary of the Company.

LISTING RULES IMPLICATIONS

As the Technologies & Engineering Company is held as to 23% equity interests by China National Water Resources & Electric Power Materials & Equipment Group Co., Ltd., a wholly-owned subsidiary of China Datang, the Controlling Shareholder of the Company, Technologies & Engineering Company is a connected subsidiary of the Company as defined in the Listing Rules. Pursuant to Chapter 14A of the Listing Rules, the Equity Transfer Agreement and the transaction contemplated thereunder constitute a connected transaction of the Company. As one or more of the applicable percentage ratios in relation to the transaction under the Equity Transfer Agreement exceed 0.1% but less than 5%, the Equity Transfer Agreement and the transaction contemplated thereunder is subject to the reporting and announcement requirements set out under Chapter 14A of the Listing Rules, but is exempt from the independent shareholders’ approval requirement.

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The Board is pleased to announce that on 18 December 2017, the Company entered into the Equity Transfer Agreement with the Technologies & Engineering Company, pursuant to which the Company has agreed to acquire and the Technologies & Engineering Company has agreed to transfer the Target Equity held by it to the Company at a consideration of RMB14,606,630.56, to be payable in cash. Upon the completion of the transaction, Hengtong Company will become a wholly-owned subsidiary of the Company.

Summary of Key Terms of the Equity Transfer Agreement

Date: 18 December 2017

Parties: Technologies & Engineering Company (as seller); and

the Company (as buyer)

Equity Transfer and Consideration

According to the terms and conditions of the Equity Transfer Agreement, the Company has agreed to acquire and the Technologies & Engineering Company has agreed to transfer the Target Equity held by it to the Company.

The consideration of the above transfer is RMB14,606,630.56, which was determined upon arm’s length negotiation between the parties and with reference to various factors, including the value of all shareholders’ equity interests of Hengtong Company (based on the appraised value of all equity interests held by shareholders of Hengtong Company as at the benchmark date of 30 April 2017 as appraised by the independent valuer under the asset-based approach (i.e. RMB18,258,200)), relevant industry situation and development prospect of Hengtong Company.

Conditions Precedent

Completion of the transaction under the Equity Transfer Agreement shall be subject to the conditions precedent as follows:

• The Board of the Company has agreed on the equity transfer;

• the shareholders’ meeting of Technologies & Engineering Company has agreed on the equity transfer; and

• the shareholders’ meeting of Hengtong Company has agreed on the equity transfer.

As at the date of this announcement, all of the conditions precedent have been fulfilled.

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Completion

Pursuant to the Equity Transfer Agreement, the Company shall transfer 30% of the consideration for equity transfer (i.e. approximately RMB4,381,989) to the designated account of Technologies & Engineering Company within 10 business days of the signing of the Equity Transfer Agreement and the fulfilment of the conditions precedent, while the remaining payments (i.e. approximately RMB10,224,642) shall be transferred to the designated account of Technologies & Engineering Company within 10 business days of the registration date for the industrial and commercial changes with the relevant authority. The Company shall notify the Technologies & Engineering Company about the above payments on the date of transferring the above payments.

The two parties shall proactively assist and cooperate with the Hengtong Company in respect of the above matters regarding the equity transfer to apply for the transfer registration procedures for the transfer of Target Equity from state-owned property registration authority and the industrial and commercial administrative authority.

Information about Hengtong Company

Hengtong Company was incorporated in Beijing, the PRC on 8 January 2009. It is principally engaged in environmental protection technological development, technical services, technology transfer, technical consultation (except agency); corporate management; water pollution treatment; sewage treatment; construction contracting; professional contracting; economic information consultation; sales of automatic control systems and equipment, environmental protection equipment, construction materials, chemicals products (excluding hazardous chemicals), machinery and equipment, electronic products, hardware and electric materials; import and export of goods (except for the management of goods subject to state-operated export trade administration), import and export agent, technology import and export; solid waste treatment and engineering design.

As at the date of this announcement, the registered capital of Hengtong Company amounted to RMB5 million. It is held as to 80% and 20% equity interests by Technologies & Engineering Company and the Company, respectively.

Technologies & Engineering Company contributed RMB2,275,000 upon the incorporation of Hengtong Company, correspondingly holding 45.5% equity interests of Hengtong Company, and subsequently acquired 34.5% equity interests of Hengtong Company held by its wholly-owned subsidiary with a consideration of RMB8,944,879.85.

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According to the PRC Accounting Standard for Business Enterprises, as of 30 April 2017, the total assets and net assets of Hengtong Company amounted to approximately RMB158.22 million and approximately RMB17.98 million, respectively.

According to the PRC Accounting Standard for Business Enterprises, relevant financial information of Hengtong Company for the two years ended 31 December 2015 and 2016 is set out below:

	Unit: RMB ’000	Unit: RMB ’000
	For the	For the
	year ended	year ended
	31 December	31 December
	2016	2015
Net profit before tax and extraordinary items	691.49	6,428.94
Net profit after tax and extraordinary items	353.63	5,348.99

REASONS FOR AND BENEFITS OF THE EQUITY TRANSFER AGREEMENT

Hengtong Company is primarily engaged in the manufacturing and sales of dry slag extractor and pipe conveyor and related engineering construction. Under the promotion of relevant environmental protection and energy conservation policies of the PRC government, such business is expected to have a huge market demand in the future with promising development prospects.

In view of the above, Directors (including independent non-executive Directors) are of the view that the Equity Transfer Agreement and the transaction contemplated thereunder are entered into on normal or better commercial terms, fair and reasonable and conducted in the ordinary course of business of the Company, which are in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As the Technologies & Engineering Company is held as to 23% equity interests by China National Water Resources & Electric Power Materials & Equipment Group Co., Ltd., a wholly-owned subsidiary of China Datang, the Controlling Shareholder of the Company, Technologies & Engineering Company is a connected subsidiary of the Company as defined in the Listing Rules. Pursuant to Chapter 14A of the Listing Rules, the Equity Transfer Agreement and the transaction contemplated thereunder constitute a connected transaction of the Company. As one or more of the applicable percentage ratios in relation to the transaction under the Equity Transfer Agreement exceed 0.1% but less than 5%, the Equity Transfer Agreement and the transaction contemplated thereunder is subject to the reporting and announcement requirements set out under Chapter 14A of the Listing Rules, but is exempt from the independent shareholders’ approval requirement.

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Mr. Jin Yaohua, Mr. Liu Chuandong, Mr. Liu Guangming and Mr. Liang Yongpan are holding positions in China Datang and therefore have abstained from voting at relevant Board meetings approving the Equity Transfer Agreement and the transaction contemplated thereunder. Saved as mentioned above, all Directors have confirmed that they have no material interests in the Equity Transfer Agreement and the transaction contemplated thereunder.

GENERAL INFORMATION

The Company is a non-wholly-owned subsidiary of China Datang, and is the sole platform for the development of environmental protection and energy conservation business under China Datang, one of the five (5) major state wholly-owned power generation groups in the PRC. The principal business of the Company includes environmental protection facility concession operation, denitrification catalysts, environmental protection facilities engineering, water treatment business, energy conservation business and renewable energy engineering business.

Technologies & Engineering Company was established on 10 May 2004 with a registered capital of RMB180 million. It is principally engaged in the design and general contracting of construction of thermal and wind power generation system, the design and general contracting of construction of the environmental protection project system for desulfurization and denitrification in energy, metallurgy and chemical engineering sectors.

China Datang is a state-owned enterprise established in the PRC in April 2003 and is primarily engaged in the development, investment, construction, operation and management of power energy; organisation of power (thermal) production and sales; manufacture, maintenance and commissioning of electric power equipment; power technology development and consultation; contracting and consulting of electric power engineering and environmental protection projects; development of renewable power; and self-operating and being an agent for import and export of any kind of goods and technology save for those where the import or export of the goods and technology are restricted or prohibited by national laws and regulations.

DEFINITIONS

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

“Board” the board of Directors of the Company

“China Datang” China Datang Corporation Ltd. ( 中國大唐集團有 限公司 ), a state-owned enterprise established in the PRC and the Controlling Shareholder of the Company

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“Company” Datang Environment Industry Group Co., Ltd.* ( 大唐環境產業集團股份有限公司 ), a joint stock company incorporated in the PRC with limited liability, whose H shares are listed on the Stock Exchange (stock code: 1272)

• “connected transaction” has the meaning ascribed under the Listing Rules

• “Controlling Shareholder” has the meaning ascribed under the Listing Rules

• “Director(s)” the director(s) of the Company

• “Domestic Share(s)” the ordinary Share(s) with a nominal value of RMB1.00 each in the share capital of the Company, subscribed and paid in RMB

• “Equity Transfer Agreement” the agreement in relation to the transfer of Target Equity entered into between Technologies & Engineering Company and the Company on 18 December 2017

• “H Share(s)” overseas listed foreign shares with a nominal value of RMB1.00 each, listed and traded on the Stock Exchange

• “Hengtong Company” Beijing Datang Hengtong Mechanical Transport Co., Ltd. ( 北京大唐恒通機械輸送技術有限公 司 ), held as to 20% and 80% equity interests by the Company and Technologies & Engineering Company, respectively, as at the date of this announcement

• “Listing Rules” Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (as amended, supplemented or modified from time to time)

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

• “RMB”

• Renminbi, the current lawful currency of the PRC

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“Share(s)” ordinary share(s) with nominal value of RMB1.00 each of the Company, composed of the Domestic Shares and H Shares

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

“Stock Exchange” The Stock Exchange of Hong Kong Limited

• “subsidiary” has the meaning ascribed under the Listing Rules

“Target Equity” 80% of the equity interests of Hengtong Company held by Technologies & Engineering Company as at the date of this announcement

• “Technologies & Engineering China Datang Technologies & Engineering Co., Company” Ltd. ( 中國大唐集團科技工程有限公司 ), a subsidiary of the Company as at the date of this announcement

“%”

per cent

By order of the Board Datang Environment Industry Group Co., Ltd.* Jin Yaohua Chairman

Beijing, 18 December 2017

As of the date of this announcement, the non-executive directors of the Company are Mr. Jin Yaohua, Mr. Liu Chuandong, Mr. Liu Guangming and Mr. Liang Yongpan; the executive directors of the Company are Mr. Deng Xiandong and Mr. Lu Shengli, and the independent non-executive directors of the Company are Mr. Ye Xiang, Mr. Mao Zhuanjian and Mr. Gao Jiaxiang.

• For identification purposes only

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