Dynagreen Environmental Protection Group Co., Ltd. — M&A Activity 2020

Apr 29, 2020

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.

綠色動力環保集團股份有限公司 Dynagreen Environmental Protection Group Co., Ltd.* (a joint stock limited liability company incorporated in the People’s Republic of China) （Stock Code: 1330）

ANNOUNCEMENT ON THE ACQUISITION OF 87.5% EQUITY INTEREST IN LAIZHOU HAIKANG ENVIRONMENTAL ENERGY CO., LTD.

I. TRANSACTION OVERVIEW

Lanyang Environmental Protection Investment Holdings Co., Ltd. (藍洋環保投資控 股有限公司) (“ Lanyang Environmental Protection ”), a wholly-owned subsidiary of Dynagreen Environmental Protection Group Co., Ltd.* (綠色動力環保集團股份有限 公司) (the “ Company ”), Shanghai SUS Environment Co., Ltd. (上海康恒環境股份有 限公司) (the “ Counterparty ”) and Laizhou Haikang Environmental Protection Energy Co., Ltd.(萊州海康環保能源有限公司) (the “ Target Company ”) entered into an equity transfer agreement (the “ Equity Transfer Agreement ”) on 29 April 2020. Pursuant to the Equity Transfer Agreement, Lanyang Environmental Protection acquired from the Counterparty the 87.5% equity interest held by it in the Target Company by way of payment in cash for a consideration of RMB1 (the “ Transaction ”).

II. PARTICULARS OF THE COUNTERPARTY

Shanghai SUS Environment Co., Ltd. is a company limited by shares established on 4 December 2008 under the PRC laws, with a registered capital of RMB417,962,400. Its registered address is No. 9 Songqiu Road, Xianghuaqiao Sub-district, Qingpu District, Shanghai, and it holds 89.9% equity interest in the Target Company.

The scope of business of Shanghai SUS Environment Co., Ltd. includes investment, development, design and construction of new energy, renewable energy and environmental protection facilities (carrying out business activities based on relevant qualification certificates), removal, transport, treatment and disposal of domestic waste (including kitchen waste), road machinical cleaning, scouring, spraying dust, removing snow in winter, removing illegal adlets, sanitation cleaning services, research,

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development, investment and construction of agricultural and forestry biomass energy, research and development of agricultural and forestry biomass treatment speciality equipment, agricultural and forestry biomass technology consulting and communication, technical research and development and technical services in the fields of environmental engineering and chemical engineering, complete installation of environmental engineering equipment, sales of environmental engineering equipment, chemical products and raw materials (excluding dangerous, monitored and precursor chemicals, civilian explosives), import and export of goods and technology, leasing of self-owned equipment, professional contracting of environmental protection projects, industrial investment, engineering construction and management services.

The substantial shareholders of Shanghai SUS Environment Co., Ltd. are Shanghai Panxin Yuran Environmental Protection Investment Center (Limited Partnership) (上海磐信昱 然環保投資中心（有限合夥）) (holding 59.00%), Long Jisheng (holding 11.01%), Zhu Xiaoping (holding 7.62%), Shanghai Kangsui Investment Center (Limited Partnership) (上海康穗投資中心（有限合夥）) (holding 10.00%).

The major financial indicators for 2019 are as follows (unaudited):

			Unit: RMB0’000
		Operating
Total assets	Net asset	income	Net profit
1,452,271	341,090	483,468	73,407

There is no connected relationship between the Counterparty as aforesaid and the Company and its controlling shareholder, de facto controller, directors, supervisors and senior management.

III. PARTICULARS OF THE TARGET COMPANY

1. Profile

The Target Company is a company established under the PRC laws with limited liability. Its registered address is Rooms 1012 & 1013, Fortune Building, Beiyuan Road, Chenggang Road Sub-district, Laizhou City, Yantai, Shandong Province, with a unified social credit code of 91370683MA3RN0LN40. Its principal business is waste incineration power generation; solid waste treatment; sales of slag, slag bricks, gravel, metal products and building materials; urban domestic waste operational services; kitchen garbage treatment; sewage treatment and recycling; sludge treatment; garbage dump management; research and development of waste treatment technology, technical consulting, technical services (the above exclude hazardous chemicals and precursor chemicals). The legal representative is Qiu Lin, and the registered capital is RMB200 million.

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As at the date of this announcement, the shareholding structure is as follows:

Name of shareholderShanghai SUS Environment Co., Ltd.Laizhou Donghai Urban ConstructionComprehensive Development Co., Ltd.(萊州市東海城建綜合開發有限公司)Hunan Industrial Equipment Installation Co., Ltd.(湖南省工業設備安裝有限公司)Total	Subscribedcapitalcontribution(RMB0’000)17,9802,0002020,000	Percentage ofshareholding(%)89.9100.1100

There is no mortgage or pledge over, or other restrictions on the transfer of, the equity interest mentioned above.

2. Business introduction

As at the date of this announcement, the Target Company had operating concessions of domestic waste comprehensive treatment PPP project in Laizhou City, Shandong (the “ Laizhou Project ”). The Laizhou Project adopts a combination of BOT and entrusted operation models, that is, new waste incineration power generation project is under the BOT model, and existing urban and rural garbage transfer and collection business is under the entrusted operation model. The Laizhou Project plans to build a domestic waste incineration power plant with a total capacity of daily domestic waste treatment of 1,500 tonnes. The first phase treatment capacity is 1,000 tonnes per day, using 2 × 500-tonne/ day incineration lines and equipped with 2 × 12MW condensing steam turbines generator sets. The project will build a 80-tonne/day kitchen waste pretreatment line with a first phase treatment capacity of 30 tonnes per day, a 80-tonne/day sludge drying workshop with a first phase treatment capacity of 30 tonnes per day, and a new supportive 600-tonne/day leachate liquid treatment workshop with a first phase treatment capacity of 400 tonnes per day. The cooperation period of the project is 30 years, including the construction period of less than two years for the newly-built waste incineration power generation, and the rest is operation period. The operation period of the garbage transfer, collection and transport is eight years. The unit price of waste incineration treatment is RMB51 per tonne. The investment in the Laizhou Project is estimated to be RMB580 million. The project obtained approval for feasibility study in 2017 and approval for environmental assessment in 2018. The warehousing procedures of the Ministry of Finance for the PPP project have been completed, which has not commenced construction yet.

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3. Financial information

Based on the audited financial report provided by the Target Company, the basic financial information of the Target Company as at 31 March 2020 is as follows:

	Total	Total	Owners’
Item	assets	liabilities	equity
Amount (RMB0’000)	20	0	20

IV. MAJOR CONTENTS OF THE EQUITY TRANSFER AGREEMENT

1. Overall plan

The Counterparty agreed to transfer the 87.5% equity interest held by it in the Target Company to Lanyang Environmental Protection for a consideration of RMB1, corresponding to a registered capital of RMB175 million (corresponding to a paid-up registered capital of RMB0). Lanyang Environmental Protection agreed to acquire the 87.5% equity interest in the Target Company from the Counterparty and all of its corresponding shareholder rights and obligations, including the obligation of capital contribution. Within 20 business days from the effective date of the Equity Transfer Agreement and upon satisfaction of the conditions precedent, the Company shall fulfill its obligation of paying up a capital of RMB175 million.

The shareholding structure following the completion of the Transaction is as follows:

Name of shareholderShanghai SUS Environment Co., Ltd.Laizhou Donghai Urban ConstructionComprehensive Development Co., Ltd.Hunan Industrial Equipment Installation Co., Ltd.Lanyang Environmental Protection InvestmentHoldings Co., Ltd.Total	Subscribedcapitalcontribution(RMB0’000)4802,0002017,50020,000	Percentage ofshareholding(%)2.4100.187.5100

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2. Change of registration procedures

The Target Company undertakes that within 10 days after the Equity Transfer Agreement becoming effective, it will complete the corresponding change in industrial and commercial registration in accordance with the terms therein. The charge required for the change of industrial and commercial registration or filing will be borne by the Target Company. Lanyang Environmental Protection and the Counterparty shall cooperate fully with the Target Company in carrying out such change in industrial and commercial registration.

Lanyang Environmental Protection is entitled to unilaterally terminate the Equity Transfer Agreement by giving a notice in writing to the Target Company which, if fails to go through the relevant procedures of change in industrial and commercial registration on time as stipulated in the Equity Transfer Agreement, and still fails more than 30 days overdue.

3. Profit or loss during the transition period and management of the Target Company

During the transition period, any profit or loss incurred by the Target Company shall be assumed by Lanyang Environmental Protection, and the entering into of contract by and capital expenditure of the Target Company shall be subject to the written consent of Lanyang Environmental Protection.

4. Dispute resolution

Any dispute arising from or relating to the Equity Transfer Agreement shall be resolved through negotiation between both parties. If the negotiation fails, either party may submit the dispute to the China International Economic and Trade Arbitration Commission for arbitration.

V. THE PURPOSE OF THIS EQUITY ACQUISITION AND ITS IMPACT ON THE COMPANY

As an environmental protection enterprise that has a deep presence in the domestic waste incineration power generation industry, the Company is committed to developing its principal business to be bigger and stronger for solidifying its position in the industry. The Company believes that the acquisition of the Target Company will, enable the Company to expand its daily domestic waste treatment capacity by 1,500 tonnes and the scope of its domestic waste incineration power generation business, thereby increasing its market share and profitability.

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VI. THE IMPLICATIONS UNDER THE RULES GOVERNING THE LISTING OF SECURITIES ON THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “LISTING RULES”)

The entering into of the Equity Transfer Agreement does not constitute a notifiable transaction under the Listing Rules. The Company will update the subsequent progress in compliance with the relevant requirements of the Listing Rules.

By Order of the Board Dynagreen Environmental Protection Group Co., Ltd. Zhi Jun* Chairman

Shenzhen, the PRC 29 April 2020

As at the date of this announcement, the non-executive Directors of the Company are Mr. Zhi Jun, Mr. Liu Shuguang, Mr. Cheng Suning and Mr. Cao Jinjun, the executive Directors of the Company are Mr. Qiao Dewei and Mr. Hu Shengyong and the independent non-executive Directors of the Company are Mr. Ou Yuezhou, Ms. Fu Jie and Mr. Xie Lanjun.

* For identification purposes only

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