THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult a 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 of Puxing Energy 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 was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong 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 however arising from or in reliance upon the whole or any part of the contents of this circular.

PUXING ENERGY LIMITED

普星能量有限公司
(Incorporated in Cayman Islands with limited liability)
(Stock Code: 90)

MAJOR AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser

东方证券
DFZQ

回除

Capitalised terms used in this cover shall have the same meaning as those defined in this circular.

A letter from the Independent Board Committee to the Independent Shareholders in relation to the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder is set out on pages 32 and 33 of this circular.

A letter from the Board is set out on pages 6 to 31 of this circular. A notice convening the EGM of the Company to be held at Second Floor No. 777 Meeting Room, Wanxiang Group Headquarters, No. 855 Jianshe 2nd Road, Xiaoshan District, Hangzhou City, China, on Tuesday, 11 February 2025 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use at the EGM is enclosed with this circular.

Whether or not you are able to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company's share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong as soon as possible and in any event not less than forty-eight (48) hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the enclosed form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish and, in such event, the form of proxy shall be deemed to be revoked.

27 January 2025

CONTENTS

Page

DEFINITIONS ... 1
LETTER FROM THE BOARD ... 6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE ... 32
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER ... 34
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP ... I-1
APPENDIX II – VALUATION REPORT OF THE TARGET COMPANY ... II-1
APPENDIX III – GENERAL INFORMATION ON THE GROUP ... III-1
NOTICE OF EGM ... EGM-1

DEFINITIONS

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

“Anergy International”
Energy International Limited, a company incorporated under the laws of British Virgin Islands with limited liability, which wholly owns Puxing International, and is owned as to 100% by Wanxiang Group which in turn is ultimately controlled by Mr. Lu;

“associate(s)”
has the meaning ascribed to it under the Listing Rules;

“Audit Reference Date”
30 September 2024, being the reference date for the preparation of the Audit Report;

“Audit Report”
consolidated audit report of the Target Group for the nine months ended the Audit Reference Date and for the year ended 31 December 2023 issued by Zhonghui Certified Public Accountants LLP, a PRC certified public accountants in accordance with PRC GAAP;

“Bluesky Power Plant”
Zhejiang Puxing Bluesky Natural Gas Power Co., Ltd.* (浙江普星藍天然氣發電有限公司), a company established under the laws of the PRC with limited liability and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date;

“Board”
the board of Directors;

“Business Day(s)”
a day other than Saturday, Sunday and a public holiday in the PRC or Hong Kong;

“Company”
Puxing Energy Limited, a company incorporated in the Cayman Islands with limited liability and the Shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 90);

“Completion”
completion of the Disposal in accordance with the terms and conditions of the Equity Transfer Agreement;

“Completion Date”
the date of the Completion;

“Consideration”
the consideration in the amount of RMB142,720,000 (the equivalent amount in Hong Kong dollars shall be calculated at the actual exchange rate at the time of payment of the Consideration) payable by the Purchaser to the Vendor for the Disposal under the Equity Transfer Agreement;

DEFINITIONS

"Controlling Shareholder" has the meaning ascribed to it under the Listing Rules;

"Directors" the directors of the Company;

"Disposal" the disposal of 51% of the equity interest in the Target Company by the Vendor to the Purchaser pursuant to the Equity Transfer Agreement;

"EGM" the extraordinary general meeting of the Company to be convened on 11 February 2025 to consider and, if thought fit, approve, among other things, the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder;

"Equity Transfer Agreement" the equity transfer agreement dated 30 December 2024 entered into between the Vendor, the Purchaser and the Target Company in relation to the Disposal;

"Force Majeure Event" any circumstances which are not within the reasonable control or prediction of affected party, or even if predicted, such circumstances are inevitable or cannot be overcome, and occur after the date of execution of the Equity Transfer Agreement and cause the performance by the party to the Equity Transfer Agreement objectively impossible in whole or in part, which include, without limitation, flood, fire, storm, earthquake, strikes, riots, wars (whether or not they have been declared) and any change in the relevant laws or regulations of the relevant industry;

"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 Committee" a committee of the Board comprising Mr. Wu Chongguo, Ms. Wu Ying and Mr. Yu Wayne W., being all the independent non-executive Directors, which is formed to advise the Independent Shareholders on the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder;

DEFINITIONS

"Independent Financial Adviser" or "Orient Capital"
Orient Capital (Hong Kong) Limited, a corporation licensed to carry out type 6 (advising on corporate finance) regulated activities under the SFO, being independent financial adviser to the Independent Board Committee and Independent Shareholders in relation to the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder;

"Independent Shareholders"
the Shareholders other than Puxing International and its associates;

"Latest Practicable Date"
24 January 2025, being the latest practicable date for the purpose of ascertaining information contained in this circular before its despatch;

"Listing Rules"
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

"Mr. Lu"
Mr. Lu Weiding (魯偉鼎), the ultimate controller of the Company;

"PRC"
the People's Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region of the People's Republic of China and Taiwan;

"PRC GAAP"
generally accepted accounting principles in the PRC;

"Purchaser"
SHUNFA HENGNENG Corporation* (順發恒能股份公司), a company established under the laws of the PRC with limited liability, the shares of which are listed on the Shenzhen Stock Exchange (stock code: 000631);

"Puxing International"
Puxing International Limited, a company incorporated under the laws of British Virgin Islands with limited liability, being directly interested in approximately 65.42% of the issued share capital of the Company as at the Latest Practicable Date;

"Quzhou Puxing"
Quzhou Puxing Gas Turbine Thermal Power Co., Ltd.* (衢州普星燃機熱電有限公司), a company established under the laws of the PRC with limited liability and a direct wholly-owned subsidiary of the Target Company;

DEFINITIONS

“Registration Procedures” the relevant registration procedures with the relevant PRC government authority in respect of the change in the ownership of the equity interest of the Target Company;

“RMB” Renminbi, the lawful currency of the PRC;

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

“Share(s)” ordinary share(s) of HK$0.10 each in the share capital of the Company;

“Shareholder(s)” holder(s) of the Shares from time to time;

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

“Target Company” Zhejiang Puxing Deneng Natural Gas Power Co., Ltd.*（浙江普星德能然氣發電有限公司），a company established under the laws of the PRC with limited liability, which is directly owned by the Vendor and Bluesky Power Plant as to 70% and 30%, respectively and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date;

“Target Equity” 51% of the equity interest in the Target Company;

“Target Group” Target Company and Quzhou Puxing;

“Valuation Date” 30 September 2024, being the reference date for the preparation of the Valuation Report;

“Valuation Report” the valuation report prepared by the Valuer on the appraised value of 100% equity interests in the Target Company as at the Valuation Date by adopting the asset-based approach;

“Valuer” Tianyuan Appraisal Co., Ltd.（天源資產評估有限公司），an independent valuer;

“Vendor” Puxing Neng (HK) Limited, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company;

DEFINITIONS

"Wanxiang Group"
Wanxiang Group Corporation* (萬向集團公司), a company established under the laws of the PRC with limited liability and is ultimately controlled by Mr. Lu; and

"%"
per cent.

For the purpose of this circular, unless otherwise indicated, the exchange rate of RMB1.00 = HK$1.08 has been used, where applicable, for purpose of illustration only and it does not constitute any representation that any amount has been, could have been or may be exchanged at that rate or at any other rate.

References to time and dates in this circular are to Hong Kong time and dates.

For identification purposes only
5 -

LETTER FROM THE BOARD

PUXING ENERGY LIMITED

普星能量有限公司

(Incorporated in Cayman Islands with limited liability)

(Stock Code: 90)

Executive Directors:
Mr. GUAN Dayuan (Chairman)
Mr. WEI Junyong
Mr. YUAN Feng

Independent Non-executive Directors:
Mr. WU Chongguo
Ms. WU Ying
Mr. YU Wayne W.

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

Principal Place of Business
in Hong Kong:
40/F, Dah Sing Financial Centre
248 Queen's Road East, Wanchai
Hong Kong

27 January 2025

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

I. INTRODUCTION

Reference is made to the announcement of the Company dated 30 December 2024 (the "Announcement") in relation to the Equity Transfer Agreement.

The purpose of this circular is to provide you with, inter alia, (i) further information on the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder; (ii) a letter from the Independent Board Committee to the Independent Shareholders containing its recommendation in respect of the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders containing its recommendation in respect of the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder; (iv) the financial information of the Group; (v) the valuation report of the Target Company; (vi) the notice of EGM; and (vii) other information as required under the Listing Rules.

LETTER FROM THE BOARD

II. MAJOR AND CONNECTED TRANSACTION

(1) Background

As disclosed in the Announcement, the Vendor, a direct wholly-owned subsidiary of the Company, the Purchaser and the Target Company entered into the Equity Transfer Agreement on 30 December 2024, pursuant to which the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, 51% of the equity interest in the Target Company at the Consideration of RMB142,720,000 (equivalent to approximately HK$154,137,600), subject to the terms and conditions of the Equity Transfer Agreement. Upon the Completion, the Target Company will cease to be a subsidiary of the Company.

(2) Equity Transfer Agreement

The principal terms of the Equity Transfer Agreement are set out below:

Date : 30 December 2024

Parties :
(a) the Vendor;
(b) the Purchaser; and
(c) the Target Company.

Subject matter : Pursuant to the Equity Transfer Agreement, the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, 51% of the equity interest in the Target Company, subject to terms and conditions of the Equity Transfer Agreement. For more information on the Target Group, please refer to the section headed “(3) Information on the Target Group” in this circular below.

Consideration : The Consideration for the Disposal is RMB142,720,000 (equivalent to approximately HK$154,137,600) which was determined after arm’s length negotiations between the Vendor and the Purchaser on normal commercial terms with reference to a number of factors, including:

(a) the audited consolidated net assets value of the Target Group of approximately RMB279,840,826 as at the Audit Reference Date based on the Audit Report;

LETTER FROM THE BOARD

(b) the audited financial performance of the Target Group for the nine months ended 30 September 2024;

(c) the benefits of the Disposal as set out in the section headed “(5) Reasons for and benefits of the Disposal” in this circular below; and

(d) for the Board’s reference purposes, the Board has also considered the appraised value of 100% equity interests in the Target Company as at 30 September 2024 by adopting the asset-based approach, being approximately RMB330,024,800 (equivalent to approximately HK$356,426,784) prepared by Tianyuan Appraisal Co., Ltd., an independent valuer.

Registration Procedures : The Vendor and the Purchaser shall complete the Registration Procedures within fifteen (15) Business Days after the date on which all the conditions precedent are fulfilled.

Payment of the Consideration : The Consideration shall be paid to a bank account designated by the Vendor within thirty (30) Business Days from the date of the completion of the foreign exchange registration of the funds of the Disposal in accordance with Hong Kong dollar foreign exchange purchase procedures (the amount of foreign exchange purchase proceeds shall be calculated at the actual exchange rate) after the Purchaser has withheld and paid taxation according to laws (if applicable).

Transition period arrangement : (a) Subject to the Completion, during the period from the Audit Reference Date to the Completion Date (the “Transition Period”), the Purchaser shall bear all the profits and losses of the Target Equity, and the Vendor shall have the obligation of good faith management of the Target Equity. In case of any event or potential event that has significant adverse impact on the Target Equity during the Transition Period, the Purchaser shall be notified in a timely manner and handle properly; and

LETTER FROM THE BOARD

(b) the Vendor, the Purchaser and the Target Company agree that the accumulated undistributed profits corresponding to the Target Equity in the Target Company shall be solely owned by the Purchaser from the Audit Reference Date.

Conditions precedent
: Completion is conditional upon the satisfaction of the following conditions precedent on or before the Completion Date in accordance with the terms of the Equity Transfer Agreement:

(a) the Equity Transfer Agreement having been duly signed by the Vendor, the Purchaser and the Target Company;

(b) the Purchaser having performed the necessary procedures in accordance with relevant laws, regulations, rules, articles of association and internal compliance procedures, including but not limited to (i) approval of the Disposal by the unrelated directors of the Purchaser and making relevant resolutions at the board meeting duly convened by the Purchaser; and (ii) consent from other relevant government departments and any third party (if applicable);

(c) the Vendor and the Target Company having performed the necessary procedures in accordance with relevant laws, regulations, rules, articles of association and internal compliance procedures, including but not limited to (i) shareholders' decisions duly signed by the Vendor approving the Disposal and adoption of new articles of association of the Target Company; (ii) approval of the Disposal by the Independent Shareholders; (iii) compliance with the relevant requirements under the Listing Rules or the Stock Exchange; and (iv) consent from other relevant government departments and any third party (if applicable); and

LETTER FROM THE BOARD

(d) the representations and warranties made by the Purchaser, the Vendor and the Target Company under the Equity Transfer Agreement remaining to be true, accurate and not misleading.

None of the above conditions precedent can be waived. As at the Latest Practicable Date, the conditions precedent set out in items (a) and (b)(i) above have been fulfilled.

Completion

: Completion shall take place on the date of the completion of Registration Procedures, which shall be completed within fifteen (15) Business Days from the date on which all the conditions precedent are fulfilled.

As at the Latest Practicable Date, the Target Company is directly owned as to 70% by the Vendor and 30% by Bluesky Power Plant, and is an indirect wholly-owned subsidiary of the Company. Upon the Completion and the completion of the relevant Registration Procedures, the Target Company will be directly owned as to 51% by the Purchaser, 30% by Bluesky Power Plant and 19% by the Vendor, and accordingly, no longer be a subsidiary of the Company.

As at the Latest Practicable Date, there is no understanding, arrangement, undertaking or agreement concerning the Company's further disposal of any of the remaining 49% equity interest in the Target Company.

Termination

: The Equity Transfer Agreement may be terminated in writing in the following manners:

(a) unless the Vendor, the Purchaser and the Target Company agree otherwise, if Completion does not take place on or before 31 March 2025, either the Vendor or the Purchaser may terminate the Equity Transfer Agreement by written notice to the other party;

(b) if the Vendor, the Purchaser and the Target Company agree in writing;

10 -

LETTER FROM THE BOARD

(c) except for the Force Majeure Event, if a party to the Equity Transfer Agreement fails to perform any of its obligations under the Equity Transfer Agreement in a timely and appropriate manner or breaches any of its representations, warranties and undertakings under the Equity Transfer Agreement, the non-defaulting party to the Equity Transfer Agreement may terminate the Equity Transfer Agreement;

(d) if the Registration Procedures cannot be completed, the Vendor, the Purchaser and the Target Company may unanimously agree to terminate the Equity Transfer Agreement; or

(e) if a Force Majeure Event has lasted for at least thirty (30) days and renders the performance of the obligations by any party under the Equity Transfer Agreement impossible, either the Vendor, the Purchaser or the Target Company may terminate the Equity Transfer Agreement.

Under the event set out in items (c) above, the non-defaulting party shall have the right to immediately terminate the Equity Transfer Agreement and abandon the Disposal upon its independent and prudent decision by written notice to defaulting party without bearing any liability. The right of either party to terminate the Equity Transfer Agreement pursuant to items (c) above is additional and separate, and any exercise of such right shall not affect, diminish, or constitute a waiver of any other right, remedy or claim available to it at the date of such written notice.

11 -

LETTER FROM THE BOARD

(3) Information on the Target Group

The Target Company is a company established under the laws of the PRC with limited liability on 18 August 2004, which is directly owned by the Vendor and Bluesky Power Plant as to 70% and 30%, respectively and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date. It is principally engaged in natural gas power generation and on-grid sales, supporting mechanical and electrical equipment production and sales, sales of hot water produced by waste heat, power grid auxiliary service project development, operation, maintenance and technical services. As at the Latest Practicable Date, the Company owns the entire equity interest in the Target Company through the Vendor and Bluesky Power Plant (each is a wholly-owned subsidiary of the Company).

As at the Latest Practicable Date, the Target Company directly owns the entire equity interest in Quzhou Puxing, a company established under the laws of the PRC with a registered capital of RMB300,000,000. Quzhou Puxing is principally engaged in thermal power technology research and development; gas turbine thermal power project investment, operation, maintenance, technical services; heating services; power generation business and photovoltaic power generation project investment and development.

The Target Group currently operates two gas-fired power plants with an aggregate installed capacity of approximately 342.15 megawatt (MW) (including approximately 150 kilowatt (kW) photovoltaic power generating units) and a maximum heating capacity of approximately 200 tons/hour. The power plants operated by the Target Group generate power in accordance with the instructions of the relevant government authorities in Zhejiang Province and sell the power generated to State Grid Zhejiang Electric Power Co., Ltd. (國網浙江省電力有限公司) by sending it to the power grid. Quzhou Puxing also supplies steam to the users locating in proximity of its heating pipelines.

12 -

LETTER FROM THE BOARD

The shareholding structure charts of the Target Company before and after the Disposal are set out as follows:

Before the Disposal

After the Disposal

LETTER FROM THE BOARD

Financial information of the Target Group

Based on the unaudited consolidated financial statements for the years ended 31 December 2022 and the audited consolidated financial statements for the year ended 31 December 2023 and the nine months ended 30 September 2024 of the Target Group prepared in accordance with the PRC GAAP, the financial information of the Target Group was approximately as follows:

	For the nine months ended 30 September 2024 RMB'000 audited	For the year ended 31 December
		2023 RMB'000 audited	2022 RMB'000 unaudited
Revenue	207,306	259,763	347,871
Profit before taxation	37,426	46,005	35,176
Profit after taxation	32,200	34,305	24,482

The revenue of the Target Group above comprises volume tariff revenue, capacity tariff revenue and revenue from sales of heat.

The audited consolidated net assets value and total assets of Target Group as at 30 September 2024 prepared in accordance with the PRC GAAP was approximately RMB279,840,826 and RMB841,074,508, respectively. Set out below is a breakdown of the major assets of the Target Group and their respective carrying values as at 30 September 2024:

	RMB'000 audited
Monetary funds	66,983
Accounts and other receivables	34,444
Inventories	47,182
Fixed assets	634,045
Intangible assets	16,795
Long-term unamortized expenses	36,161
Other assets	5,465
Total assets	841,075

LETTER FROM THE BOARD

The audited consolidated net assets value of the Target Group as at 30 September 2024 prepared in accordance with the PRC GAAP was approximately RMB279,840,826. The appraised value of the owners' equity of the Target Company as at 30 September 2024 was approximately RMB330,024,800, which was with reference to the Valuation Report prepared by the Valuer who was engaged by the Vendor at the request of the Purchaser for its reference by adopting the asset-based approach. The difference between the appraised value of the Target Company based on the Valuation Report and the audited consolidated net assets value of the Target Group based on the Audit Report was mainly due to the appreciation of land use right of the Target Group. The appraised value of such land use right was arrived at by using the market approach comparing with undeveloped lands for sale in the primary land market which did not reflect factors including: (i) the restriction on the transfer of the land use right of the Target Group (i.e. in principle, such land use right is required to be transferred entirely together with the buildings and attachments on the land as a whole according to the relevant PRC laws and regulations), and (ii) the comparatively low liquidity of such land use right in the market, considering that two power plants are constructed on such land, so the appreciation part of the land use right does not have the ability to realise. As such, the Board is of the view that such appraised value is not of much reference value to the Group in determining the Consideration.

(4) Valuation

The Company engaged the Valuer on the appraised value of the Target Company as at the Valuation Date for the purpose of the Disposal. A summary of the valuation report prepared by the Valuer is set out in Appendix II to this circular.

Valuation approach and methodology

The appraised value of the Target Company of RMB330,024,800 (equivalent to approximately HK$356,426,784) as at the Valuation Date is determined by the Valuer using the asset-based approach.

The applicability of the three basic methods of valuation, namely the market approach, the income approach and the asset-based approach, has been analyzed in the light of the valuation purpose, the valuation object, the type of value, the collection of information and other relevant conditions.

LETTER FROM THE BOARD

Based on the fundamentals of the Target Company and combined with interviews with the management of the Target Company, as well as historical operations, the main business of the Target Company is natural gas-fired power generation, and the pricing of electricity in the power generation business consists of electricity tariffs and capacity tariffs, with electricity tariffs being significantly affected by fluctuations in natural gas prices. The historical mode of operation of the Target Company has shown that natural gas-fired power generation mainly plays a role in the peaking of the electricity market, and its power generation capacity is greatly affected by the demand for power supply in the region. Based on the above factors, the management of the Target Company considers that future operating income and profitability are subject to considerable uncertainty, and it is not possible to make reasonable forecasts of future operating income and operating risks, therefore, it is not appropriate to adopt the income approach in the valuation.

There are comparable listed companies in the securities market with similar business operations as the Target Company, and the value of 100 % equity interest in the Target Company can be calculated through comparative analysis with comparable listed companies, and therefore the market approach has been adopted for this valuation.

On the basis of the financial audit as at the Valuation Date, the scope of assets and liabilities provided by the Target Company for appraisal is clear and can be verified and assessed on an item-by-item basis by means of financial information, information on purchases and construction and on-site inspections, and therefore the asset-based approach has been adopted for this valuation.

In view of the above analysis, the valuation has adopted the asset-based approach and the market approach to assess the appraised value of 100 % equity interest in the Target Company respectively.

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LETTER FROM THE BOARD

Key quantitative inputs and the computation process

Set out below is a summary of the appraised value of 100% equity interests in the Target Company as at the Valuation Date by adopting the asset-based approach prepared by the Valuer:

Item	Book Value A	Appraised Value B	Value-added (accountancy) C = B-A	Value Added Ratio% D = C/A × 100
Current asset	47,789,180.61	47,804,473.84	15,293.23	0.03
Of which: Inventory	2,957,046.14	2,957,046.14
Non-current asset	492,086,017.58	613,397,490.50	121,311,472.92	24.65
Of which: Long-term equity investments	360,114,461.33	411,242,696.92	51,128,235.59	14.20
Fixed assets	123,616,984.70	147,729,014.00	24,112,029.30	19.51
Of which: Building type	13,059,417.32	24,653,600.00	11,594,182.68	88.78
Equipment type	110,557,567.38	123,075,414.00	12,517,846.62	11.32
Right-of-use asset	62,978.42	62,978.42
Intangible asset	3,083,378.66	49,158,410.00	46,075,031.34	1,494.30
Of which: Land use right	3,083,378.66	49,140,300.00	46,056,921.34	1,493.72
Long-term amortized expense	89,410.86	89,410.86
Deferred tax asset	5,118,803.61	5,114,980.30	-3,823.31	-0.07
Total assets	539,875,198.19	661,201,964.34	121,326,766.15	22.47
Current liability	151,369,284.46	151,369,284.46
Non-current liability	179,807,888.88	179,807,888.88
Total liabilities	331,177,173.34	331,177,173.34
Total owner's equity	208,698,024.85	330,024,791.00	121,326,766.15	58.14

There are differences between the book value and appraised value of the Target Company, the details of which are set out as follows:

(i) the book value of the assets was RMB539,875,198.19 and the appraised value was RMB661,201,964.34, with an appraisal value increase of RMB121,326,766.15, representing an appreciation rate of 22.47%;

(ii) the book value of the liabilities was RMB331,177,173.34 and the appraised value was RMB331,177,173.34, with no valuation increase or decrease; and

(iii) the book value of the owners' equity was RMB208,698,024.85 and the appraised value was RMB330,024,791.00, with an appraisal value increase of RMB121,326,766.15, representing an appreciation rate of 58.14%.

LETTER FROM THE BOARD

The main differences between the book value and appraised value of the Target Company are long-term equity investments, fixed assets and intangible assets:

(i) In respect of the long-term equity investments, since the value of 100% equity interests in the Target Company had been assessed as a whole on the consolidated basis under the market approach, it was assessed in the asset-based approach that the appraised value of the long-term equity investments was determined by multiplying the value of 100% equity interests in the Target Company as a whole after the valuation by the proportion of the shareholding.

The appraised value of long-term equity investments has increased by RMB51,128,235.59, and the main reason is that the book value of the wholly-owned subsidiaries was accounted for using the cost method, and the book value does not reflect their historical retained earnings from business operations and the situation of asset quality.

(ii) In respect of the fixed assets (buildings), based on the physical condition, utilization and collection of information and other relevant conditions of buildings and structures, the cost approach was selected as the valuation method after analyzing the applicability of the three basic valuation methods, namely the market approach, the income approach and the cost approach, as well as the relevant derivative methods.

The cost approach is used to assess the replacement costs of buildings and structures as well as the physical, functional and economic depreciation, deduct the various depreciations from the replacement cost or assess the comprehensive rate of newness on the basis of a comprehensive consideration of the various depreciations, and finally calculate the appraised value of buildings and structures. The specific calculation formula selected for this appraisal was as follows:

$$
\text{Appraised value} = \text{Replacement costs} \times \text{Comprehensive rate of newness}
$$

Replacement costs generally include the necessary and reasonable costs and related taxes for purchasing or constructing of brand-new assets with the same efficacy as the valuation object, such as: construction and installation costs, preliminary engineering fees and other construction-related costs, the capital cost during construction, and reasonable profit. The specific calculation formula selected for this appraisal was as follows:

$$
\text{Replacement costs} = \text{Construction and installation costs} + \text{Preliminary engineering fees} + \text{Other construction-related costs} + \text{Capital cost during construction} + \text{Reasonable profit}
$$

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LETTER FROM THE BOARD

The appraised value of fixed assets (buildings) has increased by RMB11,594,182.68. On the one hand, buildings were constructed relatively early, and the rising construction and installation costs in recent years have led to an increase in the replacement cost of the buildings. On the other hand, the economic life span of buildings is longer than their accounting depreciation period.

(iii) In respect of the fixed assets (equipment), based on the actual utilization and current status of the equipment, the applicability of the three basic methods of valuation, namely the cost approach, the market approach and the income approach, was analyzed, and the cost approach has been selected as the main method for this equipment valuation. (Some of the old equipment was appraised using the second-hand market transaction price as a reference.)

The cost approach of equipment is used to assess the replacement costs of the equipment under appraisal and the physical, functional and economic depreciation of the equipment, deduct the various depreciations from the replacement costs or assess the comprehensive rate of newness on the basis of a comprehensive consideration of the various depreciations of the equipment, and finally calculate the appraised value of the equipment. The specific calculation formula elected for this valuation was as follows:

$$
\text{Appraised value} = \text{Replacement costs} \times \text{Comprehensive rate of newness}
$$

Replacement costs of equipment generally includes the necessary and reasonable costs and relevant taxes required for purchasing or constructing of a brand-new asset with the same efficacy as the valuation object, such as: the purchase price of the equipment, transportation and miscellaneous costs, installation and commissioning costs, foundation costs, capital costs and other costs. The calculation formula was as follows:

$$
\text{Replacement costs} = \text{Purchase price of equipment} + \text{Transportation and miscellaneous costs} + \text{Foundation costs} + \text{Installation and commissioning costs} + \text{Capital costs} + \text{Other costs}
$$

The transportation and miscellaneous cost has been comprehensively determined based on the purchase price as the base, taking into account the volume and weight of different equipment, the transportation distance, the convenience degree of traffic conditions, and the transportation mode. For the equipment whose purchase price already includes the freight, no additional calculation has been made.

19 -

LETTER FROM THE BOARD

The foundation cost has been comprehensively determined based on the purchase price as the basis, considering the characteristics of different equipment, the required engineering quantity, and auxiliary materials. For equipment that does not require a foundation, no additional calculation has been made.

For the valuation of vehicles, three recently listed vehicles of the same model have been selected from the market as reference points. After adjusting the prices, the benchmark price for the subject vehicle was derived. The average value of the benchmark prices was then used as the appraised value.

For the valuation of electronic equipment, the purchase prices of electronic equipment on the Valuation Date were determined on the basis of recent market inquiries in the local market, and the replacement costs were the purchase prices of the equipment because the general manufacturer or distributor provided free transportation and installation.

The appraised value of fixed assets (equipment) has increased by RMB12,517,846.62, and the main reason is that the depreciation period of the equipment is shorter than its economic service life.

(iv) In respect of the intangible assets – land use right, based on the current status of the land, information collection, etc., and in accordance with the requirements of the “Guidelines for Valuation Practice-Real Property”, and taking into account the location of the valuation object, the nature of the land, the conditions of utilization and the local land market conditions, the applicability of the three basic methods of valuation, namely, the market approach, the income approach and the cost approach and the assumed development method, the revised method of the base land value and other relevant derivative methods, were analyzed. As the market in which the land under appraisal is situated is active in transactions and the market approach can be adopted for valuation, the market approach has been selected as the valuation method for this valuation.

The market approach is a method of assessing the value of the land to be appraised by comparing the land to be appraised with examples of similar land transactions that have recently been traded in the market on the Valuation Date, based on the principle of substitution, and making appropriate corrections to the transaction prices of similar land. The basic formula was:

$$
V = VB \times A \times B \times C \times D \times E
$$

LETTER FROM THE BOARD

In the formula:

V: Price of land to be valued

VB: Compare example prices

A: Transaction status index of land to be valued/comparison example transaction status index

B: Land value index on the Valuation Date of land to be valued/land value index on the Valuation Date of the comparison example

C: Location factor condition index of land to be valued/comparison example location factor condition index

D: Index of rights and interests factors of land to be valued/Index of rights and interests factors of the comparative example

E: Index of physical factors of land to be valued/Index of physical factors of the comparative example

On the basis of calculating the value of the right to use the land to be appraised by applying the market approach, the appraised value of the land to be appraised was obtained by taking into account the impact of the deed tax required to reach the current state of the right to use the land in accordance with the principles of the cost approach.

The appraised value of intangible asset – land use right has increased by RMB46,056,921.34, and the main reason is that the industrial land use right for transfer was obtained relatively early, and the market price of land use rights has risen in recent years, resulting in the valuation increment.

21 -

LETTER FROM THE BOARD

Key assumptions of the Valuation

The following key assumptions were adopted in the preparation of the Valuation Report:

General assumptions

1. Transaction assumptions

Assuming that all assets to be appraised are already in the process of being traded, appraisals are conducted by simulating the market based on the trading conditions of the assets to be appraised.

2. Open market assumptions

2.1 There are voluntary sellers and buyers on an equal footing.

2.2 Both buyers and sellers have access to sufficient market information and time, and the act of trading is carried out voluntarily and sensibly rather than under coercive or unrestricted conditions.

2.3 The assets to be valued are freely transferable on the open market.

2.4 No additional bids or discounts from special buyers will be considered.

3. Assumption of relative stability of the macroeconomic environment

The value of any asset is directly related to the macroeconomic environment in which it is located. It is assumed at the time of this valuation that the industrial policy, tax policy and macroeconomic environment of the society remain relatively stable, and that there are no significant changes in interest rates and exchange rates, so as to ensure that the appraisal conclusions will have a reasonable period of use.

4. Going concern assumption

It is assumed that business operations of the Target Company are legal, that it can maintain its going concern status in the future, and that the value of its assets can be recovered through subsequent normal operations.

LETTER FROM THE BOARD

It is assumed that the equipment-type assets included in the valuation scope will be used continuously in their original location and for their original purpose.
It is assumed that the technical, structural and functional aspects of the assets are generally consistent with the conditions observed through the visible entities and the expected economic life.
The relevant basic and financial information provided by the Target Company is true, accurate and complete.

Assumptions for the adoption of the market approach

It is assumed that the property rights trading market is a fair, just and open efficient market, and that the transaction price has fully reflected the expectations of market participants on the underlying factors affecting the transaction price, such as the underlying business performance of the Target Company and the expected return, as well as the risk factors.
It is assumed that the current and future operators of the Target Company are responsible and that its corporate management is capable of assuming their positions and steadily advancing the company's growth plans and maintaining good business practices.
It is assumed that the technical workforce of the Target Company and its senior management will remain relatively stable and that there will be no significant loss of core professional and managerial staff.
It is assumed that the relevant basic and financial information of the Target Company and comparable companies in the same industry on which the valuation is based is true, accurate and complete, and that there are no undisclosed events occurring in the vicinity of the base date that would have a significant impact on its value.

In accordance with the requirements of the valuation standards, the valuation agency and the valuation professionals have determined that these premises and assumptions were established as at the Valuation Date, and will not be liable for deducing a different valuation conclusion due to a change of the premises and assumptions when there is a significant change in the economic environment in the future.

Based on the above bases, methodologies and assumptions, the Board considers that the valuation performed by the Valuer is fair, reasonable and appropriate.

23 -

LETTER FROM THE BOARD

(5) Reasons for and benefits of the Disposal

The Group is mainly engaged in the development, operation and management of natural gas-fired power plants. The Group has five wholly-owned gas-fired power plants in Zhejiang Province, with an aggregate installed capacity of 688.07 megawatt (MW) (including 1,072 kilowatt (kW) photovoltaic power generating units) with a maximum heating capacity of 360 tons/hour. Details of the operational scale and financial position of the Target Group and the Group after the Completion of the Disposal (the “Remaining Group”) prepared in accordance with the PRC GAAP are set out as follows:

(i) The Target Group currently operates two gas-fired power plants with an aggregate installed capacity of 342.15 MW (including 150 kW photovoltaic power generating units) and a maximum heating capacity of 200 tons/hour. The power plants operated by the Target Group generate power in accordance with the instructions of the relevant government authorities in Zhejiang Province and sell the power generated to State Grid Zhejiang Electric Power Co., Ltd. (國網浙江省電力有限公司) by sending it to the power grid. Quzhou Puxing also supplies steam to the users locating in proximity of its heating pipelines. For the year ended 31 December 2023, the revenue of the gas-fired power plant operated by the Target Company was RMB60,215,300 and the revenue of the gas-fired power plant operated by Quzhou Puxing was RMB199,547,300, and the net losses attributable to the gas-fired power plant operated by the Target Company were RMB706,400 and the net profits attributable to the gas-fired power plant operated by Quzhou Puxing were RMB35,011,100.

(ii) Upon the completion of the Disposal, the Remaining Group operates three gas-fired power plants with an aggregate installed capacity of approximately 345.92MW (including 922 kW photovoltaic power generating units) and a maximum heating capacity of 160 tons/hour:

(a) Puxing (Anji) Gas Turbine Cogeneration Co., Ltd. (普星(安吉)燃機熱電有限公司) operates a gas-fired power plant located in Anji County, Zhejiang Province with an installed capacity of 158.36 MW. It serves as a peak-shaving unit for the power grid. It has an annual power generation of approximately 500 hours and an annual power generation of approximately 80 million kWh. It is responsible for supplying heat to the surrounding industrial parks, with an annual heat supply of approximately 80,000 tons. For the year ended 31 December 2023, the revenue and the net profits attributable to this gas-fired power plant were RMB144,806,200 and RMB22,602,400, respectively.

24 -

LETTER FROM THE BOARD

(b) Bluesky Power Plant operates a gas-fired power plant located in Hangzhou City, Zhejiang Province with an installed capacity of 112.34 MW. It serves as a peak-shaving unit of the power grid. It has an annual power generation of approximately 400 hours and an annual power generation of approximately 40 million kWh. It has no heating business. For the year ended 31 December 2023, the revenue and the net profits attributable to this gas-fired power plant were RMB70,532,600 and RMB26,951,500, respectively.

(c) Zhejiang Puxing Jingxingran Gas Power Generation Co., Ltd. (浙江普星京興然氣發電有限公司) operates a gas-fired power plant located in Changxing County, Zhejiang Province with an installed capacity of 75.22 MW. It is a local power plant with an annual power generation of approximately 300 hours and an annual power generation of approximately 22.5 million kWh. It has no heating business. For the year ended 31 December 2023, the revenue and the net profits attributable to this gas-fired power plant were RMB52,589,700 and RMB3,394,200, respectively.

Zhejiang Province is promoting the reform of the electricity spot market and the capacity price reduction policy, which has brought challenges to the Group's business model and profitability. Zhejiang Province implemented the "Notice of the Provincial Development and Reform Commission on Optimizing the On-Grid Electricity Price of Natural Gas Power Generation in Our Province" from 1 January 2022 and lowered the capacity electricity prices, which had an adverse impact on the operating efficiency of the Target Group. The Company expects that the capacity electricity prices in Zhejiang Province may further decline in the future. On 25 December 2024, Zhejiang Provincial Development and Reform Commission, the Energy Bureau and the Energy Supervision Office issued the "Zhejiang Electricity Spot Market Operation Plan", which clearly states that the centralized dispatching gas-fired power plant which means a gas-fired power plant that is included in the unified dispatching management of the power system should not participate in the electricity spot market transactions, but should settle according to the government-authorized contract price which is usually lower than the electricity spot market price. The Company expects that the revenue of the Target Group will be affected.

25 -

LETTER FROM THE BOARD

Although the Target Group has been a profit-making subsidiary of the Company for the two years ended 31 December 2023 and nine months ended 30 September 2024, based on the aforesaid analysis on the reform of the electricity spot market and the capacity price reduction policy in Zhejiang Province, the Company believes that the Target Group's profitability will gradually decline in the future. The aforesaid analysis on the reform of the electricity spot market and the capacity price reduction policy in Zhejiang Province will affect the businesses of all the five gas-fired power plants of the Group located in Zhejiang Province. The reason for the Disposal of the Target Group only was primarily due to the comprehensive assessment of the asset-liability ratios and financial expenses of the Group's gas-fired power plants. For the year ended 31 December 2023, the asset-liability ratios and financial expenses of the two gas-fired power plants operated by the Target Group were at the highest level among all the five gas-fired power plants of the Group, and the two gas-fired power plants operated by the Target Company and Quzhou Puxing recorded the financial expenses of RMB10,965,700 and RMB10,488,200, respectively, prepared in accordance with the PRC GAAP. The Disposal will help reduce the overall financial risk and optimize the asset structure of the Group.

The Company's management team actively researches and explores business models under new forms, strives to find new market convergence points, and is committed to achieving strategic transformation. The Company intends to use the proceeds from the Disposal to develop its energy-related business and/or other upstream and downstream businesses that generate synergies with the Company's main business and are strategically aligned with the Company, by acquiring or investing in the business or companies engaged in the same business, as opportunities arise. The Group believes that the Disposal will provide the Group with the opportunity to unlock the value of its natural gas power plant holdings, supplement its current working capital and provide immediate funding for the Group's future business development, which will help to enhance the Company's negotiating power and reduce transaction time and costs when opportunities arise.

As disclosed in the section headed “(2) Equity Transfer Agreement – Consideration” in this circular above, the Board has taken into account a number of factors in determining the Consideration. The Directors (including the independent non-executive Directors who has expressed their views after considering the advice from the Independent Financial Adviser in the section headed “Letter from the Independent Financial Adviser” contained in this circular) consider that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

26 -

LETTER FROM THE BOARD

The terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder were agreed at after arm's length negotiations between the parties thereto. The Company conducted multiple rounds of commercial negotiations with the Purchaser and strived to obtain the most favorable terms for the Company and Shareholders in terms of transaction consideration, transaction terms, payment terms, etc. The Directors (including the independent non-executive Directors who has expressed their views after considering the advice from the Independent Financial Adviser in the section headed "Letter from the Independent Financial Adviser" contained in this circular) consider that the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder are on normal commercial terms which are fair and reasonable, and are in the interests of the Company and the Shareholders as a whole.

(6) Financial effects of the Disposal and use of proceeds

Upon the Completion and for illustrative purposes only, it is estimated that the Group will recognise a loss of approximately RMB2,091,521 from the Disposal. The estimated loss of approximately RMB2,091,521 is calculated based on the Consideration (approximately RMB142,720,000) minus (i) the audited consolidated net assets value of the Target Group attributable to the Target Equity as at 30 September 2024 of approximately RMB142,718,821; and (ii) estimated transaction expenses directly attributable to the Disposal of approximately RMB2,092,700.

It is estimated that the total assets of the Group will decrease by approximately RMB841,074,508, and the liabilities will decrease by approximately RMB561,233,682.

The above-mentioned estimated figures are subject to the final net assets value of the Target Group at Completion and final transaction expenses directly attributable to the Disposal.

The Company intends to use the proceeds from the Disposal to develop its energy-related business and/or other upstream and downstream businesses that generate synergies with the Company's main business and are strategically aligned with the Company, by acquiring of or investing in the business or companies engaged in the same business as opportunities arise. As at the Latest Practicable Date, the Company has not identified any specific target of such acquisition or investment. The proceeds from the Disposal will be able to improve the Company's liabilities, supplement working capital, reduce financial costs and improve management level in the short term, while it will provide immediate funding for the Group's future business development and will help to enhance the Company's negotiating power and reduce transaction time and costs when opportunities arise in the long term.

Upon the Completion and the completion of the Registration Procedures, the Target Company will be directly owned as to 51% by the Purchaser, 30% by Bluesky Power Plant and 19% by Vendor, and accordingly no longer be a subsidiary of the Company.

27 -

LETTER FROM THE BOARD

(7) Information on the parties

The Group

The Group is mainly engaged in the development, operation and management of natural gas-fired power plants.

The Purchaser

The Purchaser is a company established under the laws of the PRC with limited liability, the shares of which are listed on the Shenzhen Stock Exchange (stock code: 000631). It is principally engaged in clean energy power generation business, integrated smart energy services, real estate and property services. It is owned as to approximately 62.28% by Wanxiang Group, which in turn is ultimately controlled by Mr. Lu.

The Vendor

The Vendor is a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company, which is principally engaged in investment holding.

To the best of the Board's knowledge, information and belief having made all reasonable enquiry, the Group, the Vendor, the Purchaser and the Target Group are ultimately controlled by Mr. Lu.

(8) Implications under the Listing Rules

The shares of the Purchaser are listed on the Shenzhen Stock Exchange (stock code: 000631), which are owned as to approximately 62.28% by Wanxiang Group which in turn is ultimately controlled by Mr. Lu, the ultimate controller of the Company. Accordingly, the Purchaser is a connected person of the Company and the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio (as defined in the Listing Rules) in respect of the Disposal exceeds 25% but is less than 75%, the Disposal constitutes a major transaction of the Company and is therefore subject to the reporting, announcement and independent shareholders' approval requirements under Chapters 14 and 14A of the Listing Rules.

28 -

LETTER FROM THE BOARD

Pursuant to Rule 14A.36 of the Listing Rules, any Shareholder with a material interest in the relevant connected transaction must abstain from voting on the relevant resolution at the EGM. As at the Latest Practicable Date, Puxing International, which is ultimately controlled by Mr. Lu, is the Controlling Shareholder interested in approximately 65.42% of the total number of Shares in issue of the Company and the Purchaser is owned as to approximately 62.28% by Wanxiang Group, which in turn is ultimately controlled by Mr. Lu. Accordingly, Puxing International and its associates will be required to abstain from voting on the resolution in relation to the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder.

Save as abovementioned, to the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, no other Shareholder has a material interest in the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder and therefore, no other Shareholder is required to abstain from voting at the EGM on the relevant resolution.

To the best of the knowledge, information and belief of the Directors, none of the Directors has a material interest in the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder, and hence no Director is required to abstain from voting on the relevant resolution(s) of the Board approving the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder.

(9) Independent Board Committee and Independent Financial Adviser

The Independent Board Committee comprising Mr. Wu Chongguo, Ms. Wu Ying and Mr. Yu Wayne W., being all the independent non-executive Directors, has been formed in accordance with Chapter 14A of the Listing Rules to advise the Independent Shareholders on the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder.

In this connection, the Independent Financial Adviser has been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders on the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder.

III. EGM AND PROXY ARRANGEMENT

A notice convening the EGM to be held at Second Floor No. 777 Meeting Room, Wanxiang Group Headquarters, No.855 Jianshe 2nd Road, Xiaoshan District, Hangzhou City, China, on Tuesday, 11 February 2025 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. At the EGM, an ordinary resolution will be proposed for the approval of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder.

LETTER FROM THE BOARD

A form of proxy for use by the Shareholders at the EGM is enclosed with this circular. Whether or not you are able to attend and vote at the EGM in person, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company's share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong as soon as possible and in any event not less than forty-eight (48) hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude the Shareholders from attending and voting in person at the EGM or any adjournment thereof should you so wish and in such event, the form of proxy shall be deemed to be revoked.

IV. VOTING BY POLL

Pursuant to Rule 13.39(4) of the Listing Rules, all votes of the Shareholders to be taken at the EGM shall be taken by poll. Therefore, the chairman of the EGM will demand a poll for the ordinary resolution to be put forward at the EGM pursuant to article 66 of the articles of association of the Company. The Company will appoint scrutineers to handle vote-taking procedures at the EGM. The results of the poll will be published on the websites of the Stock Exchange's website (www.hkexnews.hk) and the Company's website (www.puxing-energy.com) as soon as possible after the EGM in accordance with Rule 13.39(5) of the Listing Rules.

V. CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed for registration of transfer of Shares from Friday, 7 February 2025 to Tuesday, 11 February 2025 (both days inclusive), for the purpose of determining Shareholders' entitlement to attend and vote at the EGM, during which period no transfer of Shares will be registered. In order to be eligible to attend and vote at the EGM, all transfer documents accompanied by the relevant share certificates must be lodged with the Company's share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong no later than 4:30 p.m. on Thursday, 6 February 2025.

VI. RECOMMENDATION

Having considered the reasons set out in the section headed "II. Major and Connected Transaction" and the advice of the Independent Financial Adviser, the Directors (including the independent non-executive Directors) are of the opinion that while the Disposal contemplated under the Equity Transfer Agreement is not in the ordinary and usual course of business of the Company, the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms or better to the Group, and in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the resolution regarding the same.

LETTER FROM THE BOARD

The Independent Board Committee has been established by the Company to consider the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder, and to advise the Independent Shareholders as to whether the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder is on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Independent Financial Adviser has been engaged to advise the Independent Board Committee and the Independent Shareholders in this respect. Your attention is drawn to (i) the letter setting out the advice from the Independent Board Committee to the Independent Shareholders, and (ii) the letter of advice from the Independent Financial Adviser setting out its advice to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder, which are set out in this circular.

VII. FURTHER INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully,

By order of the Board

Puxing Energy Limited

GUAN Dayuan

Chairman

31 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the letter from the Independent Board Committee to the Independent Shareholders in respect of the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this circular.

PUXING ENERGY LIMITED

普星能量有限公司
(Incorporated in Cayman Islands with limited liability)
(Stock Code: 90)

27 January 2025

To the Independent Shareholders of Puxing Energy Limited

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY

INTRODUCTION

We refer to the circular of the Company dated 27 January 2025 (the "Circular"), of which this letter forms part. Capitalised terms used in this letter have the same meaning as defined in the Circular unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders of the Company to consider the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder, details of which are set out in the section headed "II. Major and Connected Transaction" in the "Letter from the Board" contained in the Circular.

Your attention is drawn to the "Letter from the Board", the advice of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder as set out in the "Letter from the Independent Financial Adviser" as well as other additional information set out in other parts of the Circular.

32 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

Having taken into account the advice of, and the principal factors and reasons considered by the Independent Financial Adviser in relation thereto as stated in its letter, we consider that while the Disposal contemplated under the Equity Transfer Agreement is not in the ordinary and usual course of business of the Company, the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms or better to the Group, and in the interest of the Company and its Shareholders as a whole. We therefore recommend that you vote in favour of the ordinary resolution to be proposed at the EGM to approve the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder.

Yours faithfully,

The Independent Board Committee of

Puxing Energy Limited

Mr. Wu Chongguo
Independent Non-executive
Director

Ms. Wu Ying
Independent Non-executive
Director

Mr. Yu Wayne W.
Independent Non-executive
Director

33 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from Orient Capital (Hong Kong) Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

东方证券
D F Z Q
國際
Orient Capital (Hong Kong) Limited
28th and 29th Floor
100 Queen's Road Central
Hong Kong
27 January 2025

To: The Independent Board Committee and the Independent Shareholders

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder, details of which are set out in the letter from the Board (the "Letter from the Board") of the circular of the Company dated 27 January 2025 (the "Circular"), of which this letter forms a part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

As disclosed in the Letter from the Board, on 30 December 2024, the Vendor, a direct wholly-owned subsidiary of the Company, the Purchaser and the Target Company entered into the Equity Transfer Agreement, pursuant to which the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, 51% of the equity interest in the Target Company at the Consideration of RMB142,720,000 (equivalent to approximately HK$154,137,600), subject to the terms and conditions of the Equity Transfer Agreement. Upon Completion and the completion of the relevant Registration Procedures, the Target Company will cease to be an indirect subsidiary of the Company.

As at the Latest Practicable Date, the shares of the Purchaser are listed on the Shenzhen Stock Exchange (stock code: 000631) and it is owned as to approximately 62.28% by Wanxiang Group which in turn is ultimately controlled by Mr. Lu, the ultimate controller of the Company. As such, the Purchaser is a connected person of the Company, and the Disposal constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

34 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As the highest applicable percentage ratio (as defined in the Listing Rules) in respect of the Disposal exceeds the 25% but is less than 75%, the Disposal constitutes a major transaction of the Company and is therefore subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14 and 14A of the Listing Rules.

Pursuant to Rule 14A.36 of the Listing Rules, any Shareholder with a material interest in the relevant connected transaction must abstain from voting on the relevant resolution at the EGM. As at the Latest Practicable Date, Puxing International, which is ultimately controlled by Mr. Lu, is the Controlling Shareholder interested in approximately 65.42% of the issued Shares and the Purchaser is owned as to approximately 62.28% by Wanxiang Group which in turn is ultimately controlled by Mr. Lu. Accordingly, Puxing International and its associates will be required to abstain from voting on the resolution in relation to the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder at the EGM. To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, apart from the abovementioned, none of the Shareholders is required to abstain from voting at the resolutions at the EGM.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Wu Chongguo, Ms. Wu Ying and Mr. Yu Wayne W., has been established to advise the Independent Shareholders on the terms of the Disposal, the Equity Transfer Agreement and the transactions contemplated thereunder. In our capacity as the Independent Financial Adviser, our role is to advise the Independent Board Committee and the Independent Shareholders in this regard.

INDEPENDENCE

As at the Latest Practicable Date, we were not associated with the Company or their respective core connected persons or associates. During the last two years prior to this appointment, there were no engagement between the Group and us. Apart from normal professional fees paid or payable to us by the Company in connection with the current appointment, no arrangement exists whereby we will receive any fees or benefits from the Company or their respective core connected persons or associates that could reasonably be regarded as relevant to our independence. Accordingly, we considered eligible to act as the Independent Financial Adviser pursuant to Rule 13.84 of the Listing Rules.

35 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on the truth, accuracy and completeness of the statements, information, facts, representations and opinions contained or referred to in this Circular, provided and made to us by the Directors and management of the Company (collectively, the "Management"). We have reviewed the information of the Company, among other things, (i) the annual report of the Company for the year ended 31 December 2023 (the "2023 Annual Report") and the interim report of the Company for the six months ended 30 June 2024 (the "2024 Interim Report"); (ii) the valuation report in respect of the valuation of 100% equity interests in the Target Company as at the Valuation Date (the "Valuation Report") prepared by Tianyuan Appraisal Co., Ltd. (the "Independent Valuer"); (iii) the announcement of the Company dated 30 December 2024 in relation to, among others, the Disposal (the "Announcement"); and (iv) other information, representations and opinions as contained or referred to in the Circular.

We have not conducted an independent evaluation or appraisal of the assets and liabilities of either the Group or the Target Group, nor have we been furnished with any such evaluation or appraisal, except for the Valuation Report prepared by the Independent Valuer as set out in Appendix II to the Circular. Since we are not experts in the valuation of assets or business, thus we have relied solely upon the Valuation Report for the appraised value of the Target Company as at 30 September 2024.

This Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in this Circular or this Circular misleading. We also have sought and received confirmation from the Directors that no material information or facts have been omitted from the information supplied and opinions expressed to us were not misleading or deceptive in any material aspects. We consider that the information we have received is sufficient for us to reach an informed view and to provide a reasonable basis for us to formulate our advice and recommendation set out in this Letter. We have no reason to believe that any material information or facts have been omitted or withheld, or to doubt the truth, accuracy and completeness of the information and facts contained in this Circular or provided to us, or the reasonableness of the opinions expressed by the Management and the Company. We have not, however, conducted any independent investigation into the business, affairs, operations, financial position or future prospects of the Group or any party acting, or presumed to be acting, in concert with any of them, nor have we carried out any independent verification of the information supplied. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of this Circular, save and except for this Letter. We have also assumed that all representations contained or referred to in the Circular were true at the time they were made and at the date of the Circular and will continue to be true up to the time of the EGM, and Shareholders will be informed of any material change as soon as possible.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Our advice is necessarily based on the prevailing financial, economic, market and other conditions and the information made available to us as at the Latest Practicable Date. Where information in this Letter has been extracted from published or otherwise publicly available sources, the sole responsibility of ours is to ensure that such information has been correctly and fairly extracted, reproduced or presented from the relevant stated sources and not used out of context. This Letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the matters relating to the terms of the Disposal, Equity Transfer Agreement and the transactions contemplated thereunder. Except for its inclusion in this Circular, this Letter is not to be quoted or referred to, in whole or in part, nor shall this Letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the terms of the Disposal and Equity Transfer Agreement, we have taken into consideration the following principal factors and reasons:

1. Background information on the parties

1.1 The Group

As stated in the Letter from the Board, the Group is principally engaged in the development, operation and management of natural gas-fired power plants.

Set out below is a summary of the consolidated financial information of the Group for (i) the two years ended 31 December 2022 and 2023 ("FY2022" and "FY2023", respectively) and (ii) the six months ended 30 June 2023 and 2024 ("1H2023" and "1H2024", respectively), as extracted from the 2023 Annual Report and the 2024 Interim Report:

Table 1: Highlights of the financial results of the Group

	For the six months ended 30 June		For the year ended 31 December
	2024 RMB'000 (Unaudited)	2023 RMB'000 (Unaudited)	2023 RMB'000 (Audited)	2022 RMB'000 (Audited)
Revenue
Electricity:
- Volume tariff revenue	38,216	58,301	168,287	395,678
- Capacity tariff revenue	150,297	150,297	300,595	300,595
	188,513	208,598	468,882	696,273
Heat:
- Revenue from sales of heat	19,690	23,414	44,628	56,869
	208,203	232,012	513,510	753,142

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	For the six months ended 30 June		For the year ended 31 December
	2024 RMB'000 (Unaudited)	2023 RMB'000 (Unaudited)	2023 RMB'000 (Audited)	2022 RMB'000 (Audited)
Service:
- Revenue from provision of operation and maintenance services	-	-	-	165
	208,203	232,012	513,510	753,307
Profit from operations	69,574	70,079	140,772	119,561
Profit attributable to equity shareholders of the Company	36,837	31,942	70,842	51,932
	As at 30 June		As at 31 December
	2024 RMB'000 (Unaudited)		2023 RMB'000 (Audited)	2022 RMB'000 (Audited)
Total assets	1,993,493		1,729,629	1,779,710
Total liabilities	1,140,416		913,516	1,034,840
Net current liabilities	(336,657)		(284,999)	(282,850)
Net assets	853,077		816,113	744,870

For the six months ended 30 June 2023 and 2024

The revenue of the Group mainly comprises (i) revenue from electricity in terms of volume tariff revenue, capacity tariff revenue and (ii) revenue from sales of heat. Due to the decrease in overall demand for peak shaving power generation in Zhejiang Province, the overall power generation of the Group decreased. Revenue of the Group for 1H2024 amounted to approximately RMB208.2 million as compared to approximately RMB232.0 million for 1H2023, representing a decrease of approximately 10.26% as compared to the corresponding period of last year.

Due to the decrease in power generation and fuel costs during 1H2024, the Group's profit from operations for 1H2024 amounted to approximately RMB69.6 million (1H2023: RMB70.1 million), representing a decrease of 0.72% as compared to the corresponding period of last year.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As the combined effects of (i) the cut in capacity tariff effective from 1 January 2022; (ii) the decrease in power generation volume by natural gas power generating units of the Group for the 1H2024 as compared to 1H2023 under the exacerbation of cost inversion of natural gas power generation (i.e. the cost of natural gas power generation per unit is higher than the volume tariff of natural gas power generating units per unit) caused by the decrease in fuel costs for power generation in 1H2024; and (iii) the absence of the expected full implementation of the electricity spot market trading by Zhejiang Provincial Development and Reform Commission (浙江省發展和改革委員會) in 1H2024, the profit attributable to equity shareholders of the Company for 1H2024 was approximately RMB36.9 million, representing an increase of approximately 15.32% as compared to approximately RMB31.9 million in 1H2023.

As at 30 June 2024, the Group recorded net current liabilities and net assets of approximately RMB336.7 million and RMB853.1 million, respectively, indicating a worsening net current liabilities position as compared to 31 December 2023 and 2022.

For the two years ended 31 December 2022 and 2023

Revenue of the Group for FY2023 amounted to approximately RMB513.5 million, representing a decrease of approximately RMB239.8 million or 31.83% as compared to approximately RMB753.3 million for FY2022, which primarily attributable to the decrease in electricity sales volume, the heat supply and heating prices in 2023 as a result of the business development of the Group and grid power generation scheduling needs.

As affected by the decrease in fuel costs, and the decrease in power generation costs caused by the decrease in power generation, the profit from operations of the Group for FY2023 was approximately RMB140.8 million, representing an increase of approximately RMB21.2 million or 17.74% as compared to approximately RMB119.6 million for FY2022.

The profit attributable to equity shareholders of the Company for FY2023 was approximately RMB70.8 million, representing an increase of approximately RMB18.9 million or 36.41%, as compared to approximately RMB51.9 million for FY2022. Such increase was mainly attributed to improved operational efficiencies, effective cost management strategies, stable pricing mechanisms amidst challenging market conditions, strategic adjustments to business operations, and a recovering economic environment following the pandemic as compared to previous year. These factors collectively enabled the Company to enhance profitability despite facing significant challenges related to reduced revenue and power generation output.

As at 31 December 2023 the Group recorded net current liabilities and net assets of approximately RMB285.0 million (2022: RMB282.9 million) and RMB816.1 million (2022: RMB744.9 million), respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.2 The Purchaser

As stated in the Letter from the Board, the Purchaser is a company established under the laws of the PRC with limited liability, the shares of which are listed on the Shenzhen Stock Exchange (stock code: 000631). It is principally engaged in clean energy power generation business, integrated smart energy services, real estate and property services. As at the Latest Practicable Date, it is owned as to approximately 62.28% by Wanxiang Group which in turn is ultimately controlled by Mr. Lu.

1.3 The Vendor

As stated in the Letter from the Board, the Vendor is a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Company, which is principally engaged in investment holding.

1.4 The Target Group

As stated in the Letter from the Board, the Target Company is a company established under the laws of the PRC with limited liability on 18 August 2004, which is directly owned by the Vendor and Bluesky Power Plant as to 70% and 30%, respectively and an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date. It is principally engaged in natural gas power generation and on-grid sales, supporting mechanical and electrical equipment production and sales, sales of hot water produced by waste heat, power grid auxiliary service project development, operation, maintenance and technical services.

As at the Latest Practicable Date, the Target Company directly owns the entire equity interest in Quzhou Puxing, a company established under the laws of the PRC with a registered capital of RMB300 million. Quzhou Puxing is principally engaged in thermal power technology research and development; gas turbine thermal power project investment, operation, maintenance, technical services; heating services; power generation business and investment and development for photovoltaic power generation project.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following table sets forth the financial information of the Target Group for the two years ended 31 December 2022 and 2023 and the nine months ended 30 September 2024, prepared in accordance with the PRC GAAP and as extracted from the Letter from the Board:

Table 2: Highlights of the financial results of the Target Group

	For the nine months ended 30 September 2024 RMB'000 (Audited)	For the year ended 31 December
		2023 RMB'000 (Audited)	2022 RMB'000 (Unaudited)
Revenue	207,306	259,763	347,871
Profit/loss before taxation	37,426	46,005	35,176
Profit/loss after taxation	32,200	34,305	24,482

The revenue of the Target Group above comprises volume tariff revenue, capacity tariff revenue and revenue from sales of heat.

As stated in the Letter from the Board, the audited consolidated net assets value and total assets of the Target Group as at 30 September 2024 prepared in accordance with the PRC GAAP was approximately RMB279.8 million and RMB841.1 million, respectively.

2. Reasons for and benefits of the Disposal

As stated in the Letter from the Board, the Group is mainly engaged in the development, operation and management of natural gas-fired power plants. The Group has five wholly-owned gas-fired power plants in Zhejiang Province, with an aggregate installed capacity of 688.07 megawatt (MW) (including 1,072 kilowatt (kW) photovoltaic power generating units) with a maximum heating capacity of 360 tons/hour. For more details on the operational scale and financial position of the Target Group and the Group after the Completion of the Disposal, please refer to the section headed "II. Major and Connected Transaction - (5) Reasons for and Benefits of the Disposal" in the Letter from the Board.

Zhejiang Province is promoting reforms in the electricity spot market and implementing a capacity price reduction policy, which has brought challenges to the Group's business model and profitability. In response, the Company's management is actively researching and exploring new business models, striving to identify market convergence points, and is committed to achieving strategic transformation. The Company plans to use the proceeds from the Disposal to develop its energy-related business and/or other upstream and downstream businesses that generate synergies with the Company's main business and are strategically aligned with the Company, by acquiring or investing in the business or companies engaged in the same business, as opportunities arise.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group believes that the Disposal will provide the Group with the opportunity to unlock the value of its natural gas power plant holdings, supplement its current working capital and provide immediate funding for the Group's future business development, which will help to enhance the Company's negotiating power and reduce transaction time and costs when opportunities arise.

2.1 Assessment on the reasons for and benefits of the Disposal

As disclosed in the paragraph headed “1.1 The Group” under section “1. Background information on the parties” above, the Group’s revenue primarily includes volume tariff revenue, which represents the sale of electricity to power grid companies, capacity tariff revenue, which is subsidy income from power grid companies, and revenue from sales of heat. The decrease in the Group’s revenue for 1H2024 indicating a decline of approximately 10.26% as compared to 1H2023, which was mainly due to a significant drop in overall demand for peak shaving power generation in Zhejiang Province.

Additionally, changes in electricity tariff policies, which are governed by the “Notice Regarding the Trial Implementation of Dual Tariff for Natural Gas Power Generating Units in Zhejiang Province” (《關於我省天然氣發電機組試行兩部制電價的通知》) and the “Notice from the Zhejiang Provincial Development and Reform Commission Regarding Optimising the Province’s On-grid Tariff of Natural Gas Power Generation” (《浙江省發展改革委關於優化我省天然氣發電上網電價的通知》) issued by the Zhejiang Provincial Price Bureau (浙江省物價局) in June 2015 and September 2021, respectively, also affected the Group’s capacity tariff revenue. The combined impacts of the reduced power generation and these regulatory changes led to an overall decrease in revenue of the Group for 1H2024 as compared to 1H2023.

Further to our inquires with the Management in relation to the reasons of and benefits of the Disposal, we understood that the Company has considered the following factors when entering into the Equity Transfer Agreement:

(i) Unlocking value and financial flexibility: the Disposal allows the Group to unlock the value tied up in its natural gas power plants. The net proceeds from the Disposal will provide immediate funds that can be utilised for developing energy-related businesses and/or other upstream and downstream businesses that generate synergies with the Company’s main business and align with its strategic objectives, by acquiring or investing in businesses or companies engaged in the same industry, as opportunities arise.

(ii) Improving liquidity and addressing financial challenges: Considering the Group’s worsening net current liabilities position in recent years and the uncertainty in the operating environment, the Disposal is expected to (i) allow the Company to realise its investment in the Target Company at full book value with a reasonable amount of consideration, despite the uncertain economic outlook; (ii) provide immediate cash inflow, enabling the Group to meet its

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working capital requirement and strengthen the Group's liquidity, thereby supporting future capital needs for both existing and new business development opportunities while alleviating possible challenges arising from the ongoing financial conditions and reduces the overall financial risks and optimises the asset structure of the Group, having considered that the Target Group operates two gas-fired power plants with the highest asset-liability ratios and financial expenses among all five gas-fired power plants within the Group, which recorded aggregate financial expenses of approximately RMB21.5 million for FY2023, prepared in accordance with the PRC GAAP; and (iii) facilitate the more effective utilisation of management and financial resources, ensuring the sustainability of the Group's other existing operations.

(iii) Business diversification: by divesting from specific assets, the Group can diversify its energy portfolio. This diversification is critical in an evolving energy landscape where reliance on a single source of energy may pose risks. The Disposal provides an opportunity to divest from the Target Company at full book value with a reasonable consideration, despite the uncertain economic outlook. The proceeds will enable the Group to reallocate resources toward higher-return investment opportunities, better manage its financial resources, and explore new growth opportunities in the energy sector that align with its strategic objectives, market trends, and long-term resilience.

(iv) Rising operating costs: Although the Target Group has been a profit-making subsidiary of the Company for the two years ended 31 December 2023 and the nine months ended 30 September 2024, the Company anticipates that the Target Group's profitability will gradually decline in the future, leading to a potential decline in the Group's profitability, as gas prices are projected to increase in the future. According to the Gas Market Report, Q3-2024, published by the International Energy Agency, a distinguished intergovernmental organisation established in 1974 which acts as energy policy advisor to 28 countries, including the United States, Japan and member states of the European Union, the global rise in gas prices is primarily driven by two key factors: (a) geopolitical tensions, particularly the impact of the Russia-Ukraine conflict, which has led to disruptions in natural gas supplies, particularly from Russia; and (b) growing demand for natural gas, especially in fast-growing Asian markets, exacerbated by extreme weather conditions. These factors have contributed to tighter gas market fundamentals and increased price volatility, posing risks to the energy sector's profitability. In addition to these market dynamics, changes in electricity tariff policies, governed by the "Notice Regarding the Trial Implementation of Dual Tariff for Natural Gas Power Generating Units" (《關於我省天然氣發電機組試行兩部制電價的通知》) and the "Notice from the Zhejiang Provincial Development and Reform Commission Regarding Optimising the Province's On-grid Tariff of Natural Gas Power Generation" (《浙江省發展改革委關於優化我省天然氣發電上

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

網電價的通知》，have also impacted the Group’s capacity tariff revenue. The combined effect of reduced power generation, tighter gas market fundamentals, and these regulatory changes has contributed to the overall decline in the Group’s revenue for the 1H2024 as compared to the corresponding period of last year.

Taking into consideration of the above, our review of the abovementioned publicly available statistics and the related policies and the analysis illustrated below, we concur with the Directors that the Disposal is conducted in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole.

3. Principal terms of the Equity Transfer Agreement

The following sets forth the principal terms of the Equity Transfer Agreement. For detailed terms of the Equity Transfer Agreement, please refer to the section headed “II. Major and Connected Transaction – (2) Equity Transfer Agreement” in the Letter from the Board.

Date: 30 December 2024

Parties:
(a) the Vendor;
(b) the Purchaser; and
(c) the Target Company.

Subject matter: Pursuant to the Equity Transfer Agreement, the Vendor has conditionally agreed to sell, and the Purchaser has conditionally agreed to acquire, 51% of the equity interest in the Target Company, subject to terms and conditions of the Equity Transfer Agreement. For more information on the Target Group, please refer to the section headed “II. Major and Connected Transaction – (3) Information on the Target Group” in the Letter from the Board.

Consideration: The Consideration for the Disposal is RMB142,720,000 (equivalent to approximately HK$154,137,600) which was determined after arm’s length negotiations between the Vendor and the Purchaser on normal commercial terms with reference to a number of factors, including:

(a) the audited consolidated net assets value of the Target Group of approximately RMB279,840,826 as at the Audit Reference Date based on the Audit Report;
(b) the audited financial performance of the Target Group for the nine months ended 30 September 2024;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) the benefits of the Disposal as set out in the section headed "II. Major and Connected Transaction – (5) Reasons for and benefits of the Disposal" in the Letter from the Board; and

(d) for the Board's reference purposes, the Board has also considered the appraised value of the 100% equity interests in the Target Company as at 30 September 2024 by adopting the asset-based approach, being approximately RMB330,024,800 (equivalent to approximately HK$356,426,784) prepared by the Independent Valuer.

Registration Procedures:

The Vendor and the Purchaser shall complete the Registration Procedures within fifteen (15) Business Days after the date on which all the conditions precedent are fulfilled.

Payment of the Consideration:

The Consideration shall be paid to a bank account designated by the Vendor within thirty (30) Business Days from the date of the completion of the foreign exchange registration of the funds of the Disposal in accordance with Hong Kong dollar foreign exchange purchase procedures (the amount of foreign exchange purchase proceeds shall be calculated at the actual exchange rate) after the Purchaser has withheld and paid taxation according to laws (if applicable).

Transition period arrangement

(a) Subject to the Completion, during the period from the Audit Reference Date to the Completion Date (the "Transition Period"), the Purchaser shall bear all the profits and losses of the Target Equity, and the Vendor shall have the obligation of good faith management of the Target Equity. In case of any event or potential event that has significant adverse impact on the Target Equity during the Transition Period, the Purchaser shall be notified in a timely manner and handle properly; and

Conditions precedent:

Completion is conditional upon the satisfaction of the following conditions precedent on or before the Completion Date in accordance with the terms of the Equity Transfer Agreement:

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(a) the Equity Transfer Agreement having been duly signed by the Vendor, the Purchaser and the Target Company;

(b) the Purchaser having performed the necessary procedures in accordance with relevant laws, regulations, rules, articles of association and internal compliance procedures, including but not limited to: (i) approval of the Disposal by the unrelated directors of the Purchaser and making relevant resolutions at the board meeting duly convened by the Purchaser; and (ii) consent from other relevant government departments and any third party (if applicable);

(c) the Vendor and the Target Company having performed the necessary procedures in accordance with relevant laws, regulations, rules, articles of association and internal compliance procedures, including but not limited to: (i) shareholders' decisions duly signed by the Vendor approving the Disposal and adoption of new articles of association of the Target Company; (ii) approval of the Disposal by the Independent Shareholders; (iii) compliance with the relevant requirements under the Listing Rules or the Stock Exchange; and (iv) consent from other relevant government departments and any third party (if applicable); and

(d) the representations and warranties made by the Purchaser, the Vendor and the Target Company under the Equity Transfer Agreement remaining to be true, accurate and not misleading.

None of the above conditions precedent can be waived. As at the Latest Practicable Date, the conditions precedent set out in items (a) and (b)(i) above have been fulfilled.

Completion: Completion shall take place on the date of the completion of Registration Procedures, which shall be completed within fifteen (15) Business Days from the date on which all the conditions precedent are fulfilled.

As at the Latest Practicable Date, the Target Company is directly owned as to 70% by the Vendor and 30% by Bluesky Power Plant, and is an indirect wholly-owned subsidiary of the Company. Upon Completion and the completion of the relevant Registration Procedures, the Target Company will be directly owned as to 51% by the Purchaser, 30% by Bluesky Power Plant and 19% by the Vendor, and accordingly, no longer be a subsidiary of the Company.

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Termination:

The Equity Transfer Agreement may be terminated in writing in the following manners:

(b) if the Vendor, the Purchaser and the Target Company agree in writing;

(d) if the Registration Procedures cannot be completed, the Vendor, the Purchaser and the Target Company may unanimously agree to terminate the Equity Transfer Agreement; or

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.1 Valuation of the Target Company

To assess the fairness and reasonableness of the Consideration, we have considered and conducted the following analysis:

Consideration multiples of the Disposal and Comparable Companies

We have selected the price-to-earnings (“P/E”) multiple and the price-to-book (“P/B”) multiple (collectively, the “Multiples”), which are commonly adopted for the valuation of the profit-making companies and companies holding sufficient tangible assets on their balance sheets and thus is considered appropriate in assessing the reasonableness of the consideration for the disposals involving power assets. In this regard, we have derived the Multiples for the Disposal and compared them to the Multiples of companies which are listed on the Main Board of the Stock Exchange, have engaged in similar industry to the Target Company and recorded profit for their respective latest financial year (the “Comparable Companies”). Based on the foregoing selection criteria and to the best of our knowledge and endeavour, we have selected an exhaustive list of 13 Comparable Companies. Notwithstanding the Comparable Companies may or may not be identical to the Target Company in terms of the principal business, operations and financial position, we consider that our analysis, which was conducted based on the selection criteria, could provide a general reference for assessing the Consideration by making reference to other companies in the market with principal business comparable to that of the Target Company. The following table sets out a summary of the Multiples of the Comparable Companies:

Comparable Companies		Stock Code	Principal business (Note 5)	Profit for the year ended 31 December 2023 (Note 5) HK$ million	P/E multiple (Note 2) times	P/B multiple (Note 3) times
1	CLP Holdings Limited	00002.HK	Primarily engaged in the generation, transmission, and retailing of electricity	7,670	12.40	1.40
2	Power Assets Holdings Ltd.	00006.HK	Primarily engaged in electricity generation, transmission, and distribution, as well as gas transmission and distribution, and oil storage and transmission businesses	6,003	14.98	1.04
3	Beijing Jingneng Clean Energy Co., Limited	00579.HK	Primarily engaged in wind power, photovoltaic power, gas-fired power and heat energy generation, small-to-medium-sized hydropower, energy storage and other clean energy generation businesses	3,494	3.20	0.40
4	China Resources Power Holdings Company Limited	00836.HK	Mainly invests, develops, operates and manages wind farms, photovoltaic power plants, hydro-electric power plants and other clean and renewable energy projects and coal-fired power plants in China	12,110	5.79	1.04

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Comparable Companies	Stock Code	Principal business (Note 5)	Profit for the year ended 31 December 2023 (Note 5) HK$ million	P/E multiple (Note 2) times	P/B multiple (Note 3) times
5	Huaneng Power International, Inc.	00902.HK	Mainly engaged in developing, constructing, operating and managing power plants throughout China	9,471	6.93
6	China Longyuan Power Group Corporation Limited	00916.HK	A large-scale power generation conglomerate focusing on the development and operation of new energy	7,417	11.53
7	Datang International Power Generation Co., Ltd.	00991.HK	A large-scale comprehensive energy listed company in terms of green and low-carbon, multiple energy complementarity	3,350	5.25
8	Huadian Power International Corporation Limited	01071.HK	Primarily engaged in the construction and operation of power plants, including large-scale efficient coal- or gas-fired generating units and various renewable energy projects	5,258	8.25
9	Tianjin Tianbao Energy Co., Ltd.	01671.HK	Mainly responsible for providing comprehensive energy services, development and operation of distributed photovoltaic power stations and development of new energy business	3	6.02
10	Sichuan Energy Investment Development Co., Ltd.	01713.HK	A vertically integrated power supplier and service provider in Yibin City, Sichuan Province, with a full power supply value chain covering power generation, electricity distribution and sales	369	7.30
11	CGN New Energy Holdings Co., Ltd.	01811.HK	Operates a diversified portfolio of energy projects, including wind, solar, gas-fired, coal-fired, oil-fired, hydro, cogeneration, fuel cell, and biomass, across the PRC and Korea power markets	2,176	3.67
12	CGN Power Co., Ltd.	01816.HK	Focuses on nuclear power-based electricity supply and services	18,409	10.01
13	China Power International Development Limited	02380.HK	An integrated energy group that simultaneously owns thermal power, hydropower, nuclear power and renewable energy resources in the PRC	4,897	4.98
	High-end			14.98	1.40
	Low-end			3.20	0.13
	Average			7.72	0.67
	Median			6.93	0.59
	The Disposal (Note 1)			6.52	1.00

Source: the website of the Stock Exchange and the latest interim results for 6M2024 of each Comparable Company

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Notes:

The P/E multiple of the Disposal in calculated based on (a) the Consideration of approximately RMB142.72 million; (b) the percentage of the shares of the Target Company to be disposed of under the Disposal of 51%; and (c) the pro rata net profits of the Target Company for the year ending 31 December 2024 of approximately RMB42.93 million based on the audited profit after taxation for the nine months ended 30 September 2024, with the calculation formula of (a)/(b)/(c). Additionally, the P/B multiple is calculated based on: (a) and (b) as mentioned above, and (d) the audited consolidated net assets value of the Target Company as at 30 September 2024, which are approximately RMB279.84 million. The calculation formula for the P/B multiple is (a)/(b)/(d).
The market capitalization is calculated based on the number of issued shares as at 30 June 2024 multiplied by the share price as of the same day.
The P/E multiple of the respective Comparable Companies is calculated based on the market capitalization as at 30 June 2024 divided by the pro rata net profits of the Comparable Company for the year ending 31 December 2024 based on the profit after taxation for 6M2024 disclosed in the interim results for 6M2024 of the respective Comparable Companies.
The P/B multiple of the respective Comparable Companies is calculated based on the closing share price as at 30 June 2024 divided by the net assets value per share as at 30 June 2024, which is calculated based on the net assets value as at 30 June 2024 divided by the number of shares issued as at 30 June 2024 disclosed in the interim results for 6M2024 and monthly return of equity issuer on movement in securities as at 30 June 2024 of the respective Comparable Companies.
The descriptions of the principal businesses and the profit figures for the year ended 31 December 2023 for the Comparable Companies were sourced from their respective annual reports. For the purpose of illustration in this letter, unless otherwise indicated, the exchange rate of UDS1.00 = HK$7.78 has been used, where applicable.

As demonstrated in the table above, the P/E multiples of the Comparable Companies ranged from approximately 3.20 time to 14.98 time with an average of 7.72 time and a median of 6.93 time. In respect of the P/B multiples of the Comparable Companies, they ranged from 0.13 time to 1.40 time with an average of 0.67 time and a median of 0.59 time. In this regard, we noted that (i) the P/E multiple of the Disposal of 6.52 time falls within the range of the Comparable Companies, and is slightly lower than the average and the median of the P/E multiples of the Comparable Companies; and (ii) the P/B multiple of the Disposal of 1.00 time falls within the range of the Comparable Companies, and is higher than the average and the median of the P/B multiples of the Comparable Companies.

50 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Appraised value of the Target Company in the Valuation Report

In addition, we noted that, as for the for the Board's reference purposes, the Board has also considered the appraised value of the Target Company as at 30 September 2024 (the "Valuation") as stated in the Valuation Report prepared by the Independent Valuer. In this regard, we obtained and reviewed the Valuation Report and noted that the appraised value of 100% equity interests in the Target Company as at 30 September 2024 was approximately RMB330.02 million. Therefore, the appraised value of the Target Company, based on the respective percentage of equity interests of the Target Company, as at 30 September 2024 was approximately RMB168.31 million (the "Appraised Value").

Independent Valuer's expertise

For our due diligence purpose, we have reviewed and enquired into (i) the terms of engagement of the Independent Valuer; (ii) the Independent Valuer's qualification in relation to the preparation of the Valuation Report; and (iii) the steps and due diligence measures taken by the Independent Valuer for conducting the Valuation Report. We were informed that on-site inspection of the Target Company was carried out by the Independent Valuer as part of the valuation process. From the mandate letter and other relevant information provided by the Independent Valuer and based on our interview with them, we were satisfied with the terms of engagement of the Valuer as well as their qualification for preparation of the Valuation Report (i.e. (i) the Independent Valuer is a registered valuer under the Ministry of Finance of the PRC and has experience in providing valuation services for listed companies in PRC (including Hong Kong); and (ii) the Independent Valuer's major staff members (who were involved in the preparation of the Valuation Report) have experience of over 10 years in performing valuation services covering various industries), with the partner in charge of the Valuation has over 15 years of experience in performing valuation services in Hong Kong and the PRC. The Independent Valuer also confirmed that it is independent from the Company, the parties to the Disposal and their respective core connected persons, close associates and associates.

51 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Valuation Methodologies and Assumptions

We have obtained and reviewed the Valuation Report and further enquired into the Independent Valuer on the methodologies adopted and the basis and assumptions adopted in the Valuation Report (For details of the basis and assumptions of the Valuation Report prepared by the Independent Valuer, please refer to Appendix II to the Circular), and we did not identify any major factor which caused us to doubt the fairness and reasonableness of the methodology, principal bases, assumptions, and parameters adopted for the Valuation Report. We further understood that the Independent Valuer has considered all commonly valuation approaches adopted in the market (i.e. the income approach, the market approach and the asset-based approach) to determine the valuation of the 100% equity interests in the Target Company and adopted both market approach and asset-based approach for Valuation. According to the Independent Valuer, such approach is the most appropriate valuation method for the Valuation, primarily because: (a) based on the fundamentals of the Target Company and combined with interviews with the management of the Target Company, as well as historical operations, the main business of the Target Company is natural gas-fired power generation, and the pricing of electricity in the power generation business consists of electricity tariffs and capacity tariffs, with electricity tariffs being significantly affected by fluctuations in natural gas prices. The historical mode of operation of the Target Company has shown that natural gas-fired power generation mainly plays a role in the peaking of the electricity market, and its power generation capacity is greatly affected by the demand for power supply in the region. Based on the above factors, the management of the Target Company considers that future operating income and profitability are subject to considerable uncertainty, and it is not possible to make reasonable forecasts of future operating income and operating risks, therefore, it is not appropriate to adopt the income approach in the valuation; (b) there are comparable listed companies in the securities market with similar business operations as the Target Company, and the value of 100% equity interest in the Target Company can be calculated through comparative analysis with comparable listed companies, therefore, the market approach is applied in the valuation; and (c) on the basis of the audited financials as at the Valuation Date, the scope of assets and liabilities provided by the Target Company for appraisal is clear and can be verified and assessed on an item-by-item basis by means of financial information, information on purchases and construction and on-site inspections, and therefore the asset-based approach has been adopted for this valuation. For the above reasons, the results of the asset-based method are chosen as the total equity value of the shareholders of the Target Company. After considering the reasons above, we have not identified any material facts that would lead us to doubt the fairness and reasonableness of the Independent Valuer's adoption of the asset-based approach or the principal basis and assumptions used in the valuation of the Target Company.

52 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We noted that the Independent Valuer has considered comparable listed companies in the PRC that (i) operate in the thermal power generation industry in the PRC or have a similar business structure; and (ii) share the similar primary market and customer base, and thus identified a total of three comparable companies on an exhaustive basis. Having considered that the comparable companies are exhaustive according to the Independent Valuer's selection criteria, we therefore consider the selection criteria adopted by the Independent Valuer is fair and reasonable.

We have reviewed the Valuation Report and discussed with the Independent Valuer in respect of the key assumptions adopted for performing the Valuation. We understand from the Independent Valuer that the assumptions are commonly adopted in other valuations of similar assets and there is no unusual assumption which has been adopted during the Valuation. We also consider the assumptions adopted in the Valuation Report are general in nature and are not aware of any material facts which lead us to doubt the assumptions adopted by the Independent Valuer.

Details of the Valuation

According to the Valuation Report, the appraised value of 100% equity interests in the Target Company as at 30 September 2024 was approximately RMB330.02 million, which is differed from the audited consolidated net assets value of the Target Group as at 30 September 2024 prepared in accordance with the PRC GAAP of approximately RMB279.8 million, and that the Consideration represents a discount of approximately 17.93% to the Appraised Value.

Further to our discussions with the Independent Valuer and the Management, such difference was mainly due to the appreciation of land use right of the Target Group (the "Land Use Right"). We concurred our view with the Management and considered that the appraised value of the Land Use Right should not be taken into account as a basis for determining the Consideration is fair and reasonable primarily due to the following reasons:

(i) Transfer restrictions: according to the relevant PRC laws and regulations, the Land Use Right generally needs to be transferred together with the buildings and attachments on the land as a whole. Since there is a natural gas-fired power plant on the land, this restriction highly limits the liquidity and marketability of the Land Use Right on its own;

53 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Comparison limitations: the appraised value of the Land Use Right was derived by comparing with the undeveloped lands for sale in the primary land market. However, this comparison does not accurately reflect the situation of the Target Group's land, which has existing gas-fired power plants;

(iii) Low liquidity: due to the existing gas-fired power plant, potential buyers interested only in the land and would likely prefer undeveloped land to avoid:

a. Time and costs associated with obtaining approvals for transfer
b. Expenses related to demolition and land restructuring
c. Uncertainties in getting regulatory approval for the land use changes

(iv) Limited realisation potential: the appreciation in land value would not be easily realised due to the factors mentioned above.

During the course of discussion with the Independent Valuer and our review on the Valuation Report and having considered that (i) the methodologies being applied in the Valuation; (ii) the principal bases and assumptions used in arriving at the valuations; and (iii) the qualification, expertise and experiences of the Valuer, we consider that nothing unusual matter has come to our attention that would lead us not to believe that the Valuation Report was prepared on a reasonable basis. We are of the view that the methodologies and assumptions which had been adopted were arrived at after due and careful consideration.

Considering that (i) despite the P/E multiple of the Disposal is slightly lower than the median of the P/E multiples of the Comparable Companies, we have taken into account that (a) the P/E multiple of the Disposal is within the range of the Comparable Companies; and (b) the fact that (1) the principal terms of the Equity Transfer Agreement are determined by the parties involved after arms-length negotiation, having made reference to the reasons illustrated in the paragraph headed "2. Reasons for and benefits of the Disposal" and the "4. Financial effects of the Disposal" below; and (2) the P/B multiple of the Disposal falls within the range of the Comparable Companies and is higher than the average and the median of the P/B multiples of the Comparable Companies; (ii) our review of the Valuation Report as explained in the above; and (iii) the basis that the Board considered not to adopt and consider the appraised value of land use rights when determining the Consideration as explained in the above, we concurred with the Directors' view that the Consideration is on normal commercial terms and fair and reasonable.

54 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Financial effects of the Disposal

As stated in the Letter from the Board, upon the Completion and for illustrative purposes only, the Group is estimated to recognise a loss of approximately RMB2.1 million from the Disposal. Such estimated loss is calculated based on the Consideration (approximately RMB142.7 million) minus (i) the audited consolidated net assets value of the Target Group attributable to the Target Equity as at 30 September 2024 of approximately RMB142.7 million; and (ii) estimated transaction expenses directly attributable to the Disposal of approximately RMB2.1 million.

As a result of the Disposal, it is estimated that the total assets and the liabilities of the Group will decrease by approximately RMB841.1 million and RMB561.2 million, respectively. These figures are subject to adjustments based on the final net assets value of the Target Group at Completion and the final transaction expenses directly attributable to the Disposal.

The Company intends to use the proceeds from the Disposal to develop its energy-related business and/or other upstream and downstream businesses that generate synergies with the Company's main operations and align strategically with its goals. This will include acquiring or investing in businesses or companies engaged in the same business, as opportunities arise. As at the Latest Practicable Date, the Company has not identified any specific target of such acquisition or investment. The proceeds from the Disposal will be able to improve the Company's liabilities, supplement working capital, reduce financial costs and improve management level in the short term, while it will provide immediate funding for the Group's future business development and will help to enhance the Company's negotiating power and reduce transaction time and costs when opportunities arise in the long term.

Upon the Completion and the conclusion of the Registration Procedures, the Target Company will be directly owned as to 51% by the Purchaser and 30% by Bluesky Power Plant and 19% by the Vendor, and accordingly no longer be a subsidiary of the Company.

55 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OPINION AND RECOMMENDATIONS

Having taken into account the above principal factors and reasons, we consider that the Equity Transfer Agreement and the Disposal are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned, in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the resolutions in relation to the Equity Transfer Agreement and the Disposal to be proposed at the EGM.

Yours faithfully,

for and on behalf of

ORIENT CAPITAL (HONG KONG) LIMITED

Edmund WONG

Managing Director

Mr. Edmund Wong is a licensed person registered with the Securities and Futures Commission of Hong Kong and a responsible officer of Orient Capital Limited, which is licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. He has over 13 years of experience in the corporate finance industry.

56 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

Audited financial information of the Group for each of the three years ended 31 December 2021, 2022 and 2023 and the unaudited consolidated financial information of the Group for the six months ended 30 June 2024 in accordance with IFRS Accounting Standards are disclosed in the following documents which have been published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.puxing-energy.com).

the Company's annual report for the year ended 31 December 2021 published on 26 April 2022 (pages 85 to 215), which can be accessed by the direct hyperlink below:
https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0426/2022042600675.pdf
the Company's annual report for the year ended 31 December 2022 published on 25 April 2023 (pages 89 to 215), which can be accessed by the direct hyperlink below:
https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0425/2023042502857.pdf
the Company's annual report for the year ended 31 December 2023 published on 29 April 2024 (pages 93 to 219), which can be accessed by the direct hyperlink below:
https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0429/2024042903385.pdf
the Company's interim report of the Company for the six months ended 30 June 2024 published on 24 September 2024 (pages 7 to 37), which can be accessed by the direct hyperlink below:
https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0924/2024092400329.pdf

2. INDEBTEDNESS

As at the close of business on 30 November 2024, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group has outstanding borrowings of approximately RMB827,129,000, details of which are as follows:

RMB'000

Unsecured and unguaranteed

Shareholder's loan	120,454
Interest-bearing borrowings	626,101
- Loans from related parties	535,023
- Bank loans	91,078

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

RMB'000

Unsecured and guaranteed

Interest-bearing borrowings 80,574

Bank loans 80,574

Total 827,129

Save as disclosed above, the Group did not have any material outstanding loan capital or debt securities or non-convertible notes issued or authorised or otherwise created but unissued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchases or finance lease commitments, guarantees, or other material contingent liabilities as of 30 November 2024.

WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, taking into account (i) the effect of the transactions contemplated under the Equity Transfer Agreement; and (ii) the financial resources (including but not limited to the internally generated cash flows, existing cash and bank balances, the existing borrowings and the currently available facilities), the Group has sufficient working capital for its requirements for at least 12 months from the date of this circular.

FINANCIAL AND TRADING PROSPECT OF THE GROUP

The Group is mainly engaged in the development, operation and management of natural gas-fired power plants. As at 31 December 2024, the Group had five wholly-owned gas-fired power plants in Zhejiang Province, with an aggregate installed capacity of approximately 688.07 megawatt (MW) (including 1,072 kilowatt (kW) photovoltaic power generating units), and a maximum heating capacity of approximately 360 tons/hour.

The net profit attributable to equity shareholders of the Company for the year ended 31 December 2023 was RMB70,842,000, representing an increase of RMB18,910,000 or 36.41%, as compared to RMB51,932,000 in 2022.

I - 2

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In 2024, the capacity tariff of Bluesky Power Plant, the Target Company and Zhejiang Puxing Jingxing Natural Gas Power Co., Ltd. (浙江普星京興然氣發電有限公司) under the Company continued to use the adjusted price of RMB394.8/kW/year in 2022. The capacity tariff of Puxing (Anji) Gas Turbine Thermal Power Co., Ltd. (普星(安吉)燃機熱電有限公司) and Quzhou Puxing Gas Turbine Thermal Power Co., Ltd.* (衢州普星燃機熱電有限公司) continued to use the adjusted price of RMB571.2/kW/year in 2022, which was the same as the corresponding period of last year.

2024 was a challenging year for the Company. The cut in capacity tariff in Zhejiang Province has brought a severe test to the continuous profitability of the Company. The Group will closely follow the development of the electricity market, actively study and explore new forms of business models, strive to find new market convergence points, strengthen the development of heating business, proactively expand the development of the energy storage business, and strengthen cost management, cooperate with the continuous implementation of refined management and strict cost control, actively face challenges, so as to minimise the impact of policy changes.

Looking ahead, the government of PRC's firm commitment to the "double carbon" goal of peaking carbon emission and achieving carbon neutrality, firm acceleration in the development of new energy, optimisation of its energy structure, and embarkation on a green, low-carbon and circular development path. The fields of green power, energy storage, and smart energy will usher in a period of significant opportunities for development, which will bring huge opportunities for the Group for transforming into an integrated energy supplier. As an energy company with energy as its development core, with the goal of transforming into an integrated energy supplier and achieving diversified development of its energy business, the Group will increase research on national new energy policies, strive to find new opportunities, strive for different types of energy projects, diversify its energy business structure, and make unremitting efforts to enhance the Group's long-term growth potential and shareholder value.

5. MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, they were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2023, being the date to which the latest published audited consolidated financial statements of the Company were made up.

APPENDIX II

VALUATION REPORT OF THE TARGET COMPANY

The following is the English translation of the Valuation Report prepared by the Valuer for the purpose of inclusion in this circular in respect of the appraised value of 100% equity interest in the Target Company as at 30 September 2024. The Chinese text of this report shall prevail over the English text in the event of inconsistency.

This valuation report has been prepared in accordance with the Chinese Valuation Standards

VALUATION REPORT

THE MARKET VALUE

100 PERCENT EQUITY INTEREST

ZHEJIANG PUXING DENENG NATURAL GAS POWER CO., LTD.

Ref. No.: TYVBZ [2024] NO. 0981

TIANYUAN

Tianyuan Appraisal Co., Ltd.

December 26, 2024

APPENDIX II

VALUATION REPORT OF THE TARGET COMPANY

Statements ... II-3
Summary ... II-4
Valuation report ... II-7
1. Client, the Target Company and other users of the valuation report ... II-7
2. Valuation purpose ... II-10
3. Object and scope of the valuation ... II-10
4. Types of value ... II-11
5. Valuation Date ... II-11
6. Basis for valuation ... II-12
7. Valuation methodology ... II-15
8. Process and status of implementation of the valuation procedure ... II-30
9. Valuation assumptions ... II-33
10. Valuation conclusions ... II-34
11. Statement of special matters ... II-36
12. Statement of limitations on the use of the valuation report ... II-39
13. Valuation report date ... II-40

APPENDIX II

VALUATION REPORT OF THE TARGET COMPANY

Statements

This valuation report has been prepared in accordance with the Basic Guidelines for Valuation issued by the Ministry of Finance and the Guidelines for Valuation Practice and Code of Professional Ethics issued by the China Appraisal Society.

The client or other users shall use the valuation report in accordance with the provisions of laws and administrative regulations and the scope of use set out in the valuation report. The valuation agency and the valuation professionals shall not be liable for the use of the valuation report by the client or other users in contravention of the aforesaid provisions.

The valuation report is intended for use only by the client, other users as agreed in the asset appraisal engagement contract and users as stipulated in the laws and administrative regulations, other than that, no other organization or individual can be the user of this valuation report.

The valuation agency and the valuation professionals advise the users that the valuation conclusion should be correctly understood and used, that the valuation conclusion is not equivalent to the realizable price of the valuation object and that the valuation conclusion should not be regarded as a guarantee of the realizable price of the valuation object.

The valuation agency and the valuation professionals comply with laws, administrative regulations and valuation standards, adhere to the principles of independence, objectivity and impartiality, and assume responsibility for the valuation report issued in accordance with the law.

The analyses, judgments and conclusions in the valuation report issued by the valuation agency are subject to the assumptions and qualifications, and users of the valuation report should pay attention to the assumptions on which the valuation conclusions are founded, the description of special matters and the restrictions on the use of the valuation report.

The list of assets and liabilities involved in the valuation object shall be declared by the client (the Target Company) and confirmed by it by means of signature, seal or other means permitted by law; the principal and other relevant parties shall be responsible in accordance with the law for the truthfulness, completeness and legality of the information provided by them.

The valuation agency and the valuation professionals have no existing or prospective interest in the valuation object of the valuation report. There has no existing or prospective interest in the relevant parties and are not biased against the relevant parties.

The valuation professionals have conducted on-site investigations of the valuation object and the assets involved in the valuation report. Besides, the valuation professionals have paid the necessary attention to the legal ownership status and checked the information on the legal ownership of the valuation object and the assets involved in the valuation report, disclosed truthfully the problems that have been identified, and have drawn the attention of the principal and other relevant parties to the need to perfect the property rights in order to meet the requirements for the issuance of the valuation report.

II - 3

APPENDIX II

VALUATION REPORT OF THE TARGET COMPANY

Summary

Tianyuan Appraisal Co., Ltd. was commissioned by Zhejiang Puxing Deneng Natural Gas Power Co., Ltd. to conduct the valuation of the Market Value of 100 percent equity interest in the Company as at September 30, 2024 in relation to the proposed transfer of equity interest by the Company's shareholder in accordance with the relevant laws, administrative regulations and valuation standards, and adhering to the principles of independence, objectivity and fairness, adopting the asset-based approach and the market approach, and in accordance with the requisite valuation procedures. The valuation process and conclusion are summarized as follows:

Client (the Target Company): Zhejiang Puxing Deneng Natural Gas Power Co., Ltd. (hereinafter referred to as: Puxing Deneng)
Valuation purpose: to provide value reference for equity transfer.
Object and scope of the valuation

The valuation object was the value of 100 percent equity interest in Puxing Deneng. The scope of the valuation was all assets and liabilities declared by Puxing Deneng, specifically including current and non-current assets, current and non-current liabilities.

As at the Valuation Date, Puxing Deneng had total book assets of RMB539,875,198.19, total book liabilities of RMB331,177,173.34 and total owner's equity of RMB208,698,024.85.

Type of value: Market Value
Valuation Date: September 30, 2024
Valuation methodology: asset-based approach, market approach
Valuation conclusions

The results of the asset-based approach have been selected as the conclusion of this valuation.

Under the assumptions revealed in this report, the valuation conclusion of the valuation object as at the Valuation Date was RMB330,024,791.00, as follows:

The book value of the assets was RMB539,875,198.19 and the appraised value was RMB661,201,964.34, with an appraisal value increase of RMB121,326,766.15, and with an appreciation rate of 22.47%;

The book value of the liabilities was RMB331,177,173.34 and the appraised value was RMB331,177,173.34, with no valuation increase or decrease;

II - 4

APPENDIX II

VALUATION REPORT OF THE TARGET COMPANY

The book value of the owners' equity was RMB208,698,024.85 and the appraised value was RMB330,024,791.00, with an appraisal value increase of RMB121,326,766.15, and with an appreciation rate of $58.14\%$ .

Summary of valuation results

Item	Book Value A	Appraised Value B	Amount in RMB Yuan
			Value-added (accountancy) C = B-A	Value Added Ratio% D = C/A × 100
Current asset	47,789,180.61	47,804,473.84	15,293.23	0.03
Of which: Inventory	2,957,046.14	2,957,046.14
Non-current asset	492,086,017.58	613,397,490.50	121,311,472.92	24.65
Of which: Long-term equity investments	360,114,461.33	411,242,696.92	51,128,235.59	14.20
Fixed assets	123,616,984.70	147,729,014.00	24,112,029.30	19.51
Of which: Building type	13,059,417.32	24,653,600.00	11,594,182.68	88.78
Equipment type	110,557,567.38	123,075,414.00	12,517,846.62	11.32
Right-of-use asset	62,978.42	62,978.42
Intangible asset	3,083,378.66	49,158,410.00	46,075,031.34	1,494.30
Of which: Land use right	3,083,378.66	49,140,300.00	46,056,921.34	1,493.72
Long-term amortized expense	89,410.86	89,410.86
Deferred tax asset	5,118,803.61	5,114,980.30	-3,823.31	-0.07
Total assets	539,875,198.19	661,201,964.34	121,326,766.15	22.47
Current liability	151,369,284.46	151,369,284.46
Non-current liability	179,807,888.88	179,807,888.88
Total liabilities	331,177,173.34	331,177,173.34
Total owner's equity	208,698,024.85	330,024,791.00	121,326,766.15	58.14

Valuation conclusions are only valid as at the Valuation Date set out in the valuation report. The validity period for the use of the valuation conclusions shall be determined based on the condition of the assets and market changes after the Valuation Date, and the validity period for the use of the valuation conclusions shall be from September 30, 2024 to September 29, 2025 when the condition of the assets and market changes are minor.

8. Note on special matters

For details, please refer to "11. Statement of special matters" in the main text of the valuation report. In order to utilize the valuation conclusions correctly, we would like to draw the attention of users of the valuation report to the impact of the "Statement of special matters" on the valuation conclusions and this economic activity.

APPENDIX II
VALUATION REPORT OF THE TARGET COMPANY

Valuation report date: December 26, 2024.

The above is extracted from the main text of the valuation report, which should be read in order to understand the details of the valuation engagement and to properly understand and utilize the valuation conclusions.

II – 6

APPENDIX II

VALUATION REPORT OF THE TARGET COMPANY

Valuation report

TYVBZ [2024] NO. 0981

Zhejiang Puxing Deneng Natural Gas Power Co., Ltd.:

Tianyuan Appraisal Co., Ltd. has been commissioned by your Company to appraise the Market Value of 100 percent equity interest in the Company in relation to the proposed transfer of equity interest by the Company's shareholder as at September 30, 2024 in accordance with the provisions of the laws, administrative regulations and valuation standards, adhering to the principles of independence, objectivity and fairness, and adopting the asset-based approach and the market approach, in accordance with the requisite valuation procedures. The valuation is reported below:

1. Client, the Target Company and other users of the valuation report

1.1 Overview of the client (the Target Company)

1.1.1 Enterprise name: Zhejiang Puxing Deneng Natural Gas Power Co., Ltd. (hereinafter referred to as: Puxing Deneng)

1.1.2 Enterprise Residence: Changhong Street, Deqing Economic Development Zone, Deqing County, Huzhou City, Zhejiang Province, P.R.C, China

1.1.3 Registered capital: US$18,408,710

1.1.4 Legal representative: Shen Qiang

1.1.5 Nature of business: Limited liability company (Hong Kong, Macao and Taiwan investment, non-wholly owned)

1.1.6 Unified Social Credit Code: 913305007652060271

1.1.7 History:

Puxing Deneng was established in August 2004 with a registered capital of $12,000,000, jointly funded by Amber International Investment Co., Ltd. contributed US$5,400,000, accounting for 45% of the registered capital; Ningbo Economic Technology Development Zone Beilun Electric Power Fuel Co., Ltd. contributed US$4,800,000, accounting for 40% of the registered capital; Zhejiang Zhenneng Investment Co., Ltd. contributed US$960,000, accounting for 8% of the registered capital; and Ningbo Daxie Development Zone Zhenyang Energy Chemical Co., Ltd. contributed US$840,000, accounting for 7% of the registered capital.

II - 7

APPENDIX II

VALUATION REPORT OF THE TARGET COMPANY

After a number of equity transfers and capital increases, the shareholding structure of Puxing Deneng as at the Valuation Date was as follows:

Amount in US$

Name of Shareholder	Contributed Capital	Paid-in Capital	Contribution Rate (%)
Puxing Tian (HK) Limited	12,886,100.00	12,886,100.00	70.00
Zhejiang Puxing Bluesky Natural Gas Power Co., Ltd.	5,522,610.00	5,522,610.00	30.00
In total	18,408,710.00	18,408,710.00	100.00

1.1.8 Scope of Business:

Natural gas power generation and on-grid sales, supporting mechanical and electrical equipment production and sales, waste heat production and hot water sales, grid auxiliary service project development, operation, maintenance and technical services. (The above projects do not involve the content of the special administrative measures for foreign investment access) (Projects subject to approval by law, can only carry out business activities after approval by the relevant departments).

1.1.9 Assets, financial and operational status of Puxing Deneng for the last two years and period:

(1) Assets, financial and operational status of Puxing Deneng (on a standalone basis)

Amount in RMB Yuan

Item	FY2022	FY2023	January-September 2024
Revenues	110,795,284.13	60,215,265.15	55,631,442.72
Operating costs	103,655,850.80	45,636,212.53	46,374,240.87
Total profit	76,762,341.97	-531,406.87	-1,224,748.90
Net income	76,712,702.27	-706,400.42	2,525,875.18
	December 31,	December 31,	September 30,
Item	2022	2023	2024
Total assets	532,360,171.33	515,093,471.43	539,875,198.19
Total liability	325,594,649.30	308,902,088.53	331,177,173.34
Net assets	206,765,522.03	206,191,382.90	208,698,024.85

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The above accounting data have been audited by a certified public accountant, of which: the financial data for the year 2022 were extracted from the unqualified audit report D.H.S.Z.[2023]No. 250018 issued by Da Hua CPAs LLP.; the financial data for the year 2023 and for the period from January to September 2024 were extracted from the unqualified audit report ZhongHuiKuaiShen[2024]No. 10887 issued by ZhongHui Certified Public Accountants LLP..

(2) Assets, financial and operational status of Puxing Deneng(on a consolidated basis)

Amount in RMB Yuan

Item	FY2022	FY2023	January-September 2024
Revenues	347,870,658.03	259,762,521.14	207,305,591.67
Operating costs	278,644,889.59	184,257,791.59	149,626,628.40
Total profit	35,175,985.32	46,004,574.87	37,425,868.63
Net income	24,481,613.92	34,304,712.77	32,199,714.72
Net profit attributable to the parent company	24,481,613.92	34,304,712.77	32,199,714.72
	December 31,	December 31,	September 30,
Item	2022	2023	2024
Total assets	855,487,611.06	827,470,243.80	841,074,507.91
Total liability	643,828,888.87	581,158,875.96	561,233,682.19
Net assets	211,658,722.19	246,311,367.84	279,840,825.72
Owners’ equity attributable to the parent company	211,658,722.19	246,311,367.84	279,840,825.72

The above accounting data have been audited by a certified public accountant, of which: the financial data for the year 2022 were extracted from the unqualified audit report D.H.S.Z.[2023]No. 250019 issued by Da Hua CPAs LLP.; the financial data for the year 2023 and for the period from January to September 2024 were extracted from the unqualified audit report ZhongHuiKuaiShen[2024]No. 10887 issued by ZhongHui Certified Public Accountants LLP..

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1.1.10 Long-term equity investments:

As at the Valuation Date, Puxing Deneng has one wholly owned subsidiary, and the investment amount and shareholding ratio are shown in the table below:

Amount in RMB yuan

No.	Name of investees	Registered capital	Date of investment	Investment cost	Shareholding ratio (%)	Book value	Methods of accounting
1	Quzhou Puxing Gas Turbine Thermal Power Co., Ltd.	300,000,000.00	September 2020	360,114,500.00	100	360,114,500.00	cost method

1.2 Other users of the valuation report

Other users of this valuation report are: the ones as stipulated by national laws and regulations.

Valuation purpose

The shareholder of Puxing Deneng intends to transfer its equity interest in the Company. The valuation purpose was to provide a reference for the value of 100 percent equity interest in the Company for the purpose of this economic action.

Object and scope of the valuation

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As at the Valuation Date, Puxing Deneng had total book assets of RMB539,875,198.19, total book liabilities of RMB331,177,173.34 and total owner's equity of RMB208,698,024.85. The financial statements were reflected below:

Amount in RMB Yuan

Item	Original Book Value	Book Value
Current asset		47,789,180.61
Of which: Inventory		2,957,046.14
Non-current asset		492,086,017.58
Of which: Long-term equity investments, net		360,114,461.33
Fixed assets	395,622,380.24	123,616,984.70
Of which: Building type	33,212,023.82	13,059,417.32
Equipment type	362,410,356.42	110,557,567.38
Right-of-use asset		62,978.42
Intangible asset	5,110,379.16	3,083,378.66
Of which:Land use right	4,934,699.72	3,083,378.66
Long-term amortized expense		89,410.86
Deferred tax asset		5,118,803.61
Total assets		539,875,198.19
Current liability		151,369,284.46
Non-current liability		179,807,888.88
Total liabilities		331,177,173.34
Total owner's equity		208,698,024.85

The financial statements of Puxing Deneng as at the Valuation Date have been audited by certified public accountants and the unqualified audit report of the standard of ZhongHuiKuaishen[2024]No. 10887 has been issued by Zhonghui Certified Public Accountants LLP..

In addition to the above assets, Puxing Deneng had not declared any other unrecorded assets or liabilities.

4. Types of value

Based on factors such as the valuation purpose, market conditions and the valuation object's own conditions, the type of value selected for this valuation project was Market Value.

Market Value is the estimated amount at which the valuation object would be worth in a normal arm's length transaction on the Valuation Date between a willing buyer and a willing seller, each acting rationally and without any compulsion.

5. Valuation Date

The Valuation Date of this report is September 30, 2024.

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6. Basis for valuation

6.1 Legal and regulatory basis

6.1.1 Law of the People's Republic of China on valuation;
6.1.2 Company Law of the People's Republic of China;
6.1.3 Civil Code of the People's Republic of China;
6.1.4 Law of the People's Republic of China on Enterprise Income Tax;
6.1.5 Provisional Regulations of the People's Republic of China on Value-Added Tax;
6.1.6 Rules for the Implementation of the Provisional Regulations of the People's Republic of China on Value-Added Tax;
6.1.7 Circular on the Comprehensive Pilot Program for the Conversion of Business Tax into Value-Added Tax;
6.1.8 Circular on Pilot Policies for the Conversion of Construction Services and Other Services;
6.1.9 Circular of the Ministry of Finance and the General Administration of Taxation on the Adjustment of the VAT Rate;
6.1.10 Announcement on Matters Related to the Deepening of Value Added Tax Reform;
6.1.11 Land Management Law of the People's Republic of China;
6.1.12 Law of the People's Republic of China on Urban Real Estate Management;
6.1.13 Interim Regulations of the People's Republic of China on the Granting and Transfer of the Right to Use State-owned Land in Cities and Towns;
6.1.14 Relevant other laws and regulations related to valuation, etc.

6.2 Basis for the guidelines

6.2.1 Basic Guidelines for Valuation;
6.2.2 Code of Professional Ethics for Valuation;
6.2.3 Guidelines for Valuation Practice – Valuation Procedures;

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6.2.4 Guidelines for Valuation Practice – Valuation Reports;
6.2.5 Guidelines for Valuation Practice – Valuation Engagement Contracts;
6.2.6 Guidelines for Valuation Practice – Valuation Files;
6.2.7 Guidelines for Valuation Practice – Utilization of Expert Work and Related Reports;
6.2.8 Guidelines for Valuation Practice – Enterprise Value;
6.2.9 Guidelines for Valuation Practice – Intangible Assets;
6.2.10 Guidelines for Valuation Practice – Real Property;
6.2.11 Guidelines for Valuation Practice – Machinery and Equipment;
6.2.12 Guidelines for Valuation Practice – Valuation Approaches;
6.2.13 Guidance on Operational Quality Control for Valuation Agency;
6.2.14 Guidance on Types of Value;
6.2.15 Guidance on Legal Tenure of Valuation Objects.

6.3 Basis of tenure

6.3.1 Business Licenses and Articles of Association of Puxing Deneng and its subsidiaries;
6.3.2 Certificate of Real Estate Rights;
6.3.3 Planning Permits for Building Site;
6.3.4 Planning Permits for Construction Works;
6.3.5 Building Construction Permits;
6.3.6 Motor Vehicle Licenses;
6.3.7 Note on property rights;
6.3.8 Contracts relating to the transfer of property rights;
6.3.9 Economic business contracts, agreements and invoices related to the acquisition and use of assets or rights;

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6.3.10 Other documents proving ownership.

6.4 Basis of pricing

6.4.1 Schedule of valuation filings and related financial information provided by Puxing Deneng;

6.4.2 Financial statements as of the Valuation Date and audit reports for the previous two years;

6.4.3 Audit report ZhongHuiKuaiShen[2024]No. 10887 issued by Zhonghui Certified Public Accountants LLP.;

6.4.4 Historical operating information provided by Puxing Deneng;

6.4.5 Enterprise Accounting Standards (EAS);

6.4.6 Information on recent market prices of major raw materials;

6.4.7 Circular on Further Liberalization of Prices for Professional Services in Construction Projects;

6.4.8 Provisions for the Management of Construction Costs for Capital Projects;

6.4.9 Budget Quotas for Construction Projects in Zhejiang Province;

6.4.10 Standards for Grading and Evaluating the Completion of Housing Damage, Ministry of Urban and Rural Construction and Environmental Protection;

6.4.11 Relevant information such as engineering drawings and final account of the project provided by Puxing Deneng;

6.4.12 Information on real estate market prices in the area where the building is located;

6.4.13 Dynamic monitoring system for urban land prices in China (Ministry of Land and Resources);

6.4.14 Circular on Matters Concerning the Standardization of Matters Relating to Matching Fees for Urban Infrastructure, Quzhou Municipal Bureau of Finance, Quzhou Municipal Bureau of Housing and Urban-Rural Development;

6.4.15 Law of the People's Republic of China on Vehicle Acquisition Tax;

6.4.16 Provisions on Compulsory Motor Vehicle Obsolescence Standards;

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6.4.17 Internet access to price information;

6.4.18 Information on requesting quotations from equipment manufacturers or distributors;

6.4.19 Handbook of Data and Parameters Commonly Used in Asset Valuation, Science and Technology Press;

6.4.20 Common Data Manual for Cost Engineers, Construction Industry Publishing House;

6.4.21 Information such as purchase contracts, invoices, payment vouchers, etc. for the relevant assets;

6.4.22 The Loan Prime Rate (LPR) published by the National Interbank Funding Center authorized by the People's Bank of China;

6.4.23 Straight flush iFinD financial terminal database;

6.4.24 Valuation-related information obtained by valuation professionals from on-site inspections and market surveys.

7. Valuation methodology

7.1 Basic methodology of the valuation

The basic methods of enterprise value assessment are categorized into market, income and asset-based approaches.

7.1.1 Market approach

The market approach is a valuation method that determines the value of the valuation object by comparing it with comparable listed companies or comparable transaction cases. The basic premises for its use are:

7.1.1.1 There must be a fully developed and active capital market;

7.1.1.2 Comparable transaction cases or comparable listed companies exist on the open market;

7.1.1.3 The factors affecting the value of the transaction case or comparable listed company and the valuation object are clear and quantifiable, and relevant information can be collected.

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7.1.2 Income approach

The income approach is a valuation method that determines the value of the valuation object by capitalizing or discounting the expected return. The basic prerequisites that must be met in order to apply the income approach are:

7.1.2.1 The future earnings of the valuation object can be reasonably expected and measured in monetary terms;

7.1.2.2 The risk associated with the expected return can be measured;

7.1.2.3 The duration of the proceeds can be determined or reasonably expected.

7.1.3 Asset-based approach

The asset-based approach is a valuation method that reasonably determines the value of the valuation object by assessing the value of each asset and liability on and off the enterprise's balance sheet as at the Valuation Date of the Target Company and by assessing the value of the contribution of the assets and liabilities of the enterprise on and off the balance sheet to the whole. The prerequisites for the adoption of the asset-based approach are:

7.1.3.1 The asset under appraisal is in a state of continuous use or is intended to be in a state of continuous use;

7.1.3.2 It is possible to investigate and obtain information on the current means of acquiring and constructing the asset under appraisal and the corresponding average cost in society.

7.2 Selection of valuation methodology

Based on the company's fundamentals and combined with interviews with the company's management, as well as historical operations, the main business of Puxing Deneng is natural gas-fired power generation, and the pricing of electricity in the power generation business consists of electricity tariffs and capacity tariffs, with electricity tariffs being significantly affected by fluctuations in natural gas prices. The company's historical mode of operation has shown that natural gas-fired power generation mainly plays a role in the peaking of the electricity market, and its power generation capacity is greatly affected by the demand for power supply in the region.

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Based on the above factors, the management of Puxing Deneng considers that future operating income and profitability are subject to considerable uncertainty, and it is not possible to make reasonable forecasts of future operating income and operating risks, therefore, it is not appropriate to adopt the income approach in the valuation.

There are comparable listed companies in the securities market with similar business operations as Puxing Deneng, and the value of 100 percent equity interest in Puxing Deneng can be calculated through comparative analysis with comparable listed companies, therefore, the market approach is applied in the valuation.

On the basis of the financial audit as at the Valuation Date, the scope of assets and liabilities provided by Puxing Deneng for appraisal is clear and can be verified and assessed on an item-by-item basis by means of financial information, information on purchases and construction and on-site inspections, and therefore the asset-based approach has been adopted for this valuation.

In view of the above analysis, the valuation has adopted the asset-based approach and the market approach to assess the value of 100 percent equity interest in Puxing Deneng respectively.

7.3 Introduction to the asset-based approach

The asset-based approach is a valuation method that uses the balance sheet of the Target Company as at the Valuation Date as a basis for reasonably assessing the value of each of the enterprise's on-balance-sheet and off-balance-sheet assets and liabilities and for determining the value of the valuation object.

Based on the principles of the asset-based approach, the specific asset and liability valuation process is described below:

7.3.1 Current asset

7.3.1.1 Cash and cash equivalents

No significant outstanding items affecting the net assets have been identified in respect of cash and cash equivalents, and the appraised value was determined by the verified amount.

7.3.1.2 Current Assets of creditor's Rights

Current Assets of creditor's Rights have included accounts receivable, prepayments and other receivables. For current Assets of creditor's Rights, based on the ageing analysis and verification of entitlements, the appraised value was determined on the basis of the expected recoverable amount or the expected realization of the corresponding interests.

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7.3.1.3 Inventories

The inventories were raw materials with reasonable book value composition and relatively stable prices, and their book value could basically reflect the market value as at the Valuation Date, and the verified book value has been taken as the appraised value.

7.3.1.4 Other current assets

Other current assets have represented the actual interest in Puxing Deneng, and the appraised value has been determined by the verified book value.

7.3.2 Long-term equity investments

Based on the subsidiary ledger of long-term equity investments, the valuation professionals have collected relevant investment agreements and information such as business licenses, articles of association and financial statements of the investees as at the Valuation Date, and have reconciled them with the contents set out in schedule of valuation filings in order to verify the actual capital contribution and proportion of equity as at the Valuation Date; and to understand the method of accounting for the long-term equity investments and the operating conditions of the investees, with a focus on the actual control of the investees.

For Quzhou Puxing Gas Turbine Thermal Power Co., Ltd., a wholly-owned subsidiary, since the value of 100 percent equity interest in Puxing Deneng had been assessed as a whole on the consolidated basis under the market approach, it was assessed in the asset-based approach, and the appraised value of the long-term equity investment was determined by multiplying the value of 100 percent equity interest in the investee unit as a whole after the valuation by the proportion of the shareholding.

7.3.3 Fixed assets – Buildings

Based on the physical condition, utilization and collection of information and other relevant conditions of buildings and structures, the cost approach was selected as the valuation method after analyzing the applicability of the three basic valuation methods, namely the market approach, the income approach and the cost approach, as well as the relevant derivative methods.

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rate of newness on the basis of a comprehensive consideration of the various depreciations, and finally calculate the appraised value of buildings and structures. The specific calculation formula selected for this appraisal was as follows:

$$
\text{Appraised value} = \text{Replacement costs} \times \text{Comprehensive rate of newness}
$$

7.3.3.1 Determination of replacement costs

Replacement costs generally include the necessary and reasonable costs and related taxes for purchasing or constructing of brand new assets with the same efficacy as the valuation object, such as: construction and installation costs, preliminary engineering fees and other construction-related costs, the capital cost during construction, and reasonable profit.

Replacement costs = Construction and installation costs + Preliminary engineering fees and other construction-related costs + Capital cost during construction + Reasonable profit

A. Construction and installation costs

For the buildings and structures with complete engineering budget or settlement materials, the budget and settlement adjustment method was adopted to determine the construction and installation costs. That is to say, based on the original engineering quantity level of the buildings and structures to be appraised, the price adjustment coefficients were calculated according to the current engineering budget quota, comprehensive rates, and market prices of materials, and then the construction and installation costs at the Valuation Date were calculated.

B. Preliminary engineering fees and other construction-related costs

The preliminary engineering fees and other construction-related costs include survey and design fees, engineering construction supervision fees, management fees of the construction unit, and other fees related to the construction of buildings and structures charged as required by local regulations.

C. Capital Costs

Annual interest rate: Determined based on the financing capabilities of the Target Company.

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Construction period: A reasonable construction period (measured in years) has been established based on the project category in accordance with current pricing norms.

The capital cost has been calculated by assuming that preliminary expenses were invested as a lump sum at the start of the construction period, while other funds were invested evenly throughout the construction period.

Capital costs = Preliminary expenses × [(1 + Annual interest rate) Construction period - 1] + (Construction and installation costs + Other expenses) × [(1 + Annual interest rate) Construction period/2 - 1]

D. Reasonable Profit

Reasonable Profit = (Construction and installation costs + Preliminary engineering fees and other construction-related costs) × Reasonable profit margin

7.3.3.2 Determination of comprehensive rate of newness

The method of determining the comprehensive rate of newness by combining the theoretical rate with the rate of on-site investigation has been adopted, i.e., the rate of newness was calculated according to the age method and on-site investigation respectively, and then the comprehensive rate of newness has been calculated according to different weights. The calculation formula was as follows:

Comprehensive rate of newness = Newness rate of on-site survey A × Weight C + Newness rate of age method B × (1 - Weight C)

With respect to structures, the comprehensive rate of newness has been determined on the theoretical rate, i.e., newness rate of age method.

A. Newness rate of on-site survey A

An on-site inspection or survey of the building has been conducted to assess the usage condition of the property to be valued, including its maintenance and renovation status. This assessment follows the guidelines set by the former Ministry of Urban and Rural Construction and Environmental Protection's "Standards for Rating the Condition of Houses", "Reference Criteria for Assessing the Age of Buildings", and "Scoring Standards and Adjustment Coefficients for Different Conditions of Newness of Buildings". Each component of the building (such as

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foundation, structure, roof, doors and windows, floors, finishes, and installation works) has been individually rated. The weight of each component was determined based on its cost relative to the total construction and installation cost. The overall condition of newness has been then calculated by applying the corresponding weights to the individual scores of each component. The calculation formula was as follows:

$$
\text{Newness rate of on-site survey } A = \sum_{i=1}^{n} P_i \times Q_i
$$

Where: $P_i$: Current Condition Score

$Q_i$: Weight (i.e., the ratio of the component's cost to the total construction and installation cost)

Newness rate of on-site survey has been determined by applying the scoring system to each building component.

B. Newness rate of age method B

Newness rate of age method has been determined based on the economic life expectancy of the building to be valued and the number of years it has been in use. The calculation formula was as follows:

$$
\text{Newness rate of age method} = (\text{Economic service life} - \text{Years of Use}) / (\text{Economic service life} \times 100\%)
$$

7.3.4 Fixed assets – Equipment

Based on the actual utilization and current status of the equipment, the applicability of the three basic methods of valuation, namely the cost approach, the market approach and the income approach, was analyzed, and the cost approach has been selected as the main method for this equipment valuation. (Some of the old equipment was appraised using the second-hand market transaction price as a reference.)

$$
\text{Appraised value} = \text{Replacement costs} \times \text{Comprehensive rate of newness}
$$

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7.3.4.1 Determination of replacement costs

Replacement costs of equipment generally includes the necessary and reasonable costs and relevant taxes required for purchasing or constructing of a brand new asset with the same efficacy as the valuation object, such as: the purchase price of the equipment, transportation and miscellaneous costs, installation and commissioning costs, foundation costs, capital costs and other costs.

1) Machinery and Equipment

For equipment whose purchase price can be obtained from the market, the purchase price has been determined based on the current market price (excluding VAT). For equipment whose purchase price cannot be directly obtained due to upgrades or other reasons, a comparative analysis has been conducted using similar equipment. This analysis has taken into account the differences in performance, technical parameters, and functionality to estimate the purchase price.

Once the purchase price has been determined, relevant costs such as transportation, installation and commissioning fees, foundation costs, capital costs, and other necessary and reasonable expenses have been considered to determine the replacement cost of the equipment. The calculation formula was as follows:

Replacement costs = Purchase price of equipment + Transportation and miscellaneous costs + Foundation costs + Installation and commissioning costs + Capital costs + Other costs

Where:

A. The transportation and miscellaneous cost has been comprehensively determined based on the purchase price as the base, taking into account the volume and weight of different equipment, the transportation distance, the convenience degree of traffic conditions, and the transportation mode. For the equipment whose purchase price already includes the freight, no additional calculation has been made.

B. The foundation cost has been comprehensively determined based on the purchase price as the basis, considering the characteristics of different equipment, the required engineering quantity, and auxiliary materials. For equipment that does not require a foundation, no additional calculation has been made.

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C. The installation and commissioning cost has been comprehensively determined based on the purchase price as the base, taking into account the characteristics, weight, and complexity of installation of the equipment, as well as the required labor and auxiliary materials. For equipment that can be used without professional installation, no additional calculation has been made.

D. Capital Costs: Capital has been considered to be invested evenly over the construction and installation period. The formula for calculating capital costs was as follows:

$$
\text{Capital Costs} = (\text{Purchase costs} + \text{Other related costs}) \times \left[ (1 + \text{Annual interest rate})^{\text{Construction period}/2} - 1 \right]
$$

Where: The annual interest rate, based on the financing capacity of the Target Company, was set at 3.53%.

E. Other costs include design fees, management fees, joint trial-run fees, and other related expenses, and have been determined based on the scale and actual conditions of the equipment.

2) Vehicles

For this valuation, three recently listed vehicles of the same model have been selected from the market as reference points. After adjusting the prices, the benchmark price for the subject vehicle was derived. The average value of the benchmark prices was then used as the appraised value.

3) Electronic Equipment

The purchase prices of electronic equipment on the Valuation Date were determined on the basis of recent market inquiries in the local market, and the replacement costs were the purchase prices of the equipment because the general manufacturer or distributor provided free transportation and installation.

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7.3.4.2 Determination of comprehensive rate of newness

1) Key Equipment

The condition rating for key equipment was determined through on-site investigation using the observation method to assess the equipment's condition. This rating was then combined with the age method to determine the comprehensive rate of newness. The formula for the comprehensive condition rating is as follows:

Comprehensive rate of newness = Newness rate of on-site survey A × Weight C + Newness rate of age method B × (1 - Weight C)

The newness rate of on-site survey has been determined by conducting on-site inquiries, visual inspections, and reviewing the equipment's historical data. The goal was to understand the equipment's usage condition, wear and tear, maintenance status, workload, accuracy, and failure rates. Based on this information, the equipment's condition was analyzed and the newness rate of on-site survey was assigned.

The newness rate of age method has been determined based on the equipment's economic service life and the product's technological obsolescence rate. The formula for the newness rate of age method was as follows:

Newness rate of age method = (Economic service life - Years of Use)/Economic service life × 100%

If the equipment's years of use exceed its economic service life, then:

Newness rate of age method = Usable Remaining Life/(Usable Remaining Life + Years of Use) × 100%

2) General Equipment

For general equipment, after considering factors such as technological obsolescence and functional depreciation, the age method has been mainly used to determine the comprehensive rate of newness. The formula for the comprehensive rate of newness was as follows:

Comprehensive rate of newness = (Economic service life - Years of Use)/Economic service life × 100%

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If the equipment's years of use exceed its economic service life, then:

$$
\text{Comprehensive rate of newness} = \frac{\text{Usable Remaining Life}}{\text{Usable Remaining Life} + \text{Years of Use}} \times 100\%
$$

7.3.5 Right-of-use asset

First, relevant contracts and financial records have been reviewed to verify the lease payments for each period, ensuring consistency between the accounting records and actual transactions, and confirming the authenticity of the business. For operating lease right-of-use assets, the benefit period of the asset, the present value of lease payments, and the amortized cost have been recalculated and there were no abnormalities found. The Target Company has owned the rights and interests that match the right-of-use asset, and the appraised value has been determined based on the verified book value.

7.3.6 Intangible assets – Land use right

Based on the current status of the land, information collection, etc., and in accordance with the requirements of the "Guidelines for Valuation Practice-Real Property", and taking into account the location of the valuation object, the nature of the land, the conditions of utilization and the local land market conditions, the applicability of the three basic methods of valuation, namely, the market approach, the income approach and the cost approach and the assumed development method, the revised method of the base land value and other relevant derivative methods, were analyzed. As the market in which the land under appraisal is situated is active in transactions and the market approach can be adopted for valuation, the market approach has been selected as the valuation method for this valuation.

$$
V = V_B \times A \times B \times C \times D \times E
$$

In the formula: $V$: Price of land to be valued

$V_B$: Compare example prices

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A: Transaction status index of land to be valued/ comparison example transaction status index

B: Land value index on the Valuation Date of land to be valued/land value index on the Valuation Date of the comparison example

C: Location factor condition index of land to be valued/ comparison example location factor condition index

D: Index of rights and interests factors of land to be valued/Index of rights and interests factors of the comparative example

E: Index of physical factors of land to be valued/ Index of physical factors of the comparative example

7.3.7 Intangible assets – Other intangible assets

Other intangible assets were purchased software.

For software that was no longer in use as at the Valuation Date, it was assessed at zero; for other software, the relevant purchase contracts were verified, which were all commonly used and for which the developers provided free upgrade services, and the current market prices (excluding VAT) were checked directly with the software suppliers or through the Internet, which was taken as the appraised value.

7.3.8 Long-term amortized expense

Relevant contracts, original documents and relevant books of accounts were checked to understand the components of the book value and the amortization policy, and the original incurred amount and book value were reviewed, with no anomalies observed. Long-term amortized expense was reimbursable royalties for sewage rights, which were assessed on the basis of the entitlement of the Target Company for the remaining beneficial period.

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7.3.9 Deferred tax asset

The process of the formation of deferred tax assets has been reviewed. For the deferred tax assets formed due to the provision for bad debts, the appraised value has been determined according to the difference between the appraised value of receivables and the tax base, and in accordance with the income tax rate applicable to the Target Company. For the deferred tax assets formed by such matters as unremedied losses, accrued safety production fees, and accelerated depreciation of fixed assets, the appraised value have been confirmed based on the verified book amount.

7.3.10 Current and non-current liabilities

With respect to current and non-current liabilities within the scope of valuation, on the basis of checking the subsidiary ledgers and general ledgers, spot-checking the original vouchers and conducting confirmation, the appraised value was determined by the liability items and amounts that the Target Company was expected to bear after the realization of the economic activities corresponding to the valuation purpose.

7.4 Introduction to the market approach

7.4.1 Introduction to the market approach

The market approach is a valuation method that determines the value of the valuation object by comparing it with comparable listed companies or comparable transaction cases.

The two specific methods commonly used in the market approach are the listed-company comparison method and the transaction-case comparison method.

The listed-company comparison method refers to the specific method of obtaining and analyzing the operating and financial data of comparable listed companies, calculating the value ratios and determining the value of the valuation object on the basis of a comparative analysis with the Target Company.

The transaction-case comparison method refers to a specific method of obtaining and analyzing information on cases of sales, purchases and mergers of comparable companies, calculating appropriate value ratios, and determining the value of the valuation object based on a comparative analysis with the Target Company.

7.4.2 Applicability of market approach

The applicability of market law is reflected in three main areas:

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7.4.2.1 Adequacy of data

The adequacy of data means that while selecting comparable companies, relevant data on the operational and financial aspects of the enterprises to be analyzed and compared should be obtained, including the size of the enterprise, its operational status, its asset status and its financial status. The more adequate the data, the more specific the analysis can be and the more reliable the valuation results will be.

7.4.2.2 Reliability of data

The reliability of data refers to whether the source of data is obtained through normal channels. Data released by annual reports of listed companies, national regulatory authorities and authoritative professional organizations are generally more reliable; data obtained through other channels are generally more reliable the more transparent the information is.

7.4.2.3 Number of comparable companies

A certain number of comparable companies should be able to be collected for valuation using the market approach. In the case of the listed-company comparison method, the requirement for comparability is higher than the requirement for the number of comparable companies, as data on listed companies in various aspects are more readily available to facilitate relevant financial analyses and adjustments; and in the case of the transaction-case comparison method, due to the limited information that can be learned about comparable companies, it is necessary to select a sufficiently large number of transaction cases to dilute the impact of possible interfering factors.

7.4.3 Selection of assessment methodology

By inquiring into the transaction information platforms such as various property rights exchanges, CVsource and Straight Flush iFinD financial terminal database, and by inquiring into the transaction cases of power generation companies, it is found that there are fewer transaction cases and the information related to the operation status, asset status and financial status of the transaction cases is not perfect, therefore it was not appropriate to adopt the transaction-case comparison method for this valuation.

There are more listed companies in the fired power generation category, and the relevant financial data and other data of each company can be obtained through public information, therefore, the listed-company comparison method was used in this case.

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7.4.4 Valuation process of market approach

(1) Selection of comparable listed companies

Comparable listed companies were selected based on the primary market and customer base in which the Target Company operates. In this valuation, the key criteria for selecting comparable listed companies were that which must be engaged in the thermal power generation industry and had a similar business structure to the Target Company.

(2) Selection of value ratios

A critical step in the market approach to valuation was analyzing and determining the value ratio multipliers. Value ratios typically include earnings ratios, asset ratios, income ratios and other specific ratios. Given the development stage of the Target Company and the industry it operates in, the total invested capital market value and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) were employed to minimize the impact of differences in depreciation policies and other tax-related issues. In this valuation, the EV/EBITDA ratio has been used as the primary value ratio.

(3) Determining the value ratio

A. Determining the value ratio for comparable listed companies

The total investment value of a comparable listed company (in a non-liquid state) was calculated as follows:

Total Investment Value (Non-Liquid) = Number of shares × Stock price × (1 - Lack of marketability discount rate) × (1 + Control premium rate) + Minority shareholders' equity - Net value of surplus (non-operating) assets and liabilities + Interest-bearing liabilities

Where:

a. The stock price has been determined by the average price over the last 20 trading days prior to the Valuation Date.
b. Determination of the lack of marketability discount rate

The listed-company comparison method was selected, since the Target Company itself is not listed and the shareholders' equity lacks market liquidity, it was necessary to make a correction by deducting the liquidity discount. The lack of marketability discount rate was

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estimated by comparing the historical price-to-earnings (P/E) ratios of non-listed companies in mergers and acquisitions with those of listed companies.

c. The control premium rate was derived from statistical analysis of historical transactions involving controlling and non-controlling interests. This rate has served as a correction factor to account for the impact of control premiums and lack of control on the transaction price, adjusting the calculation of the total investment value.

d. The surplus (non-operating) assets and liabilities of comparable companies were analyzed using the same criteria applied to the Target Company.

B. Adjustments to the value ratio for comparable companies

Due to the differences in business risks between the Target Company and the comparable companies, including company-specific risks, the stages of enterprise development, as well as differences in profitability, asset quality, and debt repayment risks, appropriate and reasonable amendments need to be made accordingly.

Value ratio = Value ratio of comparable companies × Adjustment factor P

(4) Determining the market value Using the Market Approach

The adjusted value ratio is applied to the relevant analysis parameters of the Target Company to determine its market value. It was expressed by the formula as follows:

Market value of the Target Company = Analysis parameter × Adjusted multiple - Interest-bearing liabilities of the Target Company + Value of non-operating and surplus assets - Value of non-operating liabilities

Process and status of implementation of the valuation procedure

The entire valuation procedure, including acceptance of the assignment, verification of assets and checking of information, making assessment and valuation, preparation of the valuation report, internal review and submission of the report, is described below:

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8.1 Acceptance of commissions

8.1.1 On the premise of clarifying with the client the basic matters such as the valuation purpose, the object and scope of the valuation and the Valuation Date, and confirming that the independence of the valuation was not affected and the risk of the valuation was controllable, our company have accepted the engagement and entered into the entrustment contract for valuation with the client;

8.1.2 Appointment of the valuation project leader and formation of the valuation project team;

8.1.3 Preparation of work plans and elaboration of preliminary technical programs.

8.2 Verification of assets and inspection information

8.2.1 Provided Puxing Deneng with an itemized list of required information, taking into account the specifics of the valuation project;

8.2.2 Selection of valuation professionals to guide the relevant personnel of Puxing Deneng in preparing the schedule of valuation filings;

8.2.3 Counseling the financial and asset management personnel of Puxing Deneng to carry out a comprehensive inventory and verification of the assets and liabilities within the scope of the valuation and fill in the details in the schedule of valuation filings, and at the same time collect and prepare relevant valuation information, such as audit reports, property rights certificates, historical operating conditions, asset quality conditions, information on income projections (including overflow and non-operating assets and liabilities), and other financial information, in accordance with the requirements of the valuation information checklist;

8.2.4 On-site investigation, verification of assets and checking of relevant valuation information

8.2.4.1 Listened to the relevant personnel of Puxing Deneng introduce the history and current status of the Target Company and the assets involved;

8.2.4.2 Verification of accounts and items on the financial statements provided by Puxing Deneng and the completed valuation filing schedules;

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8.2.4.3 Puxing Deneng and the relevant persons confirmed by signing and stamping the schedule of valuation filings and other relevant information provided by them;

8.2.4.4 Conducting on-site investigations, verification and surveys of the assets within the valuation scope, conducting the necessary checks on the ownership certificates, financial information and other information on the valuation object provided by the client and the relevant parties, and carrying out verification and validations by means of observations, inquiries, written reviews, field investigations, inquiries, confirmation and reviews.

8.2.4.5 Investigating the operating business of the Target Company by collecting and analyzing its historical operations and future business plans and by interviewing management.

8.3 Making assessment and valuation

The information collected from the site was analyzed and sorted out, and investigations, inquiries and verification were carried out through channels such as open market information or professional data providers, government authorities, suppliers, intermediaries, the Internet, the client (Target Company) and our database, etc., so as to select appropriate valuation methods and valuation models based on the valuation object, the type of value and the information collected and to assess the value of the valuation object.

8.4 Preparation of the valuation report and internal reviews

Assembled the working draft of the valuation, summarized the itemized statements, arriving at an overall valuation conclusion and analyzing the reasons for the increase or decrease in the results. Summarized and prepared the valuation report and the valuation schedule; conducted internal hierarchical review within the valuation agency and communicate with the client and other relevant parties agreed by the client to listen to their views without prejudice to the independent judgment of the valuation professionals.

8.5 Submission of reports

Submit a formal valuation report to the client.

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9. Valuation assumptions

9.1 General assumptions

9.1.1 Transaction assumptions

Assuming that all assets to be appraised are already in the process of being traded, appraisals are conducted by simulating the market based on the trading conditions of the assets to be appraised.

9.1.2 Open market assumptions

9.1.2.1 There are voluntary sellers and buyers on an equal footing.

9.1.2.2 Both buyers and sellers have access to sufficient market information and time, and the act of trading is carried out voluntarily and sensibly rather than under coercive or unrestricted conditions.

9.1.2.3 The assets to be valued are freely transferable on the open market.

9.1.2.4 No additional bids or discounts from special buyers will be considered.

9.1.3 Assumption of relative stability of the macroeconomic environment

9.1.4 Going concern assumption

It is assumed that Puxing Deneng's business operations are legal, that it can maintain its going concern status in the future, and that the value of its assets can be recovered through subsequent normal operations.

9.1.5 It is assumed that the equipment-type assets included in the valuation scope will be used continuously in their original location and for their original purpose.

9.1.6 It is assumed that the technical, structural and functional aspects of the assets are generally consistent with the conditions observed through the visible entities and the expected economic life.

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9.1.7 The relevant basic and financial information provided by the client and the Target Company is true, accurate and complete.

9.2 Assumptions for the adoption of the market approach

9.2.1 It is assumed that the property rights trading market is a fair, just and open efficient market, and that the transaction price has fully reflected the expectations of market participants on the underlying factors affecting the transaction price, such as the underlying business performance of the Target Company and the expected return, as well as the risk factors.

9.2.2 It is assumed that the current and future operators of Puxing Deneng are responsible and that its corporate management is capable of assuming their positions and steadily advancing the company's growth plans and maintaining good business practices.

9.2.3 It is assumed that the technical workforce of Puxing Deneng and its senior management will remain relatively stable and that there will be no significant loss of core professional and managerial staff.

9.2.4 It is assumed that the relevant basic and financial information of Puxing Deneng and comparable companies in the same industry on which the valuation is based is true, accurate and complete, and that there are no undisclosed events occurring in the vicinity of the base date that would have a significant impact on its value.

In accordance with the requirements of the Valuation Standards, the valuation agency and the valuation professionals have determined that these premises and assumptions were established as at the Valuation Date, and will not be liable for deducing a different valuation conclusion due to a change of the premises and assumptions when there is a significant change in the economic environment in the future.

10. Valuation conclusions

The Market Value of the valuation object was appraised using the asset-based approach and the market approach. The results of the valuation have been set out below:

10.1 Asset-based approach

Under the assumptions revealed in this report, the valuation conclusion of the valuation object as at the Valuation Date was RMB330,024,791.00, as follows:

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The book value of the assets was RMB539,875,198.19 and the appraised value was RMB661,201,964.34, with an appraisal value increase of RMB121,326,766.15, and with an appreciation rate of 22.47%;

The book value of the liabilities was RMB331,177,173.34 and the appraised value was RMB331,177,173.34, with no valuation increase or decrease;

Summary of valuation results

Item	Book Value A	Appraised Value B	Value-added (accountancy) C = B-A	Value Added Ratio% D = C/A × 100
Current asset	47,789,180.61	47,804,473.84	15,293.23	0.03
Of which: Inventory	2,957,046.14	2,957,046.14
Non-current asset	492,086,017.58	613,397,490.50	121,311,472.92	24.65
Of which: Long-term equity investments	360,114,461.33	411,242,696.92	51,128,235.59	14.20
Fixed assets	123,616,984.70	147,729,014.00	24,112,029.30	19.51
Of which: Building type	13,059,417.32	24,653,600.00	11,594,182.68	88.78
Equipment type	110,557,567.38	123,075,414.00	12,517,846.62	11.32
Right-of-use asset	62,978.42	62,978.42
Intangible asset	3,083,378.66	49,158,410.00	46,075,031.34	1,494.30
Of which: Land use right	3,083,378.66	49,140,300.00	46,056,921.34	1,493.72
Long-term amortized expense	89,410.86	89,410.86
Deferred tax asset	5,118,803.61	5,114,980.30	-3,823.31	-0.07
Total assets	539,875,198.19	661,201,964.34	121,326,766.15	22.47
Current liability	151,369,284.46	151,369,284.46
Non-current liability	179,807,888.88	179,807,888.88
Total liabilities	331,177,173.34	331,177,173.34
Total owner's equity	208,698,024.85	330,024,791.00	121,326,766.15	58.14

10.2 Market approach

Under the assumptions revealed in this report, the Market Value of the valuation object as of the Valuation Date was as follows:

The book value of the 100 percent equity interest was RMB208,698,024.85 and the appraised value was RMB319,000,000.00, with an appraisal value increase of RMB 110,301,975.15, and with an appreciation rate of 52.85%.

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10.3 Analysis of valuation results

The difference between the valuation results of the asset-based approach and the market approach was RMB11,024,791.00, and with a difference of 3.34%. The implementation process and the selection of parameters for both valuation methods were analyzed to be reasonable.

The adequacy and completeness of the publicly available business information and financial information of comparable listed companies used in the market approach is relatively weak compared to the information used in the asset-based approach; in addition to this, the calculation of the value ratios is significantly affected by the volatility of the share prices of comparable listed companies. In view of the above, the valuation results of the asset-based approach have been selected as the value of the 100 percent equity interest of Puxing Deneng.

10.4 Valuation conclusion

After a comprehensive analysis, the Market Value of RMB330,024,791.00 determined by the asset-based approach was used in this valuation as the value of the 100 percent equity interest of Puxing Deneng, with an appraisal value increase of RMB121,326,766.15, and with an appreciation rate of 58.14%.

11. Statement of special matters

11.1 As of the Valuation Date, Puxing Deneng had the following external guarantees, mortgages and pledges of assets, lawsuits and significant financial commitments:

11.1.1 Puxing Deneng provided a credit guarantee for the loan from Quzhou Puxing Gas Turbine Thermal Power Co., Ltd. (hereinafter referred to as Quzhou Thermal Power Plant) to Wanxiang Finance Co., Ltd. in the total amount of RMB50 million for a guarantee period from November 15, 2022 to November 14, 2024. As of the Valuation Date, the balance of the loan under this guarantee contract was RMB21.2 million.

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11.1.2 Puxing Deneng provided a credit guarantee for the loan from Quzhou Thermal Power Plant to Wanxiang Finance Co., Ltd. for a total amount of RMB45 million for a period from November 25, 2022 to November 24, 2024. As of the Valuation Date, the balance of the loan under this guarantee contract was RMB45 million.

11.1.3 Puxing Deneng provided a credit guarantee for the loan from Quzhou Thermal Power Plant to Quzhou Kecheng Sub-branch, China Construction Bank Corporation for a total amount of RMB70 million for a period from November 16, 2021 to November 15, 2024. As of the Valuation Date, the balance of the loan under this guarantee contract was RMB70 million.

11.1.4 Puxing Deneng provided a credit guarantee for the loan from Quzhou Thermal Power Plant to Wanxiang Finance Co., Ltd. for a total amount of RMB0.5 million for a period from December 29, 2023 to December 28, 2025. As of the Valuation Date, the balance of the loan under this guarantee contract was RMB0.5 million.

The impact of the above matters on the valuation conclusions has not been considered in this valuation.

11.2 As at the Valuation Date, the five buildings included in the valuation scope had not yet obtained ownership certificates, as set out in the table below:

No.	Item	Area(m2)	Completion Date	Book Value (in RMB Yuan)	Owner
1	Water intake pump house	68.00	October 2005	247,743.55	Puxing Deneng
	Control room of the natural gas
2	pressure regulating station	65.00	October 2005	16,038.81	Puxing Deneng
	Control room of the pressure
3	regulating station	25.00	June 2020	43,453.76	Quzhou Thermal Power Plant
4	Online flue gas control room No.1	30.00	July 2024	24,332.88	Quzhou Thermal Power Plant
5	Online flue gas control room No.1	30.00	July 2024	24,332.88	Quzhou Thermal Power Plant
	In total	218.00		355,901.08

Each of the companies above has issued a "Declaration of Ownership of Buildings" stating that it owns the aforesaid buildings, and this valuation was based on the premise that each of the companies legally owns the aforesaid buildings.

The floor areas of the aforesaid buildings for the valuation purpose were provided by each of the companies based on the results of historical annual surveys and mapping, which were verified as necessary at the time of the valuation, but were not surveyed or mapped by professional surveying and mapping agency, and any discrepancies with the Real Estate Ownership Certificates obtained at a later stage of the period will affect the valuation conclusions.

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11.3 The client (the Target Company) has furnished the following audit reports as detailed below:

Name of organization	Name of report	Report No.	Date of issue	Audit opinion
Da Hua CPAs LLP.	Audit Report of Zhejiang Puxing Deneng Natural Gas Power Co., Ltd.	D.H.S.Z.[2023]No. 250019	February 13, 2023	unqualified opinion
Da Hua CPAs LLP.	Audit Report of Zhejiang Puxing Deneng Natural Gas Power Co., Ltd.	D.H.S.Z.[2023]No. 250018	February 8, 2023	unqualified opinion
Zhonghui Certified Public Accountants LLP.	Audit Report of Zhejiang Puxing Deneng Natural Gas Power Co., Ltd.	ZhongHuiKuaiShen[2024] No. 10887	December 23, 2024	unqualified opinion

The aforesaid audit reports are the important valuation bases for this valuation report, and any distortion of the aforesaid reports will affect the valuation conclusion.

11.4 The impact of income tax that may be involved in the valuation increase or decrease of non-current assets on the valuation conclusion has not been considered in the current asset-based approach of this valuation.

11.5 The conclusion of this valuation is the value of the 100 percent equity interest of the Target Company, and the value of the shareholders' partial equity interest is not necessarily equal to the product of the value of the 100 percent equity interest and the equity ratio. The user of the report is reminded that when quoting the conclusions of this valuation report as a reference for equity transactions, it is required to take into account the effect of premium or discount arising from factors such as possible control or lack of control on the basis of the valuation conclusion.

11.6 In this valuation, the valuation agency and the valuation professionals shall not be liable for any other defective matters that may exist in the Target Company and affect the valuation conclusion, in the absence of any special explanation by the Target Company at the time of the valuation and which the valuation professionals were generally unable to be aware of based on their professional experience.

Attention is drawn to the impact of the above matters on the valuation conclusion and this economic action by the users of the valuation report.

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12. Statement of limitations on the use of the valuation report

The use of this valuation report is subject to the following restrictions:

12.1 The principal or other users of the valuation report shall read and properly understand the components of this report (including the statement, summary, text and annexes, etc.), which alone or in part cannot fully and reasonably reflect the valuation conclusions; and shall pay particular attention to the types of value, bases, assumptions, statement of special matters and relevant hints in the letters of commitment between the client and the Target Company in this report.

12.2 The valuation report shall only be used by the user of the valuation report as disclosed in the valuation report for the valuation purpose and uses set out therein. The contents of the valuation report shall not be excerpted, quoted or disclosed in the public media without the consent of the valuation agency, except as provided for in laws and regulations and as otherwise agreed by the relevant parties.

12.3 Where the client or other user of the valuation report fails to use the valuation report in accordance with the provisions of laws and administrative regulations and the scope of use set out in the valuation report, the valuation and its valuation professionals shall not be liable.

12.4 Except for the client, other users of the valuation report agreed in the valuation entrustment contract and the users of the valuation report prescribed by laws and administrative regulations, no other organization or individual can be the user of the valuation report.

12.5 The user of this valuation report shall correctly understand and use the valuation conclusion. Valuation conclusions are not equivalent to the realizable price of the valuation object, and they should not be regarded as a guarantee of the realizable price of the valuation object.

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Valuation report date

The valuation report date is December 26, 2024.

Tianyuan Appraisal Co., Ltd.

December 26, 2024

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Explanation of the significant differences between the book value and the valuation conclusions

The valuation used the Market Value determined by the asset-based approach as the valuation conclusion of the value of the 100 percent equity interest of Puxing Deneng, and the valuation conclusions differed significantly from the book value for the reasons explained below:

Differences between the book value and valuation conclusions

The book value of the 100 percent equity interest of Puxing Deneng was RMB208,698,024.85 and the appraised value was RMB330,024,791.00, with an appraisal value increase of RMB121,326,766.15, and with an appreciation rate of 58.14%.

Analysis of the reasons for the large discrepancies

2.1 The value of long-term equity investments has increased by RMB51,128,235.59. The main reason is that the book records of the wholly-owned subsidiaries are accounted for using the cost method, and the book value does not reflect their historical retained earnings from business operations and the situation of asset quality.

2.2 The value of fixed assets (buildings) has increased by RMB11,594,182.68. On the one hand, buildings were constructed relatively early, and the rising construction and installation costs in recent years have led to an increase in the replacement cost of the buildings. On the other hand, the economic life span of buildings is longer than their accounting depreciation period.

2.3 The value of fixed assets (equipment) has increased by RMB12,517,846.62. The main reason is that the depreciation period of the equipment is shorter than its economic service life.

2.4 The value of intangible asset-land use right has increased by RMB46,056,921.34. The main reason is that the industrial land use right for transfer was obtained relatively early, and the market price of land use rights has risen in recent years, resulting in the valuation increment.

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APPENDIX III

GENERAL INFORMATION ON THE GROUP

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be (i) notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors or the chief executive of the Company were taken or deemed to have under such provisions of the SFO); or (ii) entered in the register kept by the Company pursuant to section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code").

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than Directors or chief executive of the Company) had, or were deemed or taken to have interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

Name of Shareholder	Capacity/Nature of interests	Number of Shares/ underlying Shares held (note 1)	Percentage of issued share capital (note 5)
Puxing International	Beneficial interest	300,000,000 (L)	65.42%
Anergy International (note 2)	Interests in a controlled corporation	300,000,000 (L)	65.42%
Wanxiang Group (note 2)	Interests in a controlled corporation	300,000,000 (L)	65.42%
Mr. Lu (note 2)	Interests in a controlled corporation	300,000,000 (L)	65.42%
Ms. Li Li (note 2)	Interest of spouse	300,000,000 (L)	65.42%
BC Greater China Opportunities Fund SPC – BC New Energy Fund SP (“BC Fund SPC”)	Beneficial interest	35,122,000 (L)	7.66%
BC Capital Group Limited (note 4)	Interests in a controlled corporation	35,122,000 (L)	7.66%

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Notes:

(1) The letter “L” denotes the entity/person’s long position in the Shares.

(2) These Shares are held by Puxing International, which is owned as to 100% by Anergy International, which is owned as to 100% by Wanxiang Group which in turn is ultimately controlled by Mr. Lu. Therefore, Anergy International, Wanxiang Group and Mr. Lu are deemed to be interested in the Shares held by Puxing International.

(3) Ms. Li Li is the spouse of Mr. Lu and is therefore deemed to be interested in the said Shares in which Mr. Lu is deemed to be interested.

(4) These Shares are held by BC Fund SPC. BC Fund SPC is owned as to 100% by BC Asset Management Limited, which in turn is owned as to 100% by BC Capital Group Limited. BC Capital Group Limited is owned as to 68% by Fullsun International Capital Limited.

(5) The percentage of issued share capital is calculated based on the total number of 458,600,000 shares in issue as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

As at the Latest Practicable Date, so far as is known to the Directors, Mr. Guan Dayuan (the chairman of the Board and an executive Director) is the deputy secretary of the Party Committee of Wanxiang Group. Apart from Mr. Guan Dayuan, none of the other Directors is a director or employee of a company which has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company pursuant to the provisions of Division 2 and 3 of Part XV of the SFO.

ARRANGEMENTS AND MATTERS CONCERNING DIRECTORS

(a) None of the Directors has entered or proposed to enter into any service contract with the Group, which is not expiring or determinable by the Group within one year without payment of compensation (other than the payment of statutory compensation).

(b) As at the Latest Practicable Date, none of the Directors was interested, directly or indirectly, in any assets which, since 31 December 2023, being the date to which the latest published audited consolidated financial statements of the Group were made up, had been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

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GENERAL INFORMATION ON THE GROUP

(c) As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date and entered into by the Group since 31 December 2023, being the date to which the latest published audited consolidated financial statements of the Group were made up, and which was significant in relation to the business of the Group.

(d) As at the Latest Practicable Date, none of the Directors or their respective close associates had any interest in a business which competed or might compete with the business of the Company.

4. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims of material importance nor was any litigation or claims of material importance known to the Directors to be pending or threatened against any member of the Group.

5. QUALIFICATIONS AND CONSENTS OF EXPERTS

(a) The following is the qualification of the experts who have given opinion or advice, which are contained or referred to in this circular:

Name	Qualification
Orient Capital (Hong Kong) Limited	a corporation licensed to carry out type 6 (advising on corporate finance) regulated activities under the SFO, being the Independent Financial Adviser
Tianyuan Appraisal Co., Ltd.	Independent valuer

(b) As at the Latest Practicable Date, each of the above experts did not have any shareholding in any members of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did it have any interest, direct or indirect, in any assets which had, since the date to which the latest published audited consolidated financial statements of the Group were made up, been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

(c) As at the Latest Practicable Date, each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter, advice and opinion and references to its name in the forms and contexts in which it appeared. The letter from each of the above experts is given as at the date of this circular for incorporation in this circular.

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GENERAL INFORMATION ON THE GROUP

6. MATERIAL CONTRACTS

The following contract (not being contracts entered into in the ordinary course of business) has been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date and which are, or may be, material to the Group:

(a) the Equity Transfer Agreement.

7. DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.puxing-energy.com) for a period of 14 days from the date of this circular:

(a) the Equity Transfer Agreement;

(b) the letter from the Independent Financial Adviser as set out in this circular;

(d) the written consent of each of the expects as referred to in the section headed “5. Qualifications and consents of experts” in this appendix.

8. MISCELLANEOUS

(a) The company secretary of the Company is Mr. CHUNG Ming Fai, who is a fellow of the Hong Kong Institute of Certified Public Accountants and a member of CPA Australia.

(b) The registered office of the Company is at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. The head office of the Company is at No.181-1 Hejiatang, Chongxian Subdistrict, Lingping District, Hangzhou 311108, Zhejiang Province, PRC and its principal place of business in Hong Kong is at 40/F, Dah Sing Financial Centre, 248 Queen's Road East, Wanchai, Hong Kong. The share registrar of the Company is at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong.

For identification purpose only

NOTICE OF EGM

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, 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 notice.

PUXING ENERGY LIMITED

普星能量有限公司

(Incorporated in Cayman Islands with limited liability)

(Stock Code: 90)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN an extraordinary general meeting ("EGM") of Puxing Energy Limited (the "Company") will be held at Second Floor No. 777 Meeting Room, Wanxiang Group Headquarters, No. 855 Jianshe 2nd Road, Xiaoshan District, Hangzhou City, China, on Tuesday, 11 February 2025 at 10:00 a.m. (or any adjournment thereof) for the purpose of considering and, if thought fit, approve the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

"THAT the Disposal and the Equity Transfer Agreement dated 30 December 2024 referred to in the section headed "II. Major and Connected Transaction" in the "Letter from the Board" contained in the circular of the Company (the "Circular") of which this notice forms part, and the transactions contemplated thereunder be and are hereby approved."

Yours faithfully,

By order of the Board

Puxing Energy Limited

GUAN Dayuan

Chairman

Hong Kong, 27 January 2025

Principal Place of Business in Hong Kong:
40/F, Dah Sing Financial Centre
248 Queen's Road East, Wanchai
Hong Kong

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

EGM - 1

NOTICE OF EGM

Notes:

Any member of the Company (the “Shareholder(s)”) entitled to attend and vote at the EGM is entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a Shareholder.
The form of proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.
Delivery of the form of proxy shall not preclude a Shareholder from attending and voting in person at the EGM and in such event, the form of proxy shall be deemed to be revoked.
Where there are joint Shareholders, any one of such joint Shareholders may vote, either in person or by proxy, in respect of such Shares as if he/she were solely entitled thereto, but if more than one of such joint Shareholders be present at the above meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint Shareholders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
The form of proxy and (if required by the board (the “Board”) of directors (the “Directors”) of the Company) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the Company's share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong not less than forty-eight (48) hours before the time appointed for the holding of the EGM or any adjournment thereof.
The register of members of the Company will be closed for registration of transfer of shares from Friday, 7 February 2025 to Tuesday, 11 February 2025 (both days inclusive), for the purpose of determining Shareholders’ entitlement to attend and vote at the EGM, during which period no transfer of Shares will be registered. In order to be eligible to attend and vote at the EGM, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong no later than 4:30 p.m. on Thursday, 6 February 2025.
If a Typhoon Signal No. 8 or above is hoisted or a Black Rainstorm Warning Signal is in force within a period of two (2) hours before the commencement of the EGM, the EGM will be postponed or adjourned. The Company will post an announcement on the Company’s website (www.puxing-energy.com) and the Stock Exchange’s website (www.hkexnews.hk) to notify Shareholders about the date, time and place of the rescheduled meeting. The EGM will be held as scheduled when an Amber or a Red Rainstorm Warning Signal is in force. Shareholders should decide on their own whether they would attend the EGM under bad weather condition bearing in mind their own situations.
The translation into Chinese language of this notice is for reference only. In case of any inconsistency, the English version shall prevail

As at the date of this notice, the Board comprises six Directors, of whom three are executive Directors, namely Mr. Guan Dayuan, Mr. Wei Junyong and Mr. Yuan Feng; and three are independent non-executive Directors, namely Mr. Wu Chongguo, Ms. Wu Ying and Mr. Yu Wayne W.

EGM – 2

AI assistant

KEYNE LTD — Proxy Solicitation & Information Statement 2025

48868_rns_2025-01-24_57ad15ca-9f11-4090-8223-f95b2e54f512.pdf

PUXING ENERGY LIMITED

MAJOR AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

PUXING ENERGY LIMITED

普星能量有限公司

MAJOR AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

I. INTRODUCTION

II. MAJOR AND CONNECTED TRANSACTION

(1) Background

(2) Equity Transfer Agreement

(3) Information on the Target Group

Before the Disposal

After the Disposal

Financial information of the Target Group

Key quantitative inputs and the computation process

Key assumptions of the Valuation

General assumptions

1. Transaction assumptions

2. Open market assumptions

3. Assumption of relative stability of the macroeconomic environment

4. Going concern assumption

Assumptions for the adoption of the market approach

(5) Reasons for and benefits of the Disposal

(6) Financial effects of the Disposal and use of proceeds

(7) Information on the parties

The Group

The Purchaser

The Vendor

(8) Implications under the Listing Rules

IV. VOTING BY POLL

V. CLOSURE OF REGISTER OF MEMBERS

VI. RECOMMENDATION

PUXING ENERGY LIMITED

MAJOR AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY

INTRODUCTION

RECOMMENDATION

MAJOR AND CONNECTED TRANSACTION IN RELATION TO THE DISPOSAL OF 51% EQUITY INTEREST IN THE TARGET COMPANY

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information on the parties

1.1 The Group

1.2 The Purchaser

1.3 The Vendor

1.4 The Target Group

2. Reasons for and benefits of the Disposal

2.1 Assessment on the reasons for and benefits of the Disposal

3. Principal terms of the Equity Transfer Agreement

3.1 Valuation of the Target Company

Consideration multiples of the Disposal and Comparable Companies

Valuation Methodologies and Assumptions

Details of the Valuation

4. Financial effects of the Disposal

OPINION AND RECOMMENDATIONS

1. FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS

5. MATERIAL ADVERSE CHANGE

CONTENTS

Statements

Summary

8. Note on special matters

Valuation report

1. Client, the Target Company and other users of the valuation report

1.1 Overview of the client (the Target Company)

1.1.8 Scope of Business:

1.1.9 Assets, financial and operational status of Puxing Deneng for the last two years and period:

4. Types of value

5. Valuation Date

6. Basis for valuation

6.1 Legal and regulatory basis

6.2 Basis for the guidelines

6.3 Basis of tenure

6.4 Basis of pricing

7. Valuation methodology

7.1 Basic methodology of the valuation

7.1.1 Market approach

7.1.2 Income approach

7.1.3 Asset-based approach

KEYNE LTD Proxy Solicitation & Information Statement 2025