Power Assets Holdings Limited — Proxy Solicitation & Information Statement 2006

Apr 7, 2006

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this document, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

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(Incorporated in Hong Kong with limited liability)

(Stock code: 006)

PROPOSED GENERAL MANDATES

TO ISSUE NEW SHARES AND TO REPURCHASE SHARES, DIRECTORS PROPOSED TO BE RE-ELECTED, AND PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

31st March 2006

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(Incorporated in Hong Kong with limited liability)

(Stock code: 006)

Executive Directors: CANNING FOK KIN-NING (Chairman) TSO KAI-SUM (Group Managing Director) ANDREW J. HUNTER KAM HING-LAM FRANCIS LEE LAN-YEE VICTOR LI TZAR-KUOI NEIL D. MCGEE FRANK J. SIXT WAN CHI-TIN

Registered Office: 44 Kennedy Road Hong Kong

Non-Executive Directors: RONALD JOSEPH ARCULLI SUSAN M. F. CHOW GEORGE C. MAGNUS EWAN YEE LUP-YUEN

Independent Non-Executive Directors: HOLGER KLUGE RALPH RAYMOND SHEA WONG CHUNG-HIN

31st March 2006

To the Shareholders,

Dear Sir or Madam,

PROPOSED GENERAL MANDATES TO ISSUE NEW SHARES AND TO REPURCHASE SHARES, DIRECTORS PROPOSED TO BE RE-ELECTED, AND PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

INTRODUCTION

The purpose of this circular is to provide you with information regarding the general mandates to issue shares and to repurchase shares which are proposed to be granted to the Directors, the proposed re-election of the Directors who are due to retire, and the proposed amendments to the Company’s Articles of Association. These resolutions will be proposed at the Annual General Meeting of the Company convened for 11th May 2006 (“AGM”).

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SHARE REPURCHASE AND SHARE ISSUE GENERAL MANDATES

On 12th May 2005 a general mandate was given to the Directors to exercise the powers of the Company to repurchase shares of the Company. Such mandate will lapse at the conclusion of the AGM. It is therefore proposed to seek your approval of an ordinary resolution to be proposed at the AGM granting the Directors a general mandate to repurchase shares representing not more than 10 per cent. of the share capital of the Company in issue at the date of passing the resolution (the “Repurchase Mandate”). In accordance with the relevant rules set out in the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) regulating the repurchase by companies of their own securities on the Stock Exchange, the Company is required to send Shareholders an explanatory statement containing information reasonably necessary to enable Shareholders to make an informed decision on whether to vote for or against the resolution to approve the purchase by the Company of its own shares. This explanatory statement is set out in Appendix I to this circular.

Ordinary resolutions will also be proposed at the AGM (i) to grant the Directors a general mandate to issue and otherwise deal with shares up to a limit equal to 20 per cent. of the issued shares of the Company at the date of passing of such resolution and (ii) to approve the addition of repurchased shares (up to a maximum of 10 per cent. of the issued shares of the Company at the date of passing of such resolution) to the 20 per cent. general mandate.

DIRECTORS PROPOSED TO BE RE-ELECTED

In accordance with Article 99 of the Company’s Articles of Association, Mr. Neil D. McGee and Mr. Wan Chi-tin who were appointed Directors on 12th December 2005, will retire at the AGM and, being eligible, offer themselves for re-election. In accordance with Article 116 of the Company’s Articles of Association, Mr. Ralph Raymond Shea and Mr. Wong Chung-hin will retire by rotation at the AGM, and being eligible, offer themselves for re-election. The particulars of these Directors which are required to be disclosed by the Listing Rules are set out in Appendix II to this circular.

AMENDMENTS TO EXISTING ARTICLES OF ASSOCIATION

A special resolution will also be proposed at the AGM to amend the existing Articles of Association of the Company. The proposed amendments are set out in Appendix III to this circular.

ANNUAL GENERAL MEETING

The resolutions to be proposed at the AGM are set out in full in the Notice of Annual General Meeting included in the Annual Report. Your right to demand a poll on the resolutions at the Meeting is set out in Appendix IV to this circular. Whether or not you intend to be present at the Meeting, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the registered office of the Company at the address stated above not less than 48 hours before the time fixed for holding the Meeting. The Directors believe that the resolutions set out in the notice of the Meeting are in the best interests of the Company and its Shareholders as a whole and recommend you to vote in favour of such resolutions at the Meeting.

Yours faithfully, CANNING FOK KIN NING

CHAIRMAN

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APPENDIX I

The following is the Explanatory Statement required to be sent to Shareholders under the Listing Rules and also constitutes the Memorandum required under Section 49BA of the Companies Ordinance.

SHARE CAPITAL

As at 31st March 2006 (the latest practicable date prior to the printing of this circular), the issued share capital of the Company comprised 2,134,261,654 shares of HK$1 each (“Shares”).

Exercise in full of the Repurchase Mandate (10% of the issued share capital of the Company), on the basis that no further Shares are issued prior to the date of the AGM, could accordingly result in up to 213,426,165 Shares being repurchased by the Company during the course of the period ending on the earlier of the date of the Annual General Meeting in 2007, and the date upon which such authority is revoked or varied.

REASONS FOR REPURCHASE

The Directors believe that it is in the best interests of the Company and its Shareholders to seek a general authority from Shareholders to enable the Directors to purchase Shares of the Company in the market. Such purchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net assets and/or earnings per Share. The Directors are seeking a general mandate to repurchase Shares to give the Company the flexibility to do so if and when appropriate. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are repurchased will be decided by the Directors at the relevant time having regard to the circumstances then prevailing.

FUNDING OF REPURCHASE

In repurchasing Shares, the Company may only apply funds legally available for such purpose in accordance with its Memorandum and Articles of Association and the Companies Ordinance. It is envisaged that the funds required for any repurchase would be derived from the distributable profits of the Company.

There could be material adverse impact on the working capital or gearing position of the Company (as compared with the position disclosed in the audited consolidated accounts contained in the Annual Report for the year ended 31st December 2005) in the event that the Repurchase Mandate were to be exercised in full at any time during the proposed repurchase period. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of the Company or the gearing levels which in the opinion of the Directors are from time to time appropriate for the Company.

SHARE PRICES

The highest and lowest prices at which the Shares have traded on the Stock Exchange during each of the previous twelve months before the printing of this circular were as follows:

	Highest	Lowest
	HK$	HK$
April 2005	35.80	34.10
May 2005	35.00	34.10
June 2005	35.70	34.30
July 2005	37.00	34.90
August 2005	37.95	36.10
September 2005	39.20	37.05
October 2005	39.20	35.80
November 2005	38.65	35.00
December 2005	39.20	37.20
January 2006	38.00	36.00
February 2006	37.75	34.95
March 2006	36.75	34.90

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DISCLOSURE OF INTERESTS

The Directors have given an undertaking to the Stock Exchange that, so far as the same may be applicable, they will exercise the powers of the Company to make all repurchases pursuant to the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of Hong Kong.

None of the Directors nor, to the best of their knowledge having made all reasonable enquiries, their associates, have any present intention to sell any Shares to the Company if the Repurchase Mandate is approved and exercised. No other connected persons (as defined in the Listing Rules) have notified the Company that they have a present intention to sell Shares to the Company, or have undertaken not to do so, in the event that the Repurchase Mandate is approved and exercised.

As at 31st March 2006 (the latest practicable date prior to the printing of this circular), Cheung Kong Infrastructure Holdings Ltd. (“CKI”) and its subsidiary Hyford Ltd. held through certain subsidiaries of Hyford Ltd. (including Monitor Equities S.A. and Univest Equity S.A.) a total of 829,599,612 Shares, representing 38.87% of the issued share capital of the Company. By virtue of their direct and/or indirect shareholdings in CKI, Hutchison Whampoa Ltd. and its subsidiaries. Hutchison International Ltd. and Hutchison Infrastructure Holdings Ltd., Cheung Kong (Holdings) Limited, Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust, Li Ka-Shing Unity Trustee Corporation Limited as trustee of The Li Ka-Shing Unity Discretionary Trust, Li KaShing Unity Trustcorp Limited as trustee of another discretionary trust, Messrs. Li Ka-Shing and Victor Li Tzar-kuoi (collectively the “Substantial Shareholders”) were each deemed to hold these same 829,599,612 Shares.

In the event that the Directors exercise in full the power to repurchase Shares which is proposed to be granted pursuant to the Repurchase Mandate, then (if the present shareholdings otherwise remained the same) the shareholding of CKI in the Company would be increased to approximately 43.19% of the issued share capital of the Company and similarly, so would the deemed shareholdings of each of the Substantial Shareholders be increased. In the opinion of the Directors such increase may give rise to an obligation to make a mandatory offer under Rule 26.1 of the Code on Takeovers and Mergers.

SHARE PURCHASE MADE BY THE COMPANY

The Company has not purchased any of its Shares (whether on the Stock Exchange or otherwise) in the six months preceding the date of this circular.

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APPENDIX II

The following is the information required to be disclosed by the Listing Rules on the Directors proposed to be re-elected at the AGM.

1. Mr. Neil Douglas McGee , aged 54, has been an Executive Director of the Company since December 2005 and became Group Finance Director on 1st February 2006. He is also Director of certain subsidiaries of the Company, including The Hongkong Electric Company, Limited (“HEC”). Mr. McGee worked with the Hongkong Electric Group (the “Group”) and the Hutchison Whampoa Group from 1978 holding legal, corporate finance and corporate secretarial positions. He then joined Husky Oil Ltd in 1998 as Vice President and Chief Financial Officer and from 2000 to October 2005, he served as Vice President and Chief Financial Officer of Husky Energy Inc. Mr. McGee holds a Bachelor of Arts degree and a Bachelor of Laws degree. Save as disclosed above, Mr. McGee does not have any relationship with any other director, senior management or substantial or controlling shareholders of the Company. He does not have any interest in the shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”). Mr. McGee’s emoluments including benefits specified in his service contract amount to approximately HK$4.6 million per annum. The emoluments were determined with reference to the Company’s performance and profitability, as well as remuneration benchmarks in the industry and the prevailing market conditions. He is also entitled to a Director’s fee of HK$70,000 per annum. Mr. McGee does not have any information to disclose pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules. There are no other matters of significance concerning the Director that need to be brought to the attention of shareholders.

2. Mr. Wan Chi Tin , aged 55, has been an Executive Director of the Company since December 2005. He is also Director of HEC and certain subsidiaries of the Company, and General Manager (Corporate Development) of the Group. Mr. Wan worked with the Group from 1978, holding positions of Chief Electrical Engineer of HEC and Deputy General Manager of Associated Technical Services Limited, both being wholly owned subsidiaries of the Company. He then served as Chief Executive Officer of Powercor and CitiPower, the electricity distribution associates of the Company in Australia, from September 2000 to June 2003. Since returning to Hong Kong in July 2003, he has taken up his present role of General Manager (Corporate Development) of the Group. Mr. Wan holds a Bachelor of Science degree in Electrical Engineering and is also a Chartered Engineer. He is a Fellow of the Institute of Electrical Engineers in the United Kingdom and a Fellow of the Hong Kong Institution of Engineers. Mr. Wan does not have any relationship with any other director, senior management or substantial or controlling shareholders of the Company. He does not have any interest in the shares of the Company within the meaning of Part XV of the SFO. Mr. Wan’s emoluments including benefits specified in his service contract amount to approximately HK$5.2 million per annum. The emoluments were determined with reference to the Company’s performance and profitability, as well as remuneration benchmarks in the industry and the prevailing market conditions. He is also entitled to a Director’s fee of HK$70,000 per annum. Mr. Wan does not have any information to disclose pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules. There are no other matters of significance concerning the Director that need to be brought to the attention of shareholders.

3. Mr. Ralph Raymond Shea , aged 72, has been a Director of the Company since May 1985 and is currently an Independent Non-executive Director of the Company. He is also a Director of HEC, a wholly owned subsidiary of the Company. Mr. Shea is a solicitor of the Supreme Court of England and of Hong Kong. He does not have any relationship with any other director, senior management or substantial or controlling shareholders of the Company. Mr. Shea does not have any interest in the shares of the Company within the meaning of Part XV of the SFO. There is no service contract between the Company and him. He is entitled to a Director’s fee (2005: HK$70,000) and further fees for serving as member of the Audit Committee and the Remuneration Committee (2005: HK$70,000 and HK$20,000 respectively). Mr. Shea does not have any information to disclose pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules. There are no other matters of significance concerning the Director that need to be brought to the attention of shareholders.

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1. Mr. Wong Chung-hin , aged 72, has been a Director of the Company since May 1985 and is currently an Independent Non-executive Director of the Company. He is also a Director of HEC, a wholly owned subsidiary of the Company. Mr. Wong is a solicitor. Mr. Wong is an Independent Non-executive Director of Hutchison Whampoa Limited (a substantial shareholder of the Company within the meaning of Part XV of the SFO) and The Bank of East Asia, Limited, both being listed companies. Save as disclosed above, he does not have any relationship with any other director, senior management or substantial or controlling shareholders of the Company. Mr. Wong does not have any interest in the shares of the Company within the meaning of Part XV of the SFO. There is no service contract between the Company and him. He is entitled to a Director’s fee (2005: HK$70,000) and further fees for serving as member of the Audit Committee and the Remuneration Committee (2005: HK$70,000 and HK$20,000 respectively). Mr. Wong does not have any information to disclose pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules. There are no other matters of significance concerning the Director that need to be brought to the attention of shareholders.

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APPENDIX III

The following are the proposed amendments to be made to the existing Articles of Association:

1.

Article 2:

Add the following definition in Article 2 immediately after the definition of “Associate”:—

“Clearing House” shall mean a recognised clearing house within the meaning of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Chapter 571) of the laws of Hong Kong as modified from time to time.

This is to define a new term which appears in the new Article 96A stated below.

2. Article 78:

Delete the existing Article 78 and substitute therefor the following new Article:—

• “78. The Chairman of the Board of Directors, failing whom the Deputy Chairman or the Managing Director, shall preside as chairman at every General Meeting. If there be no such Chairman, Deputy Chairman or Managing Director, or if at any meeting none of them is willing to take the chair or is present within fifteen minutes after the time appointed for holding the meeting, the Directors present shall choose one of their number, (and if no Director be present, or if all the Directors present decline to take the chair, the members present shall choose one of their number) to be chairman of the meeting.”

This is to provide for the Deputy Chairman (if any) or the Managing Director to take the chair when the Chairman of the Board is unable to attend any general meetings of the Company.

3.

Article 96A:

Add the following new Article immediately after Article 96:—

• “96A. Any Clearing House (or its nominee(s)) which is a member of the Company may authorise or appoint such person(s) as it thinks fit to act as its representative(s) or proxy(ies) at any meeting of the Company or of any class of members of the Company provided that, if more than one person is so authorised or appointed, the authorization or instrument of proxy shall specify the number and class of shares in respect of which each such person is so authorised or appointed. A person so authorised or appointed shall be entitled to exercise the same powers on behalf of the Clearing House (or its nominee(s)) which he represents as that Clearing House (or its nominee(s)) could exercise as if he were an individual member of the Company including, where applicable, the right to vote individually on a show of hands notwithstanding any contrary provisions contained in these Articles ”.

This reflects the provisions of S.115 (1A) and (3) of the Companies Ordinance. This is to allow HKSCC Nominees Limited or any person or company which is a clearing house as defined above to appoint more than one authorised representative to attend general meetings of the Company.

4. Article 100A:

Add the following new Article immediately after Article 100:—

• “100A. An Alternate Director shall be responsible and liable for his own act, omission and default. An Alternate Director shall not be deemed to be an agent of the Director who appoints him. The Director who appoints the Alternate Director shall not be vicariously liable for any acts, including but not limited to any tort, committed by the Alternate Director while acting in the capacity of Alternate Director”.

This is to provide that an alternate director is not deemed to be the agent of the director who appoints him and that a director who appoints an alternate director will not be vicariously liable for any tort committed by the alternate director.

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5. Article 106(d):

Delete in Article 106(d) the words “or if he be absent from Hong Kong for a greater period than six months without such consent previously obtained”.

Article 106(d) will read “A Director shall vacate his office if he shall have absented himself for more than three consecutive Meetings of the Board without the consent of the Directors.”

This is to remove the provision which vacates the office of a director if the director is absent from Hong Kong for more than six months without previously obtaining the consent of the board. Today’s technology allows directors who are not in Hong Kong to participate in board meetings by telephone and other electronic means and such manner of participation is allowed under Article 124.

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APPENDIX IV

Article 80 of the Company’s Articles of Association sets out the procedure by which Shareholders may demand a poll:

At any General Meeting a Resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded:—

• (a) by the Chairman; or

• (b) by at least five members present in person or by proxy; or

• (c) by any member or members present in person or by proxy and representing not less than onetenth of the total voting rights of all the members having the right to vote at the meeting; or

• (d) by a member or members holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Unless a poll be so demanded, a declaration by the Chairman that a Resolution has on a show of hands been carried or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the Company shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such Resolution.

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