Sinopec Engineering Group Co Ltd. — Capital/Financing Update 2013

Dec 13, 2013

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 howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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中石化煉化工程(集團)股份有限公司 SINOPEC Engineering (Group) Co., Ltd.[*]

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

(Stock Code: 2386)

Adjustment in Use of Proceeds from the Global Offering

Reference is made to the prospectus (the “ Prospectus ”) of SINOPEC Engineering (Group) Co., Ltd. (the “ Company ”, together with its subsidiaries, the “ Group ”) dated May 23, 2013 relating to the global offering (the “ Global Offering ”) and listing of the Company’s H shares on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”). The Board of Directors (the “ Board ”) announces that the Company has decided to adjust the use of proceeds received from the Global Offering as more particularly set out in this announcement.

Reference is made to the Company’s prospectus dated May 23, 2013 in relation to the Global Offering and the listing of the Company’s H shares on the Main Board of the Stock Exchange.

Unless otherwise defined in this announcement, terms defined in the Prospectus have the same meanings when used in this announcement.

• For identification purposes only.

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Use of Proceeds

As stated in the “Future Plans and Use of Proceeds” section of the Prospectus, the Company intends to apply the net proceeds of the Global Offering for the following purposes (the “ Original Intended Use ”):

Amount (HK$ in millions) 3,429.0 5,963.5 1,640.0 1,043.6 1,341.8 1,490.9	Percentage of the total estimated net proceeds 23% 40% 11% 7% 9% 10%	Intended use of the net proceeds
		Establishing six R&D centers in the PRC for research and development of engineering and construction technologies, including: (i) a refining and reaction engineering technology R&D center in Luoyang; (ii) a new coal chemical and natural gas chemical technology R&D center in Ningbo; (iii) a special material welding technology R&D center in Qingdao; (iv) a petrochemical-alternative energy engineering technology R&D center in Beijing; (v) a pharmaceutical chemical engineering technology R&D center in Shanghai; and (vi) a modern construction technology R&D center in Tianjin. The total investment is approximately RMB 2.3 billion, mostly to be deployed within the years of 2013 and 2014 mainly for equipment acquisition, construction costs, R&D expenditure and staff costs. Supporting operation proceeds for the Group’s EPC Contracting services to selected projects (the “Key EPC Projects”) which are important for the development of the Group’s EPC Contracting business and enhancing our client base, such as the Shaanxi Yulin methanol acetic acid deep processing EPC project Improving the Group’s overseas marketing networks, including establishing an operation and maintenance center in Saudi Arabia, an integrated operating center in North America, and several overseas subsidiaries or branches in South Asia, Africa and South America Improving the Group’s information system Purchasing crawler cranes with high lifting capacities to enhance the Group’s specialized construction capacity Working capital and other general corporate purposes

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Adjustment of Original Intended Use

As it was not possible for the Company to complete the foreign exchange settlement with the State Administration of Foreign Exchange in relation to the proceeds received from the Global Offering remitted to the PRC as expected, the Company had been unable to utilize the proceeds towards the Key EPC Projects, working capital, and other general corporate purposes stipulated in the Original Intended Use after the Listing.

As the Company has strengthened its settlement efforts, optimized customer management, and progressed smoothly on the Key EPC Projects, the Company has successfully received the relevant amounts due from its customers. As a result, the Key EPC Projects, in which the proceeds received from the Global Offering will be applied as originally planned, will no longer need any further working capital.

Pursuant to the requirements related to the State’s administration of foreign exchange, the Company is neither able nor required to further apply for and complete the foreign exchange settlement for the Key EPC Projects under the Original Intended Use. This is due to the fact that the Key EPC Projects in which the proceeds received from the Global Offering will be applied as stipulated in the Original Intended Use were completed or substantially completed. If a large amount of proceeds received from the Global Offering are deposited in banks in the form of foreign currency, this will have low efficiency and generate low return, and will not be usable for the Group’s normal operations, and may also cause further foreign exchange losses. Therefore, while considering the interests of the Company and its shareholders as a whole as well as acting in furtherance of the Company’s business development strategies, the Board has carefully examined and reviewed the necessity, feasibility and economic benefits of the Original Intended Use in an effort to further enhance the efficiency and effectiveness of capital utilization, guarantee the liquidity of its own capital and minimize foreign exchange losses. In doing so, it has resolved that the uses stipulated in the Originally Intended Use should be amended and the following uses should be added:

1. Payment for long-term equity investments in subsidiaries and settlement of non-trade amounts due to China Petrochemical Corporation (“ Sinopec Group ”), which will mitigate its foreign exchange losses and enable the Company to utilize its current working capital in a more efficient manner and in turn facilitate the Group’s business development;

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1. Newly added long-term equity investment, through investing and providing capital contribution to certain professional companies under the Group (such as lifting and transportation company, equipment manufacturing company and construction company); and

2. Mergers and acquisitions of engineering companies, purchase of patents and proprietary technologies and other items. In order to enhance the Company’s competitiveness and project implementation ability in both domestic and overseas markets, the Company has established a working team which will track and study potential targets, identify opportunities to acquire companies which can supplement the Company’s business at appropriate cost to create synergies as well as to enhance the Company’s competitiveness while maximizing returns to its shareholders.

In addition, as the Company has recently enhanced its efficiency of capital utilization and optimized and consolidated the relevant plans, the amount of funds originally planned for use in the construction of an engineering technological R&D center and the purchasing of engineering equipment shall be reduced accordingly. Furthermore, pursuant to a feasibility study report recently prepared by the Company which examined certain projects, the amount of funds originally planned to use to improve the Group’s overseas marketing networks shall also be reduced accordingly. As a result, the Board has decided to amend details of these uses and to reduce the proportion of capital for such uses on the basis of maintaining the aforesaid Original Intended Use.

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Details of the adjusted uses of the net proceeds received from the Global Offering, which is HK$13.667 billion (approximately RMB10.717 billion) based on the net amount after deduction of all listing related expenses, are set out below:

• Percentage

• of the total

• net proceeds received

• from the

• Amount (HK$ in Global millions) [Note][1] Offering Intended use of the net proceeds 2,167.59 15.86% 1. Establishing an engineering and (approximately technological R&D center and RMB 1.700 billion) reconstructing and expanding the R&D base in Luoyang to replace the following R&D centers proposed in the original plan: (i) a refining and reaction engineering technology R&D center in Luoyang; (ii) a new coal chemical and natural gas chemical technology R&D center in Ningbo; (iii) a petrochemical-alternative energy engineering technology R&D center in Beijing; and (iv) a pharmaceutical chemical engineering technology R&D center in Shanghai. The functions of the technology R&D centers to be built at various locations as proposed in the original plan will be integrated into and achieved through one single R&D base.

• 1. The SEG modular construction base will replace the modern construction technology R&D center in Tianjin and other projects as proposed in the original plan. The base, based on the R&D in construction technology, also possesses the function of modularized manufacturing and production as required for modular construction
• 1. Investment into construction machinery manufacturing projects

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2,868.70	20.99%	Paying for long-term equity investments in
(approximately		subsidiaries and settling the non-trade
RMB 2.250 billion)		amounts of RMB2 billion due to Sinopec
		Group
1,019.56	7.46%	Improving the Group’s overseas marketing
(approximately		networks and maintaining the original plan
RMB 800 million)		of establishing an operation and maintenance
		center in Saudi Arabia, an integrated
		operating center in North America, and
		several overseas subsidiaries or branches in
		South Asia, Africa and South America. In
		particular, the Group has finished an
		evaluation and demonstration of project
		planning, as well as completed a feasibility
		study report for the operation and
		maintenance center in Saudi Arabia which is
		planned to be put into operation in 2015.
		Other proposed overseas marketing networks
		will be constructed in due course according
		to the progress of the project
892.46 (approximately	6.53%	Maintaining the original plan of improving
RMB 700 million)		the Group’s information system
1,019.56	7.46%	Maintaining the original plan of purchasing
(approximately		crawler cranes with high lifting capacities,
RMB 800 million)		and, in addition, purchasing large lifting and
		transport equipment and specialized
		construction equipment to enhance the
		Group’s specialized construction capacity
		and technical level
1,456.90	10.66%	Applying for newly added long-term equity
(approximately		investment, through investing and providing
RMB 1.142 billion)		capital contribution to certain professional
		companies under the Group (such as lifting
		and transportation company, equipment
		manufacturing company and construction
		company)
4,242.24	31.04%	Newly added mergers and acquisitions of
(approximately		engineering companies, purchasing patents
RMB 3.325 billion)		and proprietary technologies and other items

Note 1: The amount of proceeds received from the Global Offering after adjustment is translated at the exchange rate of RMB 0.7842 =HK$1.00.

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The Board considers that the development direction of the Company is still in line with the disclosure in the Prospectus without any substantial change as a result of adjusting the uses of the proceeds received from the Global Offering. The aforesaid adjustment of the use of the proceeds received from the Global Offering will enhance the effective allocation of the Company’s financial resources, facilitate the future growth of the Group, and such adjusted use of the proceeds received from the Global Offering is fair, reasonable and in the interest of the Company and its shareholders as a whole.

Yours faithfully, By Order of the Board SINOPEC ENGINEERING (GROUP) CO., LTD. Sang Jinghua

Secretary to the Board of Directors and Company Secretary

Beijing, China December 13, 2013

As of the date of this announcement, the executive director is Yan Shaochun, the non-executive directors are Cai Xiyou, Zhang Kehua, Lei Dianwu, Ling Yiqun and Chang Zhenyong and the independent non-executive directors are Hui Chiu Chung, Stephen, Jin Yong and Ye Zheng.

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