Datang Intl H Regulatory News (DAT)

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong KongLimited take no responsibility for the contents of this announcement, make norepresentation as to its accuracy or completeness and expressly disclaim anyliability whatsoever for any loss howsoever arising from or in reliance uponthe whole or any part of the contents of this announcement. DATANG INTERNATIONAL POWER GENERATION CO., LTD. (a sino-foreign joint stock limited company incorporated in the People's Republic of China) (Stock Code: 00991) ANNOUNCEMENT CONTINUING CONNECTED TRANSACTIONS FRANCHISING CONTRACTS On 31 October 2012, certain power plants of the Company entered into theFranchising Contracts with Datang Technology Industry Company (previously knownas Datang Environment Company). Please refer to the Company's Announcementdated 2 November 2012 for details. The franchise period is the same as the operating period of the powergeneration facilities at which the franchise project is located (exceedingthree years). The Company had previously engaged Mizuho Securities Asia Limitedas the independent financial advisor to give independent advice on thefranchise period of the Franchising Contracts in accordance with therequirements under Rule 14A.52 of the Listing Rules. Mizuho Securities AsiaLimited considered that it was normal business practice for the franchiseperiod to be the same as the operating period of the power generationfacilities at which the franchise project was located. Please refer to theannouncement issued by the Company on 22 November 2012 for details. The annual caps of the Franchising Contracts announced by the Company on 2November 2012 had expired on 31 December 2014. On 10 February 2015, thecontinued implementation of desulfurization franchising by certain power plantsof the Company was considered and approved by the eighteenth meeting of theeighth session of the Board of the Company. ANNUAL CAPS Pursuant to the resolution of the Board, the annual caps under the FranchisingContracts for the three years ending 31 December 2017, (i) in respect of thedesulfurization electricity fees transferred by certain power plants of theCompany to Datang Technology Industry Company shall not exceed RMB540 millionper annum; and (ii) in respect of the amount reimbursed by Datang TechnologyIndustry Company for settlement of water, electricity and gas costs incurredfor desulfurization shall not exceed RMB166 million per annum. LISTING RULES IMPLICATIONS As at the date of this announcement, CDC is the controlling shareholder of theCompany, which together with its subsidiaries, hold approximately 34.71% of theissued share capital of the Company. Datang Technology Industry Company is awholly-owned subsidiary of CDC. Datang Technology Industry Company is thereforea connected person of the Company and the transactions under the FranchisingContracts constitute continuing connected transactions of the Company. Since the highest of the applicable percentage ratios (as defined in Rule 14.07of the Listing Rules) in respect of the respective transaction amount under theFranchising Contracts is above 0.1% but under 5%, the respective transactionsunder the Franchising Contracts are only subject to the reporting andannouncement requirements under Chapter 14A of the Listing Rules, but areexempt from the independent shareholders' approval requirement under Chapter14A of the Listing Rules. FRANCHISING CONTRACTS On 31 October 2012, certain power plants of the Company entered into theFranchising Contracts with Datang Technology Industry Company (previously knownas Datang Environment Company). Please refer to the Company's Announcementdated 2 November 2012 for details. The franchise period is the same as the operating period of the powergeneration facilities at which the franchise project is located (exceedingthree years). The Company had previously engaged Mizuho Securities Asia Limitedas the independent financial advisor to give independent advice on thefranchise period of the Franchising Contracts in accordance with therequirements under Rule 14A.52 of the Listing Rules. Mizuho Securities AsiaLimited considered that it was normal business practice for the franchiseperiod to be the same as the operating period of the power generationfacilities at which the franchise project was located. Please refer to theannouncement issued by the Company on 22 November 2012 for details. The annual caps of the Franchising Contracts announced by the Company on 2November 2012 had expired on 31 December 2014. On 10 February 2015, thecontinued implementation of desulfurization franchising by certain power plantsof the Company was considered and approved by the eighteenth meeting of theeighth session of the Board of the Company. The details of the Franchising Contract are set out below: Date 31 October 2012 Parties (1) Zhangjiakou Power Plant (2) Chaozhou Power Generation Company (3) Lvsigang Power Generation Company (4) Datang Technology Industry Company (previously known as Datang Environment Company) Material Terms of the Franchising Contracts The major terms of the three Franchising Contracts are substantially the same,the material terms of which are summarised as follows: 1. The settlement of desulfurization electricity fee: The power grid company shall pay on-grid electricity fee to certain power plants of the Company. After receiving such on-grid electricity fee, certain power plants of the Company shall transfer the desulfurization tariffs to Datang Technology Industry Company. 2. Settlement of water, electricity and gas costs incurred for desulfurization: During the franchise period, Datang Technology Industry Company shall reimburse and compensate certain power plants of the Company for the costs incurred for desulfurization, including water, electricity and gas. 3. The franchise period: The franchise period is the same as the operating period of the power generation facilities at which the franchise project is located (exceeding three years). Other material terms of the contracts are set out in the Company'sAnnouncement. Annual Caps The annual caps for the desulfurization tariffs transferred by certain powerplants of the Company to Datang Technology Industry Company under theFranchising Contracts over the Three Years ending 31 December 2017 shall notexceed RMB540 million (tax exclusive) per annum. The desulfurizationelectricity fees aforementioned are calculated with reference to the annualutilisation hours of the power generation units of certain power plants of theCompany for year 2014, the expected corresponding on-grid power generation ofthe power generation units with annual utilisation hours of 5,300 hours and thecurrent desulfurization electricity tariff (RMB0.015/kWh). The annual caps for the settlement of water, electricity and gas costs incurredfor desulfurization under the Franchising Contracts charged on DatangTechnology Industry Company by certain power plants of the Company over theThree Years ending 31 December 2017 shall not exceed RMB166 million (taxexclusive) per annum. The compensation fees aforementioned are calculated withreference to the annual utilisation hours of the power generation units ofcertain power plants of the Company for year 2014 and the expectedcorresponding on-grid power generation of the power generation units withannual utilisation hours of 5,300 hours. Historical Transaction Amounts The total desulfurization electricity fee expenses (tax exclusive) of certainpower plants of the Company between 31 October 2012 and 31 December 2014amounted to RMB88.58 million, RMB506.048 million and RMB508.2722 million,respectively. The total revenue (tax exclusive) from the settlement of water, electricity andgas costs incurred for desulfurization of certain power plants of the Companybetween 31 October 2012 and 31 December 2014 amounted to RMB31.20 million,RMB144.568 million and RMB146.5140 million, respectively. REASONS FOR AND BENEFITS OF ENTERING INTO THE FRANCHISING CONTRACTS The implementation of franchising for desulfurization projects by certain powerplants of the Company can bring the professional management advantage of DatangTechnology Industry Company into full play, while the operational efficiency ofthe desulfurization facilities can be enhanced, the risks concerningenvironmental protection can be reduced, and the operational costs of theCompany can be saved. These could in turn enhance the profitability andsustainability of the Company. DIRECTORS' CONFIRMATION The Directors (including the independent non-executive Directors) are of theview that the terms of the Franchising Contracts (including the terms relatingto the franchise period) have been determined on normal commercial terms and inthe ordinary and usual course of business, and the relevant transactions arefair, reasonable and in the interests of the Company and its shareholders as awhole. INFORMATION ON THE PARTIES 1. The Company, which is principally engaged in the construction and operation of power plants, the sale of electricity and thermal power, the repair and maintenance of power equipment and power-related technical services, with its main service areas located in the PRC. 2. Zhangjiakou Power Plant, a power plant owned by the Company. It currently has eight 300MW coal-fired generation units (2,400MW in total) and the assets of compatible desulfurization facilities. The power generated mainly supplies the Beijing-Tianjin-Tangshan power grid. 3. Chaozhou Power Generation Company, a subsidiary of the Company, incorporated in November 2003. It has two 600MW and two 1,000MW coal-fired generation units (3,200MW in total) and the assets of compatible desulfurization facilities. The power generated mainly supplies the Guangdong power grid. The Company holds 52.5% of the equity interest in Chaozhou Power Generation Company. 4. Lvsigang Power Generation Company, a subsidiary of the Company, incorporated in September 2003. It has four 660MW coal-fired generation units (2,640MW in total) and the assets of compatible desulfurization facilities. The power generated mainly supplies the Jiangsu power grid. The Company holds 55% of the equity interest in Lvsigang Power Generation Company. 5. Datang Technology Industry Company, a wholly-owned subsidiary of CDC, was established in July 2011 and previously known as Datang Environment Company. It has a registered capital of RMB550 million and is the major platform for the development of the technology business segment of CDC and is responsible for the implementation of the development strategy and plan for the technology business of CDC. 6. CDC was established on 9 March 2003 and has a registered capital of RMB18.009 billion. It is principally engaged in the development, investment, construction, operation and management of power energy; organisation of power (thermal) production and sales; manufacture, repair and maintenance of power equipment; power technology development and consultation; power engineering, contracting and consultation of environmental power engineering; development of new energy as well as development and production of power related coal resources. LISTING RULES IMPLICATIONS As at the date of this announcement, CDC is the controlling shareholder of theCompany, which together with its subsidiaries, hold approximately 34.71% of theissued share capital of the Company. Datang Technology Industry Company is awholly-owned subsidiary of CDC. Datang Technology Industry Company is thereforea connected person of the Company and the transactions under the FranchisingContracts constitute continuing connected transactions of the Company. Since the highest of the applicable percentage ratios (as defined in Rule 14.07of the Listing Rules) in respect of the respective transaction amount under theFranchising Contracts is above 0.1% but under 5%, the respective transactionsunder the Franchising Contracts are only subject to the reporting andannouncement requirements under Chapter 14A of the Listing Rules, but areexempt from the independent shareholders' approval requirement under Chapter14A of the Listing Rules. BOARD'S APPROVAL The Board of the Company has approved the annual caps in respect of thetransactions under the Franchising Contracts for each of the Three Years. Noneof the Director has any material interest in the Franchising Contracts. Thoseconnected Directors, including Chen Jinhang, Hu Shengmu and Liang Yongpan,being the key management of CDC, have abstained from voting for such resolutionin accordance with the listing rules of the Shanghai Stock Exchange. DEFINITIONS In this announcement, unless the context otherwise requires, the followingexpressions have the following meanings: "Board" the board of Directors of the Company "CDC" China Datang Corporation, a state-owned enterprise established under the laws of the PRC and is the controlling shareholder of the Company according to the Listing Rules "certain power plants of the those subsidiaries and power plants of theCompany" Company implementing flue gas desulfurization franchising, namely Zhangjiakou Power Plant, Chaozou Power Generation Company and Lvsigang Power Generation Company "Chaozhou Power Generation Guangdong Datang International Chaozhou PowerCompany" Generation Co., Ltd., a subsidiary of the Company, details of which are set out in the section entitled "Information on the Parties" "Company" Datang International Power Generation Co., Ltd., a sino-foreign joint stock limited company incorporated in the PRC on 13 December 1994, whose H Shares are listed on the Stock Exchange and the London stock exchange and whose A Shares are listed on the Shanghai stock exchange "Company's Announcement" the announcement on continuing connected transactions issued by the Company on 2 November 2012 "connected person" has the meaning ascribed to it under the Listing Rules "connected transaction(s)" has the meaning ascribed to it under the Listing Rules "Datang Environment Company" China Datang Environmental Technology Company Limited, which changed its name to Datang Technology Industry Company on 26 December 2013 "Datang Technology Industry Datang Technology Industry Company LimitedCompany" (previously known as Datang Environment Company), a subsidiary of China Datang Corporation, details of which are set out in the section entitled "Information on the Parties" "Director(s)" the director(s) of the Company "Franchising Contracts" three contracts on the flue gas desulfurization franchising all dated 31 October 2012 entered into between Datang Technology Industry Company and each of (1) Zhangjiakou Power Plant; (2) Chaozhou Power Generation Company; (3) Lvsigang Power Generation Company "Group" the Company and its subsidiaries "Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange "Lvsigang Power Generation Jiangsu Datang International Lvsigang PowerCompany" Generation Company Ltd., a subsidiary of the Company, details of which are set out in the section entitled "Information on the Parties" "PRC" the People's Republic of China "RMB" Renminbi, the lawful currency of the PRC "Stock Exchange" The Stock Exchange of Hong Kong Limited "Three Years" three years ending 31 December 2015, 31 December 2016 and 31 December 2017 "Zhangjiakou Power Plant" Zhangjiakou Power Plant, a power plant owned by the Company, details of which are set out in the section entitled "Information on the Parties" "%" percent By Order of the Board Zhou Gang Secretary to the Board Beijing, the PRC, 10 February 2015 As at the date of this announcement, the Directors of the Company are: Chen Jinhang, Hu Shengmu, Wu Jing, Liang Yongpan, Zhou Gang, Cao Xin,Cai Shuwen, Liu Haixia, Guan Tiangang, Yang Wenchun, Dong Heyi*, Ye Yansheng*,Zhao Jie*, Jiang Guohua*, Feng Genfu* * Independent non-executive Directors