Last checked at 23 Mar 2011 10:23
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DATANG INTERNATIONAL POWER GENERATION CO., LTD. (a sino-foreign joint stock limited company incorporated in the People's Republic of China) (Stock Code: 991) ANNOUNCEMENT CONTINUING CONNECTED TRANSACTIONS
The Board is pleased to announce that on 22 March 2011, the Company entered into the Framework Agreement for Centralised Materials Purchase with China Water Resources and Power, a subsidiary of CDC, in connection with the centralised purchase of equipment, production spare parts and bulk consumable materials required for technological renovation projects.
As at the date of this announcement, CDC and its subsidiaries hold a total of approximately 36.07% of the issued share capital of the Company. CDC holds approximately 70.72% interest in the issued share capital of China Water Resources and Power and accordingly China Water Resources and Power is a connected person of the Company under Chapter 14A of the Listing Rules. The transactions contemplated under the Framework Agreement for Centralised Materials Purchase constitutes continuing connected transactions for the Company.
As each of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) of the Framework Agreement for Centralised Materials Purchase is more than 0.1% but less than 5%, such continuing connected transactions are only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Listing Rules and do not require the approval by the independent shareholders of the Company under Chapter 14A of the Listing Rules.
BACKGROUND
In order to regulate and enhance the management of purchase of production materials and to leverage bulk purchase advantages, the Company and China Water Resources and Power entered into the Framework Agreement for Centralised Materials Purchase on 22 March 2011 to centralise the purchase of production materials so as to enhance quality of purchase and lower purchase costs, thereby enhancing the profitability of the Company.
FRAMEWORK AGREEMENT FOR CENTRALISED MATERIALS PURCHASE
Date22 March 2011Parties(i) The Company; and
(ii) China Water Resources and Power.
Subject Matter
Pursuant to the Framework Agreement for Centralised Materials Purchase, the Company agreed that it and/or its subsidiaries shall make centralised purchase of production materials required for technological renovation projects, including equipment, production spare parts and large consumable materials, through China Water Resources and Power from other third parties suppliers. Pursuant to the agreement under the Framework Agreement for Centralised Materials Purchase, the Company expects that the price of such production materials to be purchased through China Water Resources and Power shall not be higher than the average market price of such production materials.
The Company, its subsidiaries and China Water Resources and Power will enter into individual purchase orders setting out specific terms including the details of the production materials to be ordered, the price, the payment terms and schedules, but such terms shall be consistent with the principles and the terms of the Framework Agreement for Centralised Materials Purchase.
Term
The Framework Agreement for Centralised Materials Purchase is for a term of three years commencing from 1 January 2011 and ending on 31 December 2013.
The Company confirms that the transaction amounts under the Framework Agreement for Centralised Materials Purchase for the period from 1 January 2011 to the date of this announcement did not reach the de minimis threshold under Chapter 14A of the Listing Rules.
Fee Standard and Calculation
During the course of centralised purchase, China Water Resources and Power is responsible for the coordination of tenders invitation, contract signing and the implementation thereafter (including agents for importing equipment and fees for customs clearance), examination of arrival goods, claims submission, partial payment in advance and management of suppliers. As such, China Water Resources and Power will collect a management service fee (the relevant fee is equivalent to 3% to 5% of the purchase amount on the purchase order). Such management service fee is determined after arm's length negotiation between the parties taking into account that the relevant management service fee to be collected shall not be higher than the management service fee to be charged for the provision of similar services to other companies including independent third parties or CDC.
China Water Resources and Power will issue a value added tax invoice comprising the purchase amount and the management service fee to the Company's subsidiaries.
Historical Figures
The Company carried out similar transactions with China Water Resources and Power in 2009 and 2010. The transaction amount, under the Framework Agreement for Centralised Materials Purchase for 2009 and 2010 were approximately RMB240 million and RMB150 million, respectively.
Annual Cap
The continuing connected transactions contemplated under the Framework Agreement for Centralised Materials Purchase are subject to the annual cap of RMB200 million (including the purchase costs for the production materials and the management service fees payable to China Water Resources and Power) for each of the three years ending on 31 December 2013.
The above annual cap was determined with reference to or taking into account of: (i) the anticipated demand of the production materials required for the equipment technological renovation plan of the Company and its subsidiaries in accordance with the energy saving and environmental protection requirements in the PRC; (ii) the usual maintenance program of the current production equipment of the Company and its subsidiaries; and (iii) the production materials required to be consumed by the Company and its subsidiaries for the normal operation of the equipment concerned on a yearly basis for each of the three years ending 2013.
INFORMATION OF PARTIES RELATING TO THE FRAMEWORK AGREEMENT FOR CENTRALISED MATERIALS PURCHASE
The Company 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 being in the PRC.
With a registered capital of RMB473 million, China Water Resources and Power is a subsidiary of CDC which holds approximately 70.72% interest in the issued share capital of China Water Resources and Power. Its core business includes acting as agent for tenders invitation and import, pipe supplies, project consultation, spare parts, equipment supervision, management of project materials resources, CDM, safety evaluation, and so forth.
REASONS FOR AND BENEFITS OF ENTERING INTO THE FRAMEWORK AGREEMENT FOR CENTRALISED MATERIALS PURCHASE
After taking into account the necessity of lowering purchase costs and successful completion of the Company's production materials purchase tasks during the year, the Company entered into the Framework Agreement for Centralised Materials Purchase to leverage on the role of China Water Resources and Power as a professional institution in sourcing production materials to leverage the bulk purchase advantage, enhance purchase quality and lower purchase costs, thereby enhancing the profitability of the Company.
The Directors (including the independent non-executive Directors) are of the view that the continuing connected transactions under the Framework Agreement are conducted in the ordinary and usual course of business of the Company, and are fair and reasonable and are in the interest of the Company and the shareholders as a whole.
CONTINUING CONNECTED TRANSACTION
As at the date of this announcement, CDC and its subsidiaries hold a total of approximately 36.07% of the issued share capital of the Company. CDC holds approximately 70.72% interest in the issued share capital of China Water Resources and Power and accordingly, China Water Resources and Power is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the Framework Agreement for Centralised Materials Purchase constitutes continuing connected transactions for the Company.
As each of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) of the Framework Agreement for Centralised Materials Purchase is more than 0.1% but less than 5%, such transactions are only subject to the reporting and announcement requirements under Rules 14A.45 to 14A.47 of the Listing Rules and does not require the approval by the independent shareholders of the Company under Chapter 14A of the Listing Rules.
BOARD'S APPROVAL
The Framework Agreement for Centralised Materials Purchase was considered and approved by the Board on 22 March 2011. Mr. Liu Shunda, Mr. Hu Shengmu and Mr. Fang Qinghai, Directors who have material interests in the transaction (by virtue of being the principal management staff of CDC) have abstained from voting at the Board meeting for approval of the Framework Agreement for Centralised Materials Purchase.
DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
"Board" the board of Directors "CDC" China Datang Corporation, a State-owned enterprise established under the laws of the PRC and is a controlling shareholder of the Company pursuant to the Listing Rules. CDC and its subsidiaries own approximately 36.07% of the issued share capital of the Company as at the date of this announcement "China Water Resources China National Water Resources & Electric Power and Power" Materials & Equipment Corporation. "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 "Director(s)" the director(s) of the Company "Framework Agreement the framework agreement for centralised materials for Centralised purchase entered into between the Company and Materials Purchase" China Water Resources and Power on 22 March 2011 "Listing Rules" The Rules Governing the Listing of Securities on the Stock Exchange "PRC" the People's Republic of China "RMB" Renminbi, the lawful currency of the PRC "Stock Exchange" The Stock Exchange of Hong Kong Limited By Order of the Board Zhou Gang Secretary to the Board
Beijing, the PRC, 22 March 2011
As at the date of this announcement, the directors of the Company are:
Liu Shunda, Hu Shengmu, Cao Jingshan, Fang Qinghai, Zhou Gang, Liu Haixia, Guan Tiangang, Su Tiegang, Ye Yonghui, Li Gengsheng, Li Yanmeng*, Zhao Zunlian*, Li Hengyuan*, Zhao Jie*, Jiang Guohua*
* Independent non-executive directors
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